The Economy
Debbie Abrahams Excerpts(8 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I will give way in a moment, but let me first make some progress.
Of course, this is the day we vote on the Queen’s Speech, deciding whether the legislative programme it proposes should proceed into law. We were told four weeks ago by the pollsters and pundits that this day would be one of great constitutional drama. Would the party leader who managed to cobble together enough votes in a hung Parliament manage to survive the test of the vote tonight? As always, we are taking nothing for granted, but I am reasonably confident that we will have the votes tonight, because what the pollsters and pundits did not reckon on was the good sense of the British people, who did not want to put at risk everything that has been achieved over the past five years and who want to continue with a long-term economic plan that is working for this country.
Let me say—I mean this sincerely—that it is very good to see the former leader of the Labour party here today. I think that he earns everyone’s respect by coming to the House so soon after the election defeat, and I understand that he wants to take part in the debate. Despite the fierce arguments of the general election, I do not think that anyone ever doubted his personal integrity or the conviction with which he made his arguments. It is good to see him back in the Chamber.
Let me also put on the record my thanks to the former Chief Secretary to the Treasury, the former Member for Inverness, Nairn, Badenoch and Strathspey, who lost his seat at the election, with whom I worked incredibly closely. He gave great public service to this country. Of course, that is not to say that I am sorry to have a Conservative Chief Secretary. It is fantastic to have my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) in that role, along with the new members of the Treasury team.
The measures set out in the Queen’s Speech represent the next stages of our long-term economic plan, because we on the Government side of the House know that the job of repairing the British economy is not yet done, and that the work of preparing our country for the future has only just started.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Does support for hard-working people include sanctioning those who are in work but on low wages and in receipt of tax credits?
Mr Osborne
If the hon. Lady is talking about benefit sanctions, I think that it is perfectly reasonable to ask people who are capable of work to turn up to job interviews and to make sure that they are doing everything possible to look for work. We support them while they are doing that, but the taxpayers of this country expect them to search for work.
The economic situation at the beginning of this Parliament is vastly better than the one we inherited at the start of the last Parliament. Back then, debt was soaring; today, it is projected this year to fall as a share of our national income. Back then, millions were looking for work; today, 2 million new jobs have been created. Back then, we were in the grip of an economic crisis; this week, the latest forecast is that the UK will be the fastest growing of any of the G7 economies—not just in 2014, but now in 2015 as well. That we have come so far in five years is a testament to the effort of the working people of Britain.
Mr Osborne
I absolutely will do that. I remember my visit with my hon. Friend to his constituency to meet some of the small businesses on the high street who depend on the people in this House delivering economic security and stability for this country, and that is what we are determined to do.
The global economy is full of risks at present. We should be redoubling our efforts to prepare Britain for whatever the world throws at us in the coming years, not easing off. The time to fix the roof is when the sun is shining. So in the Budget and in the spending review that follows, we will take the necessary steps to eliminate the deficit and run the surplus required in good times to bring debt sustainably down. That is what we promised in the election, and it is what we aim to deliver in government. I am not going to pretend to the House that these will be easy decisions, but nor will I pretend to the public that we can avoid taking them—we cannot. We have a structural budget deficit—we spend more than we collect in taxes—and that is not going to be fixed by economic growth alone. We have to bring spending down so that our country lives within its means.
As with any challenge, the sooner you get on with it, the better, and that is what we do today. Over the past five years we have brought a culture of good housekeeping to Whitehall. In every year of the previous Parliament—
Mr Osborne
I will make a little progress, if the hon. Lady does not mind. As I say, lots of Members want to get in on this debate later.
In every year of the previous Parliament, Government Departments kept their spending not just within budget but well under budget. Outside key protected areas like the national health service, those budgets have been reduced year on year to more sustainable levels. At the start of this Parliament, it is important that we continue to control spending in the same vein. Two weeks ago, my right hon. Friend the new Chief Secretary asked Government Departments to seek further savings beyond the £13 billion of savings that they are already delivering this year. I can report today that together we have got straight back to the task in hand. We have found a further £4.5 billion of savings that we can make to the Government budget this year, including sensible asset sales. Some £3 billion of these extra savings come from finding more efficiency in Whitehall Departments and from the good housekeeping of coming in under budget. The breakdown per Department is being published by the Treasury today.
