amendment of the law

David Rutley Excerpts

Monday 24th March 2014 Commons Chamber

[David Rutley (Macclesfield) (Con)]

It is a pleasure to follow the hon. Member for Wythenshawe and Sale East (Mike Kane), a near neighbour of mine. I was pleased to hear his upbeat assessment of airport city in Manchester; I share that assessment and look forward to working with him, just as I did with his esteemed predecessor, whom many of us in this House admired and respected.

It is important that this Budget has further underlined the Government’s commitment to putting our public finances back in order. It has also highlighted the action that is being taken to address cost of living challenges, including the increase in the personal allowance to £10,500. Government Members have pointed out repeatedly that the Chancellor has gone further in this Budget by taking bold, radical steps, the better to support the aspirations of savers and pensioners. Those steps have been welcomed by many of the constituents in Macclesfield I have spoken to over the weekend, and they are popular across the country because they give power to the people. That is not something that Citizen Smith said in the 1970s; it is the Conservative way, the right way, and we welcome this approach.

Another positive theme in the Budget is the continuing action that is being taken to deliver sustainable economic growth after the boom and bust of the Labour years. The evidence is clear to see in the 2.75% growth forecast for this year and the 2.4% growth forecast for 2015. In addition, we have the 1.7 million jobs that have been created. Perhaps Labour Members could remind us who said that just could not be done—where is the right hon. Member for Morley and Outwood (Ed Balls) when you need him?

I welcome the positive progress that has been made, but clearly more needs to be done to take forward our long-term economic plan and our growth agenda, and that is what I want to say more about this evening. It is refreshing and good to see that the Federation of Small Businesses and the British Chambers of Commerce also warmly welcome this Budget. With so much new news in the Budget, it might be easy to overlook the fact that the Government have dramatically reduced corporation tax. It has fallen from 28% under the previous Government to 21% this April, and is set to fall further with a cut to 20% in 2015-16—that is the joint lowest rate in the G20.

On the employment allowance, it is crucial that we get to a lower tax environment, so that businesses have the confidence to invest, and the desire and appetite to take on more workers. I am pleased that the growth we are seeing is spread across all the regions—just about—as that is vital in our task of rebalancing the economy. In recent months, we have had positive reports about what is going on in our local economy in north-east Cheshire. In November, AstraZeneca invested £120 million in its packaging and manufacturing site in Macclesfield. The recent announcement of the sale of AstraZeneca’s Alderley Park plant to Manchester Science Parks is crucial to ensuring that there is a sustainable future at the site, which has been a centre of innovation, research and discovery for decades. This new approach means that there will be further innovation and success in decades to come. Although AstraZeneca may have decided to take its research and development facilities to Cambridge, I am pleased to be working with the company and with the Alderley Park taskforce to make sure there is a lasting legacy. The Chancellor, as a local Member of Parliament, is also championing that important start we are making. With the new owners, our aim and ambition locally is to make sure that we create a counterweight to Cambridge up in the north-west. Who knows, AstraZeneca may live to regret the day it decided to relocate—I hope it does, as that is certainly our plan.

That case study demonstrates again that the state cannot and should not seek to rebalance the economy on its own. Government Members know that making areas dependent on public sector jobs is not a panacea, despite the protestations of the hon. Member for Sheffield Central (Paul Blomfield), who is no longer in his place. The Government are right to focus on getting the economic fundamentals in place so that businesses across the regions can thrive and flourish, without the excessive competition in the labour markets from public bodies.

The Government also recognise that they have a crucial role to play in investing in infrastructure. Connectivity will be the key to rebalancing the economy, and this is not just about HS2, which I am pleased to hear will now have a hub station in Crewe six years earlier than planned; in the north-west, there are ambitious plans for the Atlantic gateway, the northern hub and, let us not forget, further rail electrification, with 800 miles planned by 2019, compared with just the nine miles put in place during the Labour years in government.

The bidding process for the £2 billion growth deal fund, involving business-led local enterprise partnerships across the country, will be another catalyst for change. I am sure I am not the only Member seeking to draw attention to major projects in their area, but in Cheshire and Warrington we are supporting an innovative cross-border science corridor, which builds on initial progress we are making at Alderley Park. So let the competition begin—just let us not forget our science corridor in Cheshire to move things forward. I support this Budget and the contribution that this Government’s long-term economic plan is making to the economy in this country.

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[Catherine McKinnell]

I caution the hon. Gentleman, given that long-term youth unemployment in his constituency has gone up 125% under this Government; he should check the figures.

However, back to the annual investment allowance, the slashing of which has cost jobs. Cutting the allowance from £100,000 to £25,000, then announcing a temporary increase to £250,000 with the expectation that it would then fall again to £25,000, before then increasing it to £500,000 in last week’s Budget, although welcome, does not really inspire confidence in the Government’s long-term strategy for supporting business growth and investment—businesses that desperately need stability and certainty, rather than continual chopping and changing over the years.

[David Rutley]

On that point, does economic growth of 2.7% inspire confidence in the hon. Lady?

[Catherine McKinnell]

The growth figures are a fraction of what the Chancellor promised back in 2010. I urge caution on the hon. Gentleman, who has seen long-term unemployment in his constituency go up 600% under this Government.

Indeed, that whole sorry saga just about sums up the Government’s haphazard and cavalier approach to backing economic growth and job creation. Clearly, it is welcome news that the economy is growing again—undoubtedly, after three years of flatlining—but as we all know, in 2010 the Chancellor predicted that our economy would have grown by 8.4% by now. Instead, we have seen growth of just 3.8%, lower than the US and lower than Germany. Indeed, GDP growth this year is still expected to be lower than the OBR forecast in 2010. This is now the slowest UK recovery for 100 years, with our economy still 1.4% behind its pre-crisis peak.

How many more businesses could have grown, and how many more jobs could have been created, had the Chancellor not slashed the annual investment allowance at the first opportunity? How many jobs and how much new investment have been lost as a result of his carbon price floor, about which the Opposition have consistently raised concerns and on which he finally used last week’s Budget to take some action?

Had the Chancellor acted before last week’s Budget, how many firms could have been given the support and finance they need to export, thereby helping to ensure that any economic recovery is driven not just by consumer spending? It is little wonder that he is so unlikely to achieve his target of doubling UK exports to £1 trillion by 2020, given that the Government’s export enterprise finance guarantee scheme helped just five firms before folding, and their export refinancing facility is still not operational, despite being announced back in July 2012.

Of course, three years of a flatlining economy have meant that the Chancellor’s much hailed deficit reduction plan has been an abject failure, with the coalition now set to borrow £190 billion more than originally planned. Indeed, the Government have borrowed more in three years than Labour borrowed in 13 years. The Prime Minister and the Chancellor previously promised to eliminate the deficit and balance the books by 2015, but now they will not be able to do that until 2018. As a result of their failed policies, the Government, who like to talk tough on welfare spending, will actually spend £1 billion more on welfare this year and next than Ministers were planning only last December to spend. They will spend £13 billion more than they planned.

[David Rutley]

It is interesting to hear the hon. Lady’s comments on the debt, the deficit and so on. Does she agree with the IFS that the Labour party would be spending £29 billion more under the plans it has in place?

[Catherine McKinnell]

I agree with the IFS that families are, on average, £891 worse off as a result of this Government’s tax and benefit changes. Once again, Government Members want to ignore the cost of living crisis that households are facing up and down the country as a direct result of this Government’s failure to deal with the deficit and help ordinary families.

