Oral Answers to Questions
Danny Alexander Excerpts(12 years, 7 months ago)
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Tom Brake (Carshalton and Wallington) (LD)
2. What fiscal steps he is taking to encourage investment and growth in the manufacturing sector.
The Chief Secretary to the Treasury (Danny Alexander)
The Government have taken a number of steps to support manufacturing industry, including: reducing corporation tax rates, with the main rate falling to 22% by 2014, which is the lowest in the G7; introducing a new above-the-line credit to support research and development in the UK; and introducing the patent box to reduce tax on profits from patents.
Tom Brake
Was the Chief Secretary as shocked as I was to hear the shadow Chief Secretary say on “Newsnight” that she opposed the coalition Government’s corporation tax cuts? Will he set out what particular measures could help businesses such as Monument Tools, a manufacturer of tools in my constituency that is able to compete with Chinese competitors?
Danny Alexander
I was indeed shocked to hear the shadow Chief Secretary say on “Newsnight” that she opposed the cut in corporation tax. I would have thought that the Labour party would welcome such a measure, as it is designed to increase investment in British businesses and support economic growth—that is something that Labour Members say they want to see. The constituency firm to which my right hon. Friend refers could benefit from the national loan guarantee scheme and the credit easing scheme that the Chancellor announced at the Budget, and it could participate in the advanced manufacturing supply chain initiative, which the Department for Business, Innovation and Skills has announced, whereby £125 million is being spent to help manufacturers improve their performance.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
Manufacturing businesses in the black country are adamant that what will help them improve their investment is an increase in capital allowances, rather than cuts and cuts in corporation tax. Why do the Government not do that?
Danny Alexander
The hon. Gentleman will know that we have put in place enhanced capital allowances in a number of enterprise zones around the country, particularly to focus investment in plant and equipment in such areas. We announced in the autumn statement improvements to the short-life capital allowances regime, which had been a major request by manufacturing and, in particular, the engineering sector. I would have thought that he would have welcomed those changes.
Mr Andrew Tyrie (Chichester) (Con)
The Budget identified a number of sectors for fiscal support. All Departments and all of us can think of deserving cases, particularly in our constituencies, but is it not the Treasury’s job to hold the line on industrial policy, remove the implicit subsidy from banking and other industries, and ensure that economic resources, through, for example, corporation tax cuts, flow to businesses that can succeed without state support?
Danny Alexander
I agree with my hon. Friend. I am sure that he would agree with me that the Vickers report on the banking sector does precisely the first thing he mentioned, and that our approach to corporation tax—reducing headline rates year by year to the lowest level in the G7 and one of the lowest levels in the G20—precisely achieves the objective that he set out.
Mr David Hanson (Delyn) (Lab)
Will the Chief Secretary tell the House whether he read the explanatory notes on his VAT on caravans proposal? If he did read them, why on earth did he support a proposal that reduces demand in manufacturing by 30% and hits tourist industries, such as those in my area, 100%? Will he now review it?
Danny Alexander
Of course I did read the explanatory notes. The right hon. Gentleman will know that we have listened to the representations in favour of extending the consultation period and have extended the deadline to 18 May to enable individuals such as him, and his constituents, to make representations as part of that consultation.
John Stevenson (Carlisle) (Con)
3. What recent representations he has received on reducing the budget deficit.
Iain Stewart (Milton Keynes South) (Con)
7. What progress the Government have made on the implementation of the national infrastructure plan.
The Chief Secretary to the Treasury (Danny Alexander)
We published an update on the national infrastructure plan alongside the Budget, showing the progress that has been made on all the priority investments. As an example, the Budget was able to confirm that the pensions infrastructure platform that we have established to enable British pension funds to invest in infrastructure in this country will be able to make its first wave of £2 billion investment by early 2013.
Iain Stewart
I very much welcome the plan and congratulate the Government on prioritising rail investment, such as the east-west line through my constituency. May I urge my right hon. Friend to continue that investment in the classic network, as well as finding the funds for High Speed 2?
Danny Alexander
My hon. Friend makes an important point. The investment in High Speed 2 will not affect the amount of investment in the traditional rail network. It will allow us to go forward—for example, with the investment in the Oxford to Bedford rail line, which I know will affect his constituency, create 12,000 jobs and give a boost of £38 million to that area’s economy.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Does the Minister realise that those of us who represent the squeezed middle in this country—the northern and midland regions—are sick to death of seeing London and the south-east getting all the infrastructure investment, all the cranes, while we are waiting patiently for investment in our part of the world, where we have been in recession for three years?
Danny Alexander
In that case, the hon. Gentleman ought also to welcome the substantial investment, for example, in the northern hub rail project. He ought to welcome the substantial investment in the electrification of the trans-Pennine railway. He ought to welcome the substantial investment in the capital infrastructure around ports to enable the north and the north-east of England to benefit, particularly from the investment in renewables that we will see over the coming years. A fair picture would represent those things too.
Graeme Morrice (Livingston) (Lab)
8. What recent assessment he has made of the rate of income tax paid by those earning over £150,000 per year.
Mr Jim Cunningham (Coventry South) (Lab)
14. By what means his Department determined which core cities would participate in the tax incremental finance scheme; and if he will make a statement.
The Chief Secretary to the Treasury (Danny Alexander)
The main tax increment financing scheme will be available to all local authorities in England from April 2013 as part of the business rates retention scheme. We will set out more details on how it will work shortly. A second pot of longer-term funding will be allocated to the core cities—the eight largest cities outside London—on a competitive basis. We will invite applications from those cities for that pot soon.
Mr Cunningham
Why was Coventry left out of the eight core cities, against the promise of the Deputy Prime Minister in 2010? Does the Chief Secretary realise that that will have a bearing on the Friargate scheme in Coventry, which will employ a lot of people when it is finished?
Danny Alexander
The eight core cities are a well-established group that have a proven role in driving economic growth in England. As I said, the main tax increment financing scheme will be available to all local authorities in England, including that of the hon. Gentleman, from 2013. We will set out the details of that shortly as part of the business rates retention scheme. Other pools of funding, such as the Growing Places fund, may be able to help with the scheme that he mentioned. The local enterprise partnership allocates those funds.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
I thank my right hon. Friend for that answer. If the city pilots are successful, will he consider extending this method of financing to all county authorities?
Danny Alexander
Tax increment financing has great potential in helping local areas to develop infrastructure projects and supporting economic growth across the country. As I said to the hon. Member for Coventry South (Mr Cunningham), the main tax increment financing scheme will be available to all local authorities in England from April 2013. That will apply to the kind of local authorities that my hon. Friend described.
Katy Clark (North Ayrshire and Arran) (Lab)
15. What assessment he has made of the effect of changes to working tax credit on couples in households where one person is retired.
Mr Mark Spencer (Sherwood) (Con)
T9. Can the Chancellor tell me how many of my constituents will benefit from the lifting of the personal tax threshold?
The Chief Secretary to the Treasury (Danny Alexander)
Information is not available at constituency level, but I can confirm that for the east midlands government region 1.7 million people will benefit in 2013-14 from the largest ever increase in the personal allowance, which was announced in the Budget. Some 152,000 people will have been taken out of tax altogether in the east midlands by the policies of this Government.
Albert Owen (Ynys Môn) (Lab)
T6. It has been reported in the papers that the Chancellor is prepared to meet with charities so that he can explain his tax hike and tell them how he can get it right in the future. For the sake of consistency, will he also meet with the purveyors of pasties, church leaders and caravan operators and manufacturers so that he can tell them how he will get it right in the future and they can tell him to drop these VAT hikes?
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
West Dunbartonshire is the most difficult local authority area in the whole of the UK in which to find a job, yet the Scottish National party Government have refused us any help and refused to meet me. Have this Government also abandoned West Dunbartonshire or can we expect help to do one thing—to create jobs?
Danny Alexander
It is disappointing to hear that members of the Scottish Government have refused to meet the hon. Lady to discuss the help they could provide to her constituents. This Government’s actions—the youth contract, in particular—will be of significant importance to many young people in her constituency. In particular, there are the additional jobs subsidies available to businesses to take on young unemployed people in her constituency. I hope she will welcome that and promote it to businesses in her area.
Jacob Rees-Mogg (North East Somerset) (Con)
Tomorrow, the European Commission will publish its proposed 2013 budget. Will Her Majesty’s Government do everything they can to ensure that there is no increase in that budget? More importantly, will they use their veto on the multi-annual framework to ensure that there is no increase?
Improving Spending Control
Danny Alexander Excerpts(12 years, 7 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
Today I am publishing new rules and incentives to strengthen the control of public spending.
The Government have set out their plan to significantly reduce the structural current budget deficit over the course of this Parliament. While good progress has been made, the scale of the challenge calls for a more robust and consistent approach to managing public spending.
The “Improving Spending Control” document has been worked up with finance directors across Whitehall. It sets out a new framework for improving financial management across the public sector, and how that framework will be supported by incentives and penalties.
All organisations spending public money will be required to collect and share better information on public spending, improve the skills needed to deliver their spending plans, and identify areas of their budget that can be reprioritised in case unforeseen spending pressures emerge.
The new framework provides the necessary incentives and penalties to reform financial management. Departments who can demonstrate a good track record of spending control will be rewarded with greater freedom within their budgets. Others will be subject to greater central Treasury control.
This document sits alongside, and is consistent with, “Managing Public Money” and the “Consolidated Budgeting Guidance”. Copies of the document have been deposited in the Libraries of both Houses.
Infrastructure Cost Review
Danny Alexander Excerpts(12 years, 7 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The Government have today published the first annual progress report on the three-year infrastructure cost review programme launched in March 2011.
Over the past 12 months, the Government have worked with industry to put in place the mechanisms through which real reductions in the costs of constructing economic infrastructure can be achieved and sustained—to enable taxpayers and utility bill payers to get more for less. The programme is on track and the report gives examples of good practice, consistent with the recommendations of the cost review, where individual savings of over £2 billion have been identified.
A key measure of success is the application of cost review principles to reduce delivery costs on the UK’s priority infrastructure projects and programmes identified in the “National Infrastructure Plan 2011”.
Copies of the document have been deposited in the Libraries of both Houses and are available on the Treasury website at: www.hm-treasury.gov.uk.
Finance (No. 4) Bill
Danny Alexander Excerpts(12 years, 7 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
I beg to move, That the Bill be now read a Second time.
This year’s Finance Bill is the next step in delivering the coalition Government’s core aims of returning this country to sustainable, shared prosperity, dealing with the deficit, supporting the private sector, restoring economic growth and clearing up the mess that the Labour party made of the British economy.
Danny Alexander
I will take interventions, but I will make some progress first.
This Finance Bill sets out wide-ranging reforms to build a fairer, more efficient and simpler tax system that supports families, rewards hard work, promotes business and ensures that everyone pays their fair share.
Ian Lucas
On the question of fairness, why has the right hon. Gentleman allowed a VAT concession for skiers going to the piste but refused my repeated request for a VAT concession for disabled people in wheelchairs using taxi facilities run by charities such as Chariots, in my constituency?
Danny Alexander
I am not aware of the particular issue that the hon. Gentleman mentions. He has not raised it directly with me before, but I am sure he has with my colleagues. I would be very happy to consider it. The issue of cable-powered transport systems has been raised many times by the industry, and a good case has been presented for the change.
The Bill builds on the strong foundations that we have secured in the past two years, safeguarding our economic stability, creating a fairer, more efficient and simpler tax system and driving through reforms to unleash the private sector enterprise and ambition that is critical to our recovery. We will not achieve that by returning to the model of unsustainable debt, irresponsible spending and over-reliance on one sector and one region.
We will not jeopardise the progress that we have made in tackling our debts. We will stick to our plans, because it is fair that we tackle those debts today so that we do not burden our children tomorrow.
Mr John Redwood (Wokingham) (Con)
When the Government proposed VAT on pasties, did they feel they needed to do that to protect other VAT revenue on takeaways from European challenge? Is that what is in the Chief Secretary’s mind?
Danny Alexander
No, that is not what is in our mind. It is one of a number of anomalies in the VAT system that we addressed in the Budget, although it is not actually a matter contained in the Bill. My right hon. Friend will be aware of the comments of, for example, the National Federation of Fish Friers, which makes the point that small independent fish shops, of which there are thousands around the country located in the constituency of every Member, have for many years been charged VAT on sales whereas other retailers have not. We are seeking to correct that anomaly.
Mr Russell Brown (Dumfries and Galloway) (Lab)
Is the Chief Secretary now in a position—he was not in the early days after the announcement—to clarify matters on hot food takeaways, particularly pasties and pies? If a product is freshly baked and hot, but then allowed to cool down, is it sold with VAT added or not?
Danny Alexander
I will give the hon. Gentleman time to cool down, if he likes. He will know that a draft statutory instrument has been published, which goes into the matter in some detail, and the House may well have an opportunity to discuss it in due course. However, the basic answer is that food that is hot and taken away is taxed as hot takeaway food. It is as simple as that.
We will stick to our plans on the economy because financial discipline is the essential pre-condition for economic growth, even though that requires difficult and sometimes unpopular decisions, and helps provide confidence and the low and stable interest rates that businesses need to invest in growth and job creation. That confidence was shown at the weekend by the reaffirmation of this country’s triple A credit rating by Standard & Poor’s, the same agency that called it into question when the right hon. Member for Morley and Outwood (Ed Balls) was a member of the Cabinet.
We are committed to securing a recovery led by private sector entrepreneurs, wealth creators and export industries—the sort of growth that the Opposition failed to deliver in more than a decade in government. That is why we are going even further in the Bill to boost our competitiveness and ensure that Britain is again one of the best places in the world to do business, reversing our fall down the global competitiveness league tables that took place under the Labour Administration.
Mr Graham Stuart (Beverley and Holderness) (Con)
This is a Budget for jobs—it lowers corporation tax and takes some people out of tax altogether. That is why it is particularly concerning that it proposes to introduce 20% VAT on static caravans, which are mostly manufactured in east Yorkshire and are deployed in coastal and rural communities throughout the country—the entire supply chain is in this country. The cost of the proposal in jobs will be thousands, and I am grateful that the Government are consulting on it. Does my right hon. Friend agree that Members of all parties are concerned? We need to get that right because the Budget will reverse the destruction of manufacturing that happened under the previous Government, and we do not want to make any inadvertent errors.
Danny Alexander
I am grateful to my hon. Friend for raising that point. I know that it is a matter of concern to several Members, particularly in his part of the country. The change is, again, intended to equalise the VAT system for caravans that are used for leisure purposes. There will certainly be an opportunity to consider the detail, and my hon. Friend will be free to make representations, along with, I am sure, colleagues from his part of the country. We look forward to hearing what he has to say.
Danny Alexander
No, I will make some progress, because, as my hon. Friend also said, and as the House knows, the Government have already set out plans to reduce the main rate of corporation tax to 23%, but this year’s Finance Bill goes even further for precisely the reasons that he gave.
Clauses 5 and 6 will reduce the main rate of corporation tax to 22% by 2014—a headline rate that is dramatically lower than that of our competitors, the lowest in the G7 and the fourth lowest in the G20.
Charlie Elphicke (Dover) (Con)
On that point, it is incredibly important that the Government are reducing the rate of corporation tax. That is great news for British business. However, British business pays corporation tax. Should not we take proper action against multinationals that rip off our country and do not pay proper taxes, and ensure that they pay a fair share of tax, like every British business, so that we have a level tax playing field for all companies?
Danny Alexander
I am grateful to my hon. Friend for his support for our measures on corporation tax. The fact that they have been welcomed not just by hon. Members, but by the CBI and a range of business organisations—and, indeed, that they have been shown to increase business investment—will help this country retain its international competitiveness, which declined markedly when the Labour party was in government.
My hon. Friend is right that we must deal with tax avoidance by companies, and there are a number of measures in the Bill that are precisely aimed at ensuring that businesses pay their fair share of tax, which I am sure he would wish to support. Furthermore, through clause 180, we are introducing vital reforms to the controlled foreign companies rules, and, through clause 19, a patent box to allow UK businesses to operate in an ever-more globalised world. Hopefully, we will encourage some of the businesses to which he refers to return to the UK. The latter measure has already secured a major investment in this country by a major chemicals company.
As well as creating the competitive conditions for enterprise to thrive, we must ensure that businesses have the support they need to seize the opportunities in the recovery. That is why we are taking action in the Bill to support the small businesses, the start-ups and the entrepreneurs that are critical to creating new jobs in the recovery. Clauses 39 and 40 increase the annual investment limit for enterprise investment scheme and venture capital trusts to £5 million. In that spirit, through clause 28, we are introducing a new scheme—the seed enterprise investment scheme—to encourage further investment in small, start-up companies, which are the kind of companies this country needs more of as the recovery continues. Those are significant steps to encouraging new growth, galvanising new sectors, and broadening access to finance for UK business, helping to rebalance our economy away from its over-reliance on one sector and one region.
