Financial Services Bill
David Mowat Excerpts(12 years, 4 months ago)
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Neil Parish
That is absolutely right. Many of the people taking out these loans earn less than £15,500 a year and therefore cannot afford the loan in the first place. I have sympathy for their position, but are we really helping them by allowing them to get into the hands of loan sharks, which results in their having to pay back huge amounts of money that they simply do not have?
I have made the point before that if financial companies and loan sharks are arguing that they need to charge huge amounts of interest because people are such a high security risk, they should not be lending them the money in the first place. Let us remember the old adage about finance: these companies will lend us an umbrella when the sun is shining, but they will take it away again as soon as it starts to rain. In the circumstances that we are describing, they should never have made the loans in the first place. Citizens Advice and financial advisers often tell us about people who have got themselves into huge amounts of debt, perhaps through no fault of their own.
It needs to be made absolutely clear to people what to expect. I am not a great believer in huge amounts of regulation, but I do believe that the consumer should be able to see exactly what they are signing up to at the outset, and be made fully aware of the consequences of their actions. They often do not understand the terms if they are hidden in the small print or expressed as complicated percentages, but if they were told, “You can borrow £100, but if you don’t pay it back on time, you could end up paying £2,000 back”, it might make them sit up and think about exactly what they were borrowing. They might then choose not to do it, or to go to someone who could lend them the money at a better rate.
The Government are doing a great deal to increase the use of credit unions, and we need to do much more work on that. Perhaps we should look into ways of financing them. I have a very successful one in my constituency, and we need to build on that. Only a small percentage of people here borrow money from credit unions, unlike in Ireland, where almost 50% of people have access to such loans.
David Mowat (Warrington South) (Con)
My hon. Friend mentioned Wonga, and he was right to suggest that 4,000% is an absurd rate of interest. Does he have a view on the rate at which interest should be capped for a fortnight’s payday loan?
Neil Parish
Yes, I do. Many people in the banking sector would probably disagree, but I believe that anything over 50% is far too high. It is obscene and immoral to allow companies to go on charging vast amounts of interest—I do not care who they are—and that is why we have to take action. I am looking to the Government to do so, not only through legislation but through stating that such companies should clearly set out their rates of interest and the consequences of non-repayment, so that our constituents can take advantage of credit that is competitive and that will not ruin them.
Chris Leslie
This goes back to the odd statement from the Minister in Committee, when he said it would be wrong for the Bank of England and the FPC to be asked to have regard to the impact of its decision on economic growth and employment. I ask the hon. Gentleman to pause and reflect on what he is saying, which is that it is not the Bank’s and the FPC’s job to think about jobs and growth. If he goes to his electorate and says that that is what he is legislating for, I doubt he will get much of a response, but it is important. The FPC will be a vital player in our economy. The Monetary Policy Committee has this objective in its remit; it seems only reasonable to have it mirrored in the Financial Policy Committee’s remit.
This attitude, which we called the Fareham doctrine of compartmentalism, that it is for the Treasury alone to think about jobs and growth—that it would be wrong and somehow dangerous for the Bank of England to think about such issues too—is an extremely dangerous way to think about this vital and extremely powerful institution. The Chair of the Treasury Committee said that, in certain ways, the Governor of the Bank of England could become even more powerful than the Chancellor of the Exchequer. I want all the players in our economy to be thinking about the impact of their decisions on our constituents, their employment prospects, their business prospects and the prospects of growth.
I think the amendment should be made. It is exceptionally important, and I feel strongly that we should press the matter. In a sense, it is similar to amendment 24. In the Bill, we enter new verbal territory with descriptions of how policy will be made. I know that many Members are intimately familiar with macro-prudential regulation, but essentially, it is that suite of rules and powers that the Bank of England and the FPC will be able to use to intervene in their systemic oversight of the economy as a whole. We suggest simply that every time the Bank of England produces a financial stability report it should give an assessment of the impact that each of the new macro-prudential measures will have on employment and growth—a simple assessment of their impact on the real economy. As the Bill stands, there is no requirement on the Bank of England, when exercising those massive powers, to provide that assessment. As the House knows, in many policy areas, we require frequent regulatory impact assessments to be made; this is a parallel requirement. We want the Bank of England properly to analyse the impact of the measures.
Let me give hon. Members some examples, so that they understand what macro-prudential regulation is. It is about setting maximum leverage ratios; sectoral capital requirements; rules on the terms of or the conditions on a loan, either to businesses or to consumers; loan-to-value ratios and loan-to-income ratios in mortgages; haircuts on secured finances or derivative transactions; disclosure requirements; and minimum credit card repayment levels. All those things are of real and great concern to our constituents. If the FPC and the Bank are able to assess the impact of their policies on credit availability, they should also be able to assess and analyse their impact on jobs and growth. Amendment 24 would achieve that.
David Mowat
I thank the shadow Minister for his lecture on macro-prudential tools. I was on the Joint Committee and I certainly did not recommend the inclusion of a growth objective, because I believe that stability and growth are potentially competing objectives. We are passing the Bill because of what happened in October 2008. I was concerned that anything that diluted the absolute requirement for stability might give an excuse for failure, which I did not want to arise.
Chris Leslie
It was the Chancellor of the Exchequer himself who warned against the stability of the graveyard. We have to have joined-up Government and co-ordinated economic policy—I hope hon. Members accept at least that much. It should not be impossible to ask the Bank of England simply to have regard to Her Majesty’s Government’s strategy—not the Opposition’s; obviously, ours would be different—and objectives on growth and jobs. That is all we are saying. We are not saying that that should overrule the broader stability objective of the FPC. It is a simple bit of wiring to make sure that we have joined-up Government and that all the branches of Government talk to one another.
Chris Leslie
I was just coming to my conclusion and am conscious that other Members wish to speak, so I will not give way. I simply urge the House to vote for the amendment in the hope that the House of Lords will improve clause 5.
Mark Field
It is a pleasure to be part and parcel of such an interesting debate. I especially commend the speech of my hon. Friend the Member for Chichester (Mr Tyrie). The hon. Member for Nottingham East (Chris Leslie) also made a thoughtful contribution, which covered a range of issues. As he said, it is regrettable that much of the real scrutiny of the Bill will be carried out in the other place, partly because of the guillotine but also because of the way in which votes on amendments are driven through here. I do not think that that reflects at all well on the House of Commons, which should be a place for genuine scrutiny rather than one that railroads Bills through their stages.
I do not go quite as far as the hon. Member for Nottingham East does in amendment 28. I do not think that we should get rid of clause 5 altogether. However, there is little doubt that the regulatory changes proposed in the clause, and the creation of the new supervisory architecture, will do little to address some of the significant risks that currently exist in the market. I say that as someone who speaks to practitioners every day in my role as Member of Parliament for the City of London.