Last week was the Chancellor’s final opportunity to introduce policies to provide the real help that people need now and to cement the recovery after choking it off when the Government first came to office. The key question that people across the UK will be asking is whether they are better off now and in the coming months than they were when the coalition came to power in 2010. With the exception of a very few of the Chancellor’s friends at the top, for most the answer is a resounding no. Last week’s Budget did absolutely nothing to reverse that.

Budget Resolutions and Economic Situation

David Rutley Excerpts

Wednesday 19th March 2014 Commons Chamber

[Mr Mark Hoban (Fareham) (Con)]

It is a pleasure to follow the right hon. Member for Newcastle upon Tyne East (Mr Brown). As someone who was born and brought up in the north-east, I too understand the deep-seated challenges that the region faces, and I hope that the emphasis in the Budget on rebuilding the manufacturing sector and investing in high levels of skills will make some progress towards tackling those problems.

The Chancellor is absolutely right to highlight the progress that has been made since we came to office in 2010, but also the further progress that we need to make. Our job is not done, and that is why the reforms announced by the Chancellor today, which refer to the need to strengthen the roles of the makers, the doers and the savers, are vital if we are to secure the future of our economy in a competitive world.

I want to highlight some of the progress that we have made. Not much has been said about the unemployment figures that have been published today. We have seen a fall in the unemployment numbers, according to both the claimant count and the labour force survey. We have also seen a big increase in the number of people in work. Record numbers of women are in work. Often the Opposition’s criticism is that these jobs are temporary or part time, but the reality is that employment increased by nearly 460,000 last year, and 430,000 of those jobs are full time. During the last year, we have seen a contraction in the number of temporary jobs in the economy, and therefore a significant increase in the number of permanent jobs in the economy.

[David Rutley (Macclesfield) (Con)]

It is appropriate to recognise the important work that my hon. Friend made as a Minister in helping to move this agenda forward, which was a real contribution. On the important point that he has raised, does he recognise that there is also an increase in the number of full-time self-employed people, who have made a conscious decision that they want to have a real say in the future of their own employment?

[Mr Hoban]

My hon. Friend is absolutely right. The number of people who want to take control over their own lives and employment, and who want the security that comes from self-employment, is significant, and the number of schemes that we have introduced to help young people find self-employment as a route out of poverty and unemployment have been a huge benefit to those who want to set up their own businesses.

The dynamism that we have seen in the private sector, which has led to this increase in employment, has been coupled with welfare reform—a key part of our long-term economic plan. Welfare reform has sharpened the incentive to work, and we expect more of those who are out of work, too. We have brought forward the point when we work with lone parents before their youngest child starts school, so that they are better prepared to start work rather than remain on benefit. For far too long, people who have been out of work through illness have been written off by the system and expected to live on benefits for the rest of their working life. We have been working with them to ensure that they get into employment so that they can look after themselves and their families, and achieve the dignity that we so often take for granted.

The recovery in employment is a product of a strong and dynamic private sector. I welcome the measures that the Chancellor has announced today to encourage business investment and to double the annual investment allowance to £500,000. That will encourage businesses in my constituency that are strong, growing, dynamic manufacturing businesses to invest more in capital equipment. They are aided by the reduction in corporation tax. We should not forget the importance that that has in sending a signal to businesses overseas that the UK is open for business and a place where they should do business. The reduction in corporation tax is mirrored by measures around the employment allowance and scrapping national insurance for young workers under the age of 21. These tax changes, along with cuts to red tape, the investment in skills and the reform of training, are part of our long-term plan to sustain the economy and job creation.

I want to spend a few minutes on the savings measures announced in the Budget. Since they took office, this Government have made radical reforms to pensions and savings. They ended compulsory annuitisation and we are seeing the successful roll-out of auto-enrolment, which will give many people their first chance to build up a pension pot for their retirement. In the next Parliament, we will be launching a single-tier pension, which will mean that people will retire on a pension above the level of means-tested benefits. We have seen the launch of the Money Advice Service and strengthened consumer protection through greater powers for the Financial Conduct Authority. They are important steps that will help reform the savings landscape, and as the Chancellor said they also create a fresh platform for radical reform of pension savings.

When compulsory annuitisation was scrapped, people could take full advantage of the flexibility of income drawdown products only if they could demonstrate that they would not be entitled to means-tested benefits. That meant they had to have a guaranteed income of £20,000 a year. That of course predated the introduction of a single-tier pension, and the limit was set at an amount that ensured that people would not fall back on those means-tested benefits. Now that the single-tier pension is in place, it is right to reduce that amount to £12,000 this year.

We also know that for many consumers it is difficult to shop around to buy an annuity. They are bewildered by the choice in the market, and annuities are often the only product that many of them can buy. Recent surveys have shown just how badly off consumers are as a consequence of not shopping around. I think that the Chancellor’s announcement today about the simplification of the way people can use their defined contribution pension pot will radically transform the insurance and savings market. It will force insurance companies to demonstrate that their products are good value, and create room for innovation for others to come up with products that will help people maximise their income in retirement.

Annuities for Pensioners

David Rutley Excerpts

Tuesday 7th January 2014 Westminster Hall

[Mr Mark Hoban (Fareham) (Con)]

I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on securing this debate. He is spot on in saying that annuities represent an important market and that we must ensure that it functions properly, fairly and to the benefit of those who have saved for their retirement and done the right thing but now face the second most difficult financial decision of their lives. The cost of getting that decision wrong is clear.

The National Association of Pension Funds has suggested that, every year, pensioners lose between £500 million and £1 billion by not shopping around for the best annuity rate, and that they make the wrong choices for a variety of reasons. We must tackle that. The research suggests that more than half of retirees do not shop around for an annuity but roll over to one of their existing pension provider’s annuities.

When I was a Treasury Minister, I worked with the Association of British Insurers in drawing up its code of conduct, which helps to shift the balance away from the default option of staying with the pension provider and towards shopping around. My hon. Friend the Member for South Derbyshire (Heather Wheeler) referred in her intervention to the change in the wake-up pack and the forms in it. However, I question whether that code of conduct is working; we must look carefully at whether the effective default is to shop around. I am not sure that the evidence exists that the code has been as effective as it should be.

My second point, raised in the report produced by the Financial Conduct Authority’s consumer panel, is about what happens when people do shop around. It is clear that the quality of help available is variable. There are some good sources of advice, but too often they are less than satisfactory. Some websites are not clear about the charges and commission earned from putting someone in contact with an annuity provider. It is sometimes not clear whether the website is offering a view of the whole market or just part of it. I looked at the Money Advice Service’s website this morning and it is clear that its comparison tables draw information from a panel of annuity providers. Firms must be much clearer about what service they are offering when people are shopping around.

We must consider whether consumers are being ripped off by hidden charges when they are shopping around, whether they are comparing the whole market or a segment of it, and whether they understand the regulatory protection when using such websites. We must ensure that consumers are properly protected and think about existing sources of information and whether they are adequate. My hon. Friend the Member for Gloucester referred to the Pensions Advisory Service. The Money Advice Service also provides information on annuities; one recommendation from the consumer panel was that the support given through the Money Advice Service and the Pension Advisory Service should be beefed up to help consumers.

