Finance (No. 2) Bill (Third sitting)

Debate between Dan Carden and Peter Dowd

Thursday 11th January 2018 Public Bill Committees

[Peter Dowd]

That is an important point. As I said, it is irrelevant—academic—where someone stands on Europe or whether they were in or out, because we are moving out of the European Union. There are all sorts of debates about the customs union, the single market and all the rest of it, but the bottom line is: what will the Government do to plug that gap? Will they give the commitment that they have given to other industries, such as agriculture, to plug that gap?

[Dan Carden]

One of the reasons that there is scepticism on this side of the Committee Room is because European money has been funnelled towards cities such as Liverpool. We have seen great investment from Europe, whereas this Government have cut council budgets in Liverpool and across the north by more than 70%. Does my hon. Friend share my scepticism?

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[Dan Carden]

This relief means a hell of a lot, especially to some larger companies, which sometimes make hundreds of millions of pounds from it. We have seen artificial schemes designed to secure the tax relief whereby it has not been appropriately used. Would not a review also help to sort out that problem?

[Peter Dowd]

It would, and I will come to that in my final comments in relation to the speech by the hon. Member for Aberdeen North. There is a wider point, which the hon. Lady has highlighted perfectly. How much difference will raising the expenditure credit by one percentage point make to companies investing in the UK? That is the question, and we need to know the answers to it, hence the proposal for a review. I sound like a stuck record, but this issue is very important. It is only right that the Minister should come back to the House at a later stage and provide it with that information.

Finance (No. 2) Bill (Second sitting)

Debate between Dan Carden and Peter Dowd

Tuesday 9th January 2018 Public Bill Committees

[Peter Dowd]

My hon. Friend again makes an important point, and that arrow goes to the heart of things.

There are practical objections on the grounds that savers are not interested in, or capable of, engaging with their money, which simply perpetuates a vicious circle of disengagement. That is the passivity I talked about earlier—almost an institutional passivity on the part of savers. Savers may be put off by the language of investment, but that does not mean that they are not interested in where their money goes; they are.

Likewise, savers may lack understanding of the technicalities of investment, but there are many matters on which they are qualified to comment, including the way the scheme behaves as an owner of major companies, or its policies on social, environmental and governance issues. We see that to an extent, in an institutional way, in the Church of England, among other organisations; it puts those things at the heart of its approach. Savers should be allowed to do that as well. Indeed, emphasising the positive contribution that schemes are making to a better economy, through their exercise of ownership rights, could be a way to engage people with saving money more widely.

The onus must be on the master trusts and the wider investment sector to take the lead in developing a clear and engaging investment strategy. Making such a strategy a requirement of registration with HMRC will ensure that no master trust will slip through the net. The recent local government pension scheme regulations follow a similar path and require the administration authorities to create investment statement strategies. There is no reason why that good practice cannot be extended to defined contribution schemes.

I turn to the reporting of costs and charges—a subject that my hon. Friend the Member for High Peak touched on, and which is addressed in proposed new subsection (3) in amendment 41. For far too long, the pensions market has had a single glaring dysfunction: no one knows how much a pension pot costs. Members of this House would not go into a marketplace to buy anything without understanding the basic information relating to a product: its price, its essential properties, and the promises made about it. Strangely, this information, which is so fundamental to consumer choice and the operation of any market, remains largely absent in the pension market. Master trusts must establish what each investment choice costs and what their drawn-down product costs. Anything short of that is not helpful for millions of citizens.

We have a duty to ensure that a reporting line is open between a master trust, HMRC regarding a trust’s tax affairs, and the trust’s members on the costs they incur while saving for retirement. Again, Labour Members have campaigned for many years on this issue and it seems that the Government are beginning to catch up, not simply because of what we have been doing but also because of what Government Members and other organisations have been doing. We are not trying to claim all the credit; to some extent, this has been a team effort, right across the piece.

In the consultation on defined contribution pension schemes, under which master trusts operate, the Government requested evidence on how they might improve transparency in reporting information on the transaction costs and charges for members of workplace pension schemes. Amendment 41 would be a clear step forward, in line with the calls that we have been making alongside the industry, trustees, savers and Government Members, for transparency of costs and charges when it comes to pension savings. This issue affects us all.

I am afraid to say that the Government have seen fit to replace action with rhetoric here—a pattern that we see a little bit too often. However, I do not want to push that argument too much. We have to encourage and prod. The architecture to get the data, analyse it and present it is being discussed, with a view to its being built. It can be a platform from which other projects, including the value-for-money analysis needed for all workplace pensions, can be developed—and it can be delivered.