A central issue is the ability of the FCA to carry out prudential regulation of firms that have sizeable assets and, often, complex structures. The recent failure of firms such as MF Global, Arch Cru and Keydata—all of which would have been prudentially regulated by the FCA—demonstrates the need for firms that have sizeable assets and are engaged in complex activities to be properly managed. One outcome of the failure of those firms has been that the liabilities of other UK businesses to the financial services compensation scheme are increasing in line with larger payouts to UK consumers. A wider effect has been that smaller and more innovative companies which, by their very nature, have less capital available to pay compensation on behalf of other firms face increased risk and rising costs. That will ultimately erode the attractiveness of London and, indeed, the UK as a venue for financial services businesses.
The FCA will not be a specialist prudential regulator. The experts will be located in the Prudential Regulation Authority, and it will be important for the FCA to work closely with the PRA to ensure that complex firms within its scope receive an adequate quality of prudential regulation. It is therefore crucial for the Bill to contain adequate safeguards and assurances that robust information-sharing agreements will exist between the two regulators. That important detail is lacking in both the Bill and the draft memorandum of understanding.
The Government should provide greater protections in clause 5, specifically in regard to the relationship between the FCA and the PRA. That would enable the two regulators to share information on systematically important companies to ensure that the PRA could make a judgment on whether they needed macro-prudential regulation. A key question is whether the FSA has learned from the problems of Lehman Brothers and the events of the past three and a half years or so. Despite the financial crisis, the FSA has failed to adjust the manner in which it supervises firms. The Turner review, published in 2009, provides a detailed analysis of the causes of the economic crisis and the areas of the financial and economic system in which the FSA and other, global regulators failed to identify growing problems.
The review promised a new philosophy of regulation that it describes as “intensive supervision”. That amounts to a huge number of new initiatives and commitments: a significant increase in the resources to be devoted to the supervision of high-impact firms; an increase in the resources devoted to sectoral and firm comparator analysis; investments in specialist skills, with supervisory teams able to draw on enhanced central expert resources; a much more intensive analysis of information relating to key risks; and an investment in specialist prudential skills.
Three years on from the publication of the Turner review, the FSA has increased the number of conduct interventions, a proportion of which have not involved consumer detriment—for example, in client asset and financial crime cases—but it has not been able to prevent the failure of a number of non-systemic companies.
The most worrying feature of what is going on at present, with the collapse of MF Global, Arch Cru and Keydata, is that under the new regulatory system they will all be prudentially managed by the FCA. It is set to be a competent financial conduct regulator, but it is no secret that it is not an expert prudential regulator. The prudential experts will all be located in the PRA. That is fine when the firms that are prudentially regulated by the FCA are small and relatively straightforward with few systemic risks, but none of the three firms to which I have referred can be regarded as small or straightforward businesses.
We are going to hear a lot more about MF Global in this House in months and years to come. It was involved in complex transactions as an intermediary on a range of financial products. The estimated gap owed by MF Global to futures customers is as large as $1.6 billion following bankruptcy. The total cost for MF Global UK has been estimated in the region of £600 million, and about $1 billion of client money remains locked in other financial institutions according to its administrators, KPMG. The total liability to consumers when Arch Cru collapsed was some £100 million, and a £54 million financial redress scheme was agreed between the FSA and the other professional organisations, Capita, HSBC and BNY Mellon.
David Mowat
I completely agree with my hon. Friend’s comments about MF Global and the fact that we did not learn quickly enough the lessons of that or of Lehman. Is there not one major aspect, however, that the Bill does not address particularly well, perhaps because it cannot: the fact that the regulation of such firms must mirror their organisational structure, which is international? Neither the FCA nor the PRA, nor any other regulatory body, can do that without much more effort being made.
Mark Field
I do not disagree with what my hon. Friend says. However, the special administration in respect of MF Global—which, as I have said, will be high profile in years to come—seems to be considerably better organised in every other jurisdiction than it is in the UK. That is doing great damage to the reputation of the UK as a destination for financial services.
Following the failure of the firms to which I have referred, the Financial Services Compensation Scheme has announced it will need to raise an additional £60 million in the investment intermediation sub-class, resulting in rising costs for firms in that category, and in the coming year both MF Global and Arch Cru will, I fear, generate further liabilities of some £600 million or more.
Finance (No. 4) Bill
David Mowat Excerpts(12 years, 4 months ago)
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Dr Whiteford
The hon. Member for Leeds West pointed out that nobody on an income of more than £25,500 a year will be affected by this measure. Frankly, with average earnings above that, I do think that most of those pensioners are living in what most people would consider to be quite modest circumstances, particularly when, as I have already argued, they have to pay much greater heating costs. Their lifestyles are not without particular burdens that they have to bear, and they do not have a chance to improve them.
Dr Whiteford
I shall not take another intervention; I am trying to conclude my remarks.
The Government had a chance to regain the confidence of pensioners after a long hiatus and much erosion of the position of pensioners over a number of decades, but they have squandered that opportunity. They are sneaking through these proposals in the fine print, claiming that they are for simplification. That undermines whatever confidence pensioners had left in them. On the streets of my constituency, people have been angry to see that what has been given with one hand as a modest increase in the state pension has been taken away from their occupational pension with the other hand.
We are leaving pensioners without any real incentive to save. We are not going to tackle the challenges of our changing demographics with that kind of attitude because people will question whether it is worth their while putting money aside for their retirement. I do not think that is a way forward, and I hope the Government will step back from this very regressive measure.
David Mowat
The hon. Lady is making a powerful point about the cumulative impact of policies on particular regions of the country. Her constituency is close to mine. Will she concede that in the last year of the previous Government the north-south divide, measured in terms of gross value added per head, reached its maximum level in the past 20 years? That is something we have to fix in this Parliament, not continue.
Alison McGovern
I am so pleased that the hon. Gentleman chose to mention the north-south divide, because it gives me the opportunity to discuss a concept that trips off the tongue so easily but is actually extremely unhelpful in tackling the kind of local economic development that I am asking Treasury Ministers to consider when making decisions. He will know as well as I do that although the north-west, which we both represent, has significant deprivation, it also has some pretty wealthy areas—the Chancellor himself has the honour of representing one such area. The north-south divide, as a concept, masks a whole lot of other inequalities. Again, I mention the inequalities in London. It cannot be said that there is a simple, straightforward north-south divide in this country affecting every locality in the same way; we should have a much more fine-grained analysis. There are places in the north that are extremely successful and places in the south that really need help.
Before I try the patience of the Chair any further, I will return to the importance of age-related allowances.
Graham Evans
My hon. Friend makes a good point, which the Prime Minister made yesterday at the Dispatch Box.
David Mowat
A number of Labour Members have mentioned bravery in respect of Government Members and some Budget measures. I was not a Member of the House before the last election, but perhaps Opposition Members who were could tell us whether they lobbied the Chancellor for a 45% or a 50% tax rate during the 12 years of the Labour Government, in which the disparity between rich and poor in this country rose to the highest level ever.
Graham Evans
I am grateful to my hon. Friend for making that point on the disparity between rich and poor under the Labour Government.
I accept the point made by the hon. Member for Stretford and Urmston (Kate Green), but bringing the UK’s top rate of tax in line with other international competitors such as Italy, France and Germany, and cutting corporation tax to the lowest level in the G7, will send out a powerful message that enterprise and aspiration are valued in this country. In the spirit of the Leader of the Opposition’s recent Occupy-style hyperbole, I want the 1% to come and occupy and therefore pay tax and create jobs in the UK.