There is another component to this: I am today announcing that the Government will begin selling the remaining 30% shareholding we have in Royal Mail. It is the right thing to do for Royal Mail, for the businesses and families who depend on it, and, crucially, for the taxpayer. That business is now thriving after we gave it access to investment from the private sector in the last Parliament. There is no reason we should continue to hold a minority stake. That stake is worth about £1.5 billion at current market prices.
Of course, share prices fluctuate and the final value will depend on market conditions at the point of sale. We will sell our stake only when we can be sure that we are getting value for money, but let us be clear: holding over £1 billion of Royal Mail shares in public hands is not a sensible use of taxpayers’ money. By selling it, we help that important national business to prosper and invest in the future, while we use the money we get to pay down the national debt and pay less interest on that debt as a result. It is a double win for the taxpayer, for we on this side never forget that it is not our money or the Government’s money; it is the money that people work for and pay in taxes, and entrust to us to spend wisely.
Finance (No. 2) Bill
Debbie Abrahams Excerpts(9 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Leslie
The hon. Gentleman must wait for our manifesto in which we shall reveal all those details.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Is my hon. Friend as concerned as I am that there is so little distributional analysis in the Finance Bill, given the past five years in which the poorest in society fared the worst and our concerns about an increase in VAT looming in the not-too-distant future if the Government get back in?
Chris Leslie
My hon. Friend’s point about distributional analysis is a good one. We know that those on lower and middle incomes have been hit particularly hard: people on the lowest incomes do not benefit from many of the changes that the Government have made, and we must consider what data we need.
My point about parliamentary procedure is not just about the political dates of Budgets and so forth; it is also about the time that officials and civil servants have to draft some of the provisions and proposals. I do not understand why it has to be so last minute and by the seat of their pants. It is one thing to exclude one’s political opponents from the reveal moment of the Budget, but surely it would be good to ensure that proper internal arrangement are in place in the Treasury for drafting these arrangements.
The Institute of Chartered Accountants in England and Wales has its concerns:
“we do not think that Parliamentary consideration amounting to only one day is in any way sufficient to consider and pass another significant Finance Bill that runs to 349 pages and contains a considerable amount of controversial legislation.”
An article in today’s Financial Times quoted Heather Self of the law firm Pinsent Masons. She said that the decision to rush through the Finance Bill was
“an abrogation of the parliamentary process…Legislation this complicated should not be going through without parliamentary scrutiny”.
My hon. Friend the Member for Edmonton was right when he talked about Tolley tax handbooks—I know his walls are adorned with the tax code in fine, leather-bound tomes. He will know that when the coalition came to office, there were 17,795 pages in that tax handbook, but by the end of this Parliament that has risen to 21,414 pages. The Minister says that is not a good barometer. I suppose it is good for publishers and perhaps makes my hon. Friend’s library a little more expansive and extensive, but I suspect it makes things more difficult for people to understand and follow. I think that our constituents deserve better and want proper scrutiny of the Finance Bill, and we will try our best to do that. The House should bear in mind the fact that the Bill appeared in the Vote Office yesterday, so it is difficult even for my diligent hon. Friends properly to absorb and assimilate all the provisions and to do justice to the Bill. Nevertheless we will give it a go and try our level best.
Ultimately, the Finance Bill could not disguise the coalition’s failures of the past five years. There is a slow recovery, but it is not being felt far and wide. By the standards and tests that the Government set when they came to office and made their promises in 2010, the Conservatives and Liberal Democrats have failed, particularly on the public finances. They have failed to eliminate the deficit, which should have gone by now. In fact, in the autumn statement 2010 the Chancellor trumpeted that he would bring forward to 2014-15 the year by which the current structural deficit would be eradicated, yet we find ourselves with a £90 billion current budget deficit, which fell by only 5% on the previous year—not exactly the rate we were promised.
There are many other structural issues in the economy. I do not know whether my hon. Friends remember the Chancellor’s promise about the march of the makers, but I am afraid that this country’s exports have not lived up to the £1 trillion target set for 2020; we are already a mere £300 billion off course in achieving that. Before the last election the Chancellor set the litmus test of cherishing our triple A rating, but of course that was downgraded.