We need to bear employers in mind, as they are another important player in the market. The reason why our constituents have to make difficult decisions about how to spend their pension pot is that employees are moved away from defined benefit schemes to defined contribution schemes. We are putting much more risk on the shoulders of employees. Although a large number of employers support their employees in making such choices and put them into contact with a pension adviser at retirement, we need to encourage more employers to do that, so that more employees who are coming up to retirement know exactly what they should be looking for and who they should be consulting.

We need to look at how the annuities market functions, because a poorly performing market has a detrimental effect on income for pensioners and also, in the longer term, reduces the incentive to save. If people feel that they will not get good value for money when they retire, they think, “Why should I put money into a pension? Why shouldn’t I put money into a house instead, or into an ISA?”

We need to make sure that we have a properly functioning market. That is not to say that all that providers should be doing is the bare minimum set out in regulation. Providers should recognise that they have a role to play in having high standards, so that consumers feel that they are being treated fairly and they know, for example, what they are being charged, that they have the best possible rate and that they have explored all the options. Providers have a role to play, too, in ensuring a high standard of conduct in those sectors. A low standard of conduct will lead to potential mis-selling risks in future and, as we have seen in the banking sector, that costs the industry dear.

[David Rutley (Macclesfield) (Con)]

I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on securing the debate. My hon. Friend the Member for Fareham (Mr Hoban) is making a compelling argument about the need to open up the market. I have been doing some research and it is clear that more than 400,000 people a year are making this decision. That is a huge number and it makes the case for opening the market up even more important. He talked about trying to delink product choices; we can look at what has gone on in the mortgage industry, for example, in decoupling household insurance. If we move forward to a more retail approach to the segment, it will help more people have a wide range of options as they consider this very important decision.

[Mr Hoban]

My hon. Friend is absolutely spot on. We need to ensure that there is a more retail-type approach. One reason why people are able to shop around and compare mortgages is that there is good-quality information out there.

It is easy to compare the different rates on mortgages and the monthly payments people will make on different mortgages. The charges are very transparent as well. We can learn things from the mortgage market and its transparency that can be applied to the annuities market. I do not often disagree with the pensions Minister, my hon. Friend the Member for Thornbury and Yate (Steve Webb), but I am not entirely convinced that being able to trade in annuities will work and be effective. There are some comparisons with the mortgage market that we cannot necessarily draw.

Finally, I want to make a broader point. Over the course of the past decade, there has been quite a lot of focus on, to use another bit of jargon, the accumulation phase—what happens when people build up their pensions savings. The previous Government commissioned Lord Turner to look at pensions. I think there was some dispute between Tony Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) about whether Lord Turner’s recommendations should be implemented, but they were, with cross-party consensus. There is considerable consensus over the introduction of the single-tier pension. One area that we have not debated in enough detail today starts that process. What happens when people spend their pension pot? What choices are available to them?

My hon. Friend the Member for Gloucester talked eloquently about an asymmetry of knowledge between someone seeking an annuity and an annuity provider, and about the circumstances that people face. Alternative products, such as income draw-down products, are out there, but that transfers both the investment risk and the longevity risk to the investor—the pensioner. We need to look carefully at the products out there, recognising that this very polarised market, with annuities on the one hand and draw-down products on the other, may not necessarily be in the interests of consumers. Other alternatives might be out there.

National Insurance (Contributions) Bill

David Rutley Excerpts

Tuesday 10th December 2013 Commons Chamber

[David Rutley (Macclesfield) (Con)]

I, too, congratulate the Government on bringing forward this important Bill. It was a pleasure to serve on the Bill Committee. I believe that the measures it contains will make a vital contribution to helping a cause that I believe in passionately: helping more people take on employees for the first time.

We have to get more of the growing band of self-employed people in this country to want to take on an extra employee and we have to overcome the barriers to that. Some 4.2 million people in this country are self-employed, which is 14% of the population, up from 12% at the turn of the century. The good news is that part-time self-employment is down and full-time self-employment is up, which is a good thing, because people are finding that it is a worthwhile form of employment and are making a contribution to the economy. The push factors in driving people to that form of employment are on the way down and the pull factors are clearly on the way up, and more young people want to get involved in self-employment.

However, the real challenge and opportunity that the Bill addresses is that of encouraging more of the self-employed to want to take on their first employee and helping people to see the benefits of working in that environment. Sadly, the pace of improvement in that area is not keeping up with the increase in self-employment. We need to help the self-employed to nudge open the barriers to becoming first-time employers and feel confident to take on employees, whether they are tangible barriers in IT, legal matters or human resources, or perceived, more psychological barriers such as their concerns about dealing with HMRC or about getting rules wrong in employing somebody.

In the Adjournment debate I held on this subject at the beginning of November, I talked through a whole series of options that we could consider to help address this challenge, but the most important thing to do today is to acknowledge that this Bill takes some vitally important steps in doing so. It will be a boost to first-time employees, whether they are apprentices, long-term unemployed, those who are economically inactive, or those who are looking for their second, third, fourth or even fifth careers.

[Ian Swales]

The hon. Gentleman is making a good point. Does he agree that the businesses he is describing find it difficult to find the time to apply for complex reliefs, and does he therefore join me in welcoming the simplicity of these proposals?

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[David Rutley]

The hon. Gentleman makes a vital point. The great thing about this initiative is that it is very simple. The hon. Member for East Antrim (Sammy Wilson) also made the important point that we need to make every effort to communicate that to small businesses. I know that the Minister is working hard in that direction as we move the Bill forward.

We need to help smaller businesses—micro-businesses —in the task of taking on employees because they are often better at taking on the long-term unemployed or those who are difficult to employ. That is another reason to welcome the Bill. I am pleased that the autumn statement went further in scrapping employers’ national insurance for under-21s completely, as in new clause 3. That is a vital step. As many Members on both sides of the House have said, it is one of the ways in which we will be able to tackle youth unemployment more comprehensively in the longer term.

This Bill is not just about improving economic growth but about tackling youth unemployment and social mobility. I congratulate my hon. Friend the Minister on bringing it to the House, helping it to progress so speedily, and doing it all with his characteristic charm, wit and dexterity. I support it because of what it will do for employment in helping more people to take on employees for the first time, and what it will do to tackle youth unemployment and drive forward sustainable economic growth that is grounded in private sector employment rather than in the public sector that was so much a focus of the previous Government and that we need to move on from. As my hon. Friend the Member for Bedford (Richard Fuller) pointed out, the hon. Member for Birmingham, Ladywood (Shabana Mahmood) might want to consider not taking her flip-flops on holiday next summer. This might be a nasty reminder of where the Labour party once stood with its jobs tax. We need to move on from that, and this Bill takes us to a better place. I commend it to the House.

Autumn Statement

David Rutley Excerpts

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

I made a point in my statement of saying that we want stable house prices and that we need more homes to be built. I know that that is what the Mayor of London also believes. We have taken steps to give the Bank of England powers to deal with asset bubbles as they develop. That, of course, did not happen five or six years ago, much to our cost. Specifically on the cost of London housing, the early Help to Buy statistics suggest that most of the families who have taken it up are from outside London and the south-east, and are buying properties worth on average £160,000. Help to Buy is therefore helping exactly those we want it to help: aspirational families who can afford a mortgage but cannot currently afford the very large deposit that the problems in our banking system have demanded of them.

[David Rutley (Macclesfield) (Con)]

I congratulate the Chancellor on sticking to the vital task of reducing the deficit. Does my right hon. Friend agree that calls to increase spending and further to drive up debt come from the same school of economic thought as no return to boom and bust, which was brought to us by the Labour party?