Amendment of the Law
David Mowat Excerpts(12 years, 5 months ago)
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David Mowat (Warrington South) (Con)
I will talk about four areas: tax avoidance; the effectiveness of the Budget in terms of pension tax relief; regional policy; and some aspects of green policy, which may not be entirely coincidental given the speech by the hon. Member for Brent North (Barry Gardiner).
On tax relief, I am pleased that the Chancellor announced that the Aaronson review is to be taken forward and that we are to have a general anti-abuse rule. Sometimes Government Members express concern about retrospective legislation as though it were all about Magna Carta and attacking the rights of the individual. In this case, however, we are talking about predatory and abusive tax practices. About a week ago, I received an e-mail from a firm of accountants telling me about a tax scheme based around film tax credits—it was presumably perfectly legal—and suggesting that there was a way for me to pay no income tax. If I am getting such e-mails, others are getting them too. It is high time that these schemes were put away for ever. I am pleased that the Government are going to move forward on that, although they may wish to consider some kind of de minimis limit as regards how the measure would work in order to avoid over-zealous tax inspectors getting in the way.
I am particularly pleased about the Government’s announcement on stamp duty. For the past three months, we have known that this measure was coming and that the loophole would be closed on 21 March, and I have been concerned about that, given what often happens in such cases. I assumed, rightly I think, that across London in particular estate agents and solicitors were putting houses into companies in order to avoid the measure. I was therefore delighted when I saw the detail of the proposed legislation, which, as far as I can see, fixes this practice. The Government are going to consult on a proposal that will force people to take their houses out of such companies and, presumably, pay tax at the new higher rate. I commend whichever civil servant thought of that. Tax avoidance matters; it strikes at the heart of the notion that we are all in this together.
Before I leave the subject, I would like to discuss it in the context of the BBC. Members on both sides of the House will remember the “Newsnight” exclusive about the head of the Student Loans Company who was not having tax deducted at source even though he was, to all intents and purposes, a full-time employee. The Government have correctly agreed to fix that and to undertake a review of the rest of the public sector. I sent a freedom of information request to the BBC, asking it how many of its employees did not have tax deducted at source. The answer was that 320 non-talent based employees—in other words, administration employees—earning more than £50,000 a year were not having tax and national insurance deducted at source through pay-as-you-earn. The review that is being conducted across Government to ensure that that is not happening explicitly excludes the BBC. I ask Ministers to reconsider that. I will repeat the statistic: 320 non-talent based BBC employees earning more than £50,000 a year do not have tax or national insurance deducted at source through PAYE. That is not acceptable.
I will talk briefly about pension tax relief. I know that this is a complex area, but I am concerned that the Government are not making the progress on private sector pensions that is needed. In broad terms, the industry is failing. There is market failure in the pension fund management industry and the annuity industry. There is a massive asymmetry of information between the industry and the people it purports to serve. Charges are out of control. I am delighted that the National Employment Savings Trust is coming in. There are limits on who NEST can serve and how it can serve them, which were forced on the Government by the industry.
It is time to look again at the whole area of pensions. In particular, we should look at what the Government spend on tax relief. They spend £8 billion on higher rate tax relief and £30 billion on tax relief in total. If that tax relief was going into people’s pension pots towards their retirement prosperity, that would be one thing. The truth is that 31% of pension pots go on charges. It is possible that that rises to 50% of pension pots when churn costs and the rest of it are taken into account.
I would have liked the Government to remove higher rate tax relief in the Budget, because frankly it is a subsidy for a chunk of the investment management industry in the City. At the same time, I would have liked them to reverse the raid on pensions undertaken by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). That could have been done easily with the money, and they might have been able to increase the overall rate of old-age pensions with what was left over. Indeed, if we removed all tax relief on pensions from this failing industry, we could increase the old-age pension by 60%. That model would put us much closer to how continental Europe deals with this matter, and we could still encourage savings through individual savings accounts and the like.
My hon. Friend the Member for North West Leicestershire (Andrew Bridgen) said that he was in favour of the regional pay policy. Anything that the Government do in that regard must be evidence-based. Taking money out of the regions is not, on the face of it, the easiest or best way of changing the north-south divide. In the last year of the previous Government, London had double the gross value added per head of the English regions. We must tread carefully. The Government must make fixing that statistic a priority. In no other country in the world—not in Germany, France or Italy—does that sort of discrepancy between the capital city and the regions exist. We must be circumspect about the regional pay policy.
I was pleased with the announcements in the Budget on the northern hub and the Manchester earn-back model. However, I was disappointed that of the £30 billion of infrastructure spending that the Chancellor announced before Christmas, 84% was for London and the south-east. We need to fix that.
Unfortunately, I do not have time to talk about green policies, so the hon. Member for Brent North will not hear my thoughts on his speech. I will at least leave the three areas that I have discussed with Ministers.
Jam Jar Bank Accounts
David Mowat Excerpts(12 years, 6 months ago)
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The Economic Secretary to the Treasury (Miss Chloe Smith)
I thank my hon. Friend the Member for East Hampshire (Damian Hinds) for securing this debate on the topic of jam jar accounts and low-income consumers. It is particularly interesting and timely, given the various reforms going on in the area, which I hope to explain a bit about in my remarks. In the absence of my colleague the Financial Secretary to the Treasury who leads on these issues, I am very pleased to be responding on behalf of the Government. Indeed, hon. Members may know that I have taken a long-standing interest in these issues in my constituency of Norwich.
My hon. Friend the Member for East Hampshire made a number of relevant points concerning the potential role that jam jar accounts could play in helping to improve financial capability and inclusion, particularly alongside the introduction of universal credit. I should like to respond to the various points that he made and take this opportunity to set out briefly some of the work that the Government are doing in this area, which I am sure he and others will welcome.
Let me begin by dwelling on the progress made to date on the issue. Jam jar—or budgeting—accounts are a relatively new concept, as my hon. Friend mentioned. However, they are available in various places. As he has described, such accounts include various features that are aimed at helping customers to manage their money more easily. At the most basic level, that includes the ability for customers to divide their money between different pots. It may also include, as my hon. Friend said, a function that automatically moves money between accounts and access to support from a trained money manager who can provide advice or direction if necessary.
As hon. Members may know, the Financial Inclusion Taskforce commissioned initial research into the viability of this concept in 2010. It was carried out by Social Finance and was published in June last year. As I think my hon. Friend is aware, the report surveyed the demand and provision of jam jar accounts. It noted, as he said, that such accounts currently exist but tend to carry a monthly account usage fee that can put them out of the reach of those on the lowest incomes. The report also quantified the pool of customers who could benefit from such accounts if they were available at lower costs—up to 9 million. The report recommended that further research be undertaken, followed by a pilot study to explore the potential benefits of such accounts.