Amendment 41 helps to embed a process that is already under way, thanks in no small way to years of campaigning by many organisations and political parties. There is no reason why the Government should not take this opportunity to do something that is in line with their stated objectives. We must ensure that every person auto-enrolled into a master trust is given the opportunity to understand what pension system they are going into, how much it will cost and how much they will get. To do otherwise would be a clear breach of the fiduciary duty owed to scheme members.

The Financial Conduct Authority’s asset management market review said that evidence suggests that

“there is weak price competition in a number of areas of the asset management industry”,

which has a material impact on investors’ returns through their payment for asset management services. One of the FCA’s conclusions was that there should be a requirement for increased transparency, and standardisation of costs and charges information for institutional investors. That word “transparency” crops up time after time, for good reason.

The Government have agreed to implement the FCA’s recommendations in full. We can enshrine that guarantee in the Bill. Quite frankly, it is a fundamental market failure that no pension fund can understand its cost basis. If one does not understand costs, the investment strategy set out in proposed subsection (2) of amendment 41 cannot be evaluated.

It is also a sensible proposition that a scheme’s outgoings on costs and charges be evaluated during the process of tax registration by HMRC. The risk and responsibility will continue to rest with the pension saver; charges for ongoing administration and investment management will be deducted from their account—another reason why transparency and low charges are important.

If a scheme member loses money in retirement, it is extremely difficult—if not impossible—to get it back again, as their sources of income may be limited and a return to work might not be an option. Ultimately, members could run out of money. That has happened before with some of these schemes. The member is responsible for their decisions and the outcome the scheme generates. It is therefore essential that the member can see the cost of their pension pot. The efficient management of pension funds is critical to ensuring that we stave off a pensions crisis.

[Dan Carden (Liverpool, Walton) (Lab)]

My hon. Friend is making an excellent contribution. Pensions are incredibly complex; I am sure that most of us would be happy to admit that we do not have any great understanding of their workings. When we speak to our constituents, we hear that this is about confidence. Many people choosing between taking money home and investing money for the future—we look at this money as deferred wages—do not have confidence in the system because it is not transparent. Anything that we can do, through the amendment, to make the Government act sooner and not engage in more consultations on what is a rather obvious solution, which is to open up the industry to scrutiny and to give greater understanding to our constituents of how their pensions are invested, is a good thing. We ask the Government to agree to this amendment, so that we can get there quicker.

[Peter Dowd]

My hon. Friend makes a very important point.

To draw to a conclusion, I reiterate the point that I was making when my hon. Friend intervened. The efficient management of funds is critical to ensuring that we stave off a pensions crisis that citizens will be forced to endure in their retirement if we are not careful. The Government will fail in their duty of care if we do not get cost reporting on to the statute book. Transparency —there is that word again—is now an objective of all parties across the House. In our view, the Government must back this amendment and replace a little bit of rhetoric with action to protect pension savers.

Finance (No. 2) Bill (First sitting)

Debate between Dan Carden and Peter Dowd

Tuesday 9th January 2018 Public Bill Committees

[Peter Dowd (Bootle) (Lab)]

It is a pleasure, as ever, to serve under your chairmanship, Mr Owen. I have sympathy with the Scottish National party on their amendment to the programme motion, which would require the Government to ensure that there was an evidence sitting this week. This is my third Finance Bill since becoming shadow Chief Secretary to the Treasury, and I have made the point on each one that we should have evidence sittings. The argument might be made, “We have had three Bills; what’s the point?” However, there is a pretty compelling argument that having had three Finance Bills is all the more reason to not just pause for breath but catch up, and get some people in to give evidence. The point is well made, and it was also part of the context for the debate in the House yesterday.

This is not simply an event; it is part of a process. Most of the traditions or protocols that we follow in the House have a perfectly rational basis, but there are occasions—I think this is one, in the light of the three Finance Bills this year—when we might want at the very least to step back from them. Every other piece of legislation that passes through the House gets its day in court, so to speak, as regards giving evidence, and of course the complex changes made to UK tax laws and systems have far-reaching consequences for everyone and for the economy.

It is important that when matters are incredibly complex—and, let us be frank, many of the matters in question are complex—we should be able to tease out issues with experts. It is not that I do not believe the Financial Secretary to the Treasury and everything that he tells us; I do, implicitly. However, I am sure that he would like us to test his assertions, and we might want to do that with other people—and with other experts.