[Mr Osborne]

I agree. The school of no more boom and bust gave us the biggest boom and the biggest bust in our history—it was spectacularly unsuccessful. One would think that those who had been through that would have learned their lesson and be keen to see borrowing controlled, public finances in good order and the deficit come down, but they are not. That speaks to a broader truth, which is that in bad times the Opposition say, “Borrow more because the country needs it” and in good times they say, “Borrow more because the country cannot afford it.” What they never say is, “Let’s get a grip on the public finances.”

National Infrastructure Plan

David Rutley Excerpts

Wednesday 4th December 2013 Commons Chamber

[Danny Alexander]

Solar energy plays an important part in helping us to meet our energy obligations. However, I am sure that the hon. Gentleman would not argue that consumers should continue to pay costs at a high level as the costs come down in that sector. The framework that we have set out today will ensure that that does not happen. I hope that it will give a degree of confidence to that industry, which I know creates a lot of jobs in his constituency.

[David Rutley (Macclesfield) (Con)]

The Chief Secretary will know that progress is being made on the link road from Manchester airport to the A6. Will he join me in supporting the calls for a related relief road for the village of Poynton, which was promised in the 1990s and which will be vital in tackling the growing traffic congestion?

[Danny Alexander]

Again, I am afraid that I do not know the details of that project, but it sounds like there is a strong case for it at a local level. If my hon. Friend writes to me with the details, I will happily see how it could be progressed.

Cost of Living

David Rutley Excerpts

Wednesday 27th November 2013 Commons Chamber

[Alun Cairns]

rose—

[David Rutley (Macclesfield) (Con)]

rose—

[Sajid Javid]

I give way to my hon. Friend for Wales first.

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[Robert Halfon (Harlow) (Con)]

Thank you for calling me, Madam Deputy Speaker. This is the first time I have spoken in front of you, and it is an honour to do so.

I am delighted that the Labour party has initiated this debate. I say to Labour Members “Bring it on!” I am glad that they have at last woken up to the cost of living crisis. While many of us were going on about it for a number of years, they were talking about predistributions or other “chattering classes” subjects that no one understood. While we were cutting and freezing fuel duty, cutting taxes and raising thresholds for lower earners, and increasing taxes for the rich by, for instance, increasing capital gains tax, they were voting against all those measures. They created a handout society, whereas we want to create a “hand back” society, and to give people back their own money through lower taxes. They created a society of dependency: a society of high tax, high debt and high borrowing.

[David Rutley]

My hon. Friend is making a very passionate speech. I know that he feels strongly about these matters, and has campaigned strongly on them in the past. Does he agree that, although our hon. Friend the Financial Secretary made an outstanding speech, what was omitted from it was a reference to the importance of the employment allowances that will allow a first-time employer to take on a new employee, thus helping even more people into the workplace?

[Robert Halfon]

My hon. Friend is absolutely right. That is another example of why we are the party of small business. Labour showed during its years in office that it was, as Peter Mandelson said, the party of the filthy rich and of big business, sucking up to bankers in the City—Fred the Shred, Flowers and all those kinds of people.

The main elements of the cost of living are jobs, pay and energy. Let us look at the Labour Government’s record. They scrapped the 10p rate of tax under Gordon Brown in 2008. They talk about wages, but median wages stopped rising in 2003, in times of plenty, and hourly pay rose at only a quarter of the rate of economic growth. They increased fuel duty 12 times while in office, and the cost of bus travel increased by 59%. Council tax increased by 67%, and energy bills doubled. That is the record of the Labour party, which says that it wants to help with the cost of living. Sadly, it has nothing to show for it at all.

Energy and fuel prices are among the key indicators of the cost of living. As we have heard from the Minister, this Government have cut fuel duty and said that they will freeze it for the lifetime of this Parliament—an historic move. Of course, I would like the Government to do more and to cut fuel duty further, and I hope that when economic conditions allow, that will be the No. 1 tax cut. We need to continue to help hard-pressed motorists.

On energy, let us remember that there were about 17 energy companies under Labour; now, there are only six. Labour decreased competition, but we are doing things to increase it. I believe that the Government should do more on VAT, particularly through renegotiating our VAT rates with the European Union. They should also consider imposing windfall taxes—de facto fines—on some of the energy companies and passing the money back to the consumer. They should also cut Labour’s green taxes, which make up 17% of the average energy bill.

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[Stewart Hosie]

I will not give way, because we only get two minutes’ stoppage time, and I have had my two minutes.

This Government are also borrowing more and we are all paying the cost of failure. The Government’s main failure is on the fiscal rules they set themselves: that the structural current account deficit should be in balance in the final year of a future five-year programme—it will not be; and that debt should be falling as a share of GDP by the end of that period—it is not. Both objectives, were, and remain, highly dependent on GDP growth, which, as we have noted in previous Budgets, is massively dependent, at least according to the OBR, on extraordinary unmet and unmeetable levels of business investment. Let us remember that in 2010 the Government suggested, with a straight face, that business investment would have to grow between 8% and 11% a year between 2011 and 2015. By the time of the OBR fiscal outlook in November 2011, growth in business investment had turned negative again and the forecast had to be changed to show future projections of growth of up to 12%.

The Chancellor was at it again this year. Having failed to get the growth in business investment we needed, he is now suggesting growth in business investment of 8.6% in three out of the next four years. I hope that that happens, but based on the evidence we have seen so far and the inability of the banks to take their share in providing credit and liquidity to businesses, I fear that is a forlorn hope.

We have also been told—this point was mentioned earlier—that we will see the benefits to GDP growth of exports from the UK. In 2011, however, we had a deficit in trade in goods of £100 billion, which rose to £110 billion the following year. The deficit in trade in goods has been sitting at about £20 billion for every quarter of this year. The balance of goods and services was £23 billion in the red in 2011, and that figure worsened to £35 billion last year after four and a half years of depreciation in sterling. I would hope that at the very least the Government recognised that that part of the plan simply has not worked.

I hope that the Government will be less stubborn about recognising where they have failed and that their optimistic Budgets have simply collapsed into dust when faced with the stark reality of austerity economics, which strips consumption out of the economy in the way I have described.

[David Rutley]

Will the hon. Gentleman give way?

[Stewart Hosie]

I will not.

The pain of all that, as always, is felt by ordinary people, because, as I said earlier, we know this much from the Red Book: the Government intend to take £155 billion a year out of the economy in discretionary consolidation by 2016-17. They will do that for that year and every year, the equivalent of stripping consumption worth about 7.5% of GDP from the economy. Given that they have increased the ratio of discretionary consolidation to four to one—four cuts for every one tax rise—we can see where the Government’s priorities lie: not with jobs, not with growth, not with recovery and not with lifting the burden of the cost of living crisis off the backs of ordinary people, but with balancing the books on the backs of ordinary people in this country. If nothing else, they should recognise that it is not working. The pain is intense for communities throughout the UK and they should think again when we get to the autumn statement.

--- Later in debate ---

[Mr Newmark]

No.

“The recovery”,

the Governor of the Bank of England says,

“has finally taken hold.”

If I may, I would like to begin by highlighting some of the economic achievements of this Government since 2010. The Government have cut the budget deficit by a third. The Government have helped the private sector create 1.4 million new jobs, offsetting any jobs lost in the public sector by 3:1. The Government have ensured that borrowing costs have fallen to record lows, saving money for taxpayers, businesses and families alike. The Government have helped bring inflation down to 2.2% as of October 2013. That is important because of the damaging effect that rising prices can have on the cost of living. The Government have helped bring back growth to the UK economy, with growth now projected to be 2.9% by year end 2014. The Government have ensured that the UK has more men and more women in work than ever before. The Government have seen the number of people claiming unemployment benefit fall at the fastest rate since 1997. Indeed, in my constituency of Braintree, both unemployment and youth unemployment are down 20% in the past year alone.