Certainly, the idea is extremely interesting. While no one financial product will suit every individual, some people may find these kinds of budgeting facilities useful, and far more useful than the methods that they use currently. The Government are committed to promoting a diverse and competitive financial services sector that provides consumers with access to a range of financial products such as jam jar accounts, which may form a part of those services, to meet consumer need.
If my hon. Friend the Member for East Hampshire will allow, I will refer briefly to a couple of points raised by my hon. Friend the Member for Hexham (Guy Opperman). Ms Osborne need not worry—I will not veer into the scope of the Royal Bank of Scotland in this debate. The Government are committed to providing a diverse and competitive financial services sector, exploring options to expand the roles of credit unions, which have been mentioned and which have an important role in providing services to communities. I note the other points that were made about more local banks and housing associations. Hon. Members will be aware of the current opportunity, under the Big Lottery Fund, for housing associations to take an interest in financial capability, which is important and an issue that I am aware of at constituency level. The Financial Services Authority has made improvements to its authorisation process to ensure that it will not act as a barrier to entry for new local banks, if that is something that the good people of Hexham want.
It is relevant to consider this issue, as my hon. Friend the Member for East Hampshire has, in the context of the introduction of universal credit. The new benefit will simplify the existing complex system of benefits and tax credits, improve work incentives and make it clearer to claimants how the move into work will benefit them. As hon. Members are aware, it will be paid in a single monthly payment, with housing costs paid direct to the tenant. That will enable low-income households to overcome one of the traps of poverty relating to the responsibility of managing a budget and the impact that that can have on other things. The monthly payment of benefits will make it easier for households to take advantage of cheaper tariffs and make access to affordable credit easier through an increased financially responsible record.
The Government recognise that some claimants need additional help to budget, particularly during the transitional period. As my hon. Friend suggests, jam jar accounts could have a role to play in helping many universal credit claimants to budget, protecting their essential payments and supporting positive money management behaviours. For that reason, I am pleased to confirm that, in addition to working with the advice sector to ensure that claimants can access appropriate budgeting support services, the Department for Work and Pensions is working with a range of banking and financial product providers, such as banks, buildings societies, credit unions, pre-paid card companies and others, to explore options for delivering such services, and to make financial services more accessible and supportive to low-income households.
David Mowat (Warrington South) (Con)
We have heard a good idea this afternoon, but high street banks cannot, or will not, provide such accounts at a cost-effective rate. Until that issue is fixed, we are just talking about an idea or a concept, and it will be very hard for it to be realised. Will the Government do more to bridge the gap between what the banks are able or willing to do and what the market is apparently willing to spend?
Miss Smith
I shall, with pleasure, come on to some of the work that the Government are doing to encourage simple financial products, via explaining briefly the next steps for the DWP and via credit unions.
From June this year, the Government will run a series of housing demonstration projects in which we will pay housing benefit direct to tenants to test the support required to help claimants budget and manage their rent payments effectively. They will be an opportunity to consider what type of budgeting products—whether from the commercial sector or elsewhere—can be used to support universal credit claimants in the longer term.
Several hon. Members have mentioned credit unions. They play an important role in offering access to financial services—bank accounts, affordable credit, insurance and savings to name but a few—to people who may not be able to, or may not wish to, access those services through mainstream banks or building societies. They work within a local community ethos and often actively seek to help those most in need of support. The recent legislative reform order brings new and exciting opportunities to credit unions. It is now for the sector to respond to those opportunities by seeking new ways to reduce their costs, to improve the products and services that it offers and to reach out to new markets to become self-sufficient and sustainable. To support credit unions in making this leap, the DWP has carried out a feasibility study to look at options for expanding their role. That study has reported to Ministers and an announcement on its findings will be made soon.
On the point about how the Government can otherwise help consumers take responsibility for their finances and make better choices, jam jar accounts may be one useful tool, but consumers need access to both financial advice and an appropriate range of products. That is why last year the Government launched the Money Advice Service, which promotes understanding of the financial system and helps to raise financial capability across the UK. In particular, its financial health check is helpful to some of the citizens referred to by my hon. Friend the Member for East Hampshire.
Another part of empowering consumers is ensuring that the right products are available. They need to be straightforward, easy to understand and simple to provide consumers with a benchmark with which to compare products, make good decisions and make sense of an often bewildering marketplace. Earlier this month, the Government launched a steering group to design a range of simple financial products, made up of representatives from both industry and consumer advocates. The group will report to Ministers in July and has announced that it will focus initially on developing simple deposit savings and protection insurance products. This is an opportunity for industry to innovate and develop a range of simple products, and it comes at a time of exciting developments elsewhere in the industry.
Under the various developments that I have outlined today, it is clear that there is an appetite, in the Government and in the third and commercial sectors, to find a way forward. I thank my hon. Friend and other hon. Members for their remarks. I am sure that my colleagues, the Financial Secretary to the Treasury and the Secretary of State for Work and Pensions, will appreciate the insights that they have contributed and will continue to take them into account in the further development of work in this area.
Banking (Responsibility and Reform)
David Mowat Excerpts(12 years, 6 months ago)
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Mr Umunna
I want to make a little more progress.
We need a more diverse and competitive banking system that is rooted in our communities and that better serves the financing needs of our businesses, as the Federation of Small Businesses and other organisations have argued. We need better developed equity finance, too, which is why we are exploring the possibility of creating in the UK something akin to the US Government’s small business investment company programme. That programme financed the likes of Apple and Intel in their early stages. We are also considering plans to set up a British investment bank that could step in if the market failed to provide for our entrepreneurs.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
I rise to support the motion. I will begin with the obvious point, which my hon. Friend the Member for Streatham (Mr Umunna) also made, that however poorly some of our banks behaved, they are an essential part of our infrastructure and will be an essential driver of ensuring that our economy improves. The question, however, is whether we relied on them too much, which has to be answered with a resounding yes. When the crash came, we not only had to bail out some of the banks that had become too large to fail but lost a huge percentage of our revenue.
A wry smile comes across my face when I see Government Members’ crocodile tears for manufacturing industries, because I remember the period from 1979 to 1997, when I was a young man, when a lot of them were responsible for the demise of manufacturing. That ensured that my late father lost his job in heavy engineering and never got back into it.
Although RBS has become a byword for profligacy, we have to recognise that other banks, such as Barclays, did not request or need a bail-out. We know that we live in difficult times, but today the National Australia bank announced a review of its Clydesdale bank and Yorkshire bank. Combined, they employ 8,500 people in this country and have two UK networks, and the NAB is to re-evaluate its UK wing. Cameron Clyne, the NAB’s chief executive, said in his statement:
“It is clear that the UK economy is likely to experience a much longer period of subdued growth with the ongoing sovereign debt crisis in the Euro-zone and the continuing austerity program by the UK government.”
Perhaps the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), can respond to that point later.
Government Members take great glee in complaining about what they describe as the mess that was left behind, despite the fact that we are nearly two years into their time in government and even though the urgent action that we in the UK took led the world. However, they should remember the saying, “What goes around comes around.” The chief executive of the NAB was actually saying that their economic policies are contributing to the problems that it is facing, because the Government are concentrating on austerity measures, not the growth of the economy. I hope that the Minister will respond to that point instead of jumping over it as the Minister did.