Several provisions in the Bill, and in previous Finance Bills, rewrite earlier measures and close loopholes. It is important for us to tease out those things, too. Why are we where we are, and what could we have done differently? Possibly we could not have done anything differently, but I am sure that if there had been evidence sittings for previous Finance Bills, the experts offering testimony might have pointed out to the Government technical pitfalls in some of the measures they wanted to introduce.

The amendment is in the spirit of attempting to move things on; it is not a wrecking proposal. I acknowledge that we will not win the debate, but it is important to state the need to push for evidence sittings. I do not think that I am alone in that view. Not only does the SNP take it, but so do many outside the House: the Institute for Fiscal Studies, the Institute for Government and the Chartered Institute of Taxation made a similar case in the report “Better Budgets: making tax policy better”, published in April 2016. Its authors pointed out that Finance Bills could be improved by oral evidence sittings, with little disturbance to the parliamentary timetable. I am sure that the Opposition would be more than happy to discuss parliamentary timetable issues with the Government.

[Dan Carden (Liverpool, Walton) (Lab)]

Andrew Tyrie, the former Chair of the Treasury Committee, also supports the idea of oral evidence sittings for the Finance Bill. Does my hon. Friend agree that there is widespread support for that across the House of Commons?

[Peter Dowd]

I think there is. I suspect that there are Members who would like to listen to the views of others besides parliamentarians on occasion. My hon. Friend makes an important point.

The authors of “Better Budgets” comment:

“This could be enhanced by ensuring effective liaison between the experts working to support the three committees that have a role in tax scrutiny—the Treasury Select Committee, which has hearings on the Budget and Autumn Statement”—

as was—

“the House of Lords Economic Affairs Committee and the Finance Bill Committee—to make sure that the results of pre-legislative work inform legislative scrutiny.”

That is not an unreasonable position to take.

As my hon. Friend said, the former Chair of the Treasury Committee made the same point, and the Committee’s current Chair, the right hon. Member for Loughborough (Nicky Morgan), followed it up in a letter to the Minister on 7 November, in which she wrote that she was not convinced by the point made—namely, that we should not have evidence sessions. She rightly pointed out that the consultation was limited, and that it is important to try to tease some of these issues out separately. She also added that she sees no reason at all why a Finance Bill Committee cannot hear oral evidence, even on clauses that have already been debated in Committee of the whole House. I would appreciate it if the Minister commented on that—I know he will.

There seems to be developing consensus across the House that oral evidence sessions on the Finance Bill would greatly improve the quality of parliamentary scrutiny of it. I think they would do good, but frankly even if they did not, they would certainly do no harm. It is time to move away from outdated and arcane parliamentary measures, especially in this area.

I am not in any way suggesting that the Government have anything to hide. I do not think it is a question of hiding; it is often a case of, “We have always done it this way; let’s carry on doing it this way.” Maybe it is time for a rethink on this matter. I exhort the Minister to give careful consideration to this. I suspect that we will not get much movement on the issue, because we would be breaking a relatively long-held tradition by having evidence sessions on the Finance Bill, but we have to start pushing the matter at some point, and this is as good a time as any.

--- Later in debate ---

[Peter Dowd]

I welcome the opportunity that my hon. Friend’s new clause presents to discuss the rate of income tax set by the Government, and its effect on the wider economy and on families.

At the general election, we clearly outlined our position: as a Government, we would not ask ordinary households to pay more. We would guarantee that there would be no rises in income tax for those earning less than £80,000 a year and no increase in personal national insurance contributions or the rate of VAT. Under our plans, 95% of taxpayers would be guaranteed to face no increase in their income tax contributions and everyone would be protected from any increase in personal national insurance contributions. Only the top 5% of earners would be asked to contribute more in tax to help fund our public services. That is in contrast to the Government, who have spent the last seven years offering tax breaks to the wealthy and large multinational corporations, and who continue to do so. That goes to the heart of the difference between the two parties.

In 2012, the former Chancellor declared—I have to say, with a certain amount of alacrity—that he was cutting the 50p rate by 5p. He claimed at the time that it would not cost the Exchequer a penny. In fact, analysis carried out by Unison shows that between 2013-14 and 2017-18, income tax cuts for those earning more than £1 million have saved the nation’s super-wealthy on average £554,000 each. Those tax cuts have cost the British taxpayer £8.6 billion over the last five years, in stark contrast to the concerns raised by my hon. Friend the Member for High Peak. The Government have not tackled that.