We are committed to supporting a private sector recovery right across the UK. Clause 44 introduces a new, enhanced capital allowance regime for businesses in seven enterprise zones in England, three in Scotland and one in Wales.
Miss Anne McIntosh (Thirsk and Malton) (Con)
My right hon. Friend might have noticed that most of the enterprise zones are in urban areas. We have heard about static caravans and churches, but there is growing concern about rural businesses, which are losing out by not being in areas that will benefit from the schemes that he is announcing.
Danny Alexander
I recognise my hon. Friend’s concern. On churches, she will be aware that, as we said in the Budget, we will increase the listed places of worship scheme by £5 million a year, precisely to enable churches that have alterations to benefit from the scheme and not to be adversely affected. However, our investment in transport infrastructure and a number of local transport schemes, and the massive investment in broadband in rural areas—we are investing £520 million to ensure that every part of the country has the latest superfast broadband—will make a major difference to rural economies. Along with the increases to the income tax personal allowance, to which I shall turn in due course and which will particularly benefit rural areas, where incomes tend to be lower than in urban areas, there are many reasons why the rural economy will benefit significantly from the measures taken by this Government. Enterprise zones will help to promote growth in every part of the UK.
The Budget included an announcement of a package of measures to ensure that we fulfil our potential to extract the greatest possible amount of oil and gas from our reserves in the North sea through a major package of tax changes. We will end the uncertainty on decommissioning tax relief that hangs over the industry by entering into contracts with companies. We will also introduce new field allowances, including a £3 billion new field allowance for large and deep fields, to open up west of Shetland, the last area of the basin left to be developed. Clause 184 gives the power to introduce new brownfield allowances as and when the industry can demonstrate the need for them in specific areas through the information it shares with the Government through the new processes that we have established. Those measures together are a huge boost for investment in the North sea.
We continue to support economic development in the devolved Administrations. Clause 189 devolves the power to the Northern Irish Assembly to set rates of air passenger duty for direct long-haul flights from Northern Ireland, which will help to protect the vital direct air service to the US, supporting tourism and businesses in Northern Ireland.
The Government will not relent as we seek to restore prosperity across the country. We are committed to promoting business enterprise, investment and exports across all parts of the UK. Securing sustainable growth and creating sustainable private sector jobs are the best ways to support families and raise living standards in the long run. Of course, I understand that these remain tough times for many families across the country. That is why the Bill reinforces our commitment to helping the lowest-paid in the country while ensuring that those with the broadest shoulders continue to carry the heaviest burden.
Simon Hughes (Bermondsey and Old Southwark) (LD)
Some of us have been frustrated in recent weeks that that point has been obscured by bigger press reporting of changes with much smaller consequences for the Treasury. Will my right hon. Friend put on the record the relevant impacts and costs, including the number of people benefiting from the threshold changes compared with the number benefiting from the other, much more marginal changes that matter little to most of our constituents, including, I think, his?
Danny Alexander
My right hon. Friend is right that the single most significant measure in the Budget was the largest ever increase in the income tax personal allowance. I will dwell on that in detail in a moment but his point—
Danny Alexander
I shall finish my response to the previous intervention before gladly taking another one.
By far the largest measure in the Budget was the £3.5 billion tax cut for people on low and middle incomes through the largest ever increase in the income tax personal allowance—a massive support to 24 million working people across the country—and my right hon. Friend is absolutely right to draw attention to it.
Rachel Reeves
Will the Chief Secretary confirm the Institute for Fiscal Studies’ numbers showing that with the changes to the personal allowance and other changes—for example, to tax credits—the average family with children will be £511 worse off from this month?
Danny Alexander
No, I will not confirm those figures. According to my figures, 23 million individuals will be better off as a result of the personal allowance change—[Interruption.] A number of families are affected by our tax credit changes but many more benefit from our income tax changes.
Danny Alexander
I will take one more intervention from the hon. Gentleman, who has not cooled down.
Mr Brown
I assure the Chief Secretary that I have cooled down—I do not take much cooling down. In the run-up to the 2010 general election, he and his Liberal colleagues made abundantly clear what they wanted to do with personal allowances to take some people out of paying income tax. Did they honestly expect to do that off the backs of pensioners?
Danny Alexander
I am glad that the hon. Gentleman at least recognises that we made clear in our election manifesto our ambition to raise the income tax personal allowance to £10,000. We have introduced the triple lock for pensions that provides for a more generous uprating system, and some 5 million pensioners pay no income tax at all. For those reasons, many pensioners will be better off.
It is right that the richest in the country contribute a fair and growing share to our collective effort to build a balanced and sustainable economy. Clause 209 increases the bank levy to 0.105% from January 2013 to offset the tax saving that the banks would otherwise have made from a reduced rate of corporation tax. That will ensure that UK banks continue to pay around £2.5 billion in this new tax each and every year, which is more than was raised in a single year by the previous Government’s one-off bank payroll tax.
Clause 211 introduces a new higher rate of stamp duty land tax of 7% on properties worth more than £2 million. That is why next year’s Finance Bill will cap the use of tax reliefs that some wealthy people currently use to reduce their income tax rate to single figures. As we made clear on page 59 of the Budget document, however, we
“will explore with philanthropists ways to ensure this new limit of uncapped reliefs will not impact significantly on charities that depend on large donations.”
Our consultation on the detail will be published in the summer.
Mr David Ruffley (Bury St Edmunds) (Con)
Many charities, including the Suffolk Foundation, estimate that the cap on tax reliefs will lead to a 20% reduction in their charitable donations. Will the Chief Secretary consider exempting charitable donations to UK charities? It would be comparatively inexpensive but terribly important to the charitable sector.
Danny Alexander
It is important that the House is clear about what is being proposed. What we are proposing is a limit, on what are currently uncapped tax reliefs, of £50,000 or a quarter of someone’s income, whichever is the higher; so someone earning £10 million a year can still receive tax relief on donations of £2.5 million to charity each and every year. However, as I say, we will discuss this with philanthropists and charities—indeed, those discussions are ongoing. Some features of the American system, for example, may be attractive, which we will certainly examine and consider as part of that process.
The basic principle that the wealthiest in the land should pay a fair proportion of their income in income tax must be absolutely right, not least because last week we published data showing that last year some of the wealthiest people in the country had reduced their tax bills to below the basic rate of income tax. That is the system that was in place when Labour was in power. I think Opposition Members should have a bit of humility about that, because it means that some millionaires are paying a lower rate of income tax than people earning £20,000 a year. That is why it is fair that we cap tax reliefs, and, in the same way, it is right that we cap benefits. It is right and proper to ensure that the wealthiest in the country should pay a fair share of their income in tax, and that is exactly what we will do.
Penny Mordaunt (Portsmouth North) (Con)
Can my right hon. Friend confirm that the measures in the Budget will raise five times more than changing the 50p rate?
Danny Alexander
My hon. Friend is absolutely right about that. The figures in the Budget book, certified by the independent Office for Budget Responsibility, show that in each and every year, money raised from the wealthiest in the land will dwarf by five times at least the cost of reducing the 50p rate to 45p. In doing that, we are also, for example, clamping down on the avoidance of stamp duty—something that was left as an open door by the previous Government. They seemed to be in favour of a tax system that encouraged avoidance, rather than clamping down on avoidance, ensuring that everyone pays their fair share and thereby raising five times as much money overall, which we can use, for example, to fund the massive cost of the substantial reductions in income tax for people on low and middle incomes in this country.
Mr Andrew Love (Edmonton) (Lab/Co-op)
How does the right hon. Gentleman square the policy that he has just enunciated with the objectives of the big society, which the Prime Minister is so keen on?
Danny Alexander
With this measure we are trying to strike the right balance between having a proper system of tax relief for charitable donations and ensuring that the wealthiest in this country pay a fair proportion of their income in tax. I would have thought that the hon. Gentleman would support that measure rather than oppose it, particularly when he considers it in the context of the many other measures that we have taken to encourage and support charities and voluntary organisations. For example, we have introduced for the first time gift aid on small donations received by small charities—from shaking tins on the street corner, holding coffee mornings and that sort of thing—which was not done when his party was in office. That will benefit thousands of small charities all around this country, and it is the sort of thing that he should welcome. Likewise, Big Society Capital has been created to help charities and voluntary organisations to raise funds.
Owen Smith (Pontypridd) (Lab)
Before the right hon. Gentleman moves off the 50p rate completely, can he explain to the House why the numbers revealed by the Treasury this morning seem to show that at least 75% of top-rate taxpayers were paying the full rate of tax? How can he explain to his hon. Friend the Member for Portsmouth North (Penny Mordaunt) that so little money—the £100 million that is ostensibly in the Budget—was being raised by the 50p rate?
Danny Alexander
First, the hon. Gentleman should study the figures based on the tax system from 2010-11, under the tax rules put in place by his Government. They show, for example, that 6% of those earning over £10 million a year were paying tax at under 10%, that 3% were paying it at 10% to 20%, that 8% were paying it at 20% to 30%, that 12% were paying it at 30% to 40%, and that 72% were paying it at above 40%. The figures do not say that they were paying at the 50% rate. The fact is that the independent Office for Budget Responsibility and the HMRC study, which I am sure the hon. Gentleman has reflected on in great detail, show the most reliable, reasonable, central estimates.
Danny Alexander
No, I want to make some progress, and the hon. Member for Pontypridd (Owen Smith) has already intervened on this point.
Danny Alexander
No, I am going to press on and address the question of the 50p rate. When I have done so, the hon. Gentleman and the hon. Lady will be free to intervene on me again.
Before discussing the 50p rate, I will refer briefly to clause 8, which will remove child benefit from the highest earners. We will withdraw child benefit from those in households earning more than £50,000 in a way that is gradual, so that only those earning more than £60,000 will lose all their child benefit. The measure will help to ensure that the burden of deficit reduction is fairly shared, and by implementing it as we propose, we will deal with the anomalies that have been highlighted.
Mark Field (Cities of London and Westminster) (Con)
I perhaps have more sympathy than many of my colleagues with the idea of the charity tax that is being introduced. Will my right hon. Friend confirm that, in regard to that tax and to child benefit, it is the Government’s intention to try to restore those benefits once the deficit has been paid down and we no longer have to service a debt of £126 billion a year?
Danny Alexander
I thank my hon. Friend for his support, but I cannot confirm that intention at this stage. We have a major ongoing problem with the sustainability of our public finances. We set out in the spending review last year, and reaffirmed in this year’s Budget documentation, the need for further spending—
Sheila Gilmore (Edinburgh East) (Lab)
Will the right hon. Gentleman give way?
Danny Alexander
I am just responding to the previous intervention, if the hon. Lady will just hold her horses for a second.
We confirmed in the Budget document the need for further fiscal consolidation in the years 2015-16 and 2016-17. We cannot simply promise to reverse measures, although that is the policy of the Labour party, which seems quite happy to return to its old habit of high spending and introducing measures that would return this country to the mess that Labour has already put us in.
Sheila Gilmore
Over the Easter recess, did the right hon. Gentleman have a chance to reflect on the question that I asked him during the Budget debate? Why, having listened to people’s concerns about child benefit, was he not prepared to make any concessions to the much poorer group of people who were going to lose their tax credits?
Danny Alexander
I explained in the Budget debate that reforms to tax credits were necessary to deal with the rapidly growing cost of a system that had started out costing £18 billion a year and was now costing £30 billion. It will still cost about £30 billion, but that money will be more focused on those on lower incomes. When we first came into office, we inherited a tax credit system that could pay tax credits to people on £50,000 or £60,000 a year—
Danny Alexander
Let me answer the hon. Lady’s point. Reform of the system was necessary. It was one of the hard decisions that we have had to make in dealing with the massive budget deficit and the huge mess that her party left the British economy in. Recognition on her part that that has to be dealt with would be a welcome way in which to start her next intervention.
Sheila Gilmore
This is a matter of fairness. I am not talking about the tapering off of tax credits at the top end, although I might have a view on that as well. I am talking about the changes that came into force the week before last, which are hitting the very lowest earners—people at the very bottom end, who will not benefit from the changed tax thresholds as they already earn too little to pay income tax. Has the right hon. Gentleman reflected on why he is prepared to make concessions on child benefit to the much better off taxpayers when he is not prepared to reconsider the hit that some of the very lowest earners are taking? Those people might end up having to give up work as a result.
Danny Alexander
I notice from the matters for debate selected by the hon. Lady’s Front-Bench colleagues for the next two days’ consideration of the Bill that restoring child benefit for this country’s highest earners and multimillionaires is a major priority for her party. As for the tax credit changes, in a system where we expect a lone parent to work 16 hours in two days a week to qualify for tax credits, it is reasonable to ask more from a household that has two earners working 24 hours a week in three days. I view that change as reasonable.
Danny Alexander
I shall return to the subject of tax avoidance and I want to make some progress, as I know many hon. Members wish to contribute to the debate. We are taking decisive action to clamp down on avoidance. It is utterly abhorrent that a minority of the population seek to avoid paying their full and fair share of tax, distorting the tax system to the detriment of the vast majority who pay their fair share of taxes in full. Whereas the previous Government allowed avoidance to grow and spread, we are putting a stop to it.
In total, this Finance Bill contains 15 measures to close loopholes and tackle avoidance. For example, clause 212 introduces a new stamp duty rate of 15% to deter those seeking to put their high-value property into a corporate structure to avoid tax—so-called enveloping. In a future Finance Bill, we will put in place an annual charge on properties that are enveloped in this way. Residential properties should be within the stamp duty system, full stop. It is shocking that the previous Government did so little on this matter. We are not being so complacent about the tax position of the most expensive properties in the country.
Julian Smith (Skipton and Ripon) (Con)
Will the right hon. Gentleman give way?
Julian Smith
The Yorkshire Post has recently established that the police chief constables’ body ACPO—the Association of Chief Police Officers—has been paying money to ex-chiefs of police forces through special purpose companies. Will the Chief Secretary confirm that the rules on this process will be tightened up under Government proposals?
Danny Alexander
I certainly can confirm that, and I shall bring some proposals before the House in due course. The hon. Gentleman may recall that it was the case of the chief executive of the Student Loans Company that brought this issue to light. We have conducted an investigation into this practice in and across government, which has highlighted the fact that this process is far too widespread. As I say, I shall announce the details in due course, but the hon. Gentleman can rest assured that the Government take this issue very seriously indeed.
Debt buy-back measures announced last month will raise more than £500 million from banks that tried to avoid paying their due tax. In addition, the introduction of the UK-Switzerland agreement into legislation will help to ensure that we can tackle the tax loss from those who put their money into Swiss banks to evade paying tax.
Through the anti-avoidance measures in this year’s Finance Bill, we are already increasing revenue over the next five years by around £l billion and are protecting a further £10 billion that could have been lost. Going even further, we will consult on the potential for a general anti-avoidance rule—a new rule that will at last put the Government one step ahead of the tax avoiders. It is because of these far-reaching reforms that we will raise £500 million more each and every year from the wealthiest in our society. That is five times more than we lose by cutting the ineffective and uncompetitive 50p tax rate.
The 50p rate raised just a fraction of the amount that the previous Government said it would raise, but by cutting the rate to 45p, the direct cost to the Exchequer is only £100 million—a figure certified by the independent Office for Budget Responsibility, which I thought the Labour party welcomed, which described the figure as “central and reasonable”. Instead, the measures we have announced in the Budget will raise considerably more from the wealthy—five times more in total—allowing us to help millions of people on lower incomes to keep more of their earnings through the largest ever increase in the income tax personal allowance.
Rachel Reeves
Figures released by the Treasury today show that of those people earning more than £10 million, 72% pay the full top rate of tax, so can the right hon. Gentleman confirm that they will be receiving on average sums amounting to tens of thousands and in some cases hundreds of thousands of pounds because of the cut in the top rate of tax?
Danny Alexander
As the report from Her Majesty’s Customs and Excise, certified by the independent Office for Budget Responsibility, showed, the cost of reducing the rate was small, precisely because the tax did not yield the amounts we were promised by the previous Government. Instead, by putting our measures in place—the cap on uncapped tax reliefs, clamping down on stamp duty avoidance, the general anti-avoidance rule and many other measures I have mentioned—we will get more money from the wealthiest, who are precisely the people the hon. Lady talks about—
Danny Alexander
No, I want to make some progress. The hon. Lady has intervened twice on this subject, and her colleagues intervened once, and they have not said anything new.
Danny Alexander
I will give way to the representative of the Scottish National party who might have new light to shed on this question.
Stewart Hosie
As a result of the 5p tax cut, the next four years will see a loss of revenue yield amounting to £350 million. About 10 minutes ago, the Chief Secretary himself said that the sustainability of the public finances was a major ongoing issue. Why are the Government prepared to forgo £350 million over the next four years in order to deliver a millionaires’ tax cut?