Although I recognise that the banks make a significant contribution to our economy, their reward structure and behaviour have been brought into sharp focus in the past four years. Based on the experience of businesses in my constituency, banks went from a Viv Nicholson “Spend, spend, spend” policy on lending to a Steptoe and Son penny-pinching policy. The businesses in my constituency with which I have been involved tell me that RBS wants to charge them exorbitant interest rates for safe, copper-bottomed business deals and has put itself first instead of looking after small and medium-sized enterprises.
Most outrageously—Ministers should take note of this—RBS stands accused of deliberately putting in place conditions to put businesses out of business, so that it can reclaim their assets at the cheapest price possible. That is an outrageous way for a bank to do business when the economy is in such difficulty. We need to ensure that we keep people in employment so that they can contribute to the wider good.
The remuneration situation is even more bizarre. When my colleagues were speaking earlier, I heard some chuntering among Government Members about the fact that business people who get large bonuses pay their taxes. There are many millions of our constituents who also pay their taxes, and I bet they wish they were getting the remuneration packages that are being given out in RBS.
As a former trade union official, I have negotiated more pay deals than I care to remember. In the civil service, in the early days of performance-related pay, the reward structure was changed from plain salary to salary plus a performance-related element. Irrespective of which bargaining unit I was dealing with, I always asked how performance would be defined and what an individual would have to do to get that additional payment. In 26 years as a lay and then full-time trade union officer, I never got a straight answer to that question. A job is a job, and someone is paid a salary to do it, but in response to that question I was given platitudes such as “We’ll give it to someone who puts in an effort above and beyond the norm”, and “We’ll reward exceptional performance.” However, when we tried to dig a little deeper into what those words meant, answer came there none.
We have to remind ourselves that the salary package that people such as Stephen Hester get is pretty significant in the first place. We therefore need to know the definition of exceptional work that brings a bonus. That needs to be clearly outlined and transparent.
David Mowat
I am a little bit puzzled by the hon. Gentleman’s argument and that of the Labour Front Benchers on bankers’ bonuses and salaries. Are they against bankers’ salaries only, or all very high salaries? He mentioned Stephen Hester, but Carlos Tevez earns five times as much. Why is the Labour party not honest enough to say that it wants higher taxes instead of just focusing on bankers?
Mr McCann
The crucial point that has come through in this debate is that RBS is owned by the public. Up until last week, when Stephen Hester did the right thing and announced that he was not going to accept the bonus, Government Members remained silent. Ministers said that it was up to him, if my memory serves me correctly—if the Minister wants to intervene, I will be happy to allow him to do so. The Prime Minister said that it was up to Stephen Hester. In relation to Carlos Tevez, I am not a Manchester City fan, so I will leave that issue alone. I have enough problems with Glasgow Celtic football club without worrying about Manchester City.
David Mowat
The hon. Gentleman seems to make a distinction between entities that are state-owned and those that are not. Is he therefore saying that if Hester worked for a non-state-owned entity, the hon. Gentleman would be quite happy with his bonus package? That seems to be the implication of his answer.
Mr McCann
There must be responsibility across every business, whether it is private or public. I am not a communist—the hon. Gentleman will be delighted to know that. I do not suggest that we move to the Cuban model and are all paid the same for doing different jobs, as I recognise that people have different contributions to make and should be paid different salaries for doing so. Often, examples that go to the extreme, such as those about footballers, and that go into other systems of capitalism in the country in which they work do not take the debate much further forward. My analogy is between the civil service and the Royal Bank of Scotland, as the civil service is in the public sector as is the Royal Bank of Scotland, because we own the largest share in it. The difficulty we had in defining performance-related pay in the civil service reads across, it strikes me, to the difficulty we have in defining performance-related pay in the Royal Bank of Scotland.
Financial Services Bill
David Mowat Excerpts(12 years, 6 months ago)
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Stella Creasy
I hope that the hon. Gentleman will use the fact that he has shares to make representations to his bank about the consumer credit market in the UK.
The consequence of doing nothing about this industry and doing nothing about how British families are being made to struggle because of the cost of credit are far too great to see. Frankly, it is not good enough for the Chancellor and the Minister to say, “Well, we have to wait until we see the research from BIS.” We have been waiting years—yes, years—for action on this issue since it was first put to Ministers.
David Mowat (Warrington South) (Con)
I am following the hon. Lady’s argument closely, and many Government Members are equally concerned about these practices, but will she clarify what rate of APR she thinks should be the maximum for a loan of, say, one week?
Stella Creasy
I have answered this question in previous debates. I do not think that we should set a single rate of APR and I do not think we should have an interest rate cap: I believe we should have a total cost cap. In the absence of the Government making progress on such a cap, however, I view the FCA as offering an opportunity to start the more effective regulation of this industry. I hope that the hon. Gentleman would agree that the opportunity to have the industry and consumers setting rates and clarifying what is excessive and what counts as consumer detriment in the listing of these products represents a way forward. That is the argument of Labour Members, and we shall seek to table amendments on that basis. It is no wonder that the number of complaints about these companies and these loans is sky-rocketing in the UK.
Mark Durkan (Foyle) (SDLP)
Like the hon. Member for North East Cambridgeshire (Stephen Barclay), I shall address areas in which we need to proof and improve the Bill before it goes to another place.
I first want to express support for the hon. Member for Walthamstow (Stella Creasy) in respect of consumer credit protection. Not only lenders of consumer credit should be under the FCA, but debt collectors, brokers, retail services that sell insurance products and those offering debt management services.
Similarly, I support the hon. Member for Rutherglen and Hamilton West (Tom Greatrex). Contrary to suggestions made earlier in the debate that the Bill is about putting Parliament back in charge, it is notable that inquiries and investigations under part 5 go to the Treasury. There is no reference whatever to Parliament in that measure, unlike in section 14 of the Financial Services and Markets Act 2000, which clearly states that any such report will be laid before Parliament.
The Financial Secretary no doubt anticipated that I would mention credit unions in Northern Ireland, because their regulatory status will change in the wider context of the changes heralded by the Bill. He was good enough to receive a pick-up band of Northern Ireland MPs last week to discuss our outstanding concerns on the detail. I can assure him that we are pursuing those. We have not yet eliminated him from our inquiries, but we are making the necessary representations to the FSA and will make them to its successor, the FCA.
I wanted to talk not just about the implications of the Bill in terms of the lessons of the banking collapse, but about other provisions. The launch of auto-enrolment means that millions more people will save for a pension through the capital markets, including many low-paid workers. In recent months, we have seen that pension savers’ interests are not always put first by the industry. The spotlight has been turned on to excessive and untransparent charges, and conflicts of interests.
The fund management industry’s duties to savers are poorly understood and observed. The Law Commission has confirmed that when firms manage other people’s money or give financial advice, they have strict fiduciary duties to act in their clients’ interests—both individuals and institutions, such as pension funds, that represent large numbers of underlying savers. That fact is, of course, not generally accepted or reflected within the industry. In addition, as we have heard, because those are common law duties, they do not form part of the FSA’s regulatory approach. An explicit reference to fiduciary duty in the Bill would give the FSA a powerful tool to ensure that consumers’ interests are protected.