The money that has been lost could have paid for an extra 20,000 nurses—topical in the current climate, and crucial given the stresses and strains on the NHS; the lack of those 20,000 nurses is a proxy for the state of the NHS—as well as 10,000 extra police community support officers, 10,000 extra police officers and 20,000 newly qualified teachers for each of those five years. That money could have paid for 60,000 bursaries for nurses, midwives, other health professionals and so on. Instead, it was used to give a tax cut to the richest 15,000 taxpayers in the country—those who are least in need. In 2013, the cut to the top rate of income tax was the largest tax cut in the world, and as a result the level of income tax in the UK dropped from the fifth highest in the world to the 13th.

As if that cut was not enough, it was paired with cuts to corporation tax, the bank levy, inheritance tax and capital gains tax. Together, they amount to about £70 billion by 2022. In the meantime, public services are beginning to decay and atrophy. As I alluded to earlier, the NHS is in a bit of a state, and the police are in chaos and crisis. That is the context for our debate. Instead of the swashbuckling we see in the Chamber, we must deal with very precise issues.

It is fair to say that since 2010, the Government have made a political choice to pursue austerity at all costs. The hon. Member for Cheltenham may shake his head, but that is the reality. Let us go back to the phrase, “We’re all in it together”. It is demonstrably clear, and history will show, that we have not all been in it together. It does not matter how much hon. Members shake their heads or roll their eyes; that is the reality, and it is coming home to roost—not on me, but on our public services. We have a social contract with our people across the country to the effect that we will take care of everybody, not just those who have the most.

I will give the Government credit for the fact that they have pursued their policies persistently and doggedly. These policies and choices are the Government’s, not mine. The Government have persisted with them, and I think they have to fess up to that. The national debt has ballooned. The cost of household essentials is spiralling, with inflation at 3.1%; I think it is now 4.6% on food. Services across the country are being slashed and the OBR predicts a 17-year period of wage stagnation. That is the high cost of austerity, which is a political choice made without any economic basis.

My hon. Friend the Member for High Peak seeks to highlight the fact that the Government could have made different political choices, and I agree with her on that one. It is a fact that increases to the lower threshold of income tax are no longer targeted towards the poorest in our society, whose earnings have long since been below that threshold. That is the reality. Had the Government changed tack sooner, there would have been little need for the self-defeating cuts to the work allowances of universal credit—those allowances are by far the best way of improving work incentives for the poorest in our society and driving positive employment outcomes, as the new clause alludes to. That is why Labour set aside £10 billion to improve the Government’s failing universal credit system at the last election. We have also repeatedly called for change from all four Secretaries of State who have occupied the office in the past two years—there have been four so far and there might be another one; I think that includes the one yesterday, but it might not, as I do not keep up with the machinations that go on in Downing Street. The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) resigned over the variation, and he was the architect of the plan.

It is clear that, while the Government talk the talk on tackling inequality, they are not capable of matching those words with action. Time and again, the Chancellor has failed to improve work incentives under the programme by investing in the work allowances, and I have no doubt that our demands will continue to go unheard. All that is an opportunity for the Government to change tack, and they will not.

[Dan Carden]

My hon. Friend is my constituency neighbour in Bootle. He will know that while the tax threshold may have been raised under this Government, an alternative economy has been created in which people have insecure employment, precarious work—sometimes two, three or four jobs on the lowest pay—and no guarantee of a weekly or monthly income to pay the bills or raise a family. While we talk about figures, facts and economic outcomes in this place, the reality of people’s lives in north Liverpool, which I represent, and in Bootle, which he represents, is very different. Those words and numbers mean little to them.

[Peter Dowd]

My hon. Friend makes an important point. The whole point of a social security system in tandem with a tax system is to ensure that those who can afford to pay do so, and those who cannot afford to pay do not. We are now in a topsy-turvy world, where things are being twisted around and the people who can least afford it pay and the people who can most afford it do not pay. That is the direction of travel, and it is affecting people day in, day out. I agree with my hon. Friend.

Finance (No. 2) Bill

Debate between Dan Carden and Peter Dowd

Committee: 1st sitting: House of Commons
Monday 18th December 2017 Commons Chamber

[Peter Dowd]

I know that the hon. Gentleman was disappointed when he was unable to ask that question last week because the Whips wound up his ability to do so. The reality is that that is of absolutely no relevance to the matter in hand. It does not matter; it is a complete irrelevance. We are in danger of getting swamped by red herrings.

[Dan Carden]

On the topic of the shadow Chancellor, it was he who called for an independent assessment of the bank levy, the balance between fairness and competitiveness, and how the Government’s calculation was arrived at. Does my hon. Friend support the shadow Chancellor in that call?