[David Rutley]

My hon. Friend sets out an impressive track record of achievement in the economy. Does he also recognise that our economic growth in the UK is projected to be the fastest in any country in Europe?

[Mr Newmark]

I thank my hon. Friend for that intervention. I am just getting to that point.

[David Rutley]

Oh, I see.

[Mr Newmark]

Furthermore, British manufacturing recently reported the strongest growth on record, exceeding that in every quarter since 1989, and Reuters recently reported that growth in UK services is the strongest in 16 years. The Government have indeed achieved much to rebalance our economy.

Finally on economic performance, as my hon. Friend the Member for Macclesfield (David Rutley) just mentioned, according to the OECD the UK has the fastest growth in the developed world, beating the US, Germany and Japan. So by almost every benchmark, the UK has made huge strides in turning around the UK economy, and the Chancellor and his team at the Treasury should be congratulated on sticking with plan A and ensuring that the UK is on the path to recovery.

The Government also have much to be proud of on the cost of living. The 2013 Budget raised the personal tax allowance to £10,000 from April 2014. That ensured a tax cut for 25 million people, with individuals paying an average of £705 less in income tax than they did in 2010. Indeed, 2.7 million people have been taken out of tax altogether, thereby reducing the cost of living.

National Insurance Contributions Bill

David Rutley Excerpts

Monday 4th November 2013 Commons Chamber

[Shabana Mahmood]

I thank the hon. Gentleman for that intervention, but I prefer to look at the record. When the Government came to power, they inherited a growing economy. They choked off the recovery, resulting in three years of flatlining and stagnation, and the current cost-of-living crisis that affects businesses and people up and down the country.

[David Rutley (Macclesfield) (Con)]

The new version of events on the Government’s legacy is interesting. We received a dismal legacy. We had a huge deficit, but Opposition Members—deficit deniers—cannot recognise that. They should apologise for proposing the jobs tax. Will the hon. Lady apologise for putting that on their policy platform? It was a complete disaster.

[Shabana Mahmood]

I do not think that an economy that was growing was a bad legacy to leave. The legacy of three wasted years, caused by the Government pursuing a failed economic plan that has delivered a cost-of-living crisis for millions of people, is not one to write home about.

--- Later in debate ---

[Julian Smith (Skipton and Ripon) (Con)]

Because I lost a contact lens on the tube, Madam Deputy Speaker, I can see you but unfortunately cannot see the Minister. I apologise in advance for the fact that my myopia means that I will be slightly less coherent than usual.

This Bill is a fantastic boost to all British business. In a constituency such as Skipton and Ripon, it is a particularly good shot in the arm for an area of Britain where employment is on the up and unemployment is going down. In my constituency, unemployment is down by about 30% and youth unemployment is down by about 35%, and more new businesses are being created. This is a big opportunity to give those entrepreneurs the backing they require to take on more jobs. The businesses in my constituency are largely based around tourism, agriculture, farming and small manufacturing. Many of the businesses in the 900 square miles that I represent are working under tough conditions, isolated and very vulnerable to the weather, and every bit of help they can get is a major boost.

We are very excited in the Yorkshire dales and in all parts of my constituency because in less than a year the Government-backed Tour de France will be on its way. I hope that the Minister may come and participate; I know that she is very into her sport. That event, which this Westminster-based, Conservative-led Government have backed, will be a major boost for Yorkshire—one of the most rural parts of our country. This policy will help businesses to try to make sure that they are taking advantage of this great sporting event.

We have talked about how this policy contrasts with the policies of the Labour party. Most of my colleagues in the Chamber have set up and run businesses, and we probably all agree that at the start of the previous Government’s time in office the messages were quite good. There were things such as taper relief to encourage entrepreneurs and talk of deregulation tsars, and it all looked as though it was moving in the right direction, but it tailed off pretty quickly. As well as pledging at the last election to raise the jobs tax, which the Federation of Small Businesses said would cost about 57,000 jobs in the UK, they raised the 50p tax rate—one of the so-called elephant traps set by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) to try to trap the next Government. Six regulations were added to the statute book per week. There were regular, astronomical rises in fuel duty, which in a constituency such as Skipton and Ripon had a major impact on businesses and families. Somebody may correct me, but I understand that not one debate about exports took place in this House under the previous Labour Government.

[David Rutley]

My hon. Friend is making a characteristically impassioned speech on behalf of small businesses and enterprises, which will thrive on the back of this Bill not only in North Yorkshire but in Cheshire and across the country. Will he remind the House of what steps the previous Government took to tackle the amount of regulation that was coming in from the EU at the time? I cannot remember them doing too much in that direction either.

[Julian Smith]

My hon. Friend makes a characteristically good point. I seem to remember that they signed up to more treaties and more red tape from Brussels. Only now have the Prime Minister and members of the current Government set up a deregulation unit to look at EU regulation, and I hope that we will all encourage them to do more. Any claim that Labour is the party of small business is a very hollow one.

The reason for my excitement about this policy is that it is one of a very large number of policies to back the risk-taker and the entrepreneur—the person who is ready to spend all night worrying about the new employee and ready to risk their capital. A few weeks ago, I went to Downing street with a number of right hon. and hon. Friends, and I met the most inspiring young people who were beneficiaries of the start-up loan scheme and the new enterprise allowance scheme. Downing street was packed with budding entrepreneurs who were benefiting from this Government’s policy. That policy is one of many, including taking out two regulations before one regulation is brought in; ensuring that 25% of all procurement goes to small businesses; taking away pre-qualification questionnaires; increasing the annual investment allowance from £25,000 to £250,000; cutting corporation tax; investing in apprenticeships; creating 27,000 business mentors; and introducing the regional growth fund and the local enterprise partnerships. There is an endless list of policies that this Government have put in place to back the entrepreneur.

That is not to say that we are perfect. The Government have a very strong record, but I would pose them a few questions. We are doing so many good things that we often fail to communicate them in as coherent and focused a way as possible and in a way that is easiest for small businesses. I encourage the Minister, who is coming turbo-charged into her new job, to consider the role of HMRC. The Government communicate more through HMRC than any other arm of Government. How can we use it better to signpost, particularly to small businesses and micro-businesses, the good things that this Government are doing?

How can we cut bureaucracy? We have heard about the bureaucracy involved in the national insurance holiday. How can we make sure that any red tape involved in this new policy is reduced as much as possible?

I urge the Government and my party to start differentiating ourselves not just from the Labour party, but from our coalition partners, with a small business Bill to show that we need to do even more to take small businesses out of the regulation quagmire they find themselves in. I remember sitting through the debate on the Government’s employment changes—colleagues have already discussed them—which were very simple and straightforward. Employers will have two years before they have to decide whether they want to keep an employee. Settlement agreements will at least allow an employer to offer an employee a deal when things are not working out. There will also be tribunal charges, not for people who cannot afford it—before Opposition Members intervene—but for most employees, who will have to pay a fee before taking an employer to tribunal. All of those really good changes—every single one of them—were opposed by the Labour party. It is heartening that, despite Labour’s rhetoric, it looks as though its Members are going to back this Bill, not by voting in favour of it, but by not opposing it.