Examples of where consumers have suffered from those duties not being observed include unauthorised profits, and recent research shows that some fund managers made significant profits from lending out clients’ shares with only two thirds of the income from those activities returned to the fund. Of course, under fiduciary duties, any such profit should go back to the underlying investor. Another example is in relation to the exercise of shareholder rights. Asset managers, acting on behalf of pension savers, should exercise their voting rights at major companies in the best interests of the savers, without regard to the interests of the firm, but we have anecdotal evidence of fund managers being told by superiors to wave through excessive executive pay to avoid upsetting potential clients. So the interests of the business are placed ahead of the savers whose money is at stake.
David Mowat
I agree with the hon. Gentleman’s point about the market failure that we have seen in the pension and fund industry in the last decade or so, which is close to being a scandal. He is right that the Bill does not include a fiduciary duty, but it would give the FCA a competition requirement that, if applied properly, would prevent the market failure and the non-transparent charges that are the core of the issue.
Mark Durkan
The hon. Gentleman has more confidence in the extensive effect that he expects from the competition requirement. I believe that that should be complemented by this other insertion in the Bill.
During pre-legislative scrutiny—about which we heard earlier—the Joint Committee heard that the Bill was unbalanced. On the one hand, it enshrines the principle that consumers are responsible for their decisions, but on the other it does not place any equivalent responsibility on firms. The Joint Committee recommended that the Bill should
“place a clear responsibility on firms to act honestly, fairly and professionally in the best interests of their customers.”
Meanwhile, the Financial Services Consumer Panel recommended that this should take the form of an explicit fiduciary duty to clients.
In response, the Government have inserted a new principle to which the FCA must have regard, which is that
“those providing regulated financial services should be expected to provide consumers with a level of care that is appropriate”,
having regard to the risks involved and consumer capabilities. But that new wording does not provide a high enough level of protection for customers. It clearly lacks clarity on what might constitute an appropriate level of care and stops short of confirming that those managing other people’s money owe fiduciary duties. We need an explicit clarification in the Bill.
Another area in which the Bill is remiss is the whole principle of stewardship. In the aftermath of the financial crisis, it was widely recognised that major institutional investors had behaved as absentee landlords, not doing enough to challenge risky behaviour at the banks that they owned. This had direct consequences for many of the pension savers whose money those shareholders invested. According to the OECD, in the year after the crisis pension funds lost an estimated 17% of their value.
After the crisis, we had the Walker review, and the Financial Reporting Council established the UK stewardship code, designed to encourage investors to behave as active owners of the companies in which they invest. This agenda is increasingly recognised by both the Government and the Opposition in all the recent, highly publicised arguments about executive pay and what can be done to curb it. Both leading parties in this House have placed great emphasis on more shareholder responsibility. But to date the FSA has treated this as a fairly marginal issue, appearing not to regard it as a consumer issue. It is not clear that it will be regarded any differently by the FCA.
There is no mention of stewardship in the Bill, although it is clearly relevant to the objectives of the PRA and the FCA. In particular, there is a danger that stewardship will continue to fall through the cracks in the new regulatory architecture. The PRA is likely to take little interest, because the ordinary asset managers of the firms in question are FCA-regulated, yet there is little reason to assume that the FCA will accord the issue any higher priority than the FSA does at present.
The proposed duty of co-ordination mentioned earlier by the hon. Member for Cities of London and Westminster (Mark Field) will do little to resolve that issue, because it will focus purely on reducing the burden of regulation on dual-regulated firms, rather than on preventing gaps in regulation between the new authorities. That measure will deal with an overlap as it affects the business; it will not deal with the gaps affecting consumers. Again, there is a hole in the legislation as far as consumer protection is concerned.
David Mowat (Warrington South) (Con)
I agree with those who have said that we are here to make a good Bill better. The financial services industry is vital to our country, and it is possible that we lead the world in that industry more than in any other, yet it is an industry that lost us near enough £200 billion three or four years ago. We need to chart a course between not locking the door after the horse has bolted and ensuring that we establish a regulatory framework that looks to the future.
Some have said that the most important aspect of regulation is not the structure, and that may cause us to wonder why we are moving from a tripartite structure to a twin-peaks system. Many words have been used tonight, but I believe that one that has not yet been used provides the most important explanation for the failure of the tripartite structure. I refer to the word “underlap”. The structure failed because none of its three components felt wholly responsible for taking the action which was needed and which they suspected might be required. That is why the twin-peaks system is sensible. It is not a “quartet”. I think that the shadow Chancellor’s point about a quartet indicated that he did not understand the issue of underlap or take it at face value. Undermining the responsibility of the Governor of the Bank of England by asking his deputies to act as whistleblowers takes us back to that structure of underlap.
The Bill could be improved in three respects. First, I want to talk about the importance of international and European co-ordination, about which my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), the Chairman of the Joint Committee, talked at some length. I have a little more sympathy for Mr Barnier than he has. Secondly, I want to talk about competition. Thirdly, I want to talk about the link between the Bill and the work of the Independent Commission on Banking and the Vickers report.
We are regulating two types of entity in the banking sector, those that are predominantly in the United Kingdom and those that are international, and I believe that the UK entities have been regulated to death. Apart from the ring fence, the capital requirements, all the buffers, the tier 1 and tier 2 capital and all that goes with it, I believe that we have fixed the problem, but one issue is still out there. If I were to predict where the next crisis will come, I would say that it will come in the international banks that straddle boundaries and continue to grow in complexity and scope: the investment banking and brokering parts of organisations such as Goldman Sachs, HSBC, Deutsche and BarCap.
Collectively, those organisations control $4 trillion of derivatives. I do not fully understand the economic purpose of $4 trillion, but I do know that regulating those entities is outwith the competence of a nation state, and we must be careful that we do not think we are doing it by passing a banking Act within our nation state. The organisation within those banks is global, the way in which they look at themselves is global, and the way in which they move capital around is global.
The Joint Committee took evidence from the Governor of the Bank of England, who explained that he would supply liquidity to an overseas bank with a subsidiary in the United Kingdom that wishes to fund activity in South America. The issue is global, and I want to talk about MF Global, the derivatives trader that went bust in the middle of October. Amazingly, the organisation was considered to be outside the scope of the PRA, yet its balance sheet was more than £40 billion. The capital flows between the USA and the UK were huge, and there now appear to be issues of insider dealing. Between £1 billion and £2 billion of customer funds have been lost. What happened to that bank is a model for the kinds of problems that we will have in controlling the financial system over the next two decades, and we need to focus on such organisations. It was a relatively small bank, only a tenth the size of Lehman Brothers, but its problems crept up on us and took us completely by surprise. There are many more banks and shadow banks like it. I would like the Minister to acknowledge this issue. It is not enough simply to say that we have colleges of regulators. I believe that this is the area in which the next crisis will arise. If I am right, I could be made Business Secretary.