Danny Alexander
Very simply, for the reason that I have given several times today. We are raising five times more from the same group of people, which helps us to deliver the policy which we firmly believe is the best way to support working people on low and middle incomes and help them to keep more of what they earn.
Frank Dobson (Holborn and St Pancras) (Lab)
Will the Chief Secretary give way?
Danny Alexander
No. I have been speaking for a long time, and I am going to make some progress now.
We have set ourselves the goal of raising the personal income tax-free allowance to £10,000. Clause 3 increases the personal allowance this year to £8,105. Together with the previous increase, that will lift more than a million low-income earners out of income tax completely. Moreover, we are going further and faster. In the Budget we announced the largest ever increase in the amount that people can earn tax-free—an increase, from next April, of £1,100 to £9,205. That tax cut will be worth £3.5 billion every year to working families. It will benefit more than 23 million people, and will be worth £220 in cash terms and £170 in real terms to every basic rate taxpayer. That is the biggest income tax cut for a generation. Taken with the previous increases, it means that this coalition Government will have halved the income tax paid by someone who works full time on the minimum wage, and lifted 2 million people out of tax altogether. We are living up to our commitment to support hard-working people and families across the country.
We are also reforming the age-related allowances available to those born before 6 April 1948. We recognise that pensioners need additional help, which is why we introduced the triple lock on pensions. The basic state pension will increase by 5.2% in April 2012, which is £127 more than was planned by the last Government and which constitutes the largest ever cash increase. Under our plans for age-related allowances, no pensioners will lose out in cash terms. Instead, given the huge increase in the personal allowance and the reduced difference between it and the age-related allowance, we will simplify the system. Those born before 6 April 1948 will benefit from the age-related allowance or the personal allowance, whichever is greater. That change will remove, in time, the complicated taper which the Public Accounts Committee called
“complex and hard to understand”.
This is a substantial Bill. It demonstrates the ambition that we need to secure a tax system and an economy that are built on fairness, that reward hard work, and that restore our private sector’s competitiveness. Even with that scale of ambition, however, the Bill makes substantial progress in simplifying our tax system and living up to our commitment to improving the way in which the Government develop tax policy. More than 75% of the measures in the Bill were announced in the 2011 Budget, with more than 400 pages of legislation published for consultation and more than 450 comments received in return. Through that openness, transparency and consultation, we are committed to building a simple and stable tax system that is easy to understand and easy to comply with. That is why we are addressing a number of loopholes and anomalies in the VAT system—introducing an anti-forestalling charge in clause 195—and why the Bill cuts large swathes of the tax code by implementing recommendations from the Office of Tax Simplification. I thank John Whiting and his team for their excellent work in that regard.
The Government are taking decisive action to restore our stability and return the country to prosperity. Our No. 1 priority remains dealing with the last Government’s legacy of crippling deficit and debt in a fair and sustainable way. Through this Finance Bill, we are continuing to ensure that the richest carry the heaviest burden. We are supporting businesses so that they can restore our global competitiveness, and we are supporting hard-working families on low and middle incomes. I commend the Bill to the House.
Amendment of the Law
Danny Alexander Excerpts(12 years, 8 months ago)
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Fiona O’Donnell (East Lothian) (Lab)
I am delighted to have the opportunity to speak in today’s debate, having been out yesterday in sunny Gillan in my constituency, speaking to voters. Gillan has more than its fair share of millionaires, but the people I met and who needed help were mainly young people searching for work.
I give some credit to the Government for a positive element of the Budget in the form of loans for young people to set themselves up in business, and I hope that many of the enterprising young people in East Lothian take advantage of that. I have concerns, however, because in Scotland to be successful people will need, first, skills and, secondly, support. The reality, however, is that the Scottish National party Government are making swingeing cuts to further education, reducing access and opportunities for young people, and at the same time making cuts to local government, which has responsibility for delivering the business gateway. I hope that the Government will enter into discussions in Scotland to make sure that young people are not saddled with debt and bad experiences of failing—
Danny Alexander
I agree wholeheartedly with what the hon. Lady just said. Does she agree with me that the increasing centralisation of services in Scotland stops councils and communities such as hers and mine taking the action needed to support young people back into work?
Fiona O’Donnell
In my area the greatest inhibition to young people gaining work is the lack of work—the lack of available jobs. That is something for which the Chief Secretary must take some responsibility. The number of young people in my constituency unemployed for more than six months has increased more than 120% in the past year. Although the numbers are small, that is starting to have a real effect in East Lothian, with young people not feeling that they have a future.
Culture, the arts and tourism are also important to our local economy. There is a relevant measure in the Budget. I will not take another intervention, but I hope that the Chief Secretary will respond to my concern about the effect of the removal of exemption from VAT for listed buildings. We have some beautiful villages. Will it be only the rich who can afford to live in a listed building? The churches in many of our villages, which are so important to community life, will also be affected by the measure. I hope that we will at least learn the rate at which VAT will be charged on listed buildings.
Like my hon. Friend the Member for Livingston (Graeme Morrice), I watched the sickening sight of the Lib Dems waving their Order Papers at the announcement of the increase in the threshold for tax on Wednesday. It is as though the Lib Dems can hold on to only one policy at a time, and the almost sadistic parent, the Tory partner in Government, distracted them with this one policy. In the meantime the child, who almost has an obsessive compulsion to focus on this one policy, failed to see the overall impact of the Budget on families in my constituency, who have little to celebrate.
If the Deputy Prime Minister is going to think about who he will invite to dinner, I would like him to invite the 225 families in my constituency who will be worse off because of the change in the rules for entitlement to working tax credit. To think that these families can go out and find those extra hours to keep their entitlement is simply not to understand the real world. At the same time, they are seeing their child benefit frozen. I wonder whether the Chief Secretary can give us some clarification, because it is not a simplification in child benefit for high earners, that is for sure. What will happen in a family when one parent earns £51,000 and one earns £151,000? Which income will be considered? Is it the higher income in every case?
Fiona O’Donnell
That is even more unfair. Two parents earning just over the threshold will be disadvantaged compared with two parents earning incredibly high incomes.
The morning before the Budget, I listened to Radio 4’s “Thought for the Day”. The appeal that was made to the Chancellor was that this should be a Budget which— I believe it was a quote from holy scripture—left those who have much not with too much, and those who have little not with too little. I regret that the Chancellor clearly was not listening to that message and that he has let down the most vulnerable in my constituency.
The Chief Secretary to the Treasury (Danny Alexander)
This has been a fascinating debate and some excellent contributions have been made by Members from both sides. I refer, in particular, to the right hon. Member for Edinburgh South West (Mr Darling), the former Chancellor of the Exchequer, who made a typically thoughtful contribution, and to my right hon. Friend the Member for Bath (Mr Foster), who, along with a number of other Members, including the hon. Member for Birmingham, Northfield (Richard Burden), warmly welcomed the package of measures for the creative industries in this Budget. Indeed, a number of other Labour Members welcomed that point, too. The hon. Member for Blyth Valley (Mr Campbell) referred to, among other things, broadband funding in his constituency, which he welcomes. My hon. Friend the Member for Brentford and Isleworth (Mary Macleod) rightly made the point that we should be highlighting the positive news for business in this country, and she highlighted some of the positive news in her constituency.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
Will my right hon. Friend confirm what corporation tax rate companies will be paying in this country? Will it be the lowest in the G20?
Danny Alexander
I can certainly confirm that, as a result of the measures in this Budget and the measures that we announced in earlier Budgets, we will have not only the lowest corporation tax rate in the G7, but one of the lowest rates of tax in the G20. That will make a fundamental difference to this country’s attractiveness to investment from overseas.
Danny Alexander
I will give way to the hon. Gentleman in a moment, but first I wish to mention some of the other contributions. My hon. Friend the Member for Montgomeryshire (Glyn Davies) talked about the benefits of the Budget for rural areas. A number of Labour Members representing Scottish constituencies rightly referred to the absence of a contribution from the Scottish National party and to the damaging policies of the SNP Government in Scotland for the economy. [Interruption.] The hon. Member for Dundee East (Stewart Hosie) has just come in now, for the very closing speeches. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who represents Plaid Cymru, did make a speech, and I will refer to some of the points he raised.
Sir Stuart Bell
Does the right hon. Gentleman believe the corporation tax reduction will lead to growth or to shareholder dividends? Will he confirm that we actually get to that rate in 2014?
Danny Alexander
We have confirmed that we will get to that rate by 2014. The hon. Gentleman should know, as I am sure he has closely studied the Office for Budget Responsibility’s report published alongside the Budget, that the OBR assesses that the cut in corporation tax announced in this Budget will, in fact, lead to an increase in business investment in this country—that is something the OBR has confirmed.
This debate has mainly been significant for the astonishing omissions in speeches from Labour Members. There were no references, except in a few cases, to this country’s fiscal position, to the huge deficit that Labour left us or to the huge debts that this country has accumulated thanks to Labour’s profligacy in office. There was no reference at all to the scale of the mess that the Labour party left this country, far less an apology from any Labour Member to the people of this country for the mess they left this country in. The right hon. Member for South Shields (David Miliband), in an otherwise interesting speech, used the phrase “dangerously complacent”. I think that refers to the opinions of the Labour party in relation to this party’s fiscal position.
Andrew Miller (Ellesmere Port and Neston) (Lab)
Talking about omissions, will the right hon. Gentleman explain to the House why it is to the advantage of the Liberal Democrats to vote for regional public sector pay? The north of Scotland, Northumberland, mid-Wales and the west country will all be losers—is he going to vote for that?
Danny Alexander
If the hon. Gentleman had studied the Budget resolutions, he would know that there is no vote on that subject on the Order Paper tonight, so the opportunity to do so simply does not arise.
To return to the fiscal position, let me be absolutely clear: we on the Government Benches will not return to the model of growth based on unsustainable debt, irresponsible spending and over-reliance on one sector, the City of London, and one region, the south-east of England. Neither will we jeopardise the progress we have made in tackling our debts. That is why this Budget will have a neutral impact on the public finances, and implements the deficit reduction as planned. The Opposition should know that this is their mess but we are clearing it up.
Elizabeth Truss (South West Norfolk) (Con)
Does my right hon. Friend agree that investing in physical infrastructure is vital and is being done by this Government? Does he share my joy that people in Norfolk will soon see the new A11 being built from January to March next year?
Danny Alexander
I certainly share the hon. Lady’s joy that the new A11 is being built by this Government. It has been campaigned for by Members from Norfolk for many decades and never agreed to before. I just wish that I could say the same for my constituents regarding the long-awaited investment in the A9 that the Scottish Government still are not delivering.
On omissions, we heard a lot of carping from the Labour party about individual measures but there were almost no references to the single biggest measure in the Budget. Opposition Members should follow the money in this Budget. More than three quarters of the money raised in this Budget is being spent on one policy measure alone—the biggest tax cut for people on low and middle incomes in this country for a generation. We have set the goal of raising the personal tax-free allowance to £10,000—from the Liberal Democrat election manifesto to the coalition agreement to the pockets of the British people in this Budget. Next month, the income tax personal allowance will rise to £8,105. That gives real help to the working people of this country this year. Taken with the previous increase that has come through this year already, it will lift more than 1 million low-income people out of tax altogether, but we are going further and faster.
Helen Goodman (Bishop Auckland) (Lab)
It is clear that the Government are going further on personal income tax cuts, but it is equally clear that they have not got a strategy for growth. How many jobs will be produced by the cut in the 50p rate?
Danny Alexander
First, I am very grateful to the hon. Lady for at least agreeing that we are going considerably further on the personal income tax allowance. That was sadly lacking from most of the contributions from the Opposition. They will also know that the OBR’s forecast that was published alongside the Budget revised downwards the forecast for the claimant count this year, next year and in every year over this Parliament.
As I was about to say, in this Budget we have announced the largest ever increase in the amount that people can earn tax-free—an increase next April of £1,100 to £9,205. That is a tax cut of £3.5 billion for working families and is the biggest ever increase in the personal allowance. It is the biggest income tax cut for people on low and middle incomes for a generation—a tax cut for more than 23 million people. It means £220 for every basic rate taxpayer, or £170 in real terms. The tax bill of someone who works full time on the minimum wage will already have been halved by this Government.
Sheila Gilmore (Edinburgh East) (Lab)
While he was arguing for the rise in the tax threshold, did the right hon. Gentleman at any time argue for the people who are losing their working tax credit from April this year, or did he just not bother to argue for those very low-paid people?
Danny Alexander
We have argued for measures to ensure that people on low and middle incomes are taken out of income tax altogether. We have made significant changes to the tax credit system, which, frankly, under the previous Government, reached way up the income distribution. The changes we have made are appropriate and fair, and it is right that we have drawn back on a system that was costing many billions of pounds under the previous Government.
Taken with the previous increase in the income tax personal allowance, this measure means that this coalition Government have reduced tax paid already by basic rate taxpayers by £350 in real terms. It is this coalition Government who, as a result of the measures in this Budget, will have lifted 2 million people out of income tax altogether—59% of them women, to respond to a point made during the debate. That is the right measure on taxation and the Labour party should support it. Labour thought it was right to double the tax on people on low incomes, but we do not; we think it right to halve the tax on people on the minimum wage.
Brandon Lewis (Great Yarmouth) (Con)
I thank my right hon. Friend for giving way and being so generous with his time. Does he agree that one of the important measures in the Budget that will help people trying to get into work is the change in the oil and gas taxation regime, especially on decommissioning, which could create huge investment and huge numbers of jobs in areas such as Great Yarmouth?
Danny Alexander
My hon. Friend is absolutely right that the decommissioning relief and the additional field allowances that we announced in the Budget will make a significant difference to investment in the oil and gas sector.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Will the Chief Secretary give way?
Danny Alexander
I will take no lessons on the treatment of elderly people from the man who was responsible for the 75p increase in the basic state pension.
Danny Alexander
So not one word of apology for the 75p increase in the basic state pension, not one word of apology for the mess that he and his colleagues left this country’s economy in—[Interruption]—and not one word of recognition that the costs of reducing the 50p rate are paid for more than five times over by other measures that impact on the wealthy.
Mr Speaker
Order. The House needs to calm down a bit. I was listening intently, because I wanted to hear the Chief Secretary’s answer, and I was struggling somewhat to do so. I want to hear what he has to say.
Danny Alexander
It is no surprise that Labour Members want to drown out any reference to their record in government.
I think I know why the record increase in the income tax personal allowance has not been welcomed by Labour Members today and was hardly mentioned by the two Opposition Front-Bench speakers, despite the fact that Labour used to call itself the party of working people. This debate has also revealed something of lasting significance about the Labour party—
Simon Hughes
Given that the shadow Chancellor is so keen to talk about pensioners, will the Chief Secretary remind us of the increase pensioners will have next month compared with what they got under Labour, and what they will have by the end of this Parliament in the citizen’s pension compared with what Labour never did in 13 years?
Danny Alexander
My right hon. Friend is, as usual, absolutely spot on. From next month, pensioners will see the largest ever increase in the basic state pension, because we have put in place the triple lock promised in our manifesto to ensure that never again will pensioners be awarded derisory increases of the sort that Labour brought us. Thanks to my hon. Friend the Pensions Minister, who is in his place, we will also be introducing, as the Chancellor announced, the single-tier pension at £140 or thereabouts a week, so that new pensioners will no longer be trapped in the means-testing system that Labour left them in for so long.
Mr David Davis (Haltemprice and Howden) (Con)
Will my right hon. Friend give way?
Danny Alexander
The full depths of the economic incompetence of the Labour party have been revealed in the course of the debate. [Interruption.] They are opposed to most of our spending reductions. They are opposed to many of the revenue-raising measures in the Budget. They have opposed tax cuts for business. I heard from the deputy Leader of the Opposition that they are opposed to our cap on unlimited tax reliefs for the wealthy. We know what Labour’s economic plan for this country would be—income taxes up, business taxes up, borrowing up, debt up, and interest rates and mortgage rates up. The only thing that would go down under the Labour party would be the British economy. It may seem astonishing that the party that got Britain into the worst economic crisis for a generation now wants to put us right back into the mess that this coalition Government are trying to get the country out of. The Labour party of the 1970s and 1980s is back and I hope the British public have been watching.
Mr Tom Harris (Glasgow South) (Lab)
When the Chief Secretary meets the Chancellor every morning at the Treasury to receive his instructions for the day, has the Chancellor ever once explained to him how his party can possibly blame the spending of the Labour Government for the deficit while having supported every single penny of spending right up to November 2008— 18 months before the general election?
Danny Alexander
There we see it again—a party in denial about the mess it got this country into. [Interruption.] I know the hon. Gentleman is a rational man and has played a great role in Scottish politics, but he ought to have a bit more sense than to pretend that his party has no responsibility whatsoever.
Danny Alexander
The Budget is fair. It raises additional taxes from the wealthiest and asks the wealthiest in this country to pay more. That is why, for example, we are capping—[Interruption.]