One thing in the Finance Bill that supports the Government’s fiscal strategy was the revelation of how extreme the cuts will be to public services over the next three years—twice as deep over the next three years as we have seen for the past five years. In the words of the Office for Budget Responsibility, the “rollercoaster” is about to go over the precipice, and public finances, social care, the police, defence and many other public services will be pushed over the edge of that cliff should the coalition parties Government have a further five years in office.
It is no wonder that when people look at the impact of deep and extreme cuts to what Government Ministers term “non-protected Departments”, and see how deep they will be, they say, “Well that isn’t going to happen; it’s impossible to countenance that they would end up taking 30%, 40% or 50% from some of those Departments.” It is no wonder that people then believe there must be another plan, either for raising taxes or for cutting other services that some assume ought to be protected, in particular the national health service.
We had the debate on VAT, but I find it difficult to take the Prime Minister’s words seriously. These days, he has a habit of shooting from the hip—about whether he is retiring or what his views are for the day—so I am not sure that people will necessarily say, “Oh well, the Prime Minister said he’s not going to do it. That’s that then.” That is sort of what he said before the last general election about having absolutely no plans to raise VAT, but it was only a matter of weeks before he got round to doing it.
Amendment of the Law
Debbie Abrahams Excerpts(9 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Vince Cable
Let me deal with one of the points of righteous indignation that is made about welfare cuts—the point about the so-called bedroom tax. The problem with it is that the idea of relating housing benefit to the size of accommodation did not start under this Government; it was a long-standing policy in relation to people in private rented accommodation. Where we have disagreed with our Conservative colleagues—we have made this explicit—is in saying that the so-called bedroom tax should not apply retrospectively. If people are given an offer of accommodation in the council house sector and they turn it down, they should pay it, but if they do not receive a satisfactory offer, they should not. That is a point of difference. The sheer righteous indignation bears absolutely no relation to the history of this problem.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Secretary of State give way?
Vince Cable
I will take the hon. Lady’s intervention later.
Let me turn to the broader issue of living standards. It is blindingly obvious that in all the western countries that were hit by the financial crisis, there has been a fall in real wages. That has happened everywhere. Countries—including ours—were made poorer, production fell, productivity fell and, although we got more people back into work, real wages fell with it. I am putting this in terms of basic economics. Unless real wages had been kept “sticky”, as Keynes termed it, they were bound to fall, and they have fallen. The alternative was what has happened in France, Spain and Italy, where real wages were maintained, but where there has been mass unemployment as a result, particularly among younger workers. That has not happened here, which is a blessing.
The figure that the Chancellor produced yesterday is highly relevant, because what matters to households is not just wages but people’s take-home pay and disposable income. Disposable income involves not just wages but tax credits and taxation, and families are now better off then when we came to office. That is a result of several interventions, the most crucial of which was lifting the tax threshold. We made the radical, massive change of lifting the income tax threshold from £6,700 to £10,800, and that has brought a great deal of relief at a time of economic crisis to 27 million people. Three million people have been lifted out of tax altogether—mainly women on part-time earnings—and that has benefited workers by the equivalent of £800 a year. That has cushioned working people from the effects of the crisis, and there should be some acknowledgement of that from the Opposition Benches.
Debbie Abrahams
I must challenge the Business Secretary on what he has said about the impact of this Government, which includes the Liberal Democrats and their policies. The Institute for Fiscal Studies clearly states that as a result of tax and spending changes, low-income families, particularly those with children, are proportionately worse off, and incomes have reduced by £1,100. We cannot avoid those facts.
Vince Cable
As I said, the whole of society was hit by the economic crisis, but it is clear that the poorest in society have not been proportionately badly hit, and the people at the top have paid proportionately more. I remind the hon. Lady of what the IFS data said, which was that if we take into account inequality in all its aspects—that includes tax, tax credits and earnings—in income terms Britain is more equal, or as equal now as it was under a Labour Government. Labour Members may need to explain why the economy got into that position when they were in office, but that is what the independent sources tell us.
In addition to the tax allowance, the other key step has been protection of the minimum wage and the Low Pay Commission. I was alarmed by comments made yesterday by the Leader of the Opposition about the minimum wage. I am not one of the people who wants to trash everything that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) did when in office. There were some mistakes but also some good things, not least making the setting of interest rates independent through the central Bank—a very positive step. Supporting science was another positive step, as was the establishment of the Low Pay Commission as a mechanism for deciding what is in the national interest as far as the minimum wage is concerned, and how we balance the perfectly natural wish of working people to see their wages rise with the overall interests of the economy and employment.