The hon. Member for Foyle (Mark Durkan) mentioned the pensions industry. The important aspect of the Bill is the competition objective. The City and the financial services industry would benefit from the systematic application of competition. The problem with systemically high salaries is not, in my view, the bonus culture; it is that there has not been enough competition in the industry to bring the salaries down. That can occur when the barriers to entry are too high, when there is market dominance or when there is asymmetric information—that is, when the organisations have much more knowledge than the punters. That is particularly true of the pensions industry. The hon. Gentleman mentioned fiduciary duty. The fundamental problem is that the charging is too high, but the fiduciary duty requirement will not take that away, because the organisations think that the charging is all part of their applying their fiduciary duty. The funds industry needs to reach a point at which something like 31% of a pension pot no longer goes on charges in the private pensions industry, and it needs competition to achieve that. Such charging is one reason why this country is so massively under-pensioned, and the issue needs to be fixed before auto-enrolment provides a further subsidy for the industry.
Tax Avoidance (Public Servants)
David Mowat Excerpts(12 years, 6 months ago)
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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
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.
Energy and Climate Change
David Mowat Excerpts(12 years, 8 months ago)
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David Mowat (Warrington South) (Con)
Over the next few minutes, I shall give a critique of aspects of the Government’s energy policy, but first I thank the Government for having an energy policy that it is possible to critique. Although I do not want to make a party political point, it is worth reflecting on the legacy that we inherited. On renewables, we were 25th out of the 27 EU countries, in front of only Malta and Luxembourg. Some 90% of our energy is from gas, coal and oil; 2.5% is from renewables. Furthermore, in 2010—the last year for which figures are available—the percentage of our energy that came from renewables actually fell. That is a staggering achievement, and it is worth noting.
What the previous Government were able to do—they had some success in this—was pass legislation, some of which is important, and that is the basis of what I shall talk about today. The Climate Change Act 2008 requires us to reduce our emissions by 80% from a 1990 baseline. I will not argue about the basis for that; we have heard from the hon. Member for Brighton, Pavilion (Caroline Lucas) about the importance of the 2° C target. I agree with much of what she said on that, but as she is present I just make the point that if she, like George Monbiot, had accepted that nuclear power has a part to play in meeting the target, her speech would have had more resonance.
The Act places onerous requirements on us. Broadly speaking, reducing our use of carbon by 80% from a 1990 base requires a strategy that may embrace 25,000 wind turbines—I say that with some regret to my hon. Friend the Member for Montgomeryshire (Glyn Davies), who is sitting in front of me—and 25 nuclear power stations. Of course, it would also mean a massive reduction in energy use; I think that Members on both sides of the House would agree with that, and the green deal is a great way forward. My difficulty is with the next Act that the previous Government enacted, relating to the EU 20-20-20 directive of 2009, which requires us to produce 15% of our energy from renewables over the next decade. In my judgment, that directive contradicts our needs under the Climate Change Act 2008. We must decarbonise, and not necessarily go in for a renewables frenzy.
People might wonder why that matters, given that renewables need to be part of the mix. It matters because the emphasis on renewables has, in my judgment, meant that we have de-emphasised other low-carbon solutions that need to go ahead much more quickly, such as nuclear power and more use of gas, which I shall discuss.
One particular aspect of the renewables frenzy brought about by the 2009 directive undermines our ability to decarbonise, and we can see it in the solar power episode that is still playing out. We made a decision to pay 40p per unit for electricity that we can sell for 8p or 9p a unit. That, of course, generates a big industry. We make that subsidy even though we are no more than 2% or 3% of the global industry for solar, and therefore realistically cannot make a big difference to how the price comes down, and even though solar power produced through photovoltaics produces more than three times more carbon than nuclear power, as was shown in a recent peer-reviewed paper from Imperial college.
Why does all that matter? Why does it matter whether we go for renewables so hard, as opposed to going for gas, which is part of this? One of the things that we have to do is get our car and transport infrastructure off oil. We shall do that not just by electrifying, although that might be part of the solution, but by going down the route of gas cars. There are about 10 million gas cars in the world, more than 2 million of which are in Pakistan. There are nothing like that many electric cars. To say that gas is not part of the solution is just wrong.
Glyn Davies
Notwithstanding the fact that my hon. Friend is focused on putting too many wind farms in my constituency, I agree with much of what he says. Does he agree that we need to emphasise the potential of tidal power as well? I have not heard that mentioned a great deal. The Severn barrage can supply 5% of British energy needs. The potential of tidal power is massive.
David Mowat
I thank my hon. Friend for that intervention. I am not an expert in hydro power, the potential of which is very large. We have a deadline of 2017 to replace about a third of our generating capacity. To do that, we must use proven technology. That meant nuclear, but we might be late for that now. It is going to end up being gas, because gas is the default solution of a failure to invest in other technologies.
The very real need to decarbonise is being threatened by the costs that we are incurring through a strategy that is too focused on introducing the wrong sort of renewables too quickly. Let me give an example of the likely cost of the carbon floor. A £70 per tonne price of carbon will add about £400 to £500 to the average domestic bill. That is important because fuel poverty is at 10% now. We have energy-intensive industries laying off people or not investing in this country, in the context of trying to grow manufacturing as a percentage of GDP. The risk is that that will prevent some of the things that we need to do in pursuing decarbonisation. I ask the Government to consider this point: optimising renewables is not the same as optimising decarbonisation, and we need to do the latter.
Norman Lamb
Absolutely, I do. I accept that completely, and that is why the Government are determined to take decisive action.
The consequences, however, of a 3.5° C to 4° C rise would be devastating, including a 2 metre rise in sea levels, a massive impact on food production and so on, but to hit the 2° C target we need global emissions to peak by 2020 and, after that, to reduce by 4% annually. That target is achievable if decisive action is taken by both the developed and the developing worlds, and this Government are determined to take a lead internationally —one of the things that the hon. Lady raised specifically —in seeking to achieve it.
Developing countries on their own are likely to account for 60% of emissions by 2020 owing to rapid development, and the Government recognise that the European Union must show leadership, so we are pressing for a 30% 2020 emissions reduction target, rather than the current 20%.
To answer the hon. Lady’s specific question about whether we need to review the target level, I note that the Cancun conference agreed to a review of the science to see whether to adjust the target and whether the 2° C target is adequate to prevent the disastrous consequences of climate change. I acknowledge what she said about the outcome of the recent Durban conference, but it did make progress on the design of that review and on the steps, including negotiating a new global agreement, to get the global community back on track to achieve at least the 2° C goal. I pay tribute to my right hon. Friend the Secretary of State for Energy and Climate Change for playing a key role in the Durban negotiations, which have taken things forward.
All that sets the context—the imperative of building a low-carbon economy—for dealing with the contributions from the hon. Members for Warrington South (David Mowat), for Daventry (Chris Heaton-Harris) and for Montgomeryshire (Glyn Davies). Not only do we need to reduce carbon emissions because of the imperative of tackling climate change, but we face the massive challenge of energy security.