Mr Speaker
Order. There is so much noise that I am not sure the Chief Secretary can even hear that his right hon. Friend the Member for Haltemprice and Howden (Mr Davis) is seeking to intervene. Perhaps he can hear and does not want to give way, but if he cannot hear, he is not able to give way.
Danny Alexander
You are quite right, Mr Speaker. I could not hear my right hon. Friend, but I am happy to give way to him.
Mr Davis
I will start by saying that I entirely support the growth orientation of the Budget, which is much better than everything we have heard for the past 10 years, but I hope my right hon. Friend will forgive me for raising a narrow issue, because 90% of the effect of one of his tax changes falls in and around my constituency—the VAT change on the production of static caravans. That will have an impact which, he says in his own Red Book, is £40 million positive, but the cost in unemployment will be £45 million negative. Will he review this issue?
Danny Alexander
My right hon. Friend will know that all these measures are consulted on, but I think the measure is appropriate. As he knows, mobile caravans are subject to VAT, but static caravans are not. Static caravans that are used for residential purposes, which people make their main home, will continue not to be subject to VAT. That may be some comfort to him.
I shall draw my remarks to a close by referring to the measures in the Budget that deal with the wealthiest in society. We have capped reliefs on income tax which the wealthy exploit. We have capped benefits; now we are capping reliefs. It is, if you like, a tycoon tax. We have introduced a new stamp duty land tax at the rate of 7% on properties worth more than £2 million. We are increasing the stamp duty charge to 15% for residential properties over £2 million and we are consulting on a new annual charge for people who continue to envelope their properties—a mansion tax on tax dodgers, if you like.
This is a fair Budget. It is for the millions, not for millionaires, a Budget for the many, not the few, and I commend it to the House.
Question put.
Oral Answers to Questions
Danny Alexander Excerpts(12 years, 8 months ago)
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Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
2. What fiscal steps he is taking to assist women facing high child care costs.
The Chief Secretary to the Treasury (Danny Alexander)
The Government do not assume that high child care costs are an issue for women only, but we have increased the provision of free child care for three to four-year-olds to 15 hours a week, and extended that commitment to about 40% of two-year-olds by 2014-15. The Government support low to middle income working families directly through the child care element of working tax credits. We also provide support through employer-supported child care vouchers.
Mr Sheerman
But what does the Minister say to young women who are professionals and managers and who, according to the Daycare Trust, face the double whammy of a 30% increase in the cost of nursery provision over the past four years and the loss of their child benefit? What does he say to those young women?
Danny Alexander
I say that the Government are increasing the entitlement to free child care for three and four-year-olds from 12.5 to 15 hours a week, and introducing a new entitlement for disadvantaged two-year-olds, so that 40% of two-year-olds will have 15 hours of free child care per week. That represents substantial support for those families, in addition to which there will be tax credit support—depending on income—and access to employer-supported child care vouchers, which were taken up by 500,000 people in 2011-12.
Mrs Anne Main (St Albans) (Con)
I welcome the free nursery places, but nursery care in constituencies such as mine is often so expensive that nurseries decline to offer the free places unless they are allowed to request a top-up. Will the Government please consider listening to those nurseries that would welcome parents being able to give a small amount so that they could offer the free places?
Danny Alexander
My hon. Friend makes an interesting point. She will also recognise that local authorities have a duty to maintain sufficient child care to meet the needs of working parents in their area. The Department for Education is to undertake a review to ensure that that is happening.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Many women facing high child care costs are low-paid workers in the public sector. We wrote to the Chancellor in January, calling on him to write to the pay bodies to ensure that by being tougher at the top, we can help to protect lower-paid workers in 2013 and 2014. Can the Chief Secretary to the Treasury tell us whether the Chancellor has taken that action, and whether he will deliver on his promise that, as he delivers pay restraint, he will do more for the lowest-paid public sector workers?
Danny Alexander
The hon. Lady will recognise that, during the pay freeze of last year and the coming year, we have provided a £250 pay increase for those earning less than £21,000 a year. The pay review bodies have been asked to provide advice in relation to the future pay remit, but she should also recognise that the increase in the income tax personal allowance, which will come through this April, will be worth £126 this coming year to precisely the people she is talking about. I hope she welcomes that.
Claire Perry (Devizes) (Con)
Does the Minister share my absolute incredulity at hearing the Opposition talk about the cost of child care, given that it went up 50% during their term in office? Will he tell us how much this Government are spending to help hard-pressed parents with the burgeoning costs of child care?
Danny Alexander
I entirely share my hon. Friend’s sentiments; she expresses them very well. We will be investing £760 million a year by 2014-15 to extend free child care to disadvantaged two-year-olds.
Julian Sturdy (York Outer) (Con)
3. What steps he is taking to strengthen consumer protection in financial services.
Ian Austin (Dudley North) (Lab)
9. What assessment he has made of the effect of fiscal policy on the level of economic growth in 2011.
The Chief Secretary to the Treasury (Danny Alexander)
Tackling the deficit is necessary for supporting sustainable economic growth. The Government’s credible consolidation plan has restored confidence in the UK’s fiscal position, helped avoid a rise in market interest rates, and allowed a more activist monetary policy to support the economy.
Ian Austin
We know that this Government’s Ministers think they are always right and everyone else is always wrong, but how do they explain why growth in America, which took a more balanced approach to dealing with the deficit, was twice the rate here in the UK, and if it is, as they insist, all the eurozone’s fault, why was it only exports that prevented the British economy from lurching back into recession last year?
Danny Alexander
If the hon. Gentleman wants an explanation for the country’s current economic position, he need look no further than the Office for Budget Responsibility report published at the time of the autumn statement. It highlighted three factors: the problems in the eurozone; high inflation and commodity prices over the past year; and the depth of the crisis that was caused in part by the hon. Gentleman’s Government and the damage that did to the British economy. If he is looking for people who should be asked to apologise, he should look to himself, and perhaps he should apologise not least to the people of the west midlands, as that region fell behind the rest of the economy during Labour Government’s period in office.
Michael Fallon (Sevenoaks) (Con)
Given the amount of Budget lobbying now going on, will the Chief Secretary remind those who want to add even more to our borrowing by proposing wholly irresponsible and unfunded tax cuts of the Institute for Fiscal Studies advice that
“there is a strong case for the Budget not to contain a significant permanent net giveaway”?
Danny Alexander
I would certainly remind them of that, and of the fact that the need to maintain the credibility of this country’s fiscal position should override any such considerations.
Mr David Anderson (Blaydon) (Lab)
In the assessment the Chief Secretary is undertaking, will he let us know about the extent of the income tax and national insurance losses that will result from the sacking of between 7,000 and 10,000 public servants? Does he expect the benefit bill to go up, and if so, by how much?
Danny Alexander
As the hon. Gentleman knows, we have had to make some very difficult decisions in order to deal with the enormous Budget deficit left to this country by Labour. If his party had not left a mess, we would not have to clean it up.
Stephen Williams (Bristol West) (LD)
One direct economic stimulus would be to allow people to keep more of their own money from the proceeds of work. The Government have already taken a great step forward in implementing the Liberal Democrat policy of raising the income tax threshold to £10,000. Will the Chief Secretary and the Chancellor seriously consider going further and faster in the Budget and achieving in this Parliament the goal of all our constituents having £10,000-worth of tax-free pay?
Danny Alexander
Such decisions are, of course, for the Chancellor to announce on Budget day, but, as my hon. Friend will know, the coalition agreement commits this Government to real-terms increases in the personal allowance every year in order to reach the goal of a £10,000 tax allowance, which the Liberal Democrats set out in our election manifesto. As a result of the substantial steps we have already taken, there will be a further tax reduction of £126 for all basic rate taxpayers in this country from April this year.
Mark Pawsey (Rugby) (Con)
10. What fiscal steps he is taking to encourage job creation in the private sector.
David Rutley (Macclesfield) (Con)
15. What assessment he has made of the effect of Government spending commitments on the budget deficit.
The Chief Secretary to the Treasury (Danny Alexander)
In the autumn statement, the Government announced their decision to continue the consolidation beyond the current spending review period in response to a deterioration in the Office for Budget Responsibility’s forecast. The Government’s plan has restored confidence in the UK’s fiscal position, protected the UK from the European sovereign debt crisis and kept low long-term interest rates.
David Rutley
Has the Chief Secretary seen the latest report by the International Monetary Fund, which shows that although the US had a fiscal contraction of 0.8% last year and Germany saw a 2.3% tightening of its fiscal policy, both those economies are still growing? Does he agree that this shows that those who have called for an increase in the deficit as a way to drive growth are completely wrong?
Danny Alexander
Yes, I wholeheartedly agree with my hon. Friend. When the coalition Government came into office the UK was forecast to have the largest deficit in the whole of the G20. It is necessary to stick to the Government’s consolidation plan to restore public finances to sustainability. At the same time, the Government are delivering a radical programme of supply-side reforms to lay the foundations for a stronger and more balanced economy in the future.
Kevin Brennan (Cardiff West) (Lab)
I think the Minister has studied some economics. Does he understand the mechanism by which going too far, too fast with cuts can make the budget deficit worse? Where did he and his colleagues go so wrong with their sums on the budget deficit?
Danny Alexander
There is a very simple mechanism going on in the economy: the hon. Gentleman’s party caused the mess and we are cleaning it up.
George Freeman (Mid Norfolk) (Con)
Has my right hon. Friend seen the report in today’s Times saying that on his appointment the shadow Chancellor apparently turned to the Leader of the Opposition and asked:
“What if George Osborne is right?”
Does not the news of the jobs in Nissan, along with the 500,000 jobs created in the economy and our low interest rates, prove that he is?
Danny Alexander
I have not seen that report, but I can tell my hon. Friend that it is not a question I have asked myself.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
16. What steps he is taking to create greater equality in gross value added between the countries and regions of the UK.
The Chief Secretary to the Treasury (Danny Alexander)
Economic development policy is devolved, although the UK Government continue to work with the devolved Administrations in Scotland, Wales and Northern Ireland, as well as with the English regions, including on policies to maintain low long-term interest rates and provide 100% capital allowances in designated enterprise zones.
Jonathan Edwards
Latest European Union statistics indicate that GVA per head in inner London is £109,278 while the figure for the south Wales valleys is £10,654. Will the Chief Secretary include provisions in the forthcoming Budget to equalise wealth levels across the British state?
Danny Alexander
Budget announcements are a matter for the Chancellor, but I recognise very much the point that the hon. Gentleman raises. That is why we have asked the Silk commission to consider changes to the financial provisions within Wales—we look forward to its report—but he will also know that the autumn statement saw an additional £216 million of capital funding going as a consequence to the Welsh Assembly Government. I am sure that he, along with me, wants to press them to announce how they will use that money.
Ian Swales (Redcar) (LD)
Ninety-three organisations in the north-east have been awarded almost £100 million from the regional growth fund. May I welcome the additional £1 billion being allocated to the fund, and will the Chief Secretary ensure that bids are supported that would route more of that money to small and medium-sized manufacturers?
Danny Alexander
My hon. Friend is absolutely right. The regional growth fund is making an enormous difference across the country, particularly in those regions that are most affected by public spending reductions. Many of those projects are creating jobs and boosting the economy in constituencies such as his. He is right to say that we need to find more ways to get those moneys to smaller businesses, and of course the next round will invite programme bids that can do precisely that.
Damian Collins (Folkestone and Hythe) (Con)
T1. If he will make a statement on his departmental responsibilities.
Nick Smith (Blaenau Gwent) (Lab)
Much work has been done to secure a private sector-led infrastructure project in Blaenau Gwent. The developers say that it could create sustainable jobs for over 10,000 people. Given that the Chancellor has already announced 100% capital allowances in six English enterprise zones, when will he be able to offer similar assistance to the Welsh enterprise zones?
The Chief Secretary to the Treasury (Danny Alexander)
We are in discussions with the Welsh Assembly Government about their proposals for enterprise zones in Wales, including the possibility of applying within them the capital allowances regime that the hon. Gentleman describes, and we will make an announcement shortly.
Public Service Pensions Uprating
Danny Alexander Excerpts(12 years, 9 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
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 9 April 2012 by 5.2%, in line with the annual increase in the consumer prices index up to September 2011, except for those public service pensions which have been in payment for less than a year, which will receive a pro-rata increase.
Tax Avoidance (Public Servants)
Danny Alexander Excerpts(12 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)
(Urgent Question): To ask the Chief Secretary to the Treasury if he will set out the Government’s policy on the operation of tax avoidance schemes in the civil service.
The Chief Secretary to the Treasury (Danny Alexander)
I am very grateful to the right hon. Gentleman for giving me the opportunity to set out the answer to this question. As hon. Members might be aware, departmental public spending encompassing the appointment of senior civil servants is audited against the Treasury’s “Managing Public Money” guidance. That document makes it clear that
“public sector organisations should avoid using tax advisers or tax avoidance schemes as any apparent savings can only be made at the expense of other taxpayers or other parts of the public sector.”
There is no place for tax avoidance in Government.
A recent case has highlighted those issues, and although I cannot comment on the specifics of an individual’s tax affairs, for reasons of which the right hon. Gentleman will be fully aware, I want to take the opportunity to explain the action that I have taken.
As hon. Members are already aware, for senior civil service appointments whose salary exceeds £142,500, terms and conditions are negotiated by the appointing Department and are presented to me for approval of the salary. Those arrangements are in place to control excessive pay.
In the light of that recent case, I have asked the Treasury urgently to review the appropriateness of allowing public sector appointees to be paid through that mechanism—[Interruption.] I have also asked the Treasury Officer of Accounts—[Interruption.]
Mr Speaker
Order. I granted this urgent question because I thought it warranted ministerial comment and scrutiny by the House. The House can rely upon me to ensure that there is plenty of time for Back Benchers, but as a matter of procedure, propriety and courtesy, we must hear what the Chief Secretary has to say, preferably without constant interruption and heckling.
Danny Alexander
I am grateful, Mr Speaker.
As I was saying, I have also asked the Treasury Officer of Accounts to write to all accounting officers across Whitehall to remind them that all appointments should, in line with existing guidance, consider the wider cost of lost revenue to the Exchequer when considering value for money.
Furthermore, I have requested that all Departments carry out an internal audit by the end of March. As my right hon. Friend the Minister for Universities and Science has said, the Student Loans Company will for the remainder of the contract in question change the arrangements and deduct tax and national insurance at source. Across Government, if any appointments that do not provide value for money are found, whether agreed by this Government or the previous one, I have urged Departments to seek to unwind them as quickly as possible and as quickly as is compatible with securing good value for public money.
At a time when we all have to pull in the same direction to tackle the country’s financial problems, it is essential we all pay our full and fair share. That is why I have taken this action to ensure that Government Departments do not support tax avoidance schemes.
Mr Brown
May I point out to the Chief Secretary to the Treasury that the chief executive of the Student Loans Company is the accounting officer? Perhaps the Chief Secretary can tell the House what sort of reply he expects from that accounting officer when he writes to him.
It is reassuring that the Chief Secretary told the House that national insurance and income tax will be paid in future, but the purpose of those arrangements was to avoid paying income tax and national insurance. When considering those arrangements, did he consider the demoralising and corrosive effect that such an arrangement must have on the rest of the public service? What fees are paid by the Department to the service company that is laundering that money? The loss is to the Exchequer and not to the Department’s budget, in which I would have thought the Chief Secretary would take an interest.
The Chief Secretary says—I support him in this—that he will now, belatedly but correctly, scope how many such arrangements there are in the public service. When his investigation is completed, will he put the facts—all of the facts—in front of the House of Commons? Given the controversial nature of those arrangements, will he tell the House whether the Cabinet Secretary approved them, and whether the Prime Minister, the Deputy Prime Minister and the Secretary of State for Business, Innovation and Skills, which is the Department responsible for the Student Loans company, were explicitly aware of those arrangements and whether they explicitly agreed to them?
Danny Alexander
I am grateful for the right hon. Gentleman’s support for the action that I have taken in respect of this case. He is right that accounting officers of organisations are responsible for implementing the “Managing Public Money” guidance. That is why the Treasury Officer of Accounts is contacting all such officers within the Government as we speak. I look forward to seeing the responses, including from the range of individuals to whom he referred.
As I said in my response to the right hon. Gentleman’s original question, my responsibility in such matters is with regard to the salary level. In this case, I reduced the salary level and amount of expenses paid under the contract, the details of which were the responsibility of the Student Loans Company and the Department for Business, Innovation and Skills. I was not made aware of any tax benefit to any individual as a result of this case, which is precisely why I have put in place the arrangements for the review that I have set out.
I can tell the right hon. Gentleman that I would of course want to update the House on the results of that review when it is completed, and I look forward to having a further opportunity to discuss the matter with him.
Mr Richard Bacon (South Norfolk) (Con)
May I say how much I welcome the Chief Secretary’s urgent review? There has been too much of this going on; there was certainly a similar case involving the chief operating officer of the Rural Payments Agency, who was appointed in an interim way under the previous Government, which should not have happened. May I invite the Chief Secretary, in the spirit of the coalition, to say whether he agrees with the former leader of the Conservative party, Michael Howard, who is now in another place, when he said:
“Special rules for special…groups breed anger and division. They blur the distinction between right and wrong. And they give the impression that some people are above the law”?
Danny Alexander
I am grateful for the hon. Gentleman’s support for the action I have taken. I was not aware of the example he gave in relation to the Rural Payments Agency. Of course, if other such cases still exist in other parts of Government, that is something the review I have instituted will bring out. I do agree with the statement the hon. Gentleman read out, which is why the Government have taken a series of strong steps—much greater steps, frankly, than the previous Government—to deal with tax avoidance and make sure that everyone pays their proper amount of tax.
Margaret Hodge (Barking) (Lab)
I welcome the commitment that has been made to review the arrangements relating to this individual and to review whether such things happen anywhere else across Government. Will the Minister agree to publish the complete list of senior civil servants whom the Government pay through companies when he completes his review by the end of March? In particular, will he report to the House on the role of Her Majesty’s Revenue and Customs in authorising the arrangement with this individual? Will he also report to the House on why the Cabinet Secretary appears to have authorised it? Will he ask officials about, and report to the House on, why a contribution to this particular individual’s pension was also agreed?
Danny Alexander
First, I am grateful for the right hon. Lady’s welcome for the action we are taking on this issue. As I said in answer to the original question, I will certainly make available to the House, and indeed to the Public Accounts Committee, if she is interested to follow the issue through that route, too, the results of the inquiry that we have set out and the information on the number of individuals—if there are any others—who are paid under similar arrangements. As I have also said, if there are such arrangements in other places, Departments have actively and urgently to consider unwinding them and making sure that proper arrangements are put in place so that people pay their full share of tax.
There will be opportunities for the right hon. Lady’s Committee to scrutinise the role of HMRC and the Cabinet Secretary in these issues, if it wishes to. It is a matter of public record that the Cabinet Secretary signed off these arrangements. The original arrangements were put in place before I was appointed Chief Secretary, but the salary was brought to me when the appointment was turned from an interim one into a temporary one for two years, which is what the arrangements now are. I am delighted that my right hon. Friend the Minister for Universities and Science has decided, through the Student Loans Company, to make sure that these arrangements apply no further in this case.
Lorely Burt (Solihull) (LD)
Will my hon. Friend confirm that the urgent review will also investigate the terms of appointments made by the previous Government?
Danny Alexander
Yes, I said that in answer to the original question. The cases that are brought to me are cases in which the level of pay is in excess of £142,500. Of course, the review will look not just at those cases, but, potentially, at the cases of people on lower salary levels. Appointments that are currently in operation may well have been put in place under the previous Government. I do not know that there are any; that is why I have instituted a review, and we will see in due course what that brings forward. As I say, I will be happy to share that information with the House.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
The Government have a duty to ensure that everyone pays their faire share of taxes. They should be especially careful when making senior appointments themselves. At a time when the economy is flatlining, families are being squeezed and students are facing the tripling of tuition fees, the news that Ministers approved the contract of a senior official that allowed tax and national insurance to be avoided shows just how out of touch they are.
There are several important questions that the Chief Secretary must answer. When he approved the contract, did he ask about the tax and national insurance implications of employing Mr Lester on this basis? Did HMRC approve the arrangement after Mr Lester was appointed chief executive on a permanent basis, or only when he was the interim chief executive? Does the Chief Secretary know how much tax and national insurance has been avoided by these arrangements? Has he now withdrawn his approval of Mr Lester’s contract, and is it being redrawn? How many other senior appointments have the Government made on these terms? Surely the right hon. Gentleman will know how many he has signed off. If he does not know, is it not time that he started asking questions of his colleagues and defending the interests of taxpayers?
The Government’s handling of higher education has been disastrous. This week, we have heard that their tripling of fees and botched reforms have cut applications to university, and before Christmas the Public Accounts Committee criticised HMRC for its cosy relationship with big business. There will be great concern if it turns out that the Government have turned a blind eye to tax avoidance. I look forward to the Chief Secretary’s answers about what seems to be a Treasury-backed tax dodge, and to a full investigation into the facts of the case.
Danny Alexander
I agree with the hon. Lady’s first remarks: of course we have a duty to ensure that every individual pays their fair share of tax. That is why the Government have done much more to tackle tax avoidance than Labour ever did during its 13 years in office.
The hon. Lady asked some important questions. I was not made aware, when approving the salary level for this post, of any tax benefit to the individual concerned. As I said earlier, the initial interim arrangements were approved before my time as Chief Secretary. I was involved in the re-appointment. As far as I am aware, having looked through the cases, of the 180 appointments with salaries of more than £142,500 that I have approved as Chief Secretary, this is the only one to which such arrangements apply. That does not mean, however, that there are not similar existing arrangements for people appointed under the previous Government or for those with lower salary levels. That is why I have implemented the review that I have set out to the Chamber. I am sorry that she did not feel able to welcome that step. I would have thought that she would have. As I have said repeatedly, however, I will happily bring the information that we unearth back to the House.
Conor Burns (Bournemouth West) (Con)
Does my right hon. Friend understand that those genuinely working on the front line in the public sector will find these revelations obscene? When his review is complete, will he be able to tell us when such practices first entered the public sector, and whether it was under this Government or the previous one?
Danny Alexander
I well understand why people would see it that way—frankly, I see it that way myself. It is interesting that already today we have heard one example, from my hon. Friend the Member for South Norfolk (Mr Bacon), who is a member of the PAC, of a similar arrangement made under the previous Government. Of course, the review will not look back on arrangements that have now been discontinued, but will look at those currently in existence in the public sector in order to ensure that everyone pays their fair share of tax. I know that my hon. Friend the Member for Bournemouth West (Conor Burns) will strongly agree with that.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
In December, I tabled a round robin question to every Department asking whether senior staff in Departments, Executive agencies and non-departmental public bodies were
“paid by means of payments to a limited company”.
On 5 December, the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), who has responsibility for consumer affairs, replied on behalf of BIS:
“The Department's policy is that staff salaries are paid into employees’ bank accounts.”
He also wrote that
“there is no evidence that any senior civil servants in the Department for Business Innovation and Skills and its non-departmental public bodies are paid by means of payments to a limited company in lieu of a salary.”—[Official Report, 5 December 2011; Vol. 537, c. 152-3W.]
Why did they get it wrong, and why did I not get an answer from the chief executive of the Student Loans Company?
Danny Alexander
That answer described the arrangements as I understood them until I received information about this case in the past few days. The inquiry that I have put in place will reveal whether any more of these arrangements exist elsewhere in Government.
Mr David Nuttall (Bury North) (Con)
Does the Minister accept that, regardless of whether someone is employed in the public or private sector, tax avoidance—otherwise known as tax mitigation—is actually legal, whereas tax evasion is illegal?
Danny Alexander
Yes, the hon. Gentleman is absolutely right on the point of fact. It is fair to say that this Government have taken strong action to deal with both tax avoidance, where we wish to remove schemes that people use to minimise the amount of tax they pay, and tax evasion, which, as he says, is illegal. We announced an initial £900 million in the spending review for HMRC to invest for that purpose. As a result, we are, for example, quadrupling the number of court cases for tax evasion, to ensure that we make an example of people.
Julie Hilling (Bolton West) (Lab)
At this time of austerity, when the poor are being made to suffer for the behaviour of the rich, is the right hon. Gentleman ashamed that his Government have failed to do anything to stop such tax avoidance? What will he do to close that loophole across all taxpayers?
Danny Alexander
I think a better way to characterise what is going on in the economy at the moment is that the whole country is being made to pay for the mistakes made by the previous Government. I have already set out the action that we taking. An urgent review is taking place, both in Departments and through the Treasury, which I put in place because I take such matters incredibly seriously. That review is of a piece with the enormously wide range of action to tackle tax avoidance and tax evasion that has been put in place by this Government. As just one example, the high net worth individuals unit was not put in place by the previous Government until they had been in office for 12 years. That was 12 years of inaction on tax avoidance in that part of the population. Contrast that with the record of this Government and we see a coalition Government who view making sure that everyone pays their fair share of tax with the utmost seriousness.
Claire Perry (Devizes) (Con)
I think there is a word, Sir, for the mock indignation on the Opposition Benches, but as I was reprimanded for anti-parliamentary language previously, I will not say it today. Will my right hon. Friend please set out what specifically we are doing about tax avoidance in foreign domiciles, which is an equally important issue?
Mr Speaker
Order. I should just emphasise that the right hon. Gentleman will want to focus specifically on the terms of the urgent question, and I know that that is what he will do.
Danny Alexander
The question is a broad one about tax avoidance in Government. There are Government employees in other jurisdictions, and I am sure that the measures we have taken—for example, in relation to Switzerland and Lichtenstein, the non-dom levy that we have put in place, and so on—will ensure that any practices that might have been in place in the past no longer occur.
Simon Danczuk (Rochdale) (Lab)
My understanding is that a service company managed the arrangement for Mr Lester. Can the Minister tell the House what fees were paid to that company?
Danny Alexander
I cannot give a detailed answer about the fees paid to that company. My understanding of the arrangement that was in place is similar to that which the hon. Gentleman has described.
Mr Rob Wilson (Reading East) (Con)
I know that the Chief Secretary well understands that there is a question of fairness at the heart of this issue for all public sector employees, so should we not either allow all employees of the Government the same advantages of tax efficiencies, if legal, or stamp out such practices altogether, right across the public sector?
Danny Alexander
I would not agree with the hon. Gentleman that such arrangements should be put in place for every public sector employee. The review that I have put in place is precisely designed to root out such arrangements across Government.
In answer to the earlier point, I gather that the fees that the hon. Member for Rochdale (Simon Danczuk) asked about are set out in the Student Loans Company annual report, which is available publicly, so he may wish to avail himself of a copy.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
We all know, if we are honest, that the administration of student loans had been a mess for years. However, the fact is that this man was appointed on a higher package of emoluments than the Prime Minister. Why was that?
Danny Alexander
What we had was a situation where, as the hon. Gentleman rightly says, for many years—including for many years under the previous Government —the Student Loans Company was in a mess. This man was brought in to run it, and in fairness I think it is widely agreed that he has done a good job of turning it around. In the context of this conversation, I hope that the hon. Gentleman would also recognise that.
Mr Peter Bone (Wellingborough) (Con)
I do not think there is a problem with what was set up; the problem is that the Inland Revenue allowed it to happen. I do not understand how such a contract can be awarded to somebody working full time. Unless there was some agreement to the avoidance scheme by the Revenue, it is not the law that is wrong, but the interpretation by the Revenue.
Danny Alexander
It is precisely those sorts of issues that the review will seek to examine and properly understand, and I am sure that the Public Accounts Committee might wish to take an interest in that issue.
Mr Alan Campbell (Tynemouth) (Lab)
Will the urgent review extend to the top salaries of people employed in local government?
Danny Alexander
I have so far written to Cabinet colleagues for salaries in central Government, and the Treasury Officer of Accounts has written to accounting officers in central Government, but I will take that suggestion away and discuss with my right hon. Friend the Secretary of State for Communities and Local Government whether that particular extension would be appropriate.
Simon Hughes (Bermondsey and Old Southwark) (LD)
The Chief Secretary has always been very robust in dealing with tax avoidance and tax evasion. May I seek an assurance that the Government’s policy will be what all those who have submitted their tax returns in the past few days want, namely to ensure that everybody in the public service, from the Cabinet Secretary downwards, and in local government service, pays normal tax like the rest of us, in a normal way, with no funny business on the side?
Danny Alexander
My right hon. Friend is absolutely right that we need to be robust about these matters. Frankly, I think this Government have been a great deal more robust on tax avoidance and tax evasion than our immediate predecessor. I certainly agree with the principle that he annunciates, which is that we need to ensure that everyone pays their fair share of tax and that arrangements are not put in place that are in breach of the guidelines that I set out earlier, which specifically say that arrangements to avoid tax for individuals should not be put in place.
Mark Durkan (Foyle) (SDLP)
Can we really have any remedy to such scandalous devices without restitution? Will any review by Revenue and Customs have an eye to possible recovery?
Danny Alexander
As I said, the arrangement has been ended by the Student Loans Company in this case, as my right hon. Friend the Minister for Universities and Science has said. The review that I have undertaken is looking at the degree to which such practices are prevalent across the rest of Government. I have not given any consideration to the question of restitution, but I shall certainly do so in the light of the hon. Gentleman’s question.
David Mowat (Warrington South) (Con)
Will the Chief Secretary confirm that his review will include all parts of the public sector, including, for example, the BBC, in which daily rates are quite prevalent?
Danny Alexander
The review that I have put in place covers all central Government Departments and their non-departmental public bodies. I will have to get back to the hon. Gentleman on whether that includes the BBC, but I can see the point he is making.
Mark Tami (Alyn and Deeside) (Lab)
What message does the Chief Secretary think this arrangement sends to ordinary taxpayers in the public sector?
Danny Alexander
I do not think it sends a very good message. That is why we have ended the arrangement and why I have put in place a review to ensure that any other such arrangements, put in place by either this Government or our predecessors, is unearthed and that appropriate action is taken.
Brandon Lewis (Great Yarmouth) (Con)
Bearing in mind that what has happened is, technically, entirely legal, as my hon. Friends have noted, and that this issue is a matter of what the Government feel is right in policy terms for Departments to do, can my right hon. Friend outline what safeguards, regulations or guidelines from the previous Government he has found in his early investigations that were designed to ensure that such practices do not happen in Departments?
Danny Alexander
There are strict guidelines from the Treasury that have been in place for some time, which are set out in the document “Managing Public Money”, the most recent edition of which was published in October 2007. I quoted the relevant section in my answer to the original question from the right hon. Member for Newcastle upon Tyne East (Mr Brown). The important thing is that Departments, and indeed accounting officers, understand that it is their responsibility to ensure that the rules for managing public money are followed in every case, and I regard it as my responsibility as Chief Secretary to ensure that they are.
Chris Bryant (Rhondda) (Lab)
Clearly two Ministers were involved in the decision—the Minister for Universities and Science and the Chief Secretary—but so far the Chief Secretary has used practically every Murdoch excuse in the book: “I didn’t know the detail,” “Nobody showed me exactly what was going on,” and all the rest of it. Will he publish the precise documents that he and the Minister for Universities and Science signed off, so that the public can make a decision about whose responsibility it is?
Danny Alexander
The hon. Gentleman might not have caught up with this, but a great deal of information has already been released on this issue under the Freedom of Information Act, which is precisely how it has come to my attention and that of others. As I said, my role in such matters is to sign off the salary arrangements and ensure that they are appropriate, given the level of salary in place. As I said at Treasury questions a few days back, in the 83 cases in which I have been involved where a previous post holder has been in place, I have reduced the salary substantially in 45 cases and frozen it in a further 23.
Andrew George (St Ives) (LD)
Although my right hon. Friend has already covered this matter to an extent, will he tell me what effective measures he inherited, and if they were inadequate, what action he took to put them right?
Danny Alexander
As I have said, the terms and conditions of appointments are negotiated by the appointing Department. I have a responsibility to control the salary levels in these sorts of cases, which I discharged in this case. I was not aware of any particular tax benefit to the individual involved. The arrangements in relation to tax avoidance and tax evasion that we inherited were not robust enough, and that is why we have taken significant steps to tighten them up, to ensure that we get the maximum amount of money from people across society. As several hon. Members have said, that is particularly important, given the difficult economic circumstances in which we find ourselves.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
As my hon. Friend the Member for Rhondda (Chris Bryant) has pointed out, the Chief Secretary to the Treasury has repeatedly denied knowledge of this arrangement, yet we know from “Newsnight” that the Minister for Universities and Science, the right hon. Member for Havant (Mr Willetts) signed off the deal. Will the Chief Secretary acknowledge corporate responsibility across Government and, despite all his protestations now, acknowledge that it was signed off by the Government?
Danny Alexander
As was revealed on “Newsnight”, and as I have said, a number of Departments were involved in this—the Cabinet Office, and so on. What I am trying to do now, through the review that I have put in place, is to ensure that these arrangements are not repeated in the future, and that any existing arrangements approved by this Government or the previous one are dealt with.
Alun Cairns (Vale of Glamorgan) (Con)
Is not the root of this issue based in the complex tax structure that has grown up over the past 15 years or so? What reassurance can the Chief Secretary to the Treasury give the House that such issues will be rooted out during the tax simplification review?
Danny Alexander
My hon. Friend makes an important point. It is precisely the complexity of the tax system that creates some of the opportunities of which many people take advantage. That is why we have created the Office of Tax Simplification, which continually makes recommendations for ways in which we could simplify the tax system and tackle some of the avoidance schemes. The very complicated tax arrangements that we inherited are gradually being changed by this process, which is in the best interests of the country.
Paul Flynn (Newport West) (Lab)
Will the Chief Secretary to the Treasury be the first Minister to accept responsibility for the conduct of the coalition in creating an “ineptocracy” of greed?
Danny Alexander
I am not quite sure how that relates to the question on the Order Paper today. I do not accept that description of what the coalition is doing. We are cleaning up the terrible economic mess that we inherited from Labour, and we are doing so in a way that is fair and that asks those with broader shoulders to bear the greater share of the burden. Frankly, if the hon. Gentleman’s party had not made such a mess, the country would not be in this position.
Miss Anne McIntosh (Thirsk and Malton) (Con)
Will the Chief Secretary to the Treasury extend his review to cover the culture of bonus payments that has built up? Is he aware, for example, that the chief executive officer of the Rural Payments Agency is being paid a bonus for the work that he did while presiding over the Child Support Agency? Will my right hon. Friend root out this culture of bonus payments for poor performance, when they are simply not warranted?
Danny Alexander
My hon. Friend has raised an important point, although it will not necessarily fall within the scope of the review, which will look at the specific arrangements that we are discussing. However, we have substantially reduced the bonus payments to many individuals and the total amounts available in Departments’ bonus pools. That is the right approach. Of course, we also need to ensure that good performance is properly recognised at all levels in the public sector, and that is what the arrangements that we have in place do.
Mr Dennis Skinner (Bolsover) (Lab)
Which Minister is going to carry the can for this mess?
Danny Alexander
Well, I am here answering questions about it, and that is appropriate, given that the question was a general one about tax avoidance, which I am very pleased to answer.
Jeremy Lefroy (Stafford) (Con)
I welcome the Chief Secretary to the Treasury’s announcement today, and the robust action that the Government are taking against tax evasion and tax avoidance everywhere. They are certainly doing more than the previous Government did. Will he extend his review to cover the extraordinary salaries paid by NHS trusts up and down the country?
Danny Alexander
I am grateful to my hon. Friend for welcoming the tough action that we have taken in this case. I have contacted the Secretary of State for Health and the accounting officer in the Department of Health to ask whether any such arrangements apply in the areas for which they are responsible.
Jonathan Ashworth (Leicester South) (Lab)
I welcome the review that the Chief Secretary to the Treasury has announced, but why did it not occur to him to launch such a review when he was asked to sign off this deal? Secondly, he said that he was not aware of the tax benefits to the individual involved, yet a BIS spokesman said last night:
“Details of the arrangement were transparent throughout”.
The right hon. Gentleman will presumably have received a submission from officials. Will he put that submission in the Library? At what point did the Minister for Universities and Science know about the tax benefits to the individual? Will all the submissions that the right hon. Gentleman received be put in the Library as well?
Danny Alexander
I am grateful to the hon. Gentleman for generously welcoming the steps that we have taken to deal with this issue. As I said in my statement, and in answer to several questions, I was not made aware of any tax benefit to any individual in this case. There is a great deal of information in the public domain that has been released under freedom of information, and I would urge him to study it.
Mr George Mudie (Leeds East) (Lab)
So, is the Chief Secretary to the Treasury actually telling the House that the information passed to him when clearing the arrangement did not include details relating to the unusual aspects of the case, and that they were withheld by the Minister for Universities and Science?
Danny Alexander
No, I am not saying that at all. What I am saying is that the arrangements were put in place by the Department for Business, Innovation and Skills. Terms and conditions of employment are a matter for individual Departments. My role is to sign off the salary level for appointments paying over £142,500. As I have said in answer to several questions, in this case we reduced the salary and the expenses payments. I think that that was an appropriate response to the information that I was provided with.
Bill Esterson (Sefton Central) (Lab)
Who signed off the tax avoidance measures in this deal?
Danny Alexander
I think the hon. Gentleman should be careful about how he characterises these arrangements, given that they are currently subject to a review.
Mr Dave Watts (St Helens North) (Lab)
On a day when another 100 of my constituents have lost their jobs because of the failed economic policy of this Government, how does the Chief Secretary to the Treasury think those people will feel about the Government allowing tax dodges, and allowing Ministers to take no responsibility for their actions? When are the Government going to come clean?
Danny Alexander
I suspect that they will feel, as I do, that urgent action needs to be taken. We have changed the arrangements in this case, and the review will root out whether any other such arrangements were put in place either under this Government or when the hon. Gentleman’s party was in office. He should wait carefully for the results of the review.
Helen Jones (Warrington North) (Lab)
The Chief Secretary to the Treasury has still not answered the question, so I shall put it to him again. Which Minister or Ministers signed off this tax avoidance scheme, and on what date?
Danny Alexander
I have made clear the answer to that question throughout my statement. I am responsible for signing off the salary level for appointments over £142,500, and I discharged that responsibility in this case.
Nick Smith (Blaenau Gwent) (Lab)
Yesterday’s Financial Times reported: “Treasury beset by exodus of top staff”. Officials have also reported that the Treasury’s staff turnover rate is now “higher than McDonald’s”. Can the Chief Secretary to the Treasury ensure that there will be sufficient firepower at the Treasury to thoroughly scrutinise tax avoidance across Government, and did the Minister for Universities and Science, the right hon. Member for Havant (Mr Willetts) agree to this arrangement?
Danny Alexander
It is precisely for the reason that the hon. Gentleman suggests that, in the spending review, we announced an additional £900 million for Her Majesty’s Revenue and Customs to enable it to focus attention specifically on tax avoidance and tax evasion. I very much hope that he welcomes that decision.
Diana Johnson (Kingston upon Hull North) (Lab)
Does the Chief Secretary to the Treasury regret not having asked more questions when he was asked to sign off this deal?
Danny Alexander
As I have said, I signed off the salary level for the appointment. I reduced it significantly, and reduced the expenses paid under the arrangement. As soon as the fact that there was a potential tax benefit to an individual was given to me, in the last few days, I took the action described, including writing round to Cabinet colleagues on Tuesday.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Given that this is the Chief Secretary to the Treasury’s third and last chance, will he now tell us which Minister or Ministers signed off the tax arrangements on this deal?
Danny Alexander
I can tell the hon. Gentleman what I have said already. I signed off the salary level in this case. The terms and conditions of the appointment were put forward by the Student Loans Company in the Department for Business, and came to me for approval in the usual way, given the salary level that was being proposed.
Mr Speaker
Order. I am grateful to the Chief Secretary to the Treasury, the Opposition Front-Bench team and the 34 right hon. and hon. Members who were able to question the Chief Secretary. [Interruption.] The hon. Member for St Helens North (Mr Watts) is thirsting to raise a point of order, but I am afraid he will have to wait until after business questions.
Oral Answers to Questions
Danny Alexander Excerpts(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Robert Buckland (South Swindon) (Con)
1. What fiscal steps he plans to take to promote economic growth.
The Chief Secretary to the Treasury (Danny Alexander)
The Chancellor is at ECOFIN today.
As the experience of many European countries has demonstrated, loss of control of the public finances is catastrophic for growth. That was why, in the autumn statement, we set out plans to maintain the credibility of our fiscal stance while innovatively using the money that we do have to support home buyers, small firms and infrastructure and to tackle youth unemployment.
Mr Buckland
I was pleased to see in the autumn statement the proposed introduction of the new seed enterprise investment scheme, which will encourage investment in small and high-risk early-growth businesses. What other measures does my right hon. Friend propose to take to encourage equity investment and support for growing businesses?
Danny Alexander
As my hon. Friend knows, at the Budget last year we announced reforms to the enterprise investment scheme and the venture capital trusts scheme, which are subject to state aid approval. The Government are committed to finding innovative ways to invest in new firms, such as the seed enterprise investment scheme, and we will consider further ideas in the future.
John Healey (Wentworth and Dearne) (Lab)
The economy has flatlined for more than 12 months since the Chancellor’s spending review, unemployment has hit a 17-year high and the national debt has now topped £1 trillion. What has gone wrong?
Danny Alexander
I would have thought that the day on which it has been announced that the national debt has broken the £1 trillion mark would provide a good opportunity for the Labour party to apologise for its catastrophic economic mismanagement that led the country into the mess that the coalition Government are cleaning up.
Mr Andrew Tyrie (Chichester) (Con)
The Redknapp case and the public interest in it illustrate the need to reform taxation to ensure that top earners pay what is due. The Chief Secretary will not want to comment on an individual case, but what steps are the Government taking, consistent with the Treasury Committee’s report on the principles of tax reform, to ensure that all taxpayers, including top earners, pay the correct amount of tax?
Danny Alexander
Of course, as the hon. Gentleman says, I cannot and will not comment on ongoing individual cases, but he is right to say that the wealthiest need to pay their fair share. That was why we announced in the spending review an extra £900 million of funding for tackling tax avoidance and evasion, which has helped to set up a new specialist unit, which became operational last year, targeting offshore evasion. High-profile tax evasion cases could become more commonplace in future, and our message to tax dodgers is: “No matter how well known you are, how clever you think your accounts are or how far away you hide your money, we are coming to get you.”
Rachel Reeves (Leeds West) (Lab)
The Chief Secretary says that the Government’s fiscal plans are working and that only the eurozone has thrown them off course. Tomorrow, we will know by how much the UK economy grew in 2011, so let me ask him a simple question. In its last forecast, did the Office for Budget Responsibility revise up or down its estimate for growth in the eurozone in 2011?
Danny Alexander
The Office for Budget Responsibility made significant changes to its forecasts for the UK and for other countries. It made a significant change to its forecast for how much damage was done to the UK economy during the time when the hon. Lady’s party was in government, suggesting that our economy is now about 13% smaller than it otherwise would have been.
Yesterday was the eighth anniversary of the shadow Chancellor’s now infamous Ken Dixon lecture, when he rightly said that long-term interest rates were
“the simplest measure of monetary and fiscal policy credibility”.
Then, 10-year gilt rates were 4.76%. Yesterday, they were 2.16%. Case closed.
Rachel Reeves
Given that the Government went to the trouble of setting up the Office for Budget Responsibility, one would expect that the Chief Secretary would read its forecasts. The reality is that it revised up its forecast for growth in the eurozone in 2011 and revised down its forecast for growth in the United Kingdom. The Government like to blame everybody except themselves for the economic troubles. First they blamed the snow, then they blamed the royal wedding, now they are blaming the eurozone. When will they take responsibility for their own actions, which choked off the economic recovery a year ago by cutting too far and too fast? As a result, they are borrowing an extra £158 billion. That is the cost of this Government’s economic failure.
Danny Alexander
Once again, the hon. Lady is wrong in her economic policy pronouncements. The Office for Budget Responsibility has the UK growing more slowly this year, but faster than countries in the eurozone in the next few years. That is a testament to the Government’s economic policies. If she wants to know who is at least partly responsible for the mess that the country is in, she should just look immediately to her left. It has come to something when Katie Price’s tweets make more sense about the economy than Labour Front Benchers.
Mr Alan Reid (Argyll and Bute) (LD)
The economy in our islands will be greatly helped by the reduction in fuel duty that the Government are introducing. Will my right hon. Friend update the House on progress towards introducing that fuel duty discount?
Danny Alexander
I am grateful for the opportunity to do that. The fuel duty discount will come into force for customers, including on the islands in my hon. Friend’s constituency, from 1 March. That will reduce the cost of fuel by 5p a litre in the most remote island communities, reflecting the fact that they have the highest cost. The scheme has been open to retailers to register for it since 1 January, and I am pleased to report that almost every retailer has already signed up.
Roberta Blackman-Woods (City of Durham) (Lab)
2. What assessment he has made of the effects on families with children of taxation changes coming into force in 2012-13.
John Howell (Henley) (Con)
4. What progress he has made on implementation of the national infrastructure plan 2011.
The Chief Secretary to the Treasury (Danny Alexander)
Work on the implementation of the national infrastructure plan is now under way across Government, led by the Treasury. This month, for example, the Government have approved High Speed 2 to Birmingham and are working to resolve radar interference issues that are holding up wind farm developments. We will update the House on progress at the Budget on 21 March.
John Howell
Does my right hon. Friend agree that the national infrastructure plan is welcome and timely because it is about real investment in our infrastructure and because it shows that the Government are thinking for the long term, both of which will encourage co-investment in those projects?
Danny Alexander
My hon. Friend is absolutely right. The national infrastructure plan sets out a medium-term plan for £250 billion of much needed investment in this country’s infrastructure. Alongside that, we brought forward plans at the autumn statement for £6 billion of further investment in capital projects in this Parliament and announced a scheme working with pension funds to get £20 billion-worth of pension fund investment into infrastructure. Those are all the right things to ensure that in the long term, we rebalance our economy and make our infrastructure stronger.
Mr Andrew Love (Edmonton) (Lab/Co-op)
With unemployment at 2.7 million and rising rapidly, what contribution will the national infrastructure plan make to reducing unemployment this year and next year?
Danny Alexander
As I said in my answer to my hon. Friend the Member for Henley (John Howell), alongside the national infrastructure plan, we announced in the autumn statement significant new investment in infrastructure projects this year, next year and the year after that, all of which will both contribute to growth in the immediate term and help to build the better infrastructure we need to ensure that our growth is stronger in the medium term.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
5. What assessment he has made of the Office for Budget Responsibility’s most recent forecast of levels of unemployment in 2012.
Annette Brooke (Mid Dorset and North Poole) (LD)
9. What steps he plans to take to ensure that the burden of taxation is fairly distributed.
The Chief Secretary to the Treasury (Danny Alexander)
We are significantly shifting the burden of taxation away from people on lower incomes and on to those with broader shoulders. The bank levy, the increase in capital gains tax, changes to pensions tax relief and the maintenance of the 50p rate all help to enable us to meet our commitment to increase the income tax personal allowance to £10,000, cutting taxes for millions of hard-pressed, hard-working families.
Annette Brooke
I thank my right hon. Friend for that answer. However, the Institute for Fiscal Studies said of the autumn statement:
“New tax and benefit measures are, on average, a takeaway from lower-income families with children, and giveaway to middle and top of income distribution”.
What further approaches will he take in the forthcoming Budget to ensure that we are all in it together, be it a demonstrable crackdown on tax avoidance, perhaps a mansion tax, and certainly more progressive tax measures?
Danny Alexander
Of course, the burden of the deficit reduction is fair overall, and we know that the burden falls most highly on the richest 20% of the population. However, with spending cuts needing to continue for longer—another two years—we need to redouble our efforts, both to tackle tax avoidance and to deliver the income tax cuts that we have promised, by lifting the personal allowance as rapidly as the nation can afford. Those are, of course, issues that we shall be considering in the run-up to the Budget.
Mr Dave Watts (St Helens North) (Lab)
Why does the Minister not look at employing more tax inspectors, given that billions of pounds are going unpaid because there are not enough tax inspectors to do the job?
Danny Alexander
Not only have we looked at that; we are doing it. In the spending review, we announced an extra £900 million for HMRC, which is creating an extra 2,000 specialist posts to tackle tax avoidance and tax evasion. It took the hon. Gentleman’s party 12 years just to set up a specialist unit at HMRC to deal with high net worth individuals. We have extended that to ensure that there is a specialist unit to deal with the tax affairs of all those who pay, or should pay, the 50p rate.
Andrea Leadsom (South Northamptonshire) (Con)
10. What steps he is taking to tackle excessive executive pay.
Nadhim Zahawi (Stratford-on-Avon) (Con)
17. What steps he is taking to tackle excessive executive pay.
The Chief Secretary to the Treasury (Danny Alexander)
The Secretary of State for Business, Innovation and Skills, my right hon. Friend the Member for Twickenham (Vince Cable), yesterday announced a package of proposals designed to address the market failure in setting executive pay. The proposals represent a major step forward in empowering shareholders, reforming remuneration committees and improving transparency in order to give shareholders the tools that they need in order to control unacceptable rewards for failure.
Andrea Leadsom
What consideration has my right hon. Friend given to a system of three-year rolling executive pay, in which the worsening of performance in one year would lead to a claw-back of remuneration from previous years? Does he think that putting pressure on companies to adopt such a system would be sufficient, or would it be necessary to legislate?
Danny Alexander
My hon. Friend makes a good point. That is already part of the Financial Services Authority’s code of practice for banking remuneration. It is particularly important to end the distorting effect of those kinds of incentives in the financial sector, but the additional powers that we are giving to shareholders, which my right hon. Friend the Business Secretary announced yesterday, will allow companies in other sectors to adopt that kind of practice, should they wish to do so.
Henry Smith
I welcome yesterday’s announcement by the Government on mitigating excessive executive pay. With regard to the UK honours system, may I seek an assurance from my right hon. Friend that the Government will be more circumspect in regard to the honours that are suggested, unlike the—
Nadhim Zahawi
In the forthcoming Financial Services Bill, should we not introduce criminal sanctions for gross negligence at the helm of a systemically important bank, to ensure that no rewards for failure would be forthcoming for those who are masters of nothing?
Danny Alexander
That was mentioned explicitly in the Financial Services Authority’s report on the failures of the Royal Bank of Scotland. Lord Turner suggested three options for changing the law, and the Joint Committee that has scrutinised the draft Financial Services Bill has recommended that the Government give consideration to the report’s recommendations. We agree with that, and we will be publishing a joint consultation document with the FSA later this spring, which will consider a range of possible measures.
Mr George Mudie (Leeds East) (Lab)
John Hourican of RBS is expected to get in excess of £4.3 million in his remuneration package in share options alone. When RBS was asked about this, it said that he had met his performance targets, but refused to say what those targets were. On the ground of transparency, will the Chief Secretary agree to put in the Library a copy of the performance targets of the chief executive of RBS and of Mr Hourican?
Danny Alexander
I will certainly look into the matter that the hon. Gentleman has raised, but it was his party that set up the contracts for many of the executives at RBS, and his party that allowed the bonuses to be paid out. It was also his party that awarded Fred Goodwin a knighthood that he should never have been given, so I do not think that we are going to take any lessons on this from him. We have certainly been looking hard at the remuneration proposals for this year, and I can assure him that bonuses will be far, far lower than they were last year.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
May I remind the Minister that, when in opposition, the present Chancellor and the present Prime Minister promised a really tough regime to reduce the gap between the high earners and the rest of the people in this country. Yesterday’s announcement showed that they have backed away from that promise, but the people in my constituency want a fair society in the so-called big society.
Danny Alexander
I am certainly not going to attempt to take responsibility for things the Chancellor and the Prime Minister said in opposition, but I can take responsibility for what the coalition Government are doing. The announcements made yesterday by the Business Secretary on tackling executive pay went far further than anything the hon. Gentleman’s party did during 13 years in government. That alone should give him pause for thought.
Mark Durkan (Foyle) (SDLP)
Giving more powers to shareholders sounds welcome, but we know that their existing powers on executive pay have not been readily used. Should institutional investors not be made more accountable to the millions of ordinary savers whose money is at stake, and does the Chief Secretary believe that the Chancellor would be ready to exercise his reserve powers to make them disclose to their savers how they vote?
Danny Alexander
One of the striking things about how the climate of opinion on this subject is changing in recent times has been the change in attitude of institutional investors. The comments of Otto Thoresen, the head of the Association of British Insurers, for example, to the banks in this remuneration round suggests that such investors are interested in and seized of the importance of ensuring that proper levels of remuneration are paid, not unfair rewards for failure.
Stephen Williams (Bristol West) (LD)
The Business Secretary’s announcements will give more power to non-exec directors and shareholders to control pay in the private sector. The Government effectively discharge those roles in the public sector, so what measures is my right hon. Friend undertaking to control high pay in the public sector?
Danny Alexander
Ministerial salaries were cut by 5% and then frozen for the whole of this Parliament. As Chief Secretary, I now personally sign off any new pay above £142,000, the equivalent of the Prime Minister’s pay. That is a vital deterrent to the cycle of ever higher pay at the top of the public sector—so much so that in central Government alone the number of people paid more than £150,000 has dropped by 55 since May last year. When applications come in, I can and do reject them if I think they are too high. In fact, since May 2010 83 like-for-like cases have sought my approval. Pay was lowered in 45 of those cases and frozen in a further 23, saving more than £1 million a year for the taxpayer, including a £100,000 cut in the pay for the new chief executive of Royal Mail.
Mr Virendra Sharma (Ealing, Southall) (Lab)
11. What assessment he has made of the Office for Budget Responsibility’s most recent estimate of the size of the deficit in 2015.
Nicky Morgan (Loughborough) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Chief Secretary to the Treasury (Danny Alexander)
The core purpose of the Treasury is to ensure the stability of the economy, promote growth and employment, reform banking, and manage the public finances so that Britain lives within her means. I am pleased to tell the House that the Chancellor has decided to reappoint David Miles as external member of the Monetary Policy Committee of the Bank of England. This morning, the Chancellor wrote to the Chair of the Treasury Committee to make the Committee aware of the reappointment, and it will decide whether to hold reconfirmation hearings. Mr Miles’s knowledge of the UK economy and his background in the financial sector will be invaluable to the Monetary Policy Committee through this challenging period.
Nicky Morgan
The Government’s plans to index-link public sector pensions to the consumer prices index rather than the retail prices index have been the subject of much debate in the House. Has the Treasury received any representations or support for that approach from private sector organisations that are planning to make changes to their pensions?
Danny Alexander
It is a very good question. We made that change, which has had an effect on public service pensions, for good reasons. The change has been made in many private sector organisations—most recently, I read, in the Labour party’s pension scheme. The Opposition’s attacks on the move being ideologically driven are belied by the decisions they have had to make because of the deficit their party is running.
Ed Balls (Morley and Outwood) (Lab/Co-op)
With the Chancellor away in Brussels in his new role as an observer at European Finance Ministers meetings, it is nice to welcome the Chief Secretary to his new starring role at Treasury questions. I am sure he will know, although he has not told the House, that in the last 15 minutes the International Monetary Fund has announced that it is once again downgrading its growth forecast for the UK economy, saying that action is now needed to support economic activity in Britain. With unemployment rising too, continued pay restraint is now inevitable, but it must be done fairly, so let me ask the Chief Secretary this. In 2010, he promised a £250 rise for every one of the 1.7 million public sector workers paid less than £21,000 a year. Can he tell the House how many of those low-paid public sector workers actually got the £250 rise?
Danny Alexander
It is good to see the shadow Chancellor after the Christmas recess. Many of us who missed the chance to go to a panto over Christmas have enjoyed the Opposition’s pantomime economic policy changes. It is not clear whether today the right hon. Gentleman supports cuts or opposes them, but this is one show that will run and run. On the point about public sector pay, for all work forces under central Government control, the £250 was paid in full.
Ed Balls
Bluster. The right hon. Gentleman is worse than the Chancellor of the Exchequer, and there was no mention of the IMF growth downgrade. The answer is that less than half of those low-paid public sector workers got the rise. Almost a million did not get the £250 increase that they were promised by the Treasury. Last week, we urged the Chancellor to ask the pay review bodies to make the 1% cap fair this time, with restraint at the top, so that we can have pay rises at the bottom. Have the Chief Secretary or the Chancellor written to the pay review bodies? Will they guarantee a fair way forward on pay restraint, or will we just get more broken promises from this Chief Secretary to the Treasury?
Danny Alexander
Of course, the people to whom the right hon. Gentleman refers are local authority employees. Many local authorities did pay the £250, including some Liberal Democrat-controlled local authorities. I am not aware of any Labour local authorities paying the £250, so perhaps he should look within his party before deciding which side of the House was most effective at ensuring that the benefit was paid directly to the lowest-paid. Of course, we have had to take the difficult decision to continue pay restraint, with a 1% cap for the following two years. The pay review bodies will be very involved in making recommendations for those two years, starting, of course, in the parts of the civil service that come out of the pay freeze earliest. The IMF has repeatedly made the point that the Government are right to stick to their fiscal consolidation strategy, and we will.
Michael Ellis (Northampton North) (Con)
T2. Does my right hon. Friend by any chance agree with the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), who said:“promising no cuts, no jobs losses and continued levels of public expenditure...is the policy of the delusional left who will never gain the public’s trust”?
Danny Alexander
That is a very wise quote. Of course, the policy of the Labour party is in increased confusion since the shadow Chancellor made his speech. It is a little-known fact that when he made it, he also signalled his opposition to more than £20 billion of this Government’s deficit reduction measures, and since he made that announcement, his party in the House of Lords has opposed a further £2 billion of welfare reforms, which rather suggests that the conversion to fiscal credibility is skin-deep at best.
Rushanara Ali (Bethnal Green and Bow) (Lab)
T6. My constituency now has one of the highest youth unemployment rates in the country, and the highest level of child poverty at 51%; that is compared with 7% in the Prime Minister’s constituency. Will the Minister admit that his Government are not serious about child poverty, and have completely failed to tackle youth unemployment?
Danny Alexander
No, I will certainly not say that, not least because youth unemployment rose by 40% when the Labour party was in government. I hope that the hon. Lady will welcome the youth contract that we announced, which is a great deal more ambitious than the package put forward by her Front Benchers; the Work programme, which is delivering real results for people up and down the country; and the investment in child care that will help women to go out to work, as well as men. Those are all things that help people to find work in these very difficult times.
Andrew Jones (Harrogate and Knaresborough) (Con)
T3. I warmly welcome the work being done by the Office of Tax Simplification, but does the Exchequer Secretary agree that we can do more to boost tax transparency, for example by providing all taxpayers with an annual statement on how their hard-earned tax pounds are spent?
Jonathan Ashworth (Leicester South) (Lab)
Can the Chief Secretary confirm, so that we are clear, that the Chancellor is set to borrow more and debt is set to be larger than it would have been, had the Government followed the path of my right hon. Friend the Member for Edinburgh South West (Mr Darling)?
Danny Alexander
I certainly cannot confirm that debt is higher than it would have been if we had followed the path advocated by the Opposition. That path was leading to lack of economic credibility. When this coalition Government came into office, our credit rating was on negative watch from one credit rating agency, and it is only because we have taken tough action to deal with the deficit that we have got our spending under control, we are reducing our deficit and we have established this country’s credibility on the international markets, which was in considerable doubt under Labour.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
T5. Can the Minister update the House on lessons learned from the Fiscal Forum on how to maximise investment in jobs in UK oil and gas production?
Mel Stride (Central Devon) (Con)
T7. Youth unemployment under the previous Government grew by more than 40%. That is 277,000 more young people out of work from the time they first came to office. Does my right hon. Friend agree that the best way to tackle youth unemployment is not to invest in wasteful schemes such as the future jobs fund, but to invest in skills for young people, which means apprenticeships, which this Government are delivering?
Danny Alexander
My hon. Friend is right to point out that youth unemployment has been rising since 2004, which suggests that it is a deep-rooted structural issue in our economy, not just the subject of political knockabout at the Dispatch Box. That is why we are, as a Government, investing far more in apprenticeships. That is a very good way to give young people the skills that they need to survive and thrive in today’s labour market. That is why, in relation to youth unemployment, we will not be deflected from the path that we are on.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
The Government’s national insurance holiday for new companies to employ new workers has been acknowledged by the Prime Minister to be a flop. So far just £6 million has been spent on supporting jobs and £12 million in administering them, out of a budget of £1 billion. Will the Minister consider taking the advice of the Federation of Small Businesses and extending that support to all small businesses prepared to take on new staff?
Sir Alan Beith (Berwick-upon-Tweed) (LD)
T9. I thank the Chief Secretary to the Treasury for his help in securing the extension of the north-east enterprise zone into Northumberland, which could bring jobs to my constituents in south-east Northumberland. Will enhanced capital allowances be available within the extended area?
Danny Alexander
My right hon. Friend has worked assiduously on behalf of his constituents to ensure that the enterprise zone includes the port of Blyth and the land at East Sleekburn, which will enable private sector firms to come into the area blighted by the problems at Alcan. Capital allowances will of course be available within the enterprise zone, and that will certainly include this territory.
Caroline Lucas (Brighton, Pavilion) (Green)
The huge reserves of coal, oil and gas held by companies listed in the City of London have been called a sub-prime asset, because the global drive to reduce emissions is likely to cause fossil fuel reserves to lose value. Has the Minister any plans to ask the Financial Policy Committee to examine the impact of over-exposure to high-carbon assets by London listed companies, and what other plans has he to remove the carbon bubble from our financial system?
Danny Alexander
The hon. Lady asks a good question. The Government’s priority in this regard is precisely to support the expansion of renewable energy, which is a vital part of our future energy strategy. That is why it is a key priority in the national infrastructure plan and why we are investing £3 billion through the green investment bank to stimulate investment. The high price of oil and fuel at the forecourt suggests that that asset is not declining as quickly as she suggests.
Jessica Lee (Erewash) (Con)
Does my hon. Friend agree that local enterprise partnerships, such as Erewash Partnership in my constituency, play a vital role in advising SMEs on the difficulties with the availability of credit and can provide an overview for banks and the Government on the current concerns?
Jim McGovern (Dundee West) (Lab)
Yesterday I found myself again agreeing with a Government Minister, at least in part, when the Under-Secretary of State for Work and Pensions, the hon. Member for Basingstoke (Maria Miller) said in answer to a question from my hon. Friend the Member for Midlothian (Mr Hamilton) that the most sustainable way to reduce child poverty is through parents going to work. GMB, my old trade union, today published a study showing figures suggesting that, on average, eight jobseekers are chasing every vacancy in Scotland, and unfortunately in Dundee the figure rises to 12 jobseekers for every vacancy. What are the Government doing to address this scandal, and are they working with the Scottish Executive on the matter?
Danny Alexander
I am sorry if agreeing with a Government Minister makes the hon. Gentleman uncomfortable, but he is of course right that work is the best route out of poverty. That is the driving force behind our welfare reforms, the Work programme, which is the most extensive initiative ever undertaken to help people off benefits and into work, and our youth contract. Of course the country is in very difficult economic circumstances, but the Government are doing everything we can to support people off benefits and into work for precisely the reason he gives.
Mr Speaker
Order. I am sorry to disappoint colleagues, but questions to the Treasury team, rather analogous to questions to the Foreign Secretary and his colleagues, tend to beat the box office records. We must now move on.
Youth Unemployment and Bank Bonuses
Danny Alexander Excerpts(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (Danny Alexander)
I welcome this opportunity to discuss youth unemployment and bank bonuses. Both matters are hugely important as we tackle this country’s extremely difficult economic circumstances. The recent youth unemployment figures demonstrate just how significant a challenge we face repairing the damage that the previous Government inflicted on the economy, restoring growth and creating new jobs in the recovery. This coalition Government will not let the young and the vulnerable bear the brunt of these difficult times, nor will we let them bear the consequences of the previous Government’s profligacy. Youth unemployment is not a price worth paying.
One thing that the shadow Chief Secretary failed to mention was the record of the Labour Government, who oversaw a 40% rise in youth unemployment.
Meg Hillier
What would the right hon. Gentleman say to the young people in my constituency, where there has been a 12.5% increase in youth unemployment among 18 to 24-year-olds from December 2010 to December 2011, on this Government’s watch?
Danny Alexander
I would say to them that in very difficult times we are doing everything we can to support them. Let me tell the House what we are already doing.
Danny Alexander
Hold on. I will give way to the former Foreign Secretary, but let me make just a little progress.
We are already providing more apprenticeship places than any previous Government, with an increase of 400,000 in the last year and a commitment to 1.2 million over the entire spending review period. That is at least 250,000 more than the previous Government’s commitment, although the shadow Chief Secretary seems to oppose that increase. As announced in the autumn statement, we are also launching a new £1 billion youth contract to help get young people into work, so that they can learn a trade and get equipped for their future career. Starting this spring, the youth contract will support up to 500,000 young people into education and employment opportunities. The youth contract wage subsidy is targeted at employers in the private sector, creating sustainable private sector jobs for the long term.
Toby Perkins
The Chief Secretary talks about the previous Government’s record, but I feel as if I am listening to a broken record, because when we are here to debate a motion about this Government’s policies, all we hear is him harking back to the last Government. Will he come up with something constructive about what he is going to do for the millions of people who are unemployed and looking to him for some guidance?
Danny Alexander
I fear that the hon. Gentleman was planning his question so carefully that he did not listen to my remarks about apprenticeships or the youth contract, which is a vast improvement on the wasteful future jobs fund, which offered subsidies almost three times as high as the youth contract and funded too many temporary jobs in the public sector. In fact, almost 50% of participants in that scheme were claiming benefits again within eight months of starting a future jobs fund job.
David Miliband
The right hon. Gentleman quoted the figure of 40% for the rise in youth unemployment under the previous Government. It is correct that youth unemployment started rising in 2004, but the allegation against the current Government is that they have made the situation much worse. In my constituency of South Shields there was a 210% increase in long-term youth unemployment in 2011 alone. That is what he has to answer for. It is not that he invented the problem, but his policies are making it worse.
Danny Alexander
The Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) will address the statistical changes that the previous Government made. However, the right hon. Gentleman was in government during a boom, yet his Government presided over an increase in youth unemployment. We are facing serious economic challenges in this country, caused in large part by the actions of the previous Government, and we have to take steps to resolve those problems.
The youth contract offers young people the prospect of long-term private sector employment. It is a scheme that has the full backing of the private sector. As John Cridland, director general of the CBI, has said, it strikes at the “scourge of youth unemployment”.
Sheila Gilmore
McDonald’s, which is apparently getting £10 million a year for training people in the things that it normally trains them in and calls the process apprenticeships, said in The Sunday Times yesterday that it had not created a single extra job with that money. What is the Chief Secretary’s response to that?
Danny Alexander
I have visited companies around the country, in Scotland and England, that have created a significant number of new jobs and new apprenticeships, providing a significant increase in skills. That is the right way to go about it, and that is what we are trying to do with the increase in apprenticeships. I hope that the hon. Lady will welcome that. It is fair to say that the apprenticeships programme and the youth contract complement our Work programme, which is the biggest payment-by-results employment programme that this country has ever seen. The Work programme will provide personalised support to around 2.4 million people over the next five years, helping those most at risk of long-term unemployment.
Alison Seabeck (Plymouth, Moor View) (Lab)
In Plymouth we are dependent on the public sector, and we are also a garrison town. As a result of the Government’s defence decisions, we are seeing a lot of young men, in particular, losing their positions in the services and becoming unemployed. Those coming out of the services are relatively highly skilled, putting pressure on the few vacancies that we have in Plymouth and cutting long-term unemployed young people out of the market. We have seen a 96% increase in the number of the long-term unemployed in Plymouth. What will this Government’s policies do for those young people? Absolutely nothing in Plymouth.
Danny Alexander
The youth contract, which I have mentioned, along with the Work programme and many other things that we are doing, will help the young people in the hon. Lady’s constituency, and I very much sympathise with the position that she has described.
Mary Macleod (Brentford and Isleworth) (Con)
Does my right hon. Friend agree that apprenticeships are an important part of the solution, by giving young people the opportunity to build their skills? We have record numbers of apprenticeships; indeed, the number of them in my constituency has doubled.
Danny Alexander
I agree with my hon. Friend: the apprenticeship programme is a vital part of tackling youth unemployment and lifting the skills in our work force. It is a real shame that the Opposition now seem to be opposing the extra investment in apprenticeships that we have made.
Danny Alexander
I am going to make some progress, and I will give way again shortly.
Across the wider economy we are doing everything we can to foster renewed prosperity, create new jobs across the UK and return the country to sustainable growth. Whether we are talking about regulation, the planning system, reducing corporate taxation, our investment in infrastructure or the tax cuts that we are delivering for low-income workers, we are putting forward ambitious plans—plans that we need in these difficult times.
Danny Alexander
I will give way in a moment.
We have plans that will help to foster a recovery led by our private sector, by entrepreneurs and by exporters, creating the kind of growth that the Opposition failed to deliver in over a decade in government. We face the monumental task of dealing with their legacy of unsustainable spending and debt-fuelled consumption, which left the coalition the task of dealing with the largest peacetime deficit on record.
Danny Alexander
I will give way in a moment.
The Opposition do not seem to realise that tackling that deficit is the vital precondition to sustainable growth. It is only by tackling the deficit that we can provide the certainty, stability and low interest rates that are critical to a recovery. The past 18 months have seen sovereign debt downgrades across the Europe, bail-outs of the weakest Eurozone economies, and countries racing to consolidate at the behest of the bond markets.
Claire Perry
I should like to bring a local business perspective to the debate. I had dinner last week with a group of people representing small businesses in the Wiltshire area, all of whom said that their businesses looked reasonable and they were thinking about hiring. Most importantly, they said that they had benefited enormously from the economic stability that the Government had created. Has my right hon. Friend heard anything from the Opposition that amounts to a coherent economic policy, or are they simply offering a wish list of chops and changes, and opposing for opposition’s sake?
Danny Alexander
I have heard nothing coherent from the Opposition, and I have heard nothing from the business community in this country but support for our policies to deal with the deficit and restore this country’s economic credibility. The coalition has never shirked its responsibility to take tough and sometimes unpopular decisions to tackle the deficit and pull the country out of the hole that the previous Government dug. Because we did not delay, and because we took action to get ahead of the curve, we can cut the deficit on our own terms and shelter the UK from the debt storm that has engulfed our nearest neighbours.
Rachel Reeves
The right hon. Gentleman says that the Government are tackling the deficit, but will he confirm how much extra borrowing there will be during this Parliament, compared with the prediction when they took office? Is that not a cost of their failed economic policies?
Danny Alexander
I can confirm that according to the latest forecast, there will be significantly increased borrowing compared with the previous one. The hon. Lady should have explained in her opening speech that her policies involve substantial further increases in borrowing, which would destroy this country’s economic credibility and the hard-won low interest rates that we have achieved.
As a result of our action, we have record low bond yields that feed through to record low interest rates, which benefit households paying mortgages and businesses refinancing loans right across the country. Whereas our bond yields are just 2.1%, those of Spain have risen to 5.5%, those of Italy remain over 6%, and those of Greece have climbed to a staggering 34%. Even a 1% rise in our market interest rates would force taxpayers to find an extra £21 billion in debt interest payments. A 1% rise in effective mortgage rates would result in an extra £10 billion for mortgage payments.
The Opposition have had 18 months to come to terms with the mess they created, but they still do not get it. It has taken them 18 months to move from the wrong place to all over the place. The Leader of the Opposition called the pay freeze an
“ideological attack on the public sector”,
but he now accepts it. The shadow Chief Secretary to the Treasury called the uprating of pensions with the consumer prices index an “ideologically driven move”, but it is a move that the Opposition have now accepted for their party’s own pension scheme. So let us be clear—financial discipline is not ideological; it is a necessary condition for effective government. In the past 10 days, members of the Labour shadow Cabinet have succeeded in proving that they cannot even convince themselves of the credibility of their economic policy.
Robert Flello (Stoke-on-Trent South) (Lab)
Will the right hon. Gentleman explain his idea of economic stability to my constituents? In my constituency the long-term youth unemployment rate has risen by 162% in the past year. Will he explain how his stability will affect the people of Stoke-on-Trent who are losing jobs hand over fist because of his policies?
Danny Alexander
If the hon. Gentleman looks around Europe at the countries that have failed to tackle their deficits, he will see much more serious economic problems—problems of the kind that we would have here if we followed Labour’s policies. He should start by apologising for the mess that his party made of the economy.
Danny Alexander
I am going to make some progress now.
As the Secretary of State for Business, Innovation and Skills outlined today, we will also take the tough decisions to tackle excessive executive pay. At a time when millions of workers face a pay freeze or worse, and when many businesses are confronting a difficult trading environment, the highest-paid cannot be disconnected from reality. That is why the Secretary of State announced new measures to drive through greater transparency on executive pay, to empower shareholders to deliver responsible pay, and to reform remuneration committees to break the old boys club.
It is for that same reason that the Government are leading efforts, domestically and internationally, to reform our banking sector fundamentally in order to protect our competitiveness while safeguarding our stability. We are abolishing the tripartite system of regulation that failed so dramatically in the run-up to the last crisis, and putting the Bank of England in charge of both micro and macro-financial supervision. We are reforming the sector itself, as recommended by the Independent Commission on Banking, to safeguard the UK’s position as host to a world-class financial services sector without putting UK taxpayers at risk.
We have implemented a permanent bank levy to ensure that banks make a fair contribution to tackling the deficit, reflecting the risks that they pose to the system while encouraging them to move away from riskier models of funding. As we announced in the autumn statement, we have increased the levy from 1 January this year to ensure that it yields at least £2.5 billion a year, which is more than the amount yielded by the previous Government’s one-off tax on bonuses—a tax that
“failed to change the industry’s behaviour over pay”.
Those are not my words, but those of the previous Chancellor, who was responsible for the policy in the first place.
Through the Financial Services Authority’s remuneration code, we have ensured that bonuses are deferred over at least three years, and linked to the performance of the employee and the firm. Through the disclosure regime, we have provided more transparency than ever on pay. And while the previous Government managed to get only four of the top 15 banks to sign up to the code of practice on taxation for banks that was introduced in 2009, we have ensured that all are signed up.
Our expectations of the banking sector are clear: banks should make a full and fair contribution. They must respect the spirit, not just the letter, of the law, and make a commitment not to use artificial schemes to avoid tax. The new Bank of England Financial Policy Committee, established as a result of this Government’s reforms, has warned that in these turbulent times it is capital levels, not bonus payments, that have to be the priority. Did the hon. Member for Leyton and Wanstead (John Cryer) want to intervene?
John Cryer
I wanted to intervene while the right hon. Gentleman was speaking earlier.
John Cryer
Going back to the subject of unemployment rates, youth unemployment in my constituency has gone up by 140% since the election. That is what is happening now, not what happened under the previous Government. Will the Chief Secretary to the Treasury deal with the immediate issue and tell us why that is happening? Will he also tell us whether he thinks it is a price worth paying?
Danny Alexander
As I made clear earlier, I do not consider it to be a price worth paying. That is why the Government are doing everything possible, through investment in apprenticeships, in our youth contract and in the Work programme, to ensure that there are opportunities for people.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Will the right hon. Gentleman tell us how many jobs the Work programme has created?
Danny Alexander
I cannot give the hon. Lady that information—[Hon. Members: “Ah!”] I welcome her to her place and congratulate her on her election. In due course the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) will provide that information. I can tell her, however, that Work programme providers are making a difference across the country, helping people to come off all sorts of benefits and acquire the necessary skills and support to get back into work.
Danny Alexander
I have already given way to the hon. Gentleman and to the hon. Lady, and I want to make some progress.
Katy Clark (North Ayrshire and Arran) (Lab)
The right hon. Gentleman will be aware that while the living standards of those on low and medium incomes are going down, the wealth of the super-rich is going up. Will he give an undertaking that he will take action on this issue, and that the gap between rich and poor will be smaller by the next election?
Danny Alexander
The Government have taken on the issue of ensuring that the wealthiest pay a greater share, to ensure that there is fairness in our deficit reduction plans. For example, we have increased capital gains tax and put in place the new bank levy that I have mentioned. We have also maintained the 50p rate of income tax. We are making substantial changes to ensure that the wealthiest pay their fair share.
Alec Shelbrooke (Elmet and Rothwell) (Con)
On the point just raised in an intervention, we hear much crowing from Opposition Members, but does my right hon. Friend think that they might persuade their former leader and Prime Minister, Tony Blair, to pay more than £315,000 in tax on a £12 million income?
Danny Alexander
My hon. Friend has made his point, but I do not think that it is for me to comment on the tax affairs of any individual taxpayer.
Meg Hillier
Last week the right hon. Gentleman made a speech in which he talked about co-operatives, and ideas to bring them into the mainstream. When the Government had the choice and opportunity to remutualise Northern Rock, why did they sell it off to a private bank? Surely a mutual would have been fairer to all, particularly to the taxpayer, than a cheap sell-off.
Danny Alexander
I am quite confident that in that case we chose the option that was best for the taxpayer, best for Northern Rock customers and best for the many hard-working people who work for Northern Rock in the north-east of England. I think that was the right decision on all those bases.
Danny Alexander
No, I will not.
I mentioned the Financial Policy Committee of the Bank of England and its comments. That is why the FSA will scrutinise all proposed bonuses to make sure that they are not paid at the expense of rebuilding capital. There has already been some progress, with levels of bonus payment down significantly. Hon. Members should consider how far they have fallen. When the shadow Chancellor was a City Minister in the Treasury, bonus levels were £11.6 billion, whereas last year they were almost half that, at £6.7 billion. We fully expect them to fall further this year.
Lisa Nandy (Wigan) (Lab)
May I ask the right hon. Gentleman to consider one more fact before he concludes on this subject? When youth unemployment rose under the previous Government, that was largely due to increases in labour supply, but since his Government took over, the massive increases in youth unemployment have been due to a collapse in labour demand. That is why the Opposition are so desperately asking his Government to change course. If the hon. Gentleman cares about this issue, as he has said that he does, will he confirm today that he will change course and prioritise growth over jobs?
Danny Alexander
I am not sure that one can prioritise growth over jobs—and that is the first explanation I have heard from Opposition Members of the reason why youth unemployment rose during Labour’s time in office. I do not know whether that opinion is shared by those on the Front Bench.
As I have made clear, we are prioritising tackling youth unemployment. We do not want to see young people blighted by long-term youth unemployment as they were in the 1980s. That is why the youth contract, our investment in apprenticeships and the Work programme are all necessary to help young people back into work.
Danny Alexander
I will give way to the hon. Member for Barrow and Furness (John Woodcock), who has not intervened before.
John Woodcock (Barrow and Furness) (Lab/Co-op)
The Chief Secretary is being very up-front with the House about the fact that he believes that he is doing everything in his power to tackle youth unemployment—yet according to the Office for Budget Responsibility’s own figures, unemployment is scheduled to rise in the coming period. Does he think that that rise is inevitable?
Danny Alexander
I do not think that he is on the Government Front Bench any more, Mr Deputy Speaker.
A fair account of the OBR’s forecast would also reflect the fact that it says that unemployment will come down to 6.2% by the end of the forecast period. That is a fair reflection of the OBR’s forecast. Of course I wish that we had not inherited such desperate economic circumstances from the previous Government, I wish that they had not left us the largest budget deficit in peacetime history, and I wish that we had not inherited a situation in which, as the same OBR report to which the hon. Member for Barrow and Furness refers showed, the damage done to our economy by the bust was even deeper than expected. He should probably reflect on that point, too.
On bonuses, we fully expect them to fall further this year and, as we approach the season, let me be clear that this is just the start. Across the banking sector, Labour allowed a sense of bonus entitlement to grow. In no other industry is there such a distorted culture of bonus entitlement. Following 13 years of Labour Government we have come some way towards dismantling that culture in the banking sector, but we accept that we have a long way to go to make a fundamental change in attitudes to pay. The coming bonus round provides another chance for the banking sector and its shareholders to demonstrate leadership on pay. That message is already getting through. As Otto Thoresen, director general of the Association of British Insurers, wrote to bank chairs last December,
“it can no longer be business as usual for this remuneration round.”
I agree with that, and the Government will play our part.
We have already said that for RBS and Lloyds Banking Group there will be a limit of £2,000 on cash bonuses, as we also imposed last year.
Richard Fuller (Bedford) (Con)
There is a lot of consensus on both sides of the House that people who are wealthy should be looking to see what they can do to help. Part of what the Opposition miss is the fact that one thing the Government have done—although they could do more—is to promote the enterprise investment scheme, which gives people the opportunity to invest directly in small businesses. Will my right hon. Friend tell me what he is doing to promote that scheme, and in particular, how small businesses that benefit from it can also take part in the youth contract?
Danny Alexander
The Government have made decisions to improve the benefits available through the enterprise investment scheme precisely to encourage more people to invest in small firms in such a way. The new seed enterprise investment scheme, which we announced in the autumn statement, will further help new businesses to be created through that route.
We have already said that for RBS and Lloyds Banking Group there will be a limit of £2,000 on cash bonuses, as was imposed last year, and let me reiterate that the bonus pool this year must be far, far lower than it was last year, and more transparent too. Tackling bank bonuses and youth unemployment is not just an economic challenge, but a challenge that is at the centre of the coalition’s purpose, which is to promote a sustainable and responsible banking sector that puts consumers’ needs at the centre of the financial system.
Julie Hilling
Is the right hon. Gentleman confirming, then, that the chief executive of RBS will only get a £2,000 bonus?
Danny Alexander
I am doing no such thing, because those announcements will be made in due course. I have said that bonuses in the banks that we own will have to be far lower than they were last year. The cash element of bonuses will be limited to £2,000 for all employees, but of course there are other parts to bonuses, too.
Returning our country to prosperity has been the founding purpose of the coalition Government, but in our determination to restore growth, we will put fairness at the very heart of our recovery, tackling gross inequity in senior pay and tackling the perils of youth unemployment to ensure that young people’s prospects are not blighted in the way that those of too many were in the 1980s.
Rehman Chishti (Gillingham and Rainham) (Con)
Will the Chief Secretary give way?
Danny Alexander
No, I am going to make some progress now.
A fair and sustainable recovery demands leadership, and that is exactly what we are providing. Labour cannot be taken seriously on the economy until it admits the mistakes it made when it was in power. If Labour was really changing its position on the economy, the first thing it would do is say sorry. Sorry for letting youth unemployment get out of control, sorry for letting the banking sector get out of control, and sorry for letting the deficit and debt get out of—[Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Hon. Members should calm down, as a lot of Back-Benchers want to speak as well.
Danny Alexander
I do not think that those on the Opposition Front were trying to shout the apology that the country wants from them. They should say sorry, too, for letting the deficit and the country’s debt get out of control. Instead, all we have heard today is the apology of a speech made by the shadow Chief Secretary.
Rachel Reeves
I wonder when the electorate might get an apology from the Liberal Democrats for trebling university tuition fees and imposing a VAT bombshell.
Danny Alexander
I am sorry that the shadow Chief Secretary did not take the opportunity to offer an apology for the terrible mess made by her party and the Government of which the shadow Chancellor was a leading member.
It is the coalition Government who are investing in skills, infrastructure and innovation to create new opportunities in the recovery. It is this coalition that is reforming a broken financial sector to entrench greater stability and embed long-term sustainability. It is this coalition Government alone who are determined to face up to today’s economic challenges to build tomorrow’s fair, prosperous and sustainable economy.