Oral Answers to Questions
Danny Alexander Excerpts(11 years, 8 months ago)
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Andrew Selous (South West Bedfordshire) (Con)
4. What steps he has taken to increase the amount of (a) lending and (b) equity financing to the real economy.
The Chief Secretary to the Treasury (Danny Alexander)
The funding for lending scheme is aimed at boosting bank lending to the real economy and has already led to some of the cheapest mortgage rates on record. Through the seed enterprise investment scheme, the Government provide generous tax relief for investment in firms with high growth potential, and we will deploy an additional £1 billion through the business bank.
Andrew Selous
Does the Chief Secretary agree that raising share capital is a vital way to help businesses grow, in addition to loan finance? Between 40 and 50 extra initial public offerings in technology companies could come to the UK in the next six months if we get conditions right, so in the forthcoming Budget will the Treasury do all it can to help businesses access share capital?
Danny Alexander
I certainly agree that there is a need to diversify the range of funding sources, including the one my hon. Friend describes, particularly for small businesses and businesses with high growth potential. That is the purpose of the seed enterprise investment scheme. The business bank has a remit to try to diversify the range of sources of finance available for small businesses, because in this country we are too dependent on solely bank finance. I shall certainly consider what my hon. Friend said.
Dr William McCrea (South Antrim) (DUP)
Small and medium-sized businesses are still finding it difficult to get banks to lend them essential finance. What further steps can the Minister take to reconnect banks with the reality of business? Up to now, it seems that banks have been a law unto themselves.
Danny Alexander
The hon. Gentleman makes a very good point. That is the purpose of a number of the schemes I mentioned earlier. The funding for lending scheme is designed to get banks to lend more to small businesses, and a complaints process has been put in place, allowing independent adjudication when cases go wrong. I encourage the hon. Gentleman to refer constituents to the scheme, which has overturned bank decisions in a large number of cases.
Mr Julian Brazier (Canterbury) (Con)
In welcoming the funding for lending scheme and the other measures my right hon. Friend mentioned, may I urge him to break up and sell off as soon as possible the publicly owned banks, so that we have more competition on the high street, and constituents of mine who are unable to borrow on good projects have more to choose from?
Danny Alexander
It is right that we own large chunks of two banks, because that was necessary to clear up the mess of the under-regulated, overheated banking system that was created under the present Opposition when the shadow Chancellor was City Minister. We are working as hard as we can to get those banks in good order and we are making progress in the direction that my hon. Friend suggests.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
The experience of small businesses across the UK does not match the rosy picture painted by the Chancellor earlier or by the Chief Secretary to the Treasury. Last week we learned that, despite the funding for lending scheme, net lending to businesses was down £4.5 billion in the last quarter. Will the Chancellor now act on Labour’s calls to reform the scheme immediately so that small and medium-sized enterprises get the funding that they so urgently need?
Danny Alexander
I am sorry that we did not hear the apology for the mess that was made in the financial system by the Opposition when they were in office. Many of the steps that we are taking are necessary to repair the damage that the hon. Lady and her Front-Bench colleagues did to the financial system and the banking system. She should also have noted that net lending to the real economy increased by £2.5 billion in January 2013. The schemes that we are putting in place are making a difference, but we are facing a continuing very challenging situation and that is why we will continue to look for further things to do to help small businesses.
Mrs Linda Riordan (Halifax) (Lab/Co-op)
5. What recent estimate he has made of unemployment levels in Halifax.
The Chief Secretary to the Treasury (Danny Alexander)
The claimant count in Halifax in December 2012 was 4,328. The UK has a lower rate of unemployment than either the US or the euro area and, as the Chancellor said earlier, we have created more than 1 million jobs in the private sector since 2010.
Mrs Riordan
I thank the Minister for that reply, but in reality the Government’s record on unemployment in Halifax since 2010 is that the number out of work has risen from 7.3% to 9.2%. Halifax cannot sustain those levels of unemployment for much longer. Can the Minister understand how angry people are? What action is he taking on unemployment in Halifax?
Danny Alexander
Of course I recognise what the hon. Lady says and that unemployment is a concern right across our economy. Unemployment rates across the economy have been coming down. She refers to the experience in her constituency. Since 2008-09 the number of apprentices in Halifax doubled, so some of the measures that the Government are taking, such as the investment in apprenticeships and the Work programme, are making a difference to her constituents. The most important thing that we can do to continue to support unemployment moving in the right direction is to maintain the credible fiscal policy that this Government have put in place, and not give up on it, as the Opposition would.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
6. What recent assessment he has made of progress on the Government’s target of public sector net debt falling as a share of GDP in 2015-16.
Duncan Hames (Chippenham) (LD)
9. What recent assessment he has made of the effect of alcohol duty and fuel duty on the cost of living and household budgets.
The Chief Secretary to the Treasury (Danny Alexander)
As a result of Government actions on fuel duty, from April average pump prices will be 13p per litre lower than if we had implemented the previous Government’s plan to squeeze motorists, and will remain at least 10p per litre lower over the remainder of the Parliament, giving real help to millions of families and small businesses.
Duncan Hames
I certainly welcome the efforts that the coalition Government have already made, but with the price of fuel now once again nudging £1.50 per litre in some places, does my right hon. Friend recognise the anxiety that the continuing prospect of rises in fuel duty causes people in rural parts of Wiltshire, as much as in the highlands of Scotland, who find themselves with little alternative to running a car?
Danny Alexander
As my hon. Friend knows, as a fellow rural MP I fully understand the pressures he describes, which is why we have taken the action I set out in my previous answer. He will also know that the pressures on the public finances remain substantial. I would remind him and the House that 25 million working people in this country will see the largest ever increase in their income tax personal allowance, meaning that the income tax cuts delivered by this Government will amount to £50 a month from April.
Albert Owen (Ynys Môn) (Lab)
One of the biggest hits on petrol prices has been the VAT increase. The hon. Member for Chippenham (Duncan Hames) is absolutely right that there are now record prices at the pumps. Will the Minister consider temporarily lowering the VAT rate, to help hard-working families across the country?
Danny Alexander
With all respect to the hon. Gentleman, I am not sure that he has reflected upon the substantial fuel duty escalator that was baked into the public finances when his party was in office. We have dealt with those increases on a case-by-case basis and reduced fuel duty by a penny. I think that is the right action to support motorists, families and small businesses alike.
Alun Cairns (Vale of Glamorgan) (Con)
16. Does my right hon. Friend share my concern that minimum unit pricing for alcohol could hit responsible drinkers from some of the most deprived families?
Danny Alexander
That matter is under consideration, and announcements will be made in due course.
Mr Russell Brown (Dumfries and Galloway) (Lab)
But surely the Minister cannot run away from the fact that the largest single increase in fuel prices at the pumps was the VAT increase. Also, over the past two weeks the weakening pound has driven up prices at the pumps. That needs to be seriously considered.
Danny Alexander
I do not run away from any of the decisions the Government have made, and the hon. Gentleman should not run away from the fact that the ratchet on fuel prices planned by his party in the last Parliament, which was baked into the public finances, would have dwarfed the increase to which he refers.
Greg Mulholland (Leeds North West) (LD)
Turning to the other escalator, the nonsensical beer duty escalator, I can give my right hon. Friend good news: there are now around 1,000 breweries in this country, the highest number for 70 years, because of the explosion in micro-breweries due to fairer and lower beer duty. Now that the Government are rightly going to tackle overcharging by the pub companies, which will allow more access to market for the wonderful micro-breweries, may we also have some joined-up thinking with the abolition in the Budget of the beer duty escalator, which simply does not make sense?
Danny Alexander
I certainly share my hon. Friend’s admiration for micro-breweries: one in my constituency has recently produced a beer called Ginger Rodent, which sold out in its first run. I look forward to more sales when it is in the House of Commons bar in June. As for the rest of his question, I take it as a Budget representation.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
11. What recent estimate he has made of the extent to which the rate of increase of average earnings has kept in line with the rate of consumer price inflation.
Nick Smith (Blaenau Gwent) (Lab)
18. What recent progress has been made on implementing the national infrastructure plan.
The Chief Secretary to the Treasury (Danny Alexander)
We have made significant progress in implementing the national infrastructure plan and published an update in December’s autumn statement alongside the latest version of the infrastructure pipeline. A further detailed delivery update on the top 40 infrastructure projects will be published alongside the Budget.
Nick Smith
Why did the Government cut infrastructure investment by £12.8 billion more than the plans they inherited?
Danny Alexander
The hon. Gentleman will know that in the 2010 spending review and the 2011 and 2012 autumn statements, we increased spending on infrastructure compared with the plans for capital spending that we inherited from the previous Government. Consequently, investment in infrastructure in this country is higher as a share of GDP over this Parliament than it was on average during the previous Government’s time in office.
Steve Reed (Croydon North) (Lab)
T2. Is it not absurd that the Liberal Democrats, who claim that the mansion tax on homes worth more than £2 million is their policy, are poised to vote against a motion that argues for precisely that?
The Chief Secretary to the Treasury (Danny Alexander)
I note that the shadow Chancellor did not refer to his opportunistic motion this afternoon, because we would have had a chance to refer to Labour’s record of welfare for the wealthy during their time in office: a lower rate of corporation tax than for the person who cleans the offices of the private equity fund manager; a lower top rate of tax of 45p during Labour’s 13 years in office; loopholes in the stamp duty system; and the 10p tax rate fiasco. We will take no lessons on tax fairness from the Labour party, and we will vote for our amendment that confirms Liberal Democrat support for a mansion tax.
Andrea Leadsom (South Northamptonshire) (Con)
Will my right hon. Friend update the House on what measures the Government are taking to put right the unbelievably poor regulation by the previous Government, and say what the permanent bank levy will do to improve revenues to the Exchequer, over the bank bonus implemented by the previous Government?
Bridget Phillipson (Houghton and Sunderland South) (Lab)
T9. Financing delays are holding up the Government’s new schools rebuilding programme. What steps is the Minister taking, together with colleagues in the Department for Education, to secure financing for this scheme and to support our construction industry, which is under real pressure at the moment?
Danny Alexander
The House will know that the Department for Education has already announced that the first 41 highest priority schools are being funded by direct capital. We will be in a position soon to make a statement about the rest, and we have announced recently additional investment in school places to expand school buildings in areas under pressure. All that adds up to an £18 billion investment programme in schools over the course of this Parliament, which I think is a credit to the Government.
Graham Evans (Weaver Vale) (Con)
Does my right hon. Friend agree that infrastructure projects such as the Mersey Gateway bridge, the northern rail hub and High Speed 2 are good news for my constituents, good news for greater Cheshire, and good news for the north of England as a whole?
Procurement and Tax
Danny Alexander Excerpts(11 years, 9 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The Minister for the Cabinet Office and I are today making available for comment a draft of new rules that will allow Government Departments to ban companies and individuals that take part in failed tax avoidance schemes from being awarded Government contracts. The discussion document and draft guidance have been deposited in the Libraries of both Houses and are available through the HMRC website.
The rules, which are intended to come into effect on 1 April 2013, are outlined in draft guidance published for consultation by the Government. They will require potential suppliers to notify contracting Departments if any tax return has recently been found to be incorrect as a result of, among other factors:
HMRC successfully challenging it, including under any targeted anti-avoidance rule (TAAR), the new general anti-abuse rule (GAAR); or
A failed avoidance scheme which the supplier was involved in and which was, or should have been, notified under the disclosure of tax avoidance scheme (DOTAS) rules.
Suppliers will also be required to disclose if they have been convicted for tax related offences or have been subject to a penalty for civil fraud or evasion. Departments will be able to disqualify any bidder meeting these criteria from the procurement process.
Following their introduction, the rules will also enable Departments to include a new clause in contracts that allows them to terminate an agreement if a supplier subsequently breaches the new tax compliance obligations. The supplier will be contractually obliged to tell the contracting Department if their status changes after the award of the contract.
The rules have been designed to operate within the EU procurement directive and Public Contracts Regulations 2006, which allow procuring authorities to apply tax and propriety-based criteria at the selection stage. In particular, a potential contractor can be asked whether it has fulfilled all its obligations relating to the payment of taxes.
These new rules are another significant tool as they will provide a framework to enable Government Departments to say no to firms bidding for Government contracts where they have been involved in failed tax avoidance.
Public Service Pensions (Up-Rating 2013)
Danny Alexander Excerpts(11 years, 9 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
Legislation governing public service pensions requires them to be increased annually by the same percentage as additional pensions—state earnings related pension and state second pension. Public service pensions will therefore be increased from 8 April 2013 by 2.2%, in line with the annual increase in the consumer prices index up to September 2012, except for those public service pensions which have been in payment for less than a year, which will receive a pro-rata increase.
Oral Answers to Questions
Danny Alexander Excerpts(11 years, 9 months ago)
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Mr Marcus Jones (Nuneaton) (Con)
5. What steps he is taking to help people with the cost of living.
The Chief Secretary to the Treasury (Danny Alexander)
The Government continue to take steps to support households. The personal allowance will be increased to £9,440 in April 2013 to support hard-working individuals. The cash increase in that year is the largest ever. The 3p fuel duty increase planned for January 2013 has been cancelled, as a result of which fuel duty will have been frozen for two and a half years.
Henry Smith
I thank my right hon. Friend for that answer and warmly welcome the fact that more than 1,700 people in my constituency have been taken out of paying income tax altogether by the raising of the threshold, and that more than 42,000 people in my constituency have had their income tax reduced as a result. May I urge him to be bold and go further?
Danny Alexander
I am grateful to my hon. Friend for those comments. We are increasing the tax allowance towards the bold and ambitious goal of £10,000, which Conservatives and Liberal Democrats have joined together in coalition to deliver. We will certainly be bold and ambitious, and I will take his comments as a Budget submission.
Mr Marcus Jones
For the third year running, the Government have provided additional funds to councils to allow them to freeze council tax, which doubled under the Labour Government. I am aware that Warwickshire county council intends to freeze council tax, but will my right hon. Friend join me in urging Nuneaton and Bedworth borough council and North Warwickshire borough council, which are Labour controlled, to get on board, freeze council tax and give the hard-working people in my constituency a break?
Danny Alexander
My hon. Friend makes an important point. We have provided funding to local authorities to enable the council tax freeze to be delivered. Of course, councillors in those areas will be answerable to their constituents if they fail to deliver the substantial financial benefit that that offers. He is right to say that council tax doubled during the Labour party’s time in office.
Geraint Davies (Swansea West) (Lab/Co-op)
Does the right hon. Gentleman accept that the cost of living increases have hit the poorest hardest, including the man I mentioned last week in Prime Minister’s questions? Should we not therefore follow the US in taxing the top 2% more, having net investment and generating an extra 1% growth, rather than hitting the poor hardest?
Danny Alexander
In that case, I am sure that the hon. Gentleman will welcome the fact that the wealthiest in society are paying more in every year of this Government’s time in office than they ever did under the Labour party.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Analysis by Citizens Advice shows that the Chancellor’s cuts to tax credits and benefits will
“swamp any gains from the change in personal tax allowances for almost all low income households…and many middle income families”.
How can that hit on working families be justified on the same day as millionaires are getting a tax cut?
Danny Alexander
The hon. Lady will know that working people in this country are net beneficiaries of the measures announced in the autumn statement. I would have thought that she would welcome the fact that 2.2 million Scots will gain from the increase in the personal allowance. It is a massive policy to ensure that the working people of this country have more of their own money back in their pockets to use for themselves.
Jeremy Lefroy (Stafford) (Con)
7. What progress HM Revenue and Customs has made in closing loopholes in the tax system.
Dr Julian Huppert (Cambridge) (LD)
10. How much VAT was paid by (a) sixth-form colleges and (b) further education colleges in 2012.
The Chief Secretary to the Treasury (Danny Alexander)
Her Majesty’s Revenue and Customs does not collect data on the VAT paid on individual goods or services at a sufficient level of detail to indentify the amount paid by sixth-form colleges and further education colleges. VAT costs, like all other costs, are taken into account as part of the up-front funding allocation.
Dr Huppert
Sixth forms and further education colleges such as Hills Road and Long Road sixth-form colleges and Cambridge Regional college do excellent work. However, they face a large VAT burden—some £300,000 for sixth-form colleges and well over £1 million for Cambridge Regional college—that schools do not face, as well as receiving less funding than the school sector. Will my right hon. Friend agree to investigate whether that anomaly can be corrected, so that sixth-form colleges and FE colleges can have a level playing field?
Danny Alexander
As my hon. Friend will know, when we took office we found a situation in which sixth-form colleges were considerably less well funded for that group of pupils than schools. We are taking steps, year by year, to equalise the funding arrangements, and we will look again at that in the spending round in the first half of this year.
Kelvin Hopkins (Luton North) (Lab)
As a governor of Luton sixth-form college for 20 years and a former teacher of A-levels, I am convinced that sixth-form colleges are the most successful institutions in our education system. Is it not time for the Government to stop punishing them for their success?
Danny Alexander
I dare say that the hon. Gentleman’s comments on sixth-form colleges will be echoed by many Members of the House. That is why, as I said in answer to the earlier question, the Government are taking steps year by year to equalise the funding arrangements. I am sure he will welcome that.
Valerie Vaz (Walsall South) (Lab)
11. What recent assessment he has made of the extent of underemployment in the work force.
The Chief Secretary to the Treasury (Danny Alexander)
If the hon. Lady were concerned about child care, I would have thought she would welcome the fact that under this Government the free offer for three and four-year-olds has been increased from 12.5 hours to 15 hours and that this Government have put in place a new offer for the 40% most disadvantaged two-year-olds for 15 hours’ free nursery education at that age. We will bring forward the proposals to which she refers very shortly, and I hope that when she sees them, she will welcome them.
Jane Ellison (Battersea) (Con)
T8. Will the Chancellor update the House on a subject on which all Members receive a great deal of correspondence—funding for small businesses? Will he in particular update us on the funding for lending scheme and other similar initiatives?
Pamela Nash (Airdrie and Shotts) (Lab)
T6. Families living with a disabled member are going to be hardest hit by tax credits and benefit cuts. That is not according to a third-party briefing, but according to the Government’s own assessments. What do this Government have against disabled people in this country?
Danny Alexander
I think that is a very poor way to phrase the question, especially when the hon. Lady will know that disability living allowance payments, for example, are continuing to be uprated in line with inflation, even as we have to take more difficult decisions on other parts of the economy.
Jeremy Lefroy (Stafford) (Con)
T9. A recent article in MoneyWeek suggested that raising the minimum wage would cut the cost of tax credits and benefits and increase employment. What work has the Treasury done on the interrelationship between the level of the minimum wage, the cost of benefits, tax revenues and employment levels?
Parliamentary Scrutiny of Government Expenditure
Danny Alexander Excerpts(11 years, 11 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
In September 2010, the hon. Members for Gainsborough (Mr Leigh) and for Southport (Dr John Pugh) were appointed as financial advisers to HM Treasury. The hon. Member for Gainsborough stepped down from the role of financial adviser following his appointment as Chair of the Public Accounts Commission in 2011, and the hon. Member for Southport followed suit. I am grateful for the work they undertook in this capacity.
The MPs prepared a report in 2011 on how parliamentary scrutiny of Government expenditure could be improved. Many of the recommendations contained in the report fall within the responsibility of Parliament. However, the Treasury is working to implement the recommendation that the Government take forward plans for developing mid-year reporting by individual Departments. Work on mid-year reporting is underway and, subject to satisfactory progress, we plan to introduce mid-year reporting from 2013-14.
A copy of the report is being placed in the Libraries of both Houses.
Oral Answers to Questions
Danny Alexander Excerpts(11 years, 11 months ago)
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Sheila Gilmore (Edinburgh East) (Lab)
6. What assessment he has made of the effectiveness of the funding arrangements which he agreed with the Secretary of State for Work and Pensions for the Work Programme.
The Chief Secretary to the Treasury (Danny Alexander)
The Work programme is the biggest single payment-by-results programme Great Britain has ever seen. The funding arrangements I agreed with the Secretary of State for Work and Pensions ensure that providers are paid to find sustained job outcomes for those who are or are at risk of being long term unemployed. For the very first time, providers are paid in part through the benefit savings that they generate.
Sheila Gilmore
The Chief Secretary wants us to look at the cheapness of the scheme to providers, but buying cheap can be a false economy if the product does not work. The price here is being paid by people staying in long-term unemployment, not getting jobs and still being on benefit. Is not the Work programme a failure?
Danny Alexander
No, I do not believe it is. The hon. Lady refers to costs, and she will know that the flexible new deal, which the Work programme replaced, cost £7,495 per job outcome; that compares with costs of about £2,000 under the Work programme. It is a great deal more cost-effective. The hon. Lady will also be aware that 56% of those first Work programme starters have come off benefits and that up to September this year, there have been 200,000 job entries, as reported by providers, so there is a sense of progress in the Work programme, too.
Andrew Bridgen (North West Leicestershire) (Con)
Does my right hon. Friend agree with the CBI, which has said that the Work programme has already helped to turn around the lives of thousands of people and is delivering real value for money for the taxpayer?
Danny Alexander
Yes, I do agree. The fact that the job outcomes are more stretching than previous schemes before providers get paid and that they are paid only for results—not just for activity—of course means that it is harder for them to start with, but the fact that there have been 200,000 job entries under the scheme up to September 2012 speaks for itself.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
8. What recent assessment he has made of the effect of the Government’s fiscal policies on the level of long-term youth unemployment.
Graham Evans (Weaver Vale) (Con)
15. What steps he is taking to reduce the cost of living.
The Chief Secretary to the Treasury (Danny Alexander)
The Government continue to take steps to support households. We will increase the personal allowance further to £9,440 in April 2013 to support hard-working individuals. That cash increase of £1,335 in 2013-14 is the largest ever. We have also cancelled the 3p fuel duty increase that was planned for January, and announced a third council tax freeze and a two-year reduction in the cap on rail fares.
Sir Tony Baldry
I just want to make sure that I have got my figures right. Am I correct in thinking that under the Labour Government fuel duty rose by 20p, and that had they remained in power, they would have planned for it to rise by 13p more than it will rise under this Government?
Danny Alexander
As usual, my hon. Friend has his facts absolutely right. The action taken on fuel duty by this Government means that in April next year, pump prices will be approximately 13p a litre lower than they would have been had the last Government remained in office.
Danny Alexander
Ensuring, through increases in the personal allowance, that low and middle-income workers in particular can keep more of the money that they earn rather than handing it over to the Exchequer helps those people to deal with pressures related to the cost of living. I can certainly assure my hon. Friend that I will continue to push that policy, along with my Liberal Democrat and Conservative colleagues. At the time of the last general election I made a key promise to lift the income tax threshold to £10,000, and I intend to deliver that promise as soon as possible. [Hon. Members:“ Like the promise about tuition fees?”]
Geraint Davies
The incomes of the top 10% in Britain have risen by 11% in the last two years, but we heard in the autumn statement that they would be cut by only 0.5%. Does Chief Secretary not agree that those people are in a fantastic position to take on increases in the cost of living, unlike the poorest 40%, who are being unnecessarily smashed by this Government?
Danny Alexander
The hon. Gentleman should recognise that the top 10% make up the part of the population that is contributing most to dealing with the financial problems caused by the Labour party—the mess that we are trying to clean up—both in cash terms and in terms of a share of their incomes. He should welcome the fact that this Government are doing more than any previous Government to ensure that the wealthiest in society contribute most to sorting out the financial problems that he and his colleagues created.
Alison Seabeck (Plymouth, Moor View) (Lab)
In the interests of transparency, will the Chief Secretary and his colleagues make public an impact assessment relating to child poverty before the welfare uprating Bill is laid before Parliament, not least because it would help us to understand the impacts of the cost of living and benefit freezes on low-paid working families?
Danny Alexander
The Department for Work and Pensions will, of course, publish an impact assessment in the normal way when the Bill is published.
Stephen Williams (Bristol West) (LD)
The most significant way in which any Government can help people with their household budgets is to put more money in their pockets and purses, particularly money that they have earned themselves and which is subject to taxation. Does the Chief Secretary agree that one of the most important things that the coalition Government will do is lift millions of people out of income tax altogether, and, by April next year, deliver a broad income tax cut of £600 a year in relation to the level in April 2010?
Danny Alexander
Like my hon. Friend, I want to build a strong economy and a fair society where everyone has a chance to get on in life. The commitment to raise the income tax threshold was a commitment that he and I and all our colleagues made at the general election, and we are delivering on it in Government. There is a tax cut for working people cumulatively over this Parliament, and next year it will be worth £50 a month to people on low and middle incomes. That is real help for hard-working families at what is a difficult time.
Mr William Bain (Glasgow North East) (Lab)
Average wages in Scotland have fallen by 7.4% under this Chief Secretary, and from next year 182,000 couple-families in work with children will stand to lose money through tax credits. Why are this Government always standing up for millionaires while hammering the strivers?
Danny Alexander
I will not take any lectures on millionaires from the Labour party, which thought it appropriate that a millionaire private equity fund manager should pay less on his income than the person who cleans his office. Labour’s record on taxing the wealthy, dealing with tax avoidance and closing tax loopholes is nothing to be proud of, and the hon. Gentleman should stop raising that point.
Stephen Gilbert (St Austell and Newquay) (LD)
11. What steps he is taking to discourage tax avoidance by wealthy people.
Dr Julian Huppert (Cambridge) (LD)
16. What assessment he has made of the importance of capital infrastructure projects in helping rebalance the economy.
The Chief Secretary to the Treasury (Danny Alexander)
Investment in infrastructure networks is a major determinant of growth and productivity, but historically such investment in this country has not kept up with the needs of a growing population. That is why this Government have increased capital expenditure compared with the previous Government’s plans, including with the extra capital we announced last week. In fact, public investment as a share of GDP is now higher on average in this Parliament than it was under the previous Government.
Dr Huppert
I thank my right hon. Friend for that, and I was delighted to see in the autumn statement extra capital investment, especially in housing, rail, cycling, science and broadband, particularly in Cambridge. What plans does he have to improve the energy infrastructure, including storage, to provide more certainty for investors?
Danny Alexander
That is an extremely good point, because on 29 November we introduced the Energy Bill, setting out the contracts for difference, which will deliver a stable financial environment of incentives, particularly for investment in renewables. Alongside that agreement, we set out the level of support consumers will pay for low-carbon generation—the so-called levy control framework—which will triple support for renewables between now and 2020, ensuring a great deal of investor confidence in that area. Along with gas investment, as set out in the autumn statement, that will help to bring forward massive investment that this country needs.
Diana Johnson (Kingston upon Hull North) (Lab)
18. There is a tendency for coalition infrastructure schemes to be news-ready many years before they are shovel-ready. Another tendency is unfairness; three out of the four road schemes in the autumn statement last week were in the south, including one helping port access in Thurrock. When is the port city of Hull going to get the A63 upgrade that is central to our regeneration?
Danny Alexander
The hon. Lady ought also to have noted that the autumn statement announced the complete dualling of the A1 between London and Newcastle, which is a very important scheme, and the upgrades for the A160 to Immingham, a very important port on the Humber estuary. That work has been accelerated under the new scheme introduced by the Department for Transport. I would have thought that she would welcome that, rather than criticise it.
Jim McGovern (Dundee West) (Lab)
17. What steps he is taking to tackle interest rate swap mis-selling.
Tristram Hunt (Stoke-on-Trent Central) (Lab)
T2. May I welcome the funding in the autumn statement for building future schools, or what we call Building Schools for the Future? May I also welcome the extra allowances for capital investment, or what we call capital allowances? Why did we have to wait two years and have a double-dip recession for those good Labour policies to return to government?
The Chief Secretary to the Treasury (Danny Alexander)
The hon. Gentleman will recall that the Building Schools for the Future scheme was expensive and inefficient and that we had to scrap it because it was unaffordable. It was one of the many unaffordable promises that he and his colleagues made before the election in order to get people’s hopes up, yet still the former Chief Secretary left a note stating, “There’s no money left.”
Mr David Ruffley (Bury St Edmunds) (Con)
It is manifestly in the interests of the British taxpayer that foreign sovereign wealth funds invest in national infrastructure projects. Will the Chief Secretary indicate what progress is being made in that respect?
Danny Alexander
Significant progress is being made in that respect. We have seen significant investment in Thames Water, for example, by overseas investment funds. We announced in the autumn statement some funding for junction 30 of the M25, which is part of ensuring a significant investment from people in Dubai in a major port facility near London. No doubt there will be further such announcements to make in future.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
In my constituency, the claimant count is just short of 3,000, double what it was five years ago. Does the Treasury accept that it is the rise in long-term unemployment and the failure of the Work programme that has resulted in the benefits bill rising so much this year?
Danny Alexander
No, I do not accept that. As I said in answer to the hon. Member for Edinburgh East (Sheila Gilmore), who has taken a great interest in these matters, the Work programme is a great success in getting people off benefits and into job starts, but not necessarily through job outcomes. Over 1 million jobs have been created in the past two and a half years, so that there are now a record number of people in employment in this country. He should welcome that, not criticise it.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
T4. Thanks to Jobs Growth Wales, an innovative start-up in my constituency called Boulders Climbing Centre, which I recently visited, has taken on a new member of staff. Will Ministers join me in congratulating the Welsh Government on their scheme and explain why they cancelled funding for the future jobs fund?
Danny Alexander
The future jobs fund was a massively expensive programme that saw more than half of participants return to benefit after completing it, and it was largely in the public sector. Of course I welcome the scheme that the hon. Gentleman mentioned; if it has created a job in his constituency, that is welcome. The truth is, though, that the biggest problem we have in this country is clearing up the mess that Labour left, and that is why we have to find better, more efficient ways of doing things.
Mr Brooks Newmark (Braintree) (Con)
The Treasury has today made a written statement alerting Parliament to a newly discovered error made by Northern Rock—an error made, I hasten to add, under the previous Government, starting in 2008—that could cost the taxpayer hundreds of millions of pounds. Does my right hon. Friend agree that this is yet another example of the previous Government’s total failure to regulate the banking system properly costing this country dearly? Could he—[Interruption.]
The Economy
Danny Alexander Excerpts(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (Danny Alexander)
I beg to move,
That this House has considered the matter of the economy.
I am pleased that this House has the opportunity to discuss the economic challenges that our country faces. The statement delivered by the Chancellor last week was a statement for the world as it is, not a statement about the world as we had hoped it would be, but in it we took the tough but fair decisions needed to fix the mess that we inherited, by bringing the deficit down, maintaining our international credibility and creating a platform for jobs and growth.
We ensured that the burden was fairly shared, asking those who have the most to contribute the most, bringing the cost of our welfare system under control and further squeezing Whitehall bureaucracy. We also addressed issues to make life easier through these tough times by cutting income tax and fuel duty and putting more money back into the pockets of working families.
That is why the autumn statement has been welcomed widely by the CBI, the British Retail Consortium, the Institute of Directors, the British Chambers of Commerce, the Federation of Small Businesses, the Engineering Employers Federation and many others that have the best interests of the British economy at heart. We inherited a mess, but we are clearing it up and building a stronger economy and a fairer society so that every person in Britain is able to get on in life.
As the Chancellor made clear last week, the road to recovery is longer than we had hoped, but this Government are committed to finishing the job and strengthening the British economy. Despite the mess we inherited and despite the headwinds from the eurozone and the impact of the banking crisis, we are making progress. The deficit has been cut by a quarter and, as the shadow Chancellor himself rightly observed last week, the deficit is falling in each and every year of the forecast. More than 1 million private sector jobs have been created and nearly 1 million young people have started apprenticeships, and exports of goods to major emerging markets have doubled since 2009.
Mr David Hanson (Delyn) (Lab)
Two years ago I sat on the National Insurance Contributions Bill Committee, which considered the national insurance contributions holiday. The Government then promised that some 400,000 employers would take up that scheme, but we were told by the Exchequer Secretary in a parliamentary answer today that only 20,000 have done so. If the Chief Secretary is not even good enough at forecasting the development of his own schemes, how can we trust his forecasts for the economy?
Danny Alexander
The right hon. Gentleman is right that take-up of that scheme has been much lower than we had expected. I think, therefore, that he would welcome the additional measures that we have taken in the autumn statement to support small businesses by, for example, continuing the small business rates relief holiday for another 12 months. The additional increases in capital allowances, which are particularly directed towards small and medium-sized enterprises, are precisely designed to encourage small businesses to invest.
Danny Alexander
I want to make some progress first. I know that many Members want to speak and there is already a time limit on speeches.
The forecasts are those of the independent Office for Budget Responsibility, and I do not think that the Labour party’s trend of attacking it is welcome.
Gavin Shuker
Will the Minister confirm that, under any measure, this Conservative-led Government will borrow more in the five years of this Parliament than Labour did in 13 years?
Danny Alexander
It is transparent from the figures presented by the Office for Budget Responsibility that borrowing is higher than it forecast in 2010. If the hon. Gentleman was being fair-minded, he would also draw the House’s attention to the analysis by the Institute for Fiscal Studies, which suggests that if we had continued with the path of spending set out by the previous Chancellor, we would be borrowing a further £200 billion —something that the country can ill afford.
Alison Seabeck (Plymouth, Moor View) (Lab)
The OBR, which is independent and gives interesting forecasts, has said that the unemployment count is likely to rise in each of the next four years. Will the right hon. Gentleman explain why that is?
Danny Alexander
The OBR has forecast that unemployment will be slightly higher next year and then fall in subsequent years. It also forecasts a rise in employment over that period. If the hon. Lady is looking for variances between reality and the OBR’s previous forecasts, it is fair to say that unemployment is now considerably lower than the OBR forecast a year ago. I hope that she welcomes that fact.
It is true that the OBR has lowered its growth forecasts and that the recovery is slower than we would have liked, but we are on the right road and the announcements that we made last week will help the country to make further progress along it. I should add that the OBR does not attribute the slower growth to the Government’s fiscal policy, but to external pressures from the eurozone and other parts of the world, and to the long-term impact of the financial crisis, especially on our banking system. If the Labour party wants to accept the OBR’s figures, it also needs to accept its analysis.
As the House knows, savings had to be found and we have decided to reduce departmental resource budgets by 1% next year and 2% the year after. We are confident that that will not impact heavily on front-line services. For example, according to the recently published “Digital Efficiency Report”, if all Departments continued to move their transactional services online and became digital by default, we could save £1.2 billion over the next two years. If all Departments moved to the property occupation benchmark of 10 square metres per person, they could save a further £300 million each year.
Emily Thornberry (Islington South and Finsbury) (Lab)
Does the right hon. Gentleman agree with the following analysis? Two and a half years ago, he asked for five years to balance the books, but without a plan for jobs and growth, he needs another five years. He still does not have a plan for jobs and growth, so it will always be five years.
Danny Alexander
No, I do not agree with the hon. Lady’s analysis.
There are still savings to be made in day-to-day administration costs. I am confident that the civil service can continue to produce more for less and provide excellent value for money to the public.
The welfare system makes up more than £200 billion of public spending and cannot be immune from the effort to deal with the deficit. As a result of the financial pressures that we are facing, we have had to take the difficult decision that we can uprate working-age benefits by only 1% in the coming three years. That figure represents a rise each year, but it will be below the rate of inflation. It is not as high as some may have expected, but it is what the country can afford. That is a tough choice, but an even-handed one, and it avoids some of the more punitive proposals that have been floated in recent months.
Most benefit claimants would love to work and are trying their best to find a job. However, we need to recognise that in-work incomes have risen at half the rate of benefits since the financial crisis. Those who are in work will be better off thanks to our income tax cuts. When we are increasing public sector pay by only 1%, it would simply not be fair to increase the benefits of those who are out of work at a higher rate than those we employ to work for us.
Even while making those cuts, we have taken steps to protect those who are most in need. That is why disability living allowance and other benefits specifically for the most disabled and their carers will continue to increase in line with inflation. It is also why the basic state pension will increase by 2.5% next April, which is higher than either earnings or prices, honouring our commitment to the triple lock. The application of the triple lock means that there will be a better rise in the basic state pension than pensioners have seen before. Pensioners will see a cash increase of £2.70 a week in the basic state pension in 2013-14.
While we are protecting those in need, it is only right that we ask the most from those who earn the most. That is why the higher rate threshold for personal income tax will also be uprated by only 1% in 2014-15 and 2015-16. It is also why the annual allowance for pensions tax relief will be reduced from £50,000 to £40,000, and the lifetime allowance from £1.5 million to £1.25 million. That will raise more than £1 billion a year by the end of the period and is something for which I, for one, have argued for quite some time. The savings from Whitehall, welfare and the wealthy, and the targeted tax rises, are helping to cut the deficit in the medium term and to boost growth now.
Our capital spending plan will see £5 billion switched from current spending to investment in infrastructure, providing a better connected UK on roads, on rails and online. We will provide £350 million for the regional growth fund, enabling it to continue its success in creating jobs throughout the country. We are rolling out rural broadband across the country and have announced £50 million for the second wave of super-connected cities across the UK from Portsmouth to Perth, via Newport and Northern Ireland.
We have announced funding for a number of road building and maintenance projects. We will be dualling the A30 in Cornwall—an improvement that has long been campaigned for, not least by my hon. Friend the Member for North Cornwall (Dan Rogerson), who is in his place. I congratulate him on his efforts. We will also bring the A1 up to motorway standard all the way to Newcastle. I have been made aware of the need to improve that road north of Newcastle, not least by my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith), and have asked my right hon. Friend the Secretary of State for Transport to work up plans for potential improvements north of Newcastle.
The capital projects will not only create jobs in the short term, but crucially will raise the quality of the country’s infrastructure and our growth potential in the medium term. Labour Members may be interested to know that during the previous Government’s time in office, we fell from eighth to 33rd in the global league table for the quality of infrastructure. That is not good enough and is why John Cridland of the CBI said last week that it is
“absolutely right to shift the focus from current to capital spending to boost jobs today and the UK’s competitiveness tomorrow.”
As colleagues will know, our plans will mean that as a share of the economy, the investment that the Government are putting forward in this Parliament is greater than the average over Labour’s period in office. These investments, not just in roads, but in schools, colleges and flood defences, can only serve to help our businesses in the future.
Andrew Gwynne (Denton and Reddish) (Lab)
I am pleased by the Chief Secretary’s recent conversion to investing in capital projects, such as building new schools. Now is perhaps an opportune time for him to apologise to the schools in my constituency that had their Building Schools for the Future funding taken away. Can they expect it back?
Danny Alexander
I have not had a recent conversion to capital expenditure. The hon. Gentleman will remember that in the spending review in 2010, we committed over £2 billion a year more to capital expenditure than had been set out in the previous Government’s plans. In the autumn statement last year we added £5 billion and in this year’s autumn statement we added another £5 billion for a range of projects. I hope that he will recognise that the Building Schools for the Future programme was expensive and bureaucratic. The proposals that have been brought forward by the Department for Education are a better and more cost-effective way to meet at least some of the needs in the school system in this country.
Mr Stewart Jackson (Peterborough) (Con)
On the subject of apologies, will my right hon. Friend invite Her Majesty’s loyal Opposition to apologise for the debt millstone of the private finance initiative in the national health service, which amounts to more than £63 billion? The right hon. Member for Morley and Outwood (Ed Balls) is aware of that, because it was all about hiding the debt off balance sheet and ensuring that our children struggle with it. [Interruption.]
Mr Jackson
I am sure that my right hon. Friend will agree with my analysis of PFI.
Danny Alexander
My hon. Friend adds another item to the long list of items for which the people of this country deserve an apology from the Labour party. We have had no such apology yet, but we live in hope. Perhaps the shadow Chief Secretary will begin her speech with an apology for the many and various mistakes. [Interruption.]
Madam Deputy Speaker
Order. Let us try just once more. By Whips, I mean Government Whips as well as Opposition Whips. Government Whips are not to shout across the Chamber. Is that clear?
Danny Alexander
Thank you, Madam Deputy Speaker. I hope this debate will be conducted in a calm manner as befits the seriousness of the issues we are discussing.
Frank Dobson (Holborn and St Pancras) (Lab)
Can the Chief Secretary to the Treasury tell the House of a single Tory or Liberal Democrat MP who objected to a PFI hospital or school being built in their constituency under the Labour Government?
Danny Alexander
Not off the top of my head, but I dare say that hon. Members on the Government Benches can speak for themselves. I have, however, heard a number of objections to the structure of PFI contracts. In fairness to the right hon. Gentleman, the PF2 model is not designed to abolish PFI and can play an important role in developing new projects. We want to strip away some of the most egregious features such as facilities management costs—a couple of years ago the Treasury was going to be charged several thousand pounds by the PFI holder for putting up a Christmas tree. That issue was resolved but it is a small example of the excessive costs involved. In Treasury questions earlier today the Chancellor gave an example concerning the cost of changing a light bulb in a hospital in Cumbria.
I am sure that on reflection the right hon. Member for Holborn and St Pancras (Frank Dobson) would agree that reforming PFI to strip out some unnecessary features such as facilities management costs and so on, and having a simpler, clearer model in which the taxpayer can share in any gains, is a big improvement. I hope that when he has looked at what is being proposed, he will welcome it.
Mr Stewart Jackson
My right hon. Friend may wish to comment on the fact that another example of Labour prudence was spending £250 million on private contractors in the NHS for operations that were never carried out.
Danny Alexander
The Government are trying to move to a system of payment by results. Too often the model of spending under the previous Government was payment for absolutely no results—[Interruption.] I will make some progress, despite the shouting from the second row of the Opposition Benches.
The Government know how important businesses are to growth, and we are taking the necessary steps so that businesses can increase employment and exports and lead the country back to prosperity. That is why we have announced, among other things, an extension of the small business rate relief scheme that will benefit over 500,000 small businesses. The extension of empty property rate relief to newly built commercial property has been called for by Members across the House, and I hope it will enable commercial property development to move forward in many parts of the country that have recently been blighted.
We have announced increased funding for UK Trade and Investment to support the growth in exports, particularly in emerging markets, alongside a substantial new trade finance scheme that will significantly help medium-sized exporters looking to win new markets across the world. Most importantly, we have announced an increase in the annual investment allowance limit from £25,000 to £250,000 for a time-limited period of two years—a capital allowance relief that I hope will send a signal to medium-sized manufacturers that now is the best time to invest in new plant and machinery. I pay particular tribute to my hon. Friend the Member for Burnley (Gordon Birtwistle) and the Liberal Democrat campaign for manufacturing that he has set up for arguing so cogently and strongly for that measure.
The Government have also announced a further drop in corporation tax to encourage investment in the United Kingdom. From April 2014 the rate in Britain will stand at just 21%—significantly lower than current levels in France, Germany or the USA. We want the world to know that the United Kingdom is open for business and that companies that invest and employ people in this country are very welcome. At the same time, however, Her Majesty’s Revenue and Customs is also receiving a further £77 million in this spending review period to ensure that where taxes should be paid, they are paid—I am sure that even the shadow Chancellor welcomes that. That increase, on top of the £900 million I announced at the spending review, will mean that HMRC will bring in total additional revenues of £9 billion each year by the end of 2014-15.
Our agreement with Switzerland to recover previously unpaid UK tax is expected to bring in a further £5 billion over the next six years. We have signed a ground-breaking agreement with the United States on automatic exchange of information, setting a new standard in tax transparency. Today we are publishing the draft Finance Bill for 2013, which confirms the introduction of the UK’s first ever general anti-abuse rule in the tax system. That measure will act as a significant deterrent to all those engaged in abusive tax avoidance. It could have been introduced at any point in Labour’s 13 years in office, but it was not. That is an example of the failure to act on tax avoidance and evasion that we saw during that time. This is not just a matter of finance; it is a matter of principle. Millions of small businesses and tens of millions of people across the UK pay the proper amount of tax, day in, day out. Ensuring that people cannot avoid our tax system is a priority for the Government so that the burden can be spread fairly.
There has been a lot of recent interest in this area, particularly with regard to the tax payments of specific multinational companies. I will not comment on individual cases but I am sure that all businesses, large or small, will take note of the reaction of the British people to recent events. Everyone understands that we must all work hard to get the economy going again and that businesses will play a key role in ensuring that growth. The reaction also shows that people believe that those at the top who earn or profit the most should also contribute the most. I agree with that—yes, we want a stronger economy, but we also want a fairer society.
Measures announced by the coalition last week will help millions of people across the country who are working hard. I am proud that we will be increasing the income tax personal allowance by a further £235 next April. That will mean that 2.2 million people have been taken out of tax by this Government, leading to around 20 million people being nearly £600 a year better off from next April. That is £50 a month extra in people’s pockets as a result of the Government’s measures on income tax and is, quite simply, the biggest income tax cut for working people in a generation—from the front page of the Liberal Democrat manifesto to the pockets of 24 million working people.
I am also proud that the coalition Government are cancelling the fuel duty increase that was planned for next month.
Nic Dakin (Scunthorpe) (Lab)
Will the Chief Secretary to the Treasury remind the House which page of the Liberal Democrat manifesto the increase in VAT was on?
Danny Alexander
No, because it was not there. That was one of a number of difficult choices that we as a Government have had to make to clean up the mess in the British economy that was left by the hon. Gentleman and his colleagues.
Danny Alexander
I will give way once more to the hon. Lady and then I will make some progress
Emily Thornberry
Am I right in remembering—I think it was on page 14 of the Liberal Democrat manifesto—a pledge to cut 7,000 tax inspectors?
Danny Alexander
The hon. Lady will know that HMRC has had to make efficiency savings along with the rest of the Government. It had to make savings when the Labour party was in office and it continues to have to do that. We have increased investment specifically in the part of HMRC focused on tackling tax avoidance and evasion—an area that saw underinvestment during Labour’s time in office. As a result, 2,000 extra specialist tax inspectors—[Interruption.] My hon. Friend the Exchequer Secretary to the Treasury brings me up to date and tells me that the figure is 2,500. Those inspectors are specifically focused on tackling tax avoidance in the affluence unit and those units that focus on offshore companies and all other tax avoidance schemes, and on implementing the anti-avoidance rule.
Dan Rogerson
I am grateful to my right hon. Friend, not least for his response to Cornwall’s call for investment in the A30 infrastructure project and his earlier kind words. Does he recall that when in opposition we had to watch the then Labour Government cutting and closing HMRC offices in a lot of regions around the country, and putting on the scrap heap a lot of skilled tax inspectors, the benefit of whose experience we sadly no longer have?
Danny Alexander
As always, my hon. Friend makes a good point. We need people with experience in compliance and enforcement, and we are expanding employment in those areas. That is the right thing to do and it should have been done a long time ago.
The previous Government set out plans to increase fuel duty above inflation last year, this year and again in 2013 and 2014. However, as a result of repeated action by this Government, pump prices will remain at least 10p per litre lower for the remainder of this Parliament than they would have been had the Labour party remained in government.
Rachel Reeves (Leeds West) (Lab)
Slide 24 of the report by the Institute for Fiscal Studies shows that, including fuel duty changes and the changes to the personal allowance and tax credits, a one-earner couple with two children will be £534 worse off on average as a result of the changes in the autumn statement. Will the right hon. Gentleman confirm that?
Danny Alexander
No, I cannot confirm that. I do not recognise those figures—[Interruption.] Labour Members are waving bits of paper—
Madam Deputy Speaker (Dawn Primarolo)
Order. The shadow Chancellor absolutely knows that he is not to throw papers across the Dispatch Box. It is no good him blaming his hon. Friend the Member for Leeds West (Rachel Reeves) for following his example. That will not happen again.
Danny Alexander
That is another way in which the shadow Chancellor is setting a bad example. Littering in the Chamber is not to be encouraged, and I am glad you, Madam Deputy Speaker, took a tough line on it.
The Government’s fuel duty measures will keep money in the pockets of millions of fathers on the school run or mothers driving to the office. As a highland MP, I know the burden that fuel costs can place on people in remote areas. That is why we are piloting the fuel rebate scheme for motorists on the Scottish islands and the Isles of Scilly. I am keen to push for EU approval for an extension of the scheme to other remote parts of the country that display similar characteristics. Of course, that will be a long and difficult job, but I am determined to gather evidence to support the case.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The right hon. Gentleman will know that the rebate scheme has been a success. When will mainland areas of Scotland be included? There are already such schemes in continental mainland areas, so why is there a delay in its introduction in mainland Scotland? Areas such as Caithness, Sutherland and Argyll need it—and need it quick.
Danny Alexander
I am grateful for the hon. Gentleman’s endorsement of the current scheme as a success. I hope he will spread the word to his constituents and ensure that the credit goes to the appropriate place.
To win the argument at European level for an extension of the scheme, we must pass the same test and provide the same evidence to justify including such remote areas. We are working with local authorities in various parts of the country to gather evidence to support our case. As the hon. Gentleman will recall, we must take that evidence to the European Commission. If it approves our proposal, it must in turn be approved by all 27 EU member states. There are a number of hurdles and a significant process to engage in to gather evidence.
Danny Alexander
If the hon. Gentleman will forgive me, I will make progress. Many hon. Members wish to speak in the debate.
There has been good engagement between the Treasury and the FairFuelUK campaign, which has pressed its case very strongly. I welcome its engagement.
The Government are on the road to cutting the deficit we inherited, but we are also building a fairer society. The distributional analysis that we publish shows that that continues to be the case, despite the tough choices we have made. It is worth pointing out that, under the previous Government, the Treasury never published detailed distributional analyses of its decisions, but under this Government the Treasury publishes them at every fiscal event. The analyses show that the top 20% of households continue to make the greatest contribution. In fact, the cumulative impact since the June 2010 Budget of tax, tax credit and benefit reforms shows that households in the top 10% see the greatest reduction in their income, both in cash terms and as a percentage of net income or expenditure.
Alex Cunningham (Stockton North) (Lab)
People in my constituency who cannot afford a car and who earn much less than most others tell me that the inflation rate on the things they have to buy is several times greater than the headline figure, which includes goods that they would just love to be able to buy. When will the Government recognise that inflation for the poorest people in our society is much higher than it is for the rest of us, and do something real? The Government have done some things, but when will they do something that makes a difference to those people instead of cutting their food intake, which is exactly what is happening?
Danny Alexander
A range of goods is included in the consumer prices index of inflation, which the Office for National Statistics constructs—it is an independent body and is responsible for constructing those baskets of goods. Some items go up in price faster than others. We are doing what we can and what the country can afford, but our priority must be to get this country back to a position in which we can pay our way in the world. Nothing would hurt the poorest in society more than losing control of our public finances, which I suspect would happen if the Labour party ever again gained the reins of power.
The quad discussed introducing a mansion tax, but a fair tax on homes worth more than £2 million was not agreed. However, the good news is that we have established a sensible, workable plan for raising additional revenues from the highest-value properties. If that does not happen in this Government’s term of office, it will be in the Liberal Democrat manifesto for the next election.
Danny Alexander
I am grateful for the hon. Lady’s support—I take support from wherever it comes these days.
The Government have taken sensible further steps to restrict pensions tax relief. The decisions the Government are taking are not easy, but as a country we must live within our means. The scale of the problems this country faces means that the period of fiscal restraint must continue for longer. That is why the Government will shortly set out spending plans for the financial year 2015-16. I will carry out a spending round in the first six months of next year to set those budgets and ensure that we continue to build a sensible long-term plan for the country’s finances. We will need to find an extra £10 billion of savings from Departments in the spending round. That will mean more difficult choices, but they are also responsible choices as the coalition continues to work to restore stability to the UK economy.
We have heard this afternoon and in Question Time that some criticise the autumn statement. The division in British politics is very clear. Government Members live in the real world. We understand that times are tough and that there is no endless supply of money, and recognise that the right and responsible action is to take the difficult decisions to ensure we can live within our means. Labour Members appear to live in a fantasy world. They still believe that they ended boom and bust, despite the events of the past five years. They still refuse to apologise for the mess they created and fail to be honest with the British people about the tough decisions that any party in government would have to take.
It will come as no surprise to hon. Members that I will not take advice from the Labour party, which wrecked our economy because it allowed the country to become too dependent on revenues from the City of London and paid too little attention to the rest of the country. Labour insulted pensioners up and down the country by increasing the basic state pension by 75p, and insulted 5 million of the lowest-paid workers by increasing their income tax bill with the abolition of the 10p rate.
Danny Alexander
I will not give way—I will finish my speech shortly.
The Labour party thought it was right that private equity managers should pay a lower rate of tax on their earnings than the person who cleaned their office, and insulted hard-working people and businesses up and down the country by failing to crack down on tax avoidance and evasion in 13 years in office.
This Government face some of the most serious decisions we have had to make in our recent history. We are recovering from a decade of debt, we inherited the largest deficit since the second world war, and we have had to face a multitude of problems abroad. However, we continue to take simple, sensible steps towards recovery. We continue to build a strong, sustainable economy and to build a fair society. I commend the autumn statement to the House.
Public Service Pension Reform
Danny Alexander Excerpts(12 years ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (Danny Alexander)
The Government have previously committed to reforming the Fair Deal policy and to delivery of this by offering access to public service pension schemes to staff who are compulsorily transferred out of the public sector.
The Government have today published a response to the consultation on the Fair Deal policy, which sets out further detail on the reformed Fair Deal policy for future staff transfers.
The document also contains some further questions for consultation, which will explore how Fair Deal should apply to those employees that have already been transferred out under existing Fair Deal when contracts are retendered. The publication also contains draft guidance setting out further details on how the policy will work in practice.
The Government welcome contributions from all interested groups.
The consultation document has been deposited in the Libraries of both Houses and can be found on the HM Treasury website at:
http://www.hm-treasury.gov.uk/consult_fair_deal_policy_ pensions _publicsector.htm.
The consultation will close on 11 February 2013.
The Government have also published two policy papers which set out further detail on the Government’s policy on actuarial valuation of public service pension schemes, and the operation of the employer cost-cap in the public service schemes. These documents have been deposited in the Libraries of both Houses and can be found on the HM Treasury website at:
http://www.hm-treasury.gov.uk/tax_pensions_resources.htm.
Oral Answers to Questions
Danny Alexander Excerpts(12 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Pat Glass (North West Durham) (Lab)
1. What recent discussions he has had with the Secretary of State for Communities and Local Government on fiscal incentives to encourage the construction of affordable housing.
The Chief Secretary to the Treasury (Danny Alexander)
The Chancellor is at the G20 meeting in Mexico, so I have been asked to reply.
On 6 September, the Government announced an ambitious package to boost housing supply, including an additional 15,000 new homes for affordable rent and bringing 5,000 empty homes back into use. We will also help a further 16,500 first-time buyers get back on the housing ladder through Firstbuy. The package includes a £10 billion debt guarantee, which will enable housing associations to benefit from the Government’s hard-earned fiscal credibility.
Pat Glass
I thank the Minister for that answer, but we have lost 120,000 construction jobs since 2010 and we are building 100,000 fewer affordable homes than even this Government tell us we need each year. When the Minister reflects on the choices he had before him, does he still believe that slashing the affordable housing grant by 60% at the same time as giving a massive tax cut to millionaires was the right thing to do?
Danny Alexander
In fact, the decision we made to move to a new affordable rent model to get more homes for the money available to us—the auction was over-subscribed, with 170,000 properties in the affordable sector being built under that model—was a good use of very limited resources, and a much more efficient use of them than the previous Government achieved.
Mr Richard Bacon (South Norfolk) (Con)
Has the Chief Secretary had a chance to look at the report by the National Self Build Association, “Lessons from International Self Build Housing Practices”, and does he agree that if we were to do more to help self-builders, we could help solve many of our housing problems, as well as increase local council tax revenue and stamp duty for the Treasury?
Danny Alexander
I have not had a chance to study that report, but, in the light of my hon. Friend’s question, I certainly will. He will know that the new national planning policy framework specifically encourages self-build, and many of the planning system reforms the coalition Government have pushed through will help self-builders to achieve their aspirations.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
The Chief Secretary spoke about the bidding for affordable housing, but the well has now run dry. Housing associations in my area have no more money to spend on affordable housing, and the birth rate in my area is increasing. What will the Chief Secretary do to ensure that in future people in Hackney and around the country have affordable homes to live in?
Danny Alexander
I want to see more affordable homes built. That is why this Government are the first Government to put in place Government guarantees for housing associations; that was never done by our predecessors. The Infrastructure (Financial Assistance) Act 2012, which received Royal Assent last week, will enable housing associations to benefit from £10 billion of Government guarantees, lowering their cost of finance and enabling them to build more homes. That has been widely welcomed in the housing association sector, including by the National Housing Federation. I think the hon. Lady should welcome it, too.
Andrew Stunell (Hazel Grove) (LD)
I greatly welcome the progress that has been made, but it is equally important to ensure that we have good construction standards for new housing. May I also impress upon Ministers the importance of supporting the zero-carbon homes target?
Danny Alexander
Let me start by paying tribute to my right hon. Friend for the work he did at the Department for Communities and Local Government, especially his leadership of the empty homes programme, which is making a major contribution to bringing homes back into use. I understand the importance of the zero-carbon homes programme. The building industry has argued for that, and I hope we will make progress on it soon.
Chris Skidmore (Kingswood) (Con)
2. What fiscal steps he is taking to encourage job creation in the private sector.
The Chief Secretary to the Treasury (Danny Alexander)
Despite these tough economic times, under this Government private sector employment has increased by more than 1 million since 2010, as firms benefit from our stable and credible fiscal policy, but, of course, we are not complacent. We are helping private sector growth through a radical programme of reforms and investment, including the £2.5 billion regional growth fund, issuing up to £50 billion in guarantees for infrastructure and housing, and funding 250,000 more apprenticeships than the previous Government had planned.
Chris Skidmore
Today marks the halfway point of the coalition Government. As the Minister said, there are 1 million more private sector jobs than there were in 2010 and more people in employment than ever before. Will he work even harder to build on his fantastic record in the second half of this Government’s term?
Danny Alexander
Yes, I certainly will. [Interruption.] I know the Opposition do not like to hear this, but my hon. Friend is right to highlight the good performance of the British labour market and the facts that the private sector has created more than 1 million new jobs in the last two and half years and that there are more people in employment in this country than ever before.
Gavin Williamson
Under the Labour Government, we lost 65,000 private sector jobs in the west midlands. In stark contrast, since 2010 my constituency alone has already secured £400 million in investment. What more will my right hon. Friend do to secure private sector jobs in South Staffordshire and the west midlands?
Danny Alexander
My hon. Friend is right to say that the Labour party’s record on encouraging the private sector was at its most catastrophic in the west midlands, for which the figures he gave are absolutely correct. That is why another £124 million of funding for projects in the west midlands was announced in round three of the regional growth fund and why we are providing additional support for the automotive sector, which is so important in his constituency and region. Of course the improved climate for business, the removal of regulations and the funding for apprenticeships will benefit businesses in the west midlands, as well as in the rest of the country.
Geraint Davies (Swansea West) (Lab/Co-op)
Yesterday, a report from the Welsh Government showed that scrapping tolls on the Severn bridge would increase the value of the Welsh economy by £107 million. Will the right hon. Gentleman commission a report to show how quickly the cost of reducing and getting rid of the tolls would be offset by the increase in income tax resulting from more jobs created in Wales?
Danny Alexander
The hon. Gentleman mentions finance in Wales, so I would have thought he might have started by welcoming the announcement I made two weeks ago on a new funding settlement for Wales and the commitment, in principle, for the first time ever—this was never made by the Labour party when it was in government—to borrowing powers for the Welsh Government. That is a major step forward. We will hear shortly from the Silk commission, which is examining revenue-raising powers. I will certainly consider the matter the hon. Gentleman raises in response to the Silk commission.
Ms Margaret Ritchie (South Down) (SDLP)
The Chief Secretary to the Treasury will be aware of ongoing ministerial discussions about setting the rate for corporation tax in Northern Ireland. Can he advise on the recommendation the Treasury will make to the Prime Minister, who will be setting that level and making a determination shortly?
Danny Alexander
I am not going to prejudge the work of the joint ministerial working group, which includes Ministers from the Northern Irish Government, my colleague the Exchequer Secretary, who is there on behalf of the Treasury, and the Northern Ireland Secretary. That group will soon produce a report, which will come to the Treasury and to the Prime Minister. We look forward to considering it and responding in due course.
Mr Brooks Newmark (Braintree) (Con)
Does the Chief Secretary agree that the seed enterprise investment scheme announced by the Government in the past year is the sort of highly attractive fiscal incentive that will both encourage angel investors to back entrepreneurs and, at the same time, stimulate the job growth in the private sector that we need?
Danny Alexander
I congratulate my hon. Friend on the work he has been doing to promote the seed enterprise investment scheme. His description of it is absolutely right, and I know it is being looked at widely by investors who wish to invest in small firms in this country. I hope it will help to transform the landscape for that sort of investment in newly formed companies in this country, and I hope that he will continue his hard work.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
When the Government introduced their flagship policy on a national insurance holiday scheme they proclaimed that about 400,000 businesses would benefit. In answer to a parliamentary question in May, Ministers told me that about 16,000 applications had been received. Will the Chief Secretary tell the House how many businesses have now applied? Is it not time to listen to Labour and the Federation of Small Businesses, and extend this scheme across the country and ensure that all small businesses can benefit from it?
Danny Alexander
I think we have heard yet another unfunded spending commitment from the Labour party in that question. The hon. Lady is right to say that this scheme has not been taken up as widely as we had expected, which is why we are putting in place other measures to support small and growing businesses: the funding for lending scheme will get finance to small firms; tax incentives of the sort just mentioned by my hon. Friend the Member for Braintree (Mr Newmark) will help to get investment in small and medium-sized enterprises; and of course the Government have set a target of 25% of procurement from small firms, too. That is the right policy for small businesses in this country.
Gordon Banks (Ochil and South Perthshire) (Lab)
12. If he will use the revenue received by the Exchequer from the forthcoming auction of the 4G mobile telephone spectrum for the purpose of building affordable homes over the next two years.
The Chief Secretary to the Treasury (Danny Alexander)
No decision has been taken on how to use the full revenue from the 4G mobile spectrum auction, but the Department for Business, Innovation and Skills was allocated an entitlement of up to, but no more than, £600 million for science projects from the fund. As I said in answer to an earlier question, on 6 September the Government announced an ambitious housing package to boost housing supply, building on our £4.5 billion investment to deliver 170,000 affordable homes over the spending review period.
Chi Onwurah
Perhaps the Chief Secretary is reluctant to commit because he does not trust his colleagues in the Department for Culture, Media and Sport to overcome their history of delay and dither when it comes to 4G. In Newcastle, thousands of families are on the council house waiting list and thousands of construction workers are unemployed. Does he not agree with the director general of the CBI, who said that this plan was exactly what the economy needed?
Danny Alexander
I recognise the concerns that the hon. Lady and other MPs have about the provision of housing in their own constituencies, and that is precisely why, on 6 September, we announced, among other things, the availability of up to £10 billion of Government guarantees for housing associations—precisely to enable them to build more affordable housing.
Emma Reynolds
In the last quarter, there was a 2.5% contraction in the construction sector, and since the Government came to power 119,000 construction jobs have been lost. Why, therefore, do the Government not take their own advice, cut through the dither, sell off 4G, and use the money to construct 100,000 affordable homes and create 150,000 jobs?
Danny Alexander
The Department is getting on with the sale of 4G as quickly as possible, but the hon. Lady should be a bit wary about the policy she is promoting. For a start, it is based on assuming that we continue with the Government’s affordable rent policy, which her colleagues oppose, but without it the costs would be a great deal greater. Also, I think she is proposing to reverse the £600 million investment in science policy, which we have already committed to from this fund.
Gordon Banks
My question is very, very simple. Will the Chief Secretary use the revenue from this sale to create jobs?
Danny Alexander
I note that when the Labour party was in government and had receipts from the 3G auction, it used the resources to pay down debt, which was very prudent. Instead, we are bringing forward policies to support housing, such as the Government guarantees, which will be available to housing associations in Scotland, as well as in other parts of the country.
Damian Hinds (East Hampshire) (Con)
Alton in east Hampshire has just benefited from a much-needed £9.5 million affordable housing scheme. What more can be done, working with other Departments, to bring on more such schemes, partly using council land, especially in the overcrowded south-east?
Danny Alexander
My hon. Friend is right to highlight the importance of releasing public sector land for development for housing, including affordable housing. The Homes and Communities Agency is well ahead of its targets for releasing such land and for schools—
Danny Alexander
I am answering the question, which relates to the proceeds of the auction. We are using other policies, rather than the proceeds of the auction, to support this objective.
Mr Gary Streeter (South West Devon) (Con)
Rather than spending money we do not yet have, would it not be better for the Department to continue to work with the Department for Communities and Local Government and others in unlocking major housing schemes which have become stuck in recent years, such as the proposed new town of Sherford in my constituency? Is that not a better way of building affordable homes and boosting the economy?
Mr Speaker
Order. That is the term of—[Interruption.] Order. No assistance is required from the hon. Gentleman. He will accept my ruling and he can like it or lump it.
Danny Alexander
Rather than the proposal to use revenues from the auction, there are other policies that we can use to support the objective highlighted in the question, including those highlighted by the hon. Member for South West Devon (Mr Streeter)—planning reform, releasing public sector land and other fiscal steps that the Government can take which do not involve committing to this policy now.
Charlie Elphicke (Dover) (Con)
Will the Minister confirm answers to my written questions—that the reserve for the auction is £1.4 billion and that half has been allocated to science and higher education investment? Is this a case of Labour spending money that we do not have, yet again?
Danny Alexander
It is exactly that. The reserve price is £1.4 billion, of which £600 million has been allocated to important science projects, such as the Graphene institute in Manchester. Were we to follow the advice of the Opposition, we would have to cancel significant science projects which are vital to growth in this country. That would be the wrong policy for the British economy.
Glyn Davies (Montgomeryshire) (Con)
14. What fiscal steps he has taken to reduce the cost of living.
Tim Loughton (East Worthing and Shoreham) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Chief Secretary to the Treasury (Danny Alexander)
The core purpose of Her Majesty’s Treasury is to ensure the stability of the economy, promote growth and employment, reform banking and manage the public finances so that Britain starts to live within her means.
Tim Loughton
That is all very interesting, but Anne Marie Carrie, the excellent head of Barnardo’s, recently said that the proposal to remove housing benefit from all under-25s
“is reckless and unfair as it will leave some of this country’s most vulnerable people stranded.”
I am particularly concerned about the impact on care leavers, who do not have a family home or family to fall back on and for whom a safe and stable roof over their heads means they can keep off the streets, out of the NEET statistics and out of trouble. Will the Chief Secretary guarantee now that he will work with other Ministers to make sure that any changes to housing benefit for under-25s do nothing further to disadvantage that already disadvantaged group?
Danny Alexander
My hon. Friend makes a very important point about care leavers. These ideas have been floated as part of a discussion within Government on the next phase of welfare reform. I will certainly make sure that his point is brought to bear in any discussions on that proposal.
Rachel Reeves (Leeds West) (Lab)
At a time when we are seeing cuts to the budgets for police, NHS and schools, it is right that last week this House gave the Government a mandate to negotiate a real-terms cut in the EU budget. However, instead of developing a strategy to deliver this, the Prime Minister has simply resorted to threatening a veto before negotiations have even begun. Of course, walking away is always an option for any EU Government, but can the Chief Secretary confirm that if Britain or any other country just turns up and uses the veto, the budget will rise in line with inflation anyway, costing British taxpayers an extra £310 million?
Danny Alexander
I start by congratulating the hon. Lady on the news that she is expecting a child, which was announced a few weeks ago. I am sure that the whole House would wish to join me in that.
Labour’s position becomes ever more extraordinary; its opportunism on Europe seems to know no bounds. That is why we have heard words of unease from several Labour Members who thought that Labour was a pro-European party. This Government have taken the toughest position of any European Government in these negotiations. We saw what happened with the previous Government’s negotiating tactics when they gave away half of Britain’s rebate. We are not going to do that all over again.
Rachel Reeves
I am not sure whether I caught an answer there. Frankly, the Chief Secretary should know better. After all, he was not only the chief press officer for the Cairngorms national park but the chief officer for Britain in Europe, and he should know that the only way to deliver a real-terms cut is to argue for one and build alliances to deliver it. Perhaps he should listen to his Cabinet colleague who said last week that it is “absolutely ludicrous” to threaten the veto now, weeks before the summit. Is that not just the desperate ploy of a weak Prime Minister with no influence, no allies and no strategy? He should get a good deal for Britain—a cut in the budget.
Danny Alexander
The hon. Lady was a pro-European once; I still am. We seem to be seeing an outbreak of amnesia on the Labour Benches. Not only has the hon. Lady forgotten what Labour did in the last multiannual financial framework negotiation, when it gave away half of Britain’s rebate by not forming any alliances and instead giving up vast amounts—billions of pounds—of Britain’s money, but the shadow Chancellor seems to have forgotten that more recently his party was running the largest structural deficit in the world economy in the good times, leaving this country more exposed than ever to the financial crisis. This country does not want amnesia from Labour—it wants an apology.
Graham Evans (Weaver Vale) (Con)
T5. Manufacturing in this country halved during the Labour period, falling from 22% of GDP in 1997 to 11% in 2010, and during that period the sector employed half the number of people it did in 1997. With this in mind, what recent representations has my right hon. Friend received regarding investment in manufacturing industry in the north-west?
Danny Alexander
My hon. Friend is right to highlight the work that we are doing to increase manufacturing through, for example, the advanced manufacturing technology institute and investment from the regional growth fund. We have had a number of representations from the north-west, not least from my hon. Friend the Member for Burnley (Gordon Birtwistle), who has made representations on capital allowances for businesses.
Mr William Bain (Glasgow North East) (Lab)
T2. Nearly three in 10 workers in my constituency, including half of all part-time workers, earn less than the living wage of £7.45 an hour. Does the Chief Secretary, unlike the Prime Minister, back the living wage? Is he not wrong to boast about a recovery that is not being felt in the pay packets of millions of people on low and middle incomes?
Danny Alexander
Labour Members had 13 years to introduce a living wage; if they believed in it so much they could have done something about it when they were in office. This Government are increasing the income tax personal allowance towards the goal of £10,000 set in the Liberal Democrat election manifesto. As of next April, the amount of income tax paid by someone working full time on the minimum wage will have been halved under this Government. I would have thought that the hon. Gentleman would want to welcome that.
Ian Swales (Redcar) (LD)
T7. The regional growth fund is a great help in sorting out the economic devastation left by the previous Government in areas such as Redcar and Middlesbrough. Does the Minister agree with Michael Heseltine that areas such as the Tees valley can become economic powerhouses again, and will he support a further round of the regional growth fund?
Danny Alexander
I welcome what my hon. Friend has said about the regional growth fund. With him, I have visited recipients of that fund in his constituency, and seen at first hand the benefits on Teesside. He will also welcome the fact that Teesside is a candidate in the next wave of city deals, which will provide an opportunity further to enhance the economy of that area. I hear his representation for a fourth round of the regional growth fund, and I will consider that alongside other policies in the normal way.
Lilian Greenwood (Nottingham South) (Lab)
T3. Instead of insulting hard-working parents and calling them “fiscal nimbys”, will the Minister explain how it is fair that a couple earning up to £100,000 a year will keep all their child benefit, while a one-earner family on £50,000 will see theirs cut?
Karl MᶜCartney (Lincoln) (Con)
T10. In the light of a recent report by the Centre for Economics and Business Research, which suggests that UK growth will outstrip many of our European neighbours in 2013 and 2014, will my right hon. Friend assure the House that the Government will continue to deal with the UK’s structural deficit? That deficit started to emerge before 2008, despite repeated protestations to the contrary by the shadow Chancellor.
Danny Alexander
Yes, I can certainly give my hon. Friend the assurance he requires. The coalition Government have put Britain back on the path to fiscal credibility, and we have cut the deficit by a quarter in our first two and a half years in office. We intend to continue in that policy direction, which is endorsed not only by the CEBR but by many other organisations.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Does my right hon. Friend agree that one way to stimulate additional growth is through better use of the prompt payment code? Will he join me in calling on businesses and public sector organisations to adopt that code and adhere to it?
Danny Alexander
I very much agree with my hon. Friend, and we have already raised that issue with central Government Departments. We will certainly reinforce that message. I know that my right hon. Friend the Minister for the Cabinet Office and Paymaster General has been advancing that as part of the reforms to public procurement, and I will pass on my hon. Friend’s concerns to him.
Mr Stephen Hepburn (Jarrow) (Lab)
T6. When universal credit is introduced next year it will cut the living standards of hundreds of thousands of working people—yes, working people. Will the Minister join the Archbishop of York, the Mayor of London and the Labour party and demand a living wage?
Danny Alexander
I think the hon. Gentleman’s criticism of universal credit is extraordinary. Universal credit will simplify the benefits system and ensure a single, clear process for all people in receipt of benefits. Having a clear single taper will ensure that everybody knows they will be better off in work—something they could not be sure of under the previous Government.
Nigel Mills (Amber Valley) (Con)
The Government have seen the benefits that transparency can bring. Would it be good to require large corporates to publish their tax returns so that we can all see how they achieve the low rates of tax they pay?
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
T9. The Prime Minister has said that a family with children will lose an average of £511 under the Government’s changes this year alone. Is that fair when the Government are cutting taxes for the most wealthy?
Danny Alexander
The Government are increasing taxes on the wealthiest in society and using that money for a number of things, including to put in place a new free child care entitlement for disadvantaged two-year-olds; to extend the child care entitlement of three and four-year-olds to 15 hours a week; and to reduce the income tax personal allowance, which benefits families in work. The hon. Lady should welcome rather than criticise those policies.
Duncan Hames (Chippenham) (LD)
Some pensioners with capped draw-down and self-invested pension plans have seen their retirement income halve as a result of decisions by the Government Actuary’s Department. How would the Minister suggest those pensioners cope in retirement with such a sharp fall in access to what is, after all, their own money?
Sheila Gilmore (Edinburgh East) (Lab)
The Government make a great deal of creating 1 million private sector jobs—[Hon. Members: “Hear, hear!”] Wait, wait. Half of those jobs, according to their statements, were in place after eight months of their coming to office, meaning that in the following 22 months only another half a million jobs were created. That suggests that the rate of growth has slowed substantially as a result of the Chancellor’s policies.
Danny Alexander
Once again, Labour Members are on the search for bad news, but the hon. Lady has picked the wrong subject. More than 1 million private sector jobs have been created since the election. The most recent figures show that tens of thousands more jobs have been created in the private sector and the largest ever number of people in employment in this country. That should be welcomed by everyone in the House, including her.
Andrew Bridgen (North West Leicestershire) (Con)
Will the Minister update the House on steps he is taking to ensure that the affordable housing programme remains on course to deliver the £19.5 billion of public and private investment in affordable housing over the course of this Parliament?
Danny Alexander
Yes, I will. The affordable rent programme was over-subscribed and will deliver more homes than originally expected. My colleagues in the Department for Communities and Local Government will ensure that they are delivered as quickly as possible. By putting in place the new guarantee programme for housing associations, we can further accelerate that programme, ensuring that we meet the targets my hon. Friend describes.
Public Service Pensions Bill
Danny Alexander Excerpts(12 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (Danny Alexander)
I beg to move, That the Bill be now read a Second time.
The Public Service Pensions Bill represents the final building block of the Government’s commitment to reforming public service pensions. It is an important measure that will affect the pensions of millions of public service workers for decades to come. It is the culmination of a process that started more than two years ago when the coalition Government invited the former Labour Secretary of State for Work and Pensions, Lord Hutton of Furness, to undertake a fundamental review of public service pensions. Lord Hutton’s independent public service pensions commission undertook its responsibilities with thoroughness. It consulted and met a wide range of interests and considered a wealth of expertise and viewpoints, and more than 3,000 pages of evidence were submitted in response to it by more than 250 bodies.
Mr Jim Cunningham (Coventry South) (Lab)
Will the right hon. Gentleman give way?
Danny Alexander
I will give way, although it is rather early in my speech. Perhaps the hon. Gentleman wants to make an urgent point about Lord Hutton.
Mr Cunningham
I appreciate that the Government commissioned the Hutton report, but surely that report would not have been needed had they honoured the previous Government’s commitment to civil servants and public service workers.
Danny Alexander
I shall deal with the good reasons why further reform is needed later in my speech.
Lord Hutton’s conclusions of March 2011 set out a clear and compelling case for further reform. He found that the status quo was not tenable, that there had been an unfair sharing of costs between the employer, the employee and the taxpayer, and that previous reforms had not fully addressed the underlying issues of sustainability and fairness. His recommendations were equally compelling, and those for the future design of schemes fall into three broad categories, the first of which is safeguards to ensure that the long-term costs of pensions are sustainable. That is achieved through a link between the state pension age and normal pension ages in the majority of schemes, and a cost-cap mechanism to protect the taxpayer in the event of other unforeseen costs.
John Healey
The Chief Secretary lays great stress on the Hutton report, so why did not the Chancellor wait until Hutton reported before hitting public service workers with a 3% surcharge on their pension payments?
Danny Alexander
I did not mention Lord Hutton’s interim report, but I am happy to do so now for the benefit of the House. The right hon. Gentleman will know that Lord Hutton produced an interim report in October 2010 that said that there was a case for rebalancing member contributions. We followed that advice and came forward with our proposals as part of the general programme to repair the public finances and clear up the mess that the Labour party left.
Mr Donohoe
The Chief Secretary is a Scottish Member, so I presume that he is aware of negotiations north of the border. If the Scottish Executive make different decisions, how will they fund them? Will the Treasury fund them?
Danny Alexander
The hon. Gentleman makes a good point. I will deal with this subject in detail later in my speech, but I shall turn to it briefly. In respect of the pension schemes that are devolved to the Scottish Government, the Northern Ireland Government—their Finance Minister, the hon. Member for East Antrim (Sammy Wilson), is in the Chamber—and the Welsh Government, those Administrations are free to negotiate within the parameters in the Bill and the cost ceiling that has been set out. I understand that such negotiations are ongoing. Should Scottish, Welsh or Northern Irish Ministers wish to offer more financially generous terms, they are entirely within their rights to do so, but the additional costs will have to be met from their budgets. They have complete freedom to do that and I know that they will want to consider it.
Mr Anderson
The Chief Secretary said that there was a fairness imbalance between employers, employees and the taxpayer. What was fair about a public body such as Royal Mail taking a 13-year pension contribution holiday when the members of the scheme had to carry on paying?
Danny Alexander
The hon. Gentleman will know that Royal Mail is a public corporation, and therefore not within the scope—
Danny Alexander
Let me respond to one intervention before I take another. I know that the hon. Gentleman is keen for me to clarify one of my points—I am sure that I will be able to do so—but let me respond to the important matter raised by the hon. Member for Blaydon (Mr Anderson). As part of our measures to support Royal Mail, we recently took its pension scheme on to the Government’s balance sheet. Many schemes took holidays during the previous Government’s time in office—
Danny Alexander
Indeed. Perhaps schemes took holidays even under the Government before that one. In many cases, members regretted such action in retrospect. The Bill is about public service pension schemes—by and large unfunded, with the exception of the local government scheme—that desperately need reform.
Mr Russell Brown
In response to my hon. Friend the Member for Central Ayrshire (Mr Donohoe), the Minister made it clear that the devolved Administrations would need to fund anything different that they wished to do. However, will he clarify the situation fully? We know that the devolved Administrations must fund those differences, but will there be an additional financial penalty through the block grant allocation?
Danny Alexander
No, there will not. Let me describe how this works. The negotiations that my ministerial colleagues and I conducted in UK Government Departments allow considerable flexibility within the parameters of the Bill—for example, the link between the state pension age and normal pension age, and the move away from final salary—and within the so-called cost envelope set up around the schemes. For example, the hon. Gentleman will note that the teachers pension scheme has agreed a different balance between accrual rates and revaluation factors for its new scheme from that for the health workers pension scheme. There is great flexibility in the provisions, provided things stay within the cost envelope. Under the Bill, the devolved Administrations are free to make more generous provision, as happened with the offer for prison officers. The Ministry of Justice agreed to fund an additional element of the proposed scheme to enable prison officers to have enhanced early retirement factors beyond those that were affordable within the cost envelope. The Ministry had offered to put additional resources on the table from its own departmental expenditure limits, and that was part of the offer that prison officers sadly rejected. Should the devolved Administrations wish to do something similar, they will be within their rights to do so, at their own expense.
Sammy Wilson (East Antrim) (DUP)
One of the options open to the devolved Administrations was for their pension schemes to be included in the Bill. In Northern Ireland, the Executive decided not to take that option, which could mean that, simply because of the timing of the legislation, the new scheme will be in place here, but not in Northern Ireland, even if Northern Ireland decides to follow suit. Will there be a penalty if there is a time gap between the implementation of the legislation in the rest of the United Kingdom and any delayed implementation in Northern Ireland?
Danny Alexander
I am not aware of any technical reason why a time gap should occur, but I know that officials in the Northern Ireland Department of Finance and Personnel discuss this regularly with my officials in the Treasury. If there is any evidence of such an occurrence, I will be happy to consider it in the normal way. There have been regular discussions on these matters, not least in our Finance Ministers quadrilateral. We will meet again in a couple of weeks in Edinburgh, when this subject will be on the agenda, so we can discuss it then.
Katy Clark (North Ayrshire and Arran) (Lab)
The Chief Secretary will be aware that several of the Bill’s provisions will affect Scottish pension schemes for the first time. There is a debate in Scotland about whether a legislative consent order is required, so will he address that point in detail in his speech?
Danny Alexander
I certainly will, when I come to it.
Lord Hutton’s first set of recommendations consisted of safeguards to ensure that the long-term cost of pensions was sustainable through a link between state pension age and normal pension age, and included a cost-cap mechanism to protect the taxpayer in the event that other unforeseen costs arose. He recommended that the new schemes should be fairer by smoothing the current disparities between high and low-income earners and ensuring that benefits are distributed more equally, which was why he recommended a move from final salary provision to career average revalued earnings—CARE—schemes. Finally, he recommended stronger governance provisions for the new schemes so that scheme members and the public could understand how the schemes were run and what they cost.
We accepted all 27 of Lord Hutton’s recommendations as the basis for discussion with trade unions and scheme member representatives across the public service, and designed our blueprint reference scheme in a way that reflected the recommendations of the Hutton report without any cherry-picking. Our aim was to strike a deal that would last, unchanged, for 25 years. Talks with the unions took place on all elements of that deal. I should stress that the Government did not do all the talking in those meetings—we listened carefully, too. Agreeing the design of these pensions has taken a considerable cross-Government effort over the past 18 months. The Minister for the Cabinet Office, the Home Secretary, the Lord Chancellor, the Education Secretary, the Defence Secretary, the Communities and Local Government Secretary and the former Health Secretary worked hard to understand the concerns of the trade unions and member representatives in their sectors.
Richard Fuller (Bedford) (Con)
The Chief Secretary talks about a deal on pensions that will last over the long term. Lord Hutton specifically ruled out moving from defined benefit to defined contribution schemes. We currently do not account for the cost of public sector pensions within our public debt numbers. Would it not have been wiser to have looked for a system that included the long-term costs for public sector pension schemes if the Government wanted to achieve such long-term sustainability?
Danny Alexander
The hon. Gentleman will know that Lord Hutton addressed that issue. The costs of such a transition would have been enormous and very disruptive, and I think that the recommendation on the career average revalued earnings scheme is preferable from that point of view. He will also know that the new whole of Government accounts presentation of the public finances takes detailed account of the unfunded liabilities in public service pension schemes. That means that the public and the House have precisely the information that he wants transparently available, so I hope that he regards that as progress.
Andrew Selous (South West Bedfordshire) (Con)
On the issue of fairness, does the Chief Secretary agree that private sector workers can only look at guaranteed retirement benefits with envy, especially because most of them would have to pay more than one third of their income to achieve equivalent benefits?
Danny Alexander
Yes, I agree. We need better pension provision across the work force. That is why I think the national employment savings trust scheme is an important step forward. That basic pension scheme, which is available to the 12 million or so members of the country’s work force who do not have any pension provision, was recently launched by the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), and had its origins under the previous Government. It is a good thing all round that we have agreed a reform to public service pensions that makes significant cost savings and ensures that public servants continue to have access to among the best pension schemes available.
We all wanted to find a solution that was sustainable, affordable and fair, as did the vast majority of trade unions and negotiators for the non-unionised work force. Thanks to both sides’ commitment to constructive talks, I am pleased to say that the final proposed designs have been issued for all major public service schemes. I thank Brendan Barber and his TUC negotiating team for the mature and constructive way in which they approached these talks. It has taken many hours of discussion to get where we are today, and I am grateful that the majority of trade unions brought sensible, workable solutions to the negotiating table, rather than grandstanding. The final scheme designs reflect that hard work.
The trade unions took those scheme designs to their memberships as the best that could be achieved through discussion, and the majority of the unions have accepted the proposed agreements. The turnout in the ballots held by the unions that rejected reform was low—less than 30% in most cases—which is hardly a compelling mandate for an ongoing dispute. The Public and Commercial Services Union decided to reject the offer before it was finalised, without first seeking the views of its membership, which was not a reasonable way to approach a set of reforms affecting more than six million public servants.
There is no point in further dispute or threats of strikes regarding public service pensions. We have set out a good and fair deal that protects those rights already earned and puts fairness at the heart of future pension provisions.
Mr Jim Cunningham
The comparison between private sector and public sector pension schemes is variable, as not all public sector schemes are good. However, what discussions has the right hon. Gentleman had about the various provisions in the Bill affecting employees? More importantly, if the Bill is passed, what method of consultation will he allow on changes to the various schemes?
Danny Alexander
We have taken great care to work with the TUC. We have taken it through the text of the Bill, listened to its concerns and made adjustments where necessary. This has not just been done through the scheme negotiations; we have also been open by sharing the Bill with trade union colleagues. Given the long-term nature of the reform and the fact that it affects so many people, it was important to engage properly. My departmental colleagues have engaged closely with representatives of the relevant work forces to ensure that that has happened.
The Bill sets out a framework for the schemes, with some restrictions, and in due course we will have to produce regulations to set out the design of each scheme. There are well-established processes within Departments for working with employers and employees on such details. My experience is that those processes work pretty well, and there is a pretty good co-operative spirit among the pensions experts around the table. I therefore do not foresee any problems but, of course, if the hon. Member for Coventry South (Mr Cunningham) does, I would be delighted for him to bring them to my attention so that I can try to resolve them.
Danny Alexander
I will make some progress and give way to the hon. Lady later.
I return to Lord Hutton’s four key tests for the future design of public service pensions: affordability, fairness to public service workers, fairness to the taxpayer and transparency. Those objectives have prevailed throughout the process and remain the cornerstones of the Bill. First, on affordability, it is clear from Lord Hutton’s report that the new scheme should be affordable and sustainable. The Bill represents a significant proportion of the total of more than £430 billion of savings that our reforms of public service pensions are estimated to save over the next 50 years.
James Duddridge (Rochford and Southend East) (Con)
Those of us on the Government Benches are quite often accused of reminding those on the Opposition Benches that they left us with a massive deficit and unsustainable debt, but in fairness is it not true that these reforms would have had to happen even without the awful economic legacy we were left?
Danny Alexander
I agree with that, and I would add that, frankly, these reforms could have been made in the 1980s or 1990s, as well as the 2000s. In fact, we have to go back quite a few decades to find the root of the problems we are having to tackle in this Bill, which I think we are doing very effectively.
The remainder of the £430 billion of savings are generated by the Government’s decisions to change their policy on the indexation of pensions and payments from the retail prices index to the consumer prices index, and, as has been mentioned, to increase the contributions that public servants pay towards their pensions, rebalancing the costs more fairly between them and other taxpayers. The combined effect of those changes will help to restore the health of the British economy, reduce the size of our deficit and correct the unsustainable 40% increase in costs there has been over the last 50 years.
Andrew Gwynne (Denton and Reddish) (Lab)
I am grateful to the Chief Secretary for giving way. Does he recognise that the Government have to be careful and approach this issue in a much more balanced manner? There is a danger that if more people opt out of occupational pensions because they find them unaffordable, that could end up costing the Treasury more in the long run through means-tested benefits.
Danny Alexander
I would say that we have handled this process in a balanced and sensitive way throughout, in recognition of the fact that the changes affect millions of public service workers. In response to the hon. Gentleman’s concern, which was raised a number of times in the talks, I would say that none of us wants to see increased opt-outs from pensions, for the reasons that have been mentioned on both sides of the House. We have put in place a process for reviewing the next stage of the contribution increase in the light of opt-out data from the first year. I am sure he will be pleased to hear that there is no evidence of increased opting out in response to this year’s increase in contributions. However, we will review the matter again next year before proceeding with the third phase of the increases, so he makes a serious and important point.
The reforms treat not only the symptoms of delayed reform but the underlying problem. Therefore, they are forecast to reduce the cost of providing public service pensions by around 40% over the next 50 years, returning costs to their historic long-term average. Clause 9 deals with the principal risk that needs to be managed if pensions are to be affordable and sustainable: longevity. Longevity has improved significantly over recent decades, which is a very good thing. As a result, the state pension age has increased. The Government are therefore asking public service workers in due course also to retire later. In a society where we are all living longer and where fellow citizens in the private sector are expected to retire later, it is both fair and right that the public sector retirement age should rise with the state pension age. As Lord Hutton says, improvements have continuously been underestimated in the past, which has led to the cost of providing pensions rising significantly over recent decades. As such, clause 9 provides that in future the normal retirement age in the public schemes will be set at the state pension age. As Lord Hutton identified, this change will move the proportion of adult life in retirement for public service pension scheme members back to where it was in the 1980s. More important, by linking the scheme retirement age to the state retirement age, we will ensure that further improvements in longevity are tracked. That is the main way in which the Bill will ensure that the cost of public service pensions cannot again spiral out of control, but will remain affordable and sustainable long into the future.
Mr Anderson
The Chief Secretary talks about longevity, but what does he think the proposals will mean for the longevity of a mental health nurse who is 67 and a half years old, goes to work every day and ends up literally fighting with patients?
Danny Alexander
We will conduct a regular review, as Lord Hutton suggested, which will enable issues such as those the hon. Gentleman has raised to be taken into account. They were raised and discussed in the scheme talks. In the end, employee and employer representatives both agreed that the modelling we are using—which is similar to that used in the deal struck under his Government—is the right, fair and balanced way to take such matters forward across the whole work force.
John Healey
The Chief Secretary will be aware that there is a working longer review in the NHS that is looking into the question of working longer in particular disciplines in the health service. Will the provisions in the Bill allow flexibility in the link between the normal pension age and the state pension age, depending on the conclusions of that review?
Danny Alexander
If I may, I will come to that issue in a moment. The arrangements for the NHS pension scheme have been agreed, and the reforms have been taken forward on that basis. That includes the link between the normal pension age and the state pension age.
Danny Alexander
I will go on with my speech, if I may. I hope that I will be able to answer the hon. Gentleman’s question as I do so. I will not take interventions at the moment, as this is an important subject. I will perhaps take some at the end of this section.
We have all heard the cries “68 is too late”, along with similar slogans, but it is crucial that people understand the facts behind the proposals in the Bill. The pension age is a calculation point, not a fixed date up to which people must work in order to receive their pension. Public service workers will still be free to choose when to retire, either earlier or later than the state retirement age. When a person retires at a different age, their pension benefits will be adjusted, to take account fairly of the fact that they are taking them earlier or later than the date against which they have been costed. People will still have the freedom to choose when to retire, however. The Bill does not deprive public servants of that choice.
Lord Hutton said that the Government should ensure that the link between the public service schemes and the state pension age should be reviewed to ensure that it continued appropriately to track longevity. We will do that. The Bill does not provide for such a review, however, and nor should it. We have already committed to come forward with details of how the review of the state pension age will be conducted. We will review the normal pension age of the schemes, to consider whether the state pension age appropriately tracks longevity in the public service schemes. The process will be determined once the detail of the state pension age review system is settled. That is the right way to proceed, and it would be inappropriate for the Bill to attempt to second-guess that.
Mark Durkan
The Chief Secretary is emphasising the importance of clause 9 in facilitating future adjustments in relation to pension ages. Why, then, does he also seek to justify the Henry VIII provision in clause 3, which will allow the Government radically and retrospectively to alter pension terms at any time, or times, in the future?
Danny Alexander
The hon. Gentleman will know that the provisions in the clause to which he refers mirror directly those in the Superannuation Act 1972, which this Bill in many cases replaces. It was passed in the year I was born, and it has been used by a number of Governments to make adjustments to public service pensions. We have set out in the Bill certain elements of the scheme, particularly the pension age link, and the fact that the schemes need to be CARE schemes and certainly cannot be final salary schemes in future. The provisions to which the hon. Gentleman refers are in fact more limited than those in the 1972 Act. It is appropriate that we continue in broadly the same way, because that has stood the test of time. I hope that, by setting out the Government’s intentions here and in Committee and by undertaking detailed negotiations with work forces, we will have ensured that people know precisely how we intend to use these powers. I think it is clause 23—I might have got that number wrong—that refers directly to the 25-year guarantee that I mentioned earlier. I hope that that will give people some assurance that our scheme designs will stand the test of time.
John Healey
With respect, intentions are one thing but the terms of the legislation are another. Is my reading of it wrong? As I understand it, the provisions will not allow flexibility for some groups of NHS workers in the link between the normal pension age and the state pension age. Clause 9(3) states:
“The deferred pension age of a person under a scheme under section 1”—
including NHS workers—
“must be…the same as the person’s state pension age”.
That suggests that there will be no flexibility. Am I right or wrong?
Danny Alexander
The right hon. Gentleman is absolutely right to say that the link between the state pension age and the normal pension age is fixed in the legislation. That is a matter that was discussed in the negotiations, including the detailed negotiations with health service unions. The point I was seeking to make was that, as Lord Hutton recommended, we have agreed to review how that link operates at each stage at which the state pension age is increased, to enable those issues to be debated.
Danny Alexander
I will give way one more time, then I must make some progress. There is a lot of detail to get through.
Katy Clark
Clause 9(2) means that firefighters would not be able to retire with a pension until they were 60. Many in the industry believe this is unworkable. What would the right hon. Gentleman suggest to firefighters who cannot work until they are 60?
Danny Alexander
In that case, we followed the recommendations of Lord Hutton—and, indeed, previous practice. The point I made just a moment ago—I am sure the hon. Lady was listening carefully—is that the provision does not stipulate the date to which people must work. Clearly, if people wish to retire earlier, they can do so and take an actuarially reduced pension or, indeed, retire later and take an actuarially enhanced pension.
Danny Alexander
I am going to make some progress, if I may.
The second and third tests of Lord Hutton were fairness to public servants and fairness to taxpayers. The Government have worked hard to ensure that the reformed pensions are fair and continue to provide a generous level of retirement income for public servants as a fair reward for a career spent serving the public. The Government made a commitment that these schemes would be at least as generous at retirement for those on low and middle-income earnings. We have delivered that commitment in a number of ways.
First, clause 16 allows transitional protection to be provided for those who have already had a long career in public service and are approaching retirement. I said in November last year that the offer provided that those within 10 years of their normal pension age on 1 April this year would not see any changes to their pension, nor the date at which they can draw it. The Bill ensures that the current final salary schemes will remain open to people who are covered by the transitional protection criteria in those schemes. Most of the proposed final scheme designs include the transitional offer as we set it out; however, the local government scheme in England and Wales has chosen alternative arrangements as sought by their trade unions and employers.
Secondly, we have honoured our commitment to retain the final salary link for people who have already built up some service in final salary schemes, as the provisions in schedule 7 make clear. Although these people will move on to CARE schemes by 6 April 2015 at the latest, their accrued years of final salary benefits will be calculated and paid at their final retirement salary—not their 2015 salary.
Most importantly for low and middle-income earners, we are putting the fairness back into public service pensions. Clause 7 provides that the new default for public schemes will be based on career average earnings, rather than on final salary. Final salary schemes are unfair to the majority of the work force as they disproportionately reward those who progress to senior roles compared with the majority of staff who have more consistent career paths. These outmoded schemes provide lower effective benefit rates to the people that carry out the core front-line work in our public services—the nurses, police officers and our armed forces whose work is so valuable to everyone here.
Career average schemes are fairer to the members and to taxpayers alike. Under final salary schemes, it is the taxpayer that picks up the cost of those high flyers who attain high salaries by the time they leave public service. Such members can receive twice as much in benefits per £1 of contributions that they have paid towards their pension. This is clearly unfair, which is why this Bill will not allow final salary schemes to continue after 2015. For members, pension benefits will be based on the amount that they earn over their career. That means their pension benefits will directly reflect the contributions that they and their employer make over their career.
The Bill ensures that these pensions remain among the very best available—and rightly so, if we are to continue to be able to recruit and retain the right people to undertake these crucially important roles. A key objective of the reforms is to ensure a fair balance of risks between scheme members and the taxpayer. To achieve this, Lord Hutton recommended that the Government establish a mechanism to control the future costs of pensions.
Clauses 10 and 11 establish an employer cost cap in the public service schemes. This will provide backstop protection to the taxpayer to ensure that any unexpected risks associated with pension provision are shared between employers and scheme members. With foreseeable longevity risk controlled through the pension age link, this really is a backstop, which under normal circumstances should not need to be used. Everyone in a public service pension scheme will see their pensions reformed along the same lines. I do not believe in special cases at a time when we are reforming the pension arrangements of those who provide essential services to the public.
John Healey
I promise not to intervene on the Chief Secretary again, but I want to ask about the employer cost cap in clause 11. On the front of the Bill, the Chancellor has signed a declaration that the provisions of the Bill
“are compatible with the Convention”.
It is clear from clause 11(7), however, that the Bill allows schemes to provide for reduction of accrued benefits as part of the employer cost cap. This would be a fundamental breach of scheme members’ rights under article 1 of protocol 1 of the convention, so how can the Chancellor’s statement on the front of the Bill be true?
Danny Alexander
I do not think that the right hon. Gentleman is right in this instance. In fact, had the “cap and share” arrangements introduced by the last Government been allowed to operate, they could have manifested themselves—[Interruption.] No, the right hon. Gentleman is wrong. They could have manifested themselves in both a reduction in benefits and an increase in costs to members. The right hon. Gentleman is free to explore the matter in Committee, and I am sure that he will.
I should add that I have some further information relating to the right hon. Gentleman’s earlier intervention. The working longer review is acknowledged in the proposed final agreement on the NHS pension scheme, which specifically states that early retirement factors allowing retirement before the state pension may be considered should the review suggest that that is necessary.
As we have established, public body pension schemes and public service schemes operated by the devolved Administrations are required to make equivalent changes to their schemes as swiftly as possible. In the case of public body schemes, it has not been possible in all cases to complete the reform process according to the same timetable. As I said in a written ministerial statement on 16 July, reform is definitely on the cards for these organisations, and the Government aim to complete the work by 2018.
Speaking of special cases, the House should note that the Bill will also close the generous and outdated “great offices of state” pension schemes. They have outlived their usefulness in the modern world. I am glad that the Bill will close them to new office holders and will ensure that people in such roles are given the same pensions as Ministers. As I am sure Members are aware, the Prime Minister waived his entitlement to such a pension when he took office. The current Lord Chancellor is making arrangements to do likewise, as did his predecessor. Mr Speaker announced on the day that we published this Bill that he would retain the pension, but would take it only when he reached the age of 65 rather than drawing it as soon as he left office.
Lord Hutton’s fourth key test related to governance and transparency. The reformed schemes should be widely understood, both by scheme members and by taxpayers. People understand what is in their pay packet each month, and it should be just as easy to understand how their pension works. Under the Bill, the schemes will have robust and transparent management arrangements.
Clause 5 provides for each scheme to have a pension board which will work to ensure that the scheme is administered effectively and efficiently. There will be local pension boards in the case of the locally administered police, fire and local authority schemes. The boards will consist of member representatives, employer representatives and officials. They will operate in a similar way to boards of trustees, holding scheme administrators to account and providing scheme members and the public with more information about the pensions. The board members will be identified publicly, and their duties will be made clear to scheme members. I welcome the greater transparency that the Bill will bring to this area of public pension administration.
Clause 15 and schedule 4 provide for an extension of the role of the pensions regulator, who will improve and police the management and administration of all the new schemes. The regulator is independent of Government, and will be able to utilise its full range of powers to ensure that the public schemes are managed properly and to consistently high standards. Clauses 12 and 13 will ensure that all schemes collate and publish information to improve transparency and enable comparisons to be made between them.
Since the Bill was published, I have received a number of questions about its design. It establishes a common framework of delegated powers which enable schemes to be made in respect of the public service work forces. The common framework constrains the use of those powers on core parts of pension scheme design, such as the link between state pension age and normal pension age, the career average pension structure, and the abolition of the final salary link. Those core elements are fixed in this legislation in order to create fairness and an even degree of cost control across the work forces.
At the same time, the Bill allows flexibility when that is appropriate, enabling the secondary detail of the pension schemes to be adjusted in recognition of the differences between different areas of public service work. Members will know that the final scheme designs agreed vary significantly from work force to work force, properly reflecting differing priorities and concerns within the cost ceilings that I established. The approach builds on that taken in the Superannuation Act 1972, which set out a framework of delegated powers some 40 years ago.
Mark Durkan
The Chief Secretary has just mentioned the Superannuation Act 1972 again. Does he accept that section 2(3) of that Act specifically prohibits retrospective effects, whereas clause 3 of the Bill specifically allows them?
Danny Alexander
There are some technical areas in which that may be necessary, but in practice the adjustments that we are making in the clause to which the hon. Gentleman has referred—and also in clause 11(7), which was mentioned earlier—allow the design of future benefits to change to ensure that costs are controlled, but do not allow changes to accrued benefits. The Bill, however, takes a more balanced approach than the Superannuation Act. The core elements for all public pensions are set out in the Bill. This serves as an important constraint on the delegated powers, to ensure our main objectives for reform are met.
I have also heard representations from Members of the devolved Administrations, but I think we have addressed that matter through earlier interventions. The Bill contains some minor areas that touch on devolved matters in Scotland and Wales, and I have written to all the devolved Finance Ministers to request that they seek legislative consent motions for the appropriate provisions. The Bill covers Northern Ireland, and the Minister of Finance and Personnel there—the hon. Member for East Antrim—has indicated that the Executive are considering a legislative consent motion to that effect. As to the progress of reform discussions in Scotland and Wales, the Government have made it clear that these Administrations have exactly the same flexibility in discussions with their trade unions as Whitehall Ministers have had, and within those parameters there is a great deal of flexibility.
Members who have followed this issue closely will know that the path to these reforms has been a long one, but it has also been a collaborative journey. The public debate on these pensions has been happening ever since this Government came to power more than two years ago. Some 18 months have passed since the Independent Public Service Pensions Commission published its final report, and discussions with trade unions and negotiators have taken place continuously since then. It is now time to take the final step by codifying the key elements of these reforms in legislation.
The framework set out in the Bill provides Parliament, public service employees and taxpayers with an assurance that the new schemes will be consistent, transparent and effectively managed. More than that, it requires new schemes to have common retirement ages, to provide benefits on a fairer basis and to include cost control mechanisms to protect members and other taxpayers from unforeseen changes in the cost of providing pensions.
The Government have set out a settlement that represents a good deal for public sector employees and a good deal for the taxpayer. It recognises the enormously valuable contribution that public sector workers make to our society and ensures a fair balance of contributions between public sector workers and other taxpayers. Taken together, these reforms will ensure that these pensions are sustainable for a generation. That is why the Bill proposes to create a high barrier for future changes to these elements of pension scheme designs. That means that any Government wishing to adjust them within the next 25 years would be required to jump a very high hurdle to do so.
In the UK’s long-term interests, we are facing up to tough decisions that Labour failed to address during its time in office, and we have done so while engaging with the unions every step of the way. We have made huge savings that were long overdue while protecting the entitlement of public service workers to a very good pension in retirement, giving public servants the confidence that future Governments will not need to make further reforms, and giving taxpayers confidence that never again will these costs be allowed to balloon out of control. These reforms therefore also help to repair the mess that Labour made of our public finances.
Fair, affordable, sustainable, good pensions that last: this is a new pension settlement for a generation, and I commend this Bill to the House.