I shall deal first with the hon. Member for Warrington South, who criticised the focus on renewables and sought to concentrate on the optimisation of decarbonisation, arguing for the importance of nuclear and gas in the short term. We face the immediate and remarkable challenge that nearly one third of our energy supplies will be going off-grid in the next decade. That is because of decisions already taken. Nuclear cannot deliver in that time frame. There are disadvantages in relying heavily on imported gas because it makes us more vulnerable to risks with regard to security of supply, fluctuating and volatile cost, and availability of supply. To replace the lost capacity and to hit challenging emissions targets, we need a new supply quickly, and wind and other renewables are a crucial part of that. Over the longer term, the Government have no intention of favouring one form of low-carbon energy production over another. Our intention is to secure a level playing field for low-carbon technologies competing with one another. Tidal power, which was mentioned by the hon. Member for Montgomeryshire, should be given its chance along with other technologies.
The Government have already issued a White Paper on electricity market reform. That is an important way to deliver the change that we need to secure proper competition between low-carbon technologies. It will mean that a level playing field is introduced by 2020, and it covers nuclear, carbon capture and storage, and renewables. The carbon plan published on 1 December, which sets out how we will meet the requirements of the fourth carbon budget—between 2022 and 2027—does not favour one form of production over another but offers different scenarios and different combinations within the whole mix. We are not looking to lock in any one form of production. The Government have stressed the importance of reducing energy demand and of improved energy conservation. That is why our green deal is so important, as is the radical step of introducing smart electricity and gas meters across every home. We do, however, stress the need for immediate and decisive action.
Norman Lamb
I will not, because I am conscious of time constraints and think that I must press on.
The hon. Members for Daventry and for Montgomeryshire discussed wind energy. First, it is important to recognise that this does cause concern for many people; we are all familiar with that in our own constituencies. Those concerns cannot just be dismissed. There are inevitably tensions between the absolute imperative of reducing carbon in our economy and the concerns of local people. It is important to recognise, though, that applications are turned down on landscape grounds. The key is to find appropriate locations in terms of landscape and wind speed.
The hon. Member for Daventry raised concerns about the efficiency and effectiveness of wind energy. Wind energy is generated for between 70% and 80% of the time. It is already providing about 2.9% of total energy generation—that was the figure for the second quarter of 2011—and it represented approximately 31% of the overall renewable electricity generated in that period. It is already delivering results. The costs of onshore wind are expected to come down by about 8% to 9% between now and 2030. That will result in support for onshore wind reducing by 10% from April 2013. The hon. Gentleman also raised concerns about the proximity of wind turbines to where people live and the importance of local decision making. The Government, through the Localism Act 2011, want to give people in their communities a greater say in the decisions that are taken.
The hon. Member for Montgomeryshire raised particular concerns about what is happening in his own community. I pay tribute to the passion and commitment that he has demonstrated on this issue over a long period. He will be aware that the location of wind farms in mid-Wales is down to TAN 8—technical advice note 8—which is the responsibility of the Welsh Assembly Government. Any changes or variations to TAN 8 are their responsibility rather than that of the UK Government. Six applications for developments of over 50 MW are currently in train in mid-Wales, and we are waiting on the response of the local authority, Powys county council, which is due by the end of March next year. The Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry) has written to the authority recently—last week, I think—to extend the deadline to the end of September so that it can conduct its assessment properly and respond fully to the proposals. That extension is subject to approval by the applicants.
I should also mention the Localism Act 2011, which has removed decision making powers from the Infrastructure Planning Commission. That body has dealt with applications for developments of more than 50 MW since April 2010. It was introduced by the previous Government and it was an appointed, unaccountable quango. This Government have returned responsibility to Ministers, thereby reinstating clear accountability.
I want to reiterate the value and importance of wind in meeting climate change targets, for the reasons that I have already expressed. It has to be part of the mix. I stress its economic benefits in Wales and elsewhere. Wind energy contributes £158 million directly to the Welsh economy every year in turnover, employment and expenditure. It is responsible for more than 800 full- time jobs in Wales, and that is expected to rise to 1,000 next year. That must be considered.
Finally, I will deal with the contribution of the hon. Member for South West Bedfordshire (Andrew Selous). I am grateful to him for raising the concerns brought to his attention by Mrs Lorraine Bond. The amount that she and others have to pay over the winter just to heat their homes should concern us all. He is right that the recent Office of Fair Trading report highlighted that cylinder liquefied petroleum gas—
Public Service Pensions
David Mowat Excerpts(12 years, 8 months ago)
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Danny Alexander
I would have welcomed from the Scottish National party—as from the Labour Front-Bench team—a recognition that opposition to these reforms was wrong and a welcome of the fact that we have reached agreement. Sadly, Salmond and Serwotka are the duo who continue to reject public service pension reform. The position of Unite is more nuanced, as it has signed up to the agreement in the local government sector and reserved its position on the health sector, pending consultation with some of its lay members. If that proves to be positive, the union would be welcome back at the negotiating table.
David Mowat (Warrington South) (Con)
An inflation-proof pension of £20,000 a year taken at the age of 67 would cost about £500,000 to purchase on the open market, yet the average pot in the private sector is about £30,000 for those people who have any provision at all. This difference is exacerbated by the charging structure in the UK fund management industry, which cripples private provision. Now that the Chief Secretary has more time on his hands, having concluded these negotiations, will he address this issue with colleagues because it is a disgrace?
Danny Alexander
I am not sure that I would accept the description of having time on my hands. The hon. Gentleman’s point is a serious one, however, particularly on the charging structure. This has been looked at by the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb) in the context of the new National Employment Savings Trust scheme, and the Financial Secretary has been considering it. If we can find things to help reduce those costs, we will certainly go ahead with them.
Banking Commission Report
David Mowat Excerpts(12 years, 8 months ago)
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Mr Osborne
There is nothing specifically about that in the Vickers report, but the Financial Services Authority has done an investigation into what happened at the Royal Bank of Scotland, and has made specific recommendations on the law regarding bank directors. It turns out that the laws were inadequate to help the authorities to investigate specific individuals at RBS and HBOS, so we are going to look at the recommendation, which came to us only recently, and see whether we can implement it, to ensure that individuals as well as institutions can be held responsible for their actions.
David Mowat (Warrington South) (Con)
There is no agreed definition of which bank functions may be included in the ring fence, and which may not. There is therefore a risk of fudge as the proposals are rolled out over the next few years. Will the Chancellor agree to ensure that that is defined in primary and secondary legislation, and not simply left to the regulators to argue over with the banks?
Mr Osborne
There will be clear definitions in the legislation. To be fair, what John Vickers recommended, and what we are proposing, is relatively straightforward. There are certain things that will have to be in the ring fence, such as the deposits of individuals and the overdrafts of small businesses. There are also certain things that cannot be in it, such as classic investment banking activities. There will then be a middle ground, which will essentially involve corporate lending, and that can either be in the ring fence or not. John Vickers thought that it would be wrong to prescribe that, because different banks have different models, so he has left the location of the ring fence flexible. However, the height of the fence will be high, and we are going to introduce it into legislation.