I pay tribute to the Treasury, the Exchequer Secretary, who started this debate, the Chancellor and the Conservative Ministers at the Department for Business, Innovation and Skills, who are pushing ahead with enterprise reform. This Bill is a major step towards sealing the Conservative party’s record on backing those people in our society who want to take a risk and run a business.

[David Rutley (Macclesfield) (Con)]

It is an honour and a privilege to follow the impassioned speech of my hon. Friend the Member for Skipton and Ripon (Julian Smith).

I was fortunate enough to secure an Adjournment debate last week. The good news was that it was on the subject of supporting first-time employers, but the bad news was that I secured the 2.30 pm on a Friday afternoon slot, which is not always prime time in Parliament. I am therefore pleased to be able to return to the subject and debate it further in the presence of a few other colleagues.

The good news is that over the past decade the number of people who work for themselves has increased to 4.2 million, or 14% of all those in employment—up from 12% at the start of the century. They are taking the chance to be their own boss and often embracing new technologies to enable that. Record numbers of people are working for themselves. As I have said, that is good news, but it would be even better if more of the self-employed, one-person businesses and sole traders took the step from being first-time entrepreneurs to being first-time employers. That is why I support the new employment allowance: it is a huge step forward.

Entrepreneurialism is a culture that spreads. Once a person is in it, they live it. They go native, as they say, and embrace risk-taking. Significantly, entrepreneurs are more likely than established businesses to take on workers from the ranks of the unemployed or the non-active, who often find the formalised application processes, let alone the working practices, of large firms restrictive. Established companies may tend to value the ability to adhere to existing processes and systems above the creativity, dynamism and individual flair that smaller businesses help to stimulate. Doing more to encourage the smallest firms to take on staff, particularly a first member of staff, has to be a step in the right direction.

Despite siren warnings from the unions and others that self-employed jobs are not proper jobs, there is clear evidence that the self-employed and those employed by them in the smallest companies enjoy better industrial relations. Data from the most recent workplace employment relations survey suggest that 67% of employees in the small and medium-sized enterprise sector strongly agree that managers treat them fairly, compared with 53% of those who work in large firms.

Furthermore, a survey by the TUC, no less, and YouGov has shown that a greater proportion of employees in small firms report the highest levels of job satisfaction, compared with employees in larger firms. However, as my hon. Friend the Member for Skipton and Ripon has said, there is still a tendency in Whitehall to prefer to deal with larger companies and to underestimate the burdens on the smallest businesses when introducing uniform regulations. The new employment allowance, however, shows that this Government understand the importance of measures that, though uniform, are of greatest benefit to the smallest operators, and that is why they should be commended.

[Bob Stewart]

I endorse my hon. Friend’s last point. It is clear that if the boss of a business works closely with his first employee, industrial relations should be excellent and there should be no problems. That is the reason for the 67% satisfaction rate.

[David Rutley]

My hon. Friend makes an important point. That is absolutely the case. This is about how we build good working relationships and a strong economic base through SMEs. That is far more sustainable than the approach adopted by the previous Government, which seemed to be underpinned by more and more public spending. That is completely unsustainable.

What a boost it will be for more of the growing army of the self-employed to become small employers. Indeed, if they all, or a vast proportion of them, took on one employee, that would make a huge dent—even bigger than the current one—in the unemployment figures. The number of self-employed people with no employees has increased, but the number of self-employed people with a small number of employees has not kept pace, and that is what the Bill seeks to address. In the past, the focus has been more on encouraging people to start up a business and less on taking the next step to becoming micro-employers. The Bill is an opportunity to further liberate the self-employed from barriers to growth and to nudge first-time entrepreneurs into becoming first-time employers. The prize is stronger, more sustainable economic growth.

Micro-businesses play an important role in Macclesfield, working in forums like Make it Macclesfield and the Poynton business forum. They make a huge contribution to strengthening the community and, at the same time, moving our economy forward by creating jobs.

Surveys and statistics abound to show that small businesses can be, and often are, job-creation machines. They also show that small businesses are more likely to employ the longer-term unemployed and those who may struggle to enter the job market as a result of a lack of formal qualifications or, indeed, their ethnic background. This is what the Federation of Small Businesses calls the “entrepreneurial pipeline” to what Professor Mark Hart calls “growth gazelles”. We need to encourage more growth gazelles. Essentially, this is about everyday entrepreneurs, street-level small businesses and office-share operators giving people a chance to work. Analysis by the FSB suggests that 74% of those who become self-employed and who have employees come from the self-employed who had no employee, and that a further 13% come from employees who had been working in micro-businesses. Clearly, there will be a multiplier effect once we get this right and start moving in the right direction.

The Government are absolutely right to introduce the new employment allowance. Slashing the cost of national insurance and taking many employees out of it completely will encourage more of the self-employed to become employers. However, this is not—and nor should it be—the only measure to increase the number of first-time employers. The Bill must be viewed in concert with the new enterprise allowance—for which Levi Roots is an ambassador for the Government—which seeks to encourage the longer-term unemployed into self-employment. The three-year moratorium on new regulations for small businesses is another important step in the right direction. I encourage Ministers at the Department for Business, Innovation and Skills to view it as a rolling moratorium.

[Julian Smith]

I thank my hon. Friend for giving way in his excellent speech. Does he agree that one of the most depressing things about the lack of Labour Members present is that, to make those schemes truly work, we all need to push them, whatever our political viewpoint, in order to ensure that those who are taking the risks hear about them and understand them?

--- Later in debate ---

[David Rutley]

Absolutely; there is a responsibility on all Members to do that. It is disappointing how few Opposition Members are present, and what they have said has been negative, rather than focused on the opportunities that are available.

As Lord Young of Graffham has rightly argued, there are regulatory issues that we must deal with. The employment allowance will simplify the system for small businesses. We must also tackle the problems with culture and communication. Through careers advice in schools, we must help young people to realise that there are huge opportunities in small businesses. If people are familiar with SMEs and particularly micro-businesses early in their careers, they are more likely to stick with them and to take the step of setting up small businesses themselves.

There is certainly no lack of ambition. The Prince’s Trust has found that up to 30% of young people expect to be self-employed, and a YouGov poll has found that 43% of young people have made money through entrepreneurial activities, like selling their own products or working on a freelance basis. We must help them to achieve their ambitions. The Bill means that their aspirations will not just be pipe dreams. It is a can-do Bill for a can-do generation and it deserves our support.

Those who seek to regulate businesses or to complicate the tax system should recognise the consequences of doing so. Whitehall communications must take notice of business-to-business communications so that those communications can be strengthened. My hon. Friend the Member for Skipton and Ripon highlighted the importance of the work of HMRC on communicating more effectively. I would add to that the work of Directgov.

As Lord Young says, it is vital that the psychological barriers are broken down so that they do not stifle the ambition that is latent in the marketplace. If we are to create an aspiration nation, the road to running one’s own business must be a clearly signposted fast lane, not the last Labour Government’s minefield of forms, box ticking and regulations. Their approach reminded me of a sign that I saw once to a business park, which said, “Enterprise Way—Cul-de-sac”. We have to have a different perspective and that is what this Government are seeking to achieve.