What was alarming about the comments of the Leader of the Opposition yesterday was that he now wishes to turn that valuable inheritance into a political football. I think he originally said that he would determine politically that there should be an £8 minimum wage, regardless of the conditions of the economy. Yesterday it was “at least £8”, but why not £8.50, £9 or £10? We could all bid in a Dutch auction on the minimum wage, but it would be ruinous for the economy.
Mr Brian Binley (Northampton South) (Con)
As ever, I am most grateful to you, Mr Deputy Speaker. It has been an honour to serve under you. This will be my last speech in a major debate and I am delighted that you are in the Chair.
Let me continue to be nice by telling the Economic Secretary how much I welcome this Budget for growth. It is based on five years of careful management, the provision of affordable services and the gradual reduction of a massive budget deficit. I pay tribute to my hon. Friend and the Chancellor for creating this opportunity for growth, which I believe many businesses and taxpayers up and down the country will welcome enormously.
Some years ago, I said that my grandmother would have told this place, “You have only two options when you’re in financial difficulties: earn more or spend less.” Listening to the Opposition’s arguments, it seems to me that they believe that, while earning more has some merit, spending less has no merit at all. My grandmother would have said that they were foolish. I would not dare say that in this place, but I know that she would have been pleased with the Budget this Government have produced.
It does no harm to recognise the inheritance this Government were dealt by a Labour Government who had themselves inherited a golden legacy that they frittered away. [Interruption.] It certainly was a golden legacy and was said to be so by pretty much every economist in the country, except, of course, for those affiliated to the Labour party. The Labour Government engineered a growing structural deficit from 2002 onwards. That is totally irrefutable. The deficit they left was not, as has been said, £140 billion; in their last Budget, they left a deficit of £163 billion.
If we consider that 1 billion seconds is 32 and a half years, we may get an idea of what £1 billion looks like. What a massive, massive sum.
Debbie Abrahams
The hon. Gentleman is as charming as ever and I am grateful to him for giving way. I want to correct the record. I am sure he will acknowledge that there was a global economic crisis in 2007-08 and that we reduced the deficit from 47% to 37% of GDP.
Mr Binley
The deficit was reduced because you spent more money—of course that would reduce the deficit.
I thank the hon. Lady for her intervention, because it leads me on to the next part of my speech. You failed to mend the roof while the sun was shining. You failed to recognise the fact that there was a global storm approaching. You massively increased borrowing when every business in the land was doing just the opposite—I can tell you that as a business man. Indeed, you almost broke the country.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I will deal with the closing remarks of the hon. Member for Daventry (Chris Heaton-Harris) later in my speech.
The rhetoric from both parties in the Government has been breathtaking. It certainly has not matched the reality for my constituents in Oldham East and Saddleworth and for constituents across the country. For them, all is not rosy. As we have already heard, most working people on average earnings are £1,600 a year worse off than they were in 2010. According to the Institute for Fiscal Studies, families are on average £1,100 worse off if we take into account tax and benefit changes. That is important to consider. We know that our NHS is at breaking point, with A and E targets and cancer targets all being missed on this Government’s watch. Trying to get access to a GP is a challenge, and frail older people have to fend for themselves after being isolated and left alone because of the £2.7 billion cuts to social care.
The sick and disabled are vilified for needing support from the state, and are made to go through dehumanising assessments and told to take up their bed and walk, as this Government will have cut £24 billion in support for them by 2018. Food banks provide subsistence to people left poverty-stricken through benefits sanctions and from just being in a low-paid job. Young people feel as though they have been thrown on the scrapheap even before their working lives have started. This is just as I remember it in the 1980s, when my first job was with community groups and I worked specifically with unemployed young people. Small businesses struggling with late payments from contractors and cash-flow issues are being driven to the brink, with the Government doing little to help them. This is Britain in the 21st century, the sixth wealthiest country in the world, under this Tory and Liberal Democrat Government.