[Peter Dowd]

Of course I am more than happy to support the shadow Chancellor, because that is the very point that we are trying to make—[Interruption.] I referred to red herrings a moment ago, and I hear Conservative Members mentioning Marxist herrings. That is very witty; it is nice to hear a witty comment from the Conservative side on occasions.

--- Later in debate ---

[Dan Carden]

I am grateful to my hon. Friend and constituency neighbour for giving way. There is a lot of displacement activity coming from Conservative Members in the form of interventions. This is the second debate I have attended on the Finance Bill in which not one Conservative Member has mentioned living standards, wages, public sector pay or any real life conditions.

I encourage my hon. Friend to carry on with his speech and to talk about the review that should take place into the bank levy and the real life consequences of this Tory Government’s policies.

[Peter Dowd]

I thank my hon. Friend for his advice, which I will take.

In 2017, we are still feeling the effects and economic consequences of the actions of the banks. Every day we are told by the Government that there is no money to invest and that austerity must continue, yet the Government have gone out of their way to undermine any remuneration from the banks that caused this sorry state of affairs in the first place.

Once again, the Opposition’s ability to amend this Bill is hamstrung and limited by the Government’s continued use of arcane and outdated parliamentary procedure. In football parlance, not only have they moved the goalposts but they have put boards across the goalmouths so that the Opposition cannot score any goals—a recreant act, if ever there was one, from a pusillanimous Government frightened of their own shadow.

By tabling new clause 1, we seek, first, to require the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims—Sir Roger, you will be glad that we are back on the bank levy. Secondly, we seek to establish the extent of the revenue effects of the cuts made in 2015. Thirdly, we seek to calculate how much would have been raised if the Government had stuck with Labour’s bankers bonus tax. Let us have the comparisons.

Such a report would shine a light on the Government’s malpractice in cutting frontline services while offering tax giveaways to the banks. It would require the Minister to reassure the House directly that certain banking practices are not simply in hibernation. “Once bitten, twice shy” is a fair assessment of most people’s views, including many in the sector itself. A by-product of the process would be to show that far more would have been raised under Labour’s bankroll tax.

We are also calling for a separate review of the changes introduced by clause 33 and schedule 9 and their overall impact on revenue and risky behaviour. That review would make the Treasury explain the rationale for further limiting the scope of the bank levy and forgoing billions of pounds while, at the same time, pushing for more cuts to departmental budgets and frontline services.

It is, of course, unsurprising and indicative of the Government that they have failed to keep track of the banks that regularly pay the levy and a full list of what they have paid. That is why, in the name of transparency—a very novel concept for the Government—we would ensure fiscal accountability. The Opposition have tabled an amendment that seeks to create a public register for the bank levy.

The Minister talks about commercial sensitivity. Well, that old chestnut is brought out time after time. When we supported the banks with billions upon billions of pounds, nobody talked about commercial sensitivity then. In this particular case, I am sure many in the banking sector would be happy to have such transparency. It is shocking that the Government consider this tax cut for the wealthy few to be a good use of nearly £5 billion.

Alongside demanding that the Government change course, we must also understand the impact of the lower levy rate introduced in 2011, as well as the revenue effects of lowering the levy in 2015. That, among other things, is what our amendment seeks to tease out.

Finance (No. 2) Bill

Debate between Dan Carden and Peter Dowd

2nd reading: House of Commons
Monday 11th December 2017 Commons Chamber

[Peter Dowd]

With the greatest respect, I am not the hon. Gentleman’s research assistant. I refer him to Labour’s proposals in “Funding Britain’s Future”. I know that he can read, so I suggest that he should go and have a look at that document.

The Brexiteers in the Cabinet continue to undermine any attempts to progress the talks and compromise with our European partners. We had a bizarre scenario today—everyone telling the Prime Minister how wonderful she was. Last week she was a basket case, as far as I could tell, but this week she is a wonderful woman. The Brexiteers are happy to continue to create economic uncertainty to the detriment of businesses and workers alike.

[Dan Carden (Liverpool, Walton) (Lab)]

Was my hon. Friend surprised, as I was, that the Financial Secretary did not mention wages once? He did not mention that real wages will not return to pre-crash levels for almost a decade. Do this Government care about people’s wages?

Public Sector Pay

Debate between Dan Carden and Peter Dowd

Monday 4th December 2017 Westminster Hall

[Peter Dowd]

Trying to find a Conservative who practically believes that—you are more likely to find, if you will excuse the expression, rocking horse dung, quite frankly. There is more chance of finding that.

[Dan Carden]

It seems that the Conservatives want to be seen to be softening the language on austerity and on pay caps, but in truth we see no action. Does my hon. Friend agree?