In small firms, there is often less formality, more fluidity and greater flexibility. What we need, and what we now have, is a simple tax allowance that everybody can understand. That will create more jobs and more first-time employers. It is vital that the Government communicate the scheme creatively. I also say to the Minister that we must not listen to what is said by the Opposition. The idea that we have listened to them in designing the scheme is fanciful. After the deficit and flawed forecasts that they gave us, the chances of our listening to them are somewhere between no hope and Bob Hope. Their jobs tax, on top of the record deficit, would have been devastating for the economy.

In conclusion, I am delighted that the Government are champions of first-time entrepreneurs. I believe that the Bill will help us to encourage more of them to become first-time employers. I give the Bill my full support.

--- Later in debate ---

[Catherine McKinnell]

Once again, Government Members want to airbrush the past three years of stagnation, lack of economic growth and the failure of the Government’s implementation of that policy. They failed to address the issue quickly enough, so only today are we finally introducing a policy that will help and that will give that support to small businesses. Unfortunately, it is a little too late in the day for some businesses, which have suffered over the last three years, and for the people who have lost their jobs as a result.

[David Rutley]

In the spirit of not wanting to airbrush, will the hon. Lady tell the House how she thinks the jobs tax would have helped her much-cherished goal of encouraging economic growth?

[Catherine McKinnell]

Coalition Back Benchers want to forget what the Government have done and the past three years of the policy we are debating. They want to debate a policy that never came into play.

None the less, despite the restrictive and complex nature of the previous scheme, the Exchequer Secretary and his Treasury colleagues had bold ambitions for it. He acknowledged from the Dispatch Box that some 400,000 new businesses would benefit from the scheme, with each successful applicant creating an average of two jobs. At that rate, the scheme would have created 800,000 new jobs, with a total cost to the Exchequer of £940 million over its three-year lifespan.

Given that the scheme, which was one of the Chancellor’s flagship policies, drew to a close in September, one might have assumed that the Exchequer Secretary would want to promote the outcome. Sadly, he cannot do so—sadly for the businesses that failed to benefit. Only through a written answer obtained by my hon. Friend the Member for Nottingham East (Chris Leslie), the shadow Chief Secretary to the Treasury, did we learn that a grand total of some 25,400 businesses successfully applied for the scheme over the three-year period. That is undeniably a sizeable number, and the creation of any new jobs in the past three years, during a period of economic stagnation, is welcome; but with only 6% of the target reached, the Exchequer Secretary has had to acknowledge that, as flagship policies for economic growth go, that one has been a bit of a flop.

When the previous scheme was introduced, the Opposition called for there to be no regional restrictions on it, for it to be extended to charities, and for a review of its effectiveness after six months. Those proposals were rejected. The Government ploughed on with a scheme that obviously was not delivering the goods throughout its operation. That was why, as long ago as September 2011, my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor, called for a one-year national insurance break for every small firm that took on extra workers, using the money left over from that failing Government policy—it was clear that it was failing even in September 2011.

The Government are now introducing the employment allowance. It is not regionally restricted and will apply to charities as well as businesses, and it will apply whether or not they are start-ups. It should be easier for firms to access it because it will be delivered by the standard payroll software and Her Majesty’s Revenue and Customs real-time information system, as the Exchequer Secretary said in his opening comments. The question is this: why did it take so long? Given that the scheme will not be available until April 2014, we have had nearly four wasted years when the Chancellor could have helped the thousands of small businesses about which Government Members have spoken so passionately to expand and create jobs.

Financial Services (Banking Reform) Bill

David Rutley Excerpts

Tuesday 9th July 2013 Commons Chamber

[David Rutley (Macclesfield) (Con)]

I was not able to participate in the Public Bill Committee or the parliamentary commission, but I have followed their work from a distance. We must recognise the important progress that has been made over recent weeks and months.

I praise my hon. Friend the Member for Chichester (Mr Tyrie), Chairman of the Treasury Committee and of the parliamentary commission. He has taught me a lot during my time in Parliament. Tim Knox, the director of the Centre for Policy Studies, has said of my hon. Friend that

“he’s quite prepared to argue half the night over whether a comma should be a semi-colon—which is reflective of the seriousness with which he takes his work.”

My hon. Friend is prepared to do a lot more than that. He is prepared to debate and work tirelessly for months on end with colleagues on both sides of the House and with Ministers to move matters forward.

The huge progress that has been made in recent months on this important subject is also a credit to the Minister and his colleagues on the Front Bench. The Government’s response, which was published yesterday, moved the debate forward. On page 22, it summarises the failure that took place at HBOS. I worked at HBOS from 2005 to 2007 and saw at first hand the problems with the federal structure at the bank. I hasten to add that I worked in the general insurance side of the business, which was performing particularly well. It was clear that there was a problem with managing risk across the entire business. It was also clear from my interactions with the Financial Services Authority that it did not have a grip on the regulation of the smaller parts of the business or the business as a whole. It was clear that my business friends in Yorkshire who worked outside the bank recognised that the bank was involved in very racy deals. They kept asking me how the bank could support them. The FSA clearly was not paying sufficient attention to what was going on.

The Bill is vital. It is critical to bringing about the individual accountability that many of us want to see across our financial services sector, with the tough senior persons regime, reversing the burden of proof and criminal sanctions for reckless misconduct. All those steps are vital, as is the ring fence and the attempts to electrify it. They will bring about a meaningful distinction between what goes on in retail banks, which are vital for individuals and small businesses, and more risky investment banking. In my interaction with other banks, such as HBOS and Barclays, it was clear that they had very different cultures and needed to be brought under control. The ring fence will help to do that.

It is important to bring about enhanced competition. I helped to launch Asda’s introduction to financial services, and other retail brands have moved into financial services too. As my hon. Friend the Member for Hexham (Guy Opperman) said, we need new entrants. That will encourage greater competition and help us in our task of building trust in our financial services sector. It is good to see, in recommendation 4.22, that the Government will be initiating an independent study into the feasibility of the costs and benefits of full account portability. Bold, radical steps are required to move things forward and build the trust we want to see in our financial services sector. I commend the work of the parliamentary commission and the Government in taking these steps forward.

[John Mann (Bassetlaw) (Lab)]

A vast amount of hard work has been diligently done for such a puny and inadequate set of proposals. Where does it leave us, if we look at the big picture? There is a debate about the Government’s failure to electrify the ring fence, although as I recall, the financial crisis started with Northern Rock and Lehman Brothers, where the ring fence would have made no difference whatever. What are we trying to address?

We have two banks in state ownership that are still in crisis. Clearly, the Government have no idea what to do with RBS, from who is running it and the Government’s cack-handed handling of Mr Hester’s departure, to what its role should be. Should RBS exist? Should it be broken up? How should it be broken up? Can it be broken up? How could competition emanate from breaking it up? We hear the word competition all the time. I was a signatory to the extremely modest bank account portability amendment that, rightly, was tabled. The structure of banking, however, remains pretty much as was. There is significantly less competition than there was 10 years ago. Building societies have been consolidated and about a third have vanished.

Where is the international level? This was not a British crisis, but today, as a consequence of the British LIBOR scandal, we have lost out to New York, which has played its political hand far more astutely than the Government and has grabbed business from this country. Frankfurt and Paris will be lining up to do the same. We are dealing with international banks, and the Government’s insular look at what should be done, presuming that British solutions will add to British competition, is a misnomer. We face problems with transparency in the UK dependencies, which, unlike any other country, we can influence. They remain totally opaque, specifically in relation to banking and subsidiaries—there is nothing there. On international banking agreements, the Government are hiding even from the modest proposals emanating from Brussels, of all places. This is not going to solve our problems. Competition has not moved forward, and there is no evidence that it will. The Government have an aspiration, but no strategy, for competition, so we remain with none. The problem of oligarchies running investment banking worldwide has not changed either; it remains as was—a fundamental weakness in the banking stranglehold over the rest of the economy—and totally unaddressed.

The fundamental issue that some posed at the beginning will remain the Achilles heel of all politicians and whoever is in government in this country from now on: if there is a further banking crisis and individuals—known as voters—are in a panic over their savings, there is no politician in any Government who would not bail out those accounts. No Government, whatever their colour, whatever the economic situation, would survive grabbing the electorate’s savings.

Most fundamentally, we have failed to create a concept of tiered risk for consumers to give them a choice. It has worked before. The classic example is a simple one, but a real one: the premium bond. When the premium bond was introduced, people knew that it was totally guaranteed; they knew it was not the best way of investing, but they bought them because they were absolutely guaranteed. We do not do that with our savings now. We have not created the options that would let our constituents say, “We’ll put X amount in here, knowing we’ll get a lower return than elsewhere, because the Government will give an absolute guarantee. And we can put Y amount in a middle-risk option, where there are some guarantees to certain levels, and we’ll put Z amount into something with great returns, but explicitly no Government guarantee.”

Our failure to create those options has created a fundamental weakness. I would not even describe that as radical; I would call it a rather conservative, with a small c, and moderate proposal, giving choice, creating markets and trusting people. We have not done that. At some stage, a future Government—not this one or the next one, I hope, or one in our lifetime—will face the dilemma again and will be forced to bail out a bank. There is the danger, however, that it might come more suddenly than that.

[David Rutley]

Does the hon. Gentleman not recognise that there are options for fully guaranteed savings with National Savings & Investment as well as the £85,000 protection? There are those opportunities for people.

[John Mann]

I sit on the Treasury Select Committee; the hon. Gentleman served on it, so we have a modicum more information on these matters, as do other hon. Members, than our constituents. Nothing has changed for them, however. Fundamentally, there has been no segmentation of the market, which is why the new challenger banks are getting no further. Only a tiny, tiny proportion of business is going to them. We have not restructured, even though in RBS and Lloyds TSB we have the perfect opportunity, owing to the crisis, to restructure. Across the world, we see vast numbers of people suffering and Governments of every political persuasion being voted out because of the financial crisis and the decisions they have made. This Government might face the same dilemma. I am not commenting on whether the decisions on the deficit and debt are right or wrong economically, politically or socially—that is a critical debate, but it is a different debate—but the fact that we are in this situation and we are not addressing it for the future in anything but the most micro-management way is part of that weakness.

The Government might want to give themselves plaudits and say, “Well, perhaps we’re doing a little better than the Government of Greece or Spain,” or whichever Government it is. The Americans can slap themselves on the back and say, “Unlike the Brits, we’ve got our act together. We’ve targeted their banks. We’ve portrayed them as the wrongdoers. We’ve managed to shift some of the powers to ourselves,” which is precisely what is going on among the political, banking and business classes in Washington and New York. They are winning that battle.

I will end on this point. This is a world crisis. My research document proves that every one of the top 50 banks in the world, without exception, have been involved in criminality in recent times. That is staggering for any industry. For us to hold that industry together with sticking tape, not even with the most damaged and shattered elements, including those that have had to be nationalised, such as Lloyds TSB—

Financial Services (Banking Reform) Bill

David Rutley Excerpts

Monday 8th July 2013 Commons Chamber

[Cathy Jamieson]

The hon. Gentleman makes an extremely good point. It is perhaps worth remembering that not only did the Parliamentary Commission on Banking Standards make that recommendation, but Andy Haldane supported it when he came before the Treasury Committee. I am sure that the Minister will have something to say on that when he sets out his next set of actions.

New clause 7 relates to protection for whistleblowers. It is important to ensure that workers are protected if they make a disclosure in the “reasonable belief” that misconduct has occurred, is occurring or could occur. The new clause would amend the Employment Rights Act 1996 and impose a duty on managers to inform the bank chairman—or chairwoman, if that is the case—of any report of wrongdoing that qualifies as a “protected disclosure”. This is an updated version of a clause tabled in Committee, and reflects the final report of the parliamentary commission, which in paragraph 788 states:

“A non-executive board member—preferably the Chairman—should be given specific responsibility under the Senior Persons Regime for the effective operation of the firm’s whistleblowing regime. That Board member must be satisfied that there are robust and effective whistleblowing procedures in place and that complaints are dealt with and escalated appropriately. It should be his or her personal responsibility to see that they are.”

In new clause 7 we are attempting to trigger a cultural change in the financial services sector. There is no doubt that a bank employee would wrestle with their conscience before deciding to break ranks. If an honest trader suspects wrongdoing and is considering informing the authorities, there must be protections to mitigate his or her fear of losing their job.

The LIBOR scandal illustrates the importance of making it easier to report wrongdoing. At that time there was a quite a lot of speculation in the press and elsewhere about the accuracy of LIBOR, yet nobody came forward with the evidence. New clause 7 seeks to bolster the maintenance of law and order—I think everyone would generally agree with that—and would make it easier for the regulators and the banks’ compliance teams to do their jobs.

I looked closely at the Government’s response to the commission today, which says:

“The Government recognises the important role that whistleblowing can play in exposing wrongdoing”.

It continues:

“BIS is publishing a ‘call for evidence’ to establish a strong evidence base to help Government better understand the operation of the whistleblowing framework in today’s employment environment”.

It seems that the Government are now linking whistleblowing in the financial services sector with the wider review. We need to be careful about how a code of conduct, support for regulators and the role of regulators—including their interaction with employment tribunals, which is how the report couches this issue in context—are dealt with. Will the Minister say in his response when he anticipates the review being completed and what legislative vehicle would be proposed to implement any recommendations? It was not immediately apparent to me on reading the report that that had been established or thought through. Does he agree that any delay in dealing with the issue would risk putting that change out of sync with some of the other important changes that will be made to banking and the banking culture?

[David Rutley (Macclesfield) (Con)]

I am following the hon. Lady’s argument with interest. Proposed new section 43B(g) of the Employment Rights Act 1996 refers to where

“a breach of regulated activities under FSMA 2000…has been committed…or is likely to be committed.”

So that we can understand the new clause better, how would she determine whether something was “likely” to be committed?

[Cathy Jamieson]

The hon. Gentleman makes a useful and probing point—I wish I had had the opportunity to probe the Government’s proposals in the same way. The point is to look at patterns of behaviour and conduct. The important thing is that this change or anything that the Government introduce should be robust and should stack up. That is why I was particularly keen to know how the Minister sees this issue being taken forward. However, I recognise that there is a wider context, so if he could respond by giving me some assurances on this issue, I would probably be tempted not to press new clause 7 to a vote.

Let me briefly mention new clause 11, which deals with criminal sanctions. New clause 11 was also inspired by the work of the Banking Commission. It would require the Government to bring forward proposals for the new offence of reckless misconduct in the management of a bank covering the people licensed under the senior persons regime and would seek civil recovery of money from people found guilty of the offence. Although that might be controversial in some areas, it is important. I welcome the fact that the Government now seem to be moving on this, and I await the detail with interest. It is vital that bankers are held to account for their actions. That is important not just for any action after a future crisis, but as a deterrent, should any bank executives be tempted to take unnecessary or reckless risks.