After what has been said by Government Members crowing about their economic performance, let me take them back to an economy that was growing at the end of 2010. It then flatlined for three years, and, yes, we have seen a little bit of growth, and every bit is welcome, but we know from the International Monetary Fund that it is all going downhill from now, despite what the Government have said. We have had the worst recovery in 100 years, and they have squandered the growth that was given to them at the end of 2010. We have the second lowest level of productivity in the G7 and we are 19th lowest in terms of average productivity—the worst figure since 1992. The total annual value of UK exports decreased by 3.9% in the year ending 2014. As we have heard, the Government are borrowing £219 billion more than they estimated in 2010. How about that for economic incompetence? Just this year, they will be borrowing £91 billion as opposed to the £37 billion they said they would be borrowing.
On unemployment, the jobseeker’s allowance figures look positive, but evidence from eminent academics has shown the effects of benefit sanctions on JSA claimants. One in five JSA claimants will be sanctioned, and 43% of them will leave JSA, 80% without getting a job. What is being reported in official statistics is not reflected in what is really going on. We have had the biggest rise in self-employment in 40 years—an increase of 15%. For many, that is a positive thing and a good way of working, but the average income of self-employed people is £10,000. We have already heard about zero-hours contracts and the levels of under-employment. The picture is not all rosy.
On the inequalities that this Tory and Liberal Democrat Government have presided over, according to the IFS, families on low incomes, particularly families with children, have lost proportionately more of their income than any other group as a result of tax and benefit changes. There is clear evidence that parental income affects a child’s cognitive and social development as well as their health. This Government are condemning another generation before they have even got started. House of Commons Library figures show that after housing costs have been taken into account, 4.1 million children are living in absolute poverty—half a million more than in 2010, a figure that will increase to about 1.1 million by 2020, according to the Institute for Fiscal Studies.
The net effect of the Government’s fiscal policies has been to favour the rich at the expense of the poor. It does not stop at family incomes. Shockingly, as many hon. Members have said, the evidence shows that the link between public spending and life expectancy is not being recognised, and the Government have decided to cut resources allocated to the public sector in the most deprived areas. One can only draw the conclusion that the Chancellor is on some kind of evangelical mission. The Secretary of State for Work and Pensions wants to restrict child benefit to the first two children in a family to instigate what he calls behaviour change, which is code for wanting poor families to have just two children, and perhaps the Chancellor is of a similar mind.
We are already seeing the effects of these cuts in the dire circumstances that people are finding themselves in. We have seen a surge in the number of food banks, with nearly 1 million food parcels delivered last year. In my home town of Oldham, we never had a food bank until 2012. Last year, it delivered meals to 5,000 people, including 1,500 children. We have a level of malnutrition that we have not seen since the ’30s, as well as increases in rickets and scurvy—and this is 2015. After decades of decline, suicide rates are going up, with more than 4,500 male suicides in the UK in 2012—three and half times the figure for women. Again, this is exactly what happened in the 1980s.
At the same time, we have more billionaires per capita than anywhere else in the world. The wealth of five families is equivalent to that of the poorest 20%—in other words, 13 million people—and boardroom pay has rocketed. According to the High Pay Commission, FTSE 100 chief executive officers earn 185 times the salary of their average employee, and that does not reflect performance. As I have said, incomes have fallen by £1,600. In my own town, one in three people are paid below the living wage.
The Government have done nothing about those damaging inequalities. I am sure that some Government Members still believe the discredited theory that inequalities are good for motivation, but that and the theory of trickle-down economics have been disproved. Overwhelming evidence now shows how bad inequality is for the economy and for society as a whole. The IMF has come out in support of Joseph Stiglitz’s analysis that inequality is a drag on growth and can also make growth more volatile. The OECD has also rejected trickle-down economics and said that the resulting inequality has slowed growth, not increased it, through negative effects on human capital. The Equality Trust estimates that the UK loses £39 billion a year as a result of inequalities, and the work of Richard Wilkinson and Kate Pickett has described how reducing the gap between rich and poor can increase not only life expectancy, but social mobility, educational attainment and happiness, while reducing crime.
Andrea Leadsom
I apologise if I misunderstood the right hon. Gentleman’s comment. Nevertheless, Help to Buy will provide support for young people in his constituency looking to get on the housing ladder.
My right hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) gave an interesting insight into her experience as an economics teacher, particularly in respect of the terrible time of our exit from the ERM. I was working in a dealing room then, and like her I have always thought that financial stability is key to our security, our jobs and our future. As she knows, I agree totally with her about the vital importance of interventions to support the mental health of children, mums and babies in the perinatal period, and I thoroughly congratulate her on her work in that area.
On the hon. Member for Easington (Grahame M. Morris), the best I can say is that I agree with my hon. Friend the Member for Daventry (Chris Heaton-Harris). Although I disagree with what the hon. Gentleman said, he is too courteous for me to pick a fight with him about it. I agree with my hon. Friend the Member for Daventry on two other points—first, that Northampton Saints are an excellent rugby team, and secondly, that it is people and businesses across the UK that, through their hard work and aspiration, deserve the credit for our economic recovery.
Finally, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) talked about the biggest increase in self-employment in 40 years, and then somehow suggested it was a bad thing. I hope her aspiring new business owners were listening. In truth, under this Government, the richest 20% of households are contributing in cash terms over four times more than the poorest 20%.
Debbie Abrahams
For clarity, I said that although some people might want to adopt the lifestyle, it had to be recognised that the average salary of people who are self-employed is about £10,000.
Andrea Leadsom
I am glad that the hon. Lady has clarified what she meant.
I would like to tackle head-on the lazy idea held by many Labour Members that when a country grows, it is the Government who do the running. It is not the Government; it is businesses and hard-working individuals.
In this Budget, as in all previous fiscal statements, this Government have demonstrated our pro-business, pro-growth credentials. That means more tax credits for key sectors, whether they be energy-intensive heavy industries or creative industries maintaining Britain’s status as a cultural centre of the world. It means further action to stimulate investment in the North sea through investments and tax cuts, and a long-term strategy for superfast broadband, enabling the next step in the technological revolution.
Yesterday, my right hon. Friend the Chancellor announced that next April we will abolish national insurance altogether for employing a young apprentice. We will be holding a major review of business rates, reflecting the fact that the old system needs to be reviewed so that it works better to support aspiring business owners in our country. He announced the abolition of class 2 national insurance contributions for the self- employed, and the abolition of the annual tax return altogether. I can tell you, Madam Deputy Speaker, that I had phone calls to my office from two constituents, one of whom said that the Government’s Help to Buy ISA will persuade them to vote for me, while the other said that the abolition of the annual tax return will encourage them to do the same. On the basis of my own small opinion poll, this is already making a difference.
Fiscal Responsibility and Fairness
Debbie Abrahams Excerpts(9 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
I agree with my right hon. Friend. The plan I have set out today ensures that we would borrow less than Labour and cut less than the Conservatives, ensuring a fair path for the public finances, which is necessary to deliver in full on our plans to dual the A1—plans that he has championed relentlessly during his time in the House. I am pleased it has been a Liberal Democrat Chief Secretary who has enabled that scheme to be funded.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
This is clearly the Chief Secretary to the Treasury presenting an alternative Liberal Democrat Budget. He obviously did not hear your statement at the beginning, Mr Speaker. To press him on the point my hon. Friend the Member for Nottingham East (Chris Leslie) raised, how will he be voting on Monday, and if he is going to vote for his own alternative Budget, will he be resigning as Chief Secretary to the Treasury?
Danny Alexander
With the greatest respect, I think it was the hon. Lady who was not listening. I made it clear that the policy measures in the Budget were ones that I helped put together, on an equal basis with the Chancellor, and I will be voting in favour of all the Budget resolutions, as I think Labour should. If it wants to oppose income tax cuts for working people and measures to support first-time buyers and savers and motorists, it should tell the British electorate.
Future Government Spending
Debbie Abrahams Excerpts(9 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Anderson
I rarely disagree with my hon. Friend, but I could never bring myself to watch the Tory party conference. However, I heard what they said, and it is quite clear what they would do: they would have to take £7 billion from somewhere, and it will be the public sector. They are committed to going back to the level that things were at in the 1930s, when people in this country were, quite frankly, living like slaves, working in conditions that were abhorrent and going home to houses that were a disgrace. That is why when my party came into government in 1945 we had a massive house building project. That is why we nationalised the coal industry, the rail industry and the steel industry—the Conservatives had let them run into disrepair for decades and did not care a toss about the people who worked in them and lived in conditions that were worse than we could ever imagine.
The Government have not only failed on those levels—they have also failed to collect money because they have made people go out of wealthier jobs into low-paid jobs where they are not paying income tax or national insurance contributions. They have collected £68 billion less in income tax than they projected and lost £27 billion in national insurance contributions. You couldn’t make it up, Mr Deputy Speaker. We can see where they want to be. They want to take us back to the 1930s, when we had a low-paid, low-skill work force who were frightened to stand up to the boss, made to go to work when they did not want to, and made to work for poverty wages. That is exactly what they want to us to go back to—unless, of course, you are one of their friends who happens to be the chairman of a FTSE 100 company, and who last year, on average, had a £4.27 million salary. That is a lot of money, even for the Conservatives. Perhaps it is not as much as some of them earn, but it is a lot of money. The directors in those firms got a 21% pay rise, on average, while at the same time the Government are denying a pay rise of even a meagre 1% to nurses, firefighters and care workers—the people who keep this country running day in, day out, and contribute more in a day than some of these leeches will do in a lifetime.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
My hon. Friend is making a very powerful speech. Is it not also a disgrace that young people are being hammered in so many different directions by this Government and have seen an average 7.8% drop in their income over the past five years?
Mr Anderson
It is an absolute disgrace. One of the saddest things of my life is that I might go out of it—I hope a long time from now—and leave behind a generation who are worse off than I was, for the first time ever. We should hang our heads in shame if that is where we end up with the young people of this country, because it is clearly where we are going. During the past week, I have been approached by a young man who was an apprentice, and who became ill and had to come off work. He was not even allowed to get statutory sick pay. That is how disgraceful things are in this day and age.
Bankers’ Bonuses and the Banking Industry
Debbie Abrahams Excerpts(9 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Andrea Leadsom
That is just another typical Opposition ploy. At that point, the Conservative party was in opposition and the Labour party was in government. It is absolutely unconscionable for the Labour party to suggest that the Opposition of the day should have saved the Labour Government from their own excesses.
Andrea Leadsom
My hon. Friend is quite right. It is extraordinary that Labour Members have the cheek to come to the House and suggest that Conservative Members are somehow responsible.
I want to draw to the House’s attention the very prescient quote from the former Prime Minister when, representing the previous Government, he addressed the City in his Mansion House speech in 2002:
“What you as the City of London have done for financial services, we as a Government aim to do for the economy as a whole.”
And didn’t they just? It is absolutely extraordinary that under the “intensely relaxed” Labour Administration, bankers were rewarded for taking excessive risk, and if they failed, were allowed to get away with it—heads they win, tails the taxpayer loses.
Andrea Leadsom
My hon. Friend is exactly right that the Opposition are simply trying to recycle something as a distraction. I am truly delighted that the motion gives me the opportunity to set out the wide-ranging measures that this Government have taken to sort out the appalling legacy of the Labour party on banks and remuneration. We have taken an extraordinarily wide-ranging set of measures to sort out a mess left, once again, by a Labour Government.
Debbie Abrahams
I am grateful to the hon. Lady for ultimately giving way. Will she remind the House how much more the Government are borrowing now compared with 2010?
Andrea Leadsom
The hon. Lady will know that the Government have taken steps to bring down significantly the amount we are borrowing each year to get our economy on the road to recovery after the disaster caused by the Labour party.
To return to the point of this debate, the real fact is that the public are absolutely right to be furious about the behaviour and misconduct of banks. It still feels as though there are fresh examples every day of the shameful practices that went on in the bad old days. The public will want to know what this Government have done to sort out the mess left by the previous Government.
I can tell the House that, under this Government, we have the toughest remuneration regime of any major financial centre in the world; we are making banks raise their standards, rebuild their reputation and get back to the job they used to do prudently and respectably for centuries; and we are making sure that we never go back to the bad old days of banking.
Autumn Statement
Debbie Abrahams Excerpts(9 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I thank my hon. Friend for what he has said. I should have been extremely disappointed if my announcement of a big improvement in our support for postgraduate students had not been welcomed by the Member of Parliament for Cambridge. He is absolutely right: the lack of financial support available to people doing post-grads is indeed a barrier, which falls particularly on those from low-income backgrounds, and which has been identified as a real problem in a number of reports on social mobility. I am glad that we have been able to work together to bring about this change.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The OBR’s analysis clearly states that borrowing over the forecast period will increase above and beyond what was forecast back in March, predominantly as a result of the reduction in tax receipts. Far from rebalancing the economy, and failing to meet his own deficit reduction targets, the Chancellor is presiding over a low-pay, zero-hours-contract economy in which one in five people—one in three in my constituency—are paid below the living wage. Is it not an insult to the 3 million people on the lowest incomes, and an insult to the value of British fair play, that the Government will be hammering them yet again with a potential cut in tax credits?
Mr Osborne
Today we have increased the personal allowance, which increases the number of low-paid people taken out of income tax to 3.5 million.
It is interesting to look at the caricature of what is happening in this country that Labour Members have tried to present. They said that all the jobs were part-time; it turns out that 85% of them are full-time. They talked about the gender pay gap; of course that remains a challenge, but it is at its lowest level in British history, and has fallen since the period of the last Labour Government. They complained about the abuse of zero-hours contracts; I had to sit there for 13 years listening to Labour Chancellors, and never once did they introduce a reform of zero-hours contracts. That reform is now taking place, and we are ending the abuse that comes with the exclusive contracts.
Ultimately, the people who suffer most when the economy fails—when economic stability is destroyed and unemployment rises—are the poorest people in the country. That, sadly, was their experience under a Labour Government, but under this Government, employment is growing and economic security is returning.
The Economy
Debbie Abrahams Excerpts(9 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Leslie
I was about to give way to my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams).
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
My hon. Friend is making a powerful argument about the appalling economic context that the country faces. Does he agree that the reduction in full-time jobs—there are 670,000 fewer full-time jobs in the economy since 2008—is an indictment of the poor health of the economy under this Government?
Chris Leslie
My hon. Friend is right: the labour market is changing, and not always for the better. The instability, short-term assignments and zero-hours culture that are now much more prevalent add to the insecurity experienced by so many of our constituents.
Priti Patel
The Labour party created even more red tape, regulatory burden and excessive regulation on business, and I commend my hon. Friend and the businesses in her constituency on everything they are doing on job creation.
Britain tumbled down the international league tables under the Labour Government: from 11th to 23rd in the world in terms of our corporate tax regime; out of the top 10 in the global competitiveness league; and out of the top 10 in terms of the ease of starting a business and doing business—we were level pegging with Mongolia on that. Levels of Government spending under Labour were catastrophically higher than we could afford. We had the most over-indebted banks and households, and we were on course for having the biggest budget deficit of any major economy in the world.
The British public are still experiencing the impacts of the Labour Government’s economic policies but, rather than coming to the House to apologise for the economic carnage that they created, Labour Members have the audacity to come here today and ask us why we are not clearing up their mess quickly enough. I think we all know that the past four years have been hard, and we cannot magic up a better standard of living from the economic carnage that we inherited. The only way to deliver for people up and down the country is to put in place a lasting, sustainable and healthy recovery.
Debbie Abrahams
Does the Minister count among the Government’s successes the waste of £2.8 billion on welfare reforms that was identified in a National Audit Office report this afternoon?
Priti Patel
Our welfare reforms have been focused on ensuring that work pays. The Opposition were fully opposed to our reforms to the welfare system, and they still stand against welfare reform today—
Income Tax
Debbie Abrahams Excerpts(9 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Leslie
There are plenty of the Chancellor’s friends, some of them standing opposite, who want that to happen. The Mayor of London, Boris Johnson, says:
“The Government should open up some more blue water, and cut the top rate back to 40p.”
The hon. Member for Altrincham and Sale West (Mr Brady) says that 40p would be his priority. The politics of the 45p cut
“was very straightforward and it really wouldn’t have made any difference to the popularity…of the measure if you went from 50p to 40p rather than 45p.”
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Does my hon. Friend agree that the important point is that, yes, a marginal income is raised through the top rate of tax, but it is also about the principle? We know that the UK has one of the highest levels of income inequality, with the impact that that has on matters such as life expectancy and health. If the Government do not recognise the divisions and hardship that this is creating, it is a sad day.
Taxation of Pensions Bill
Debbie Abrahams Excerpts(9 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Minister explain why there has been a change in terminology from “advice”—which the Chancellor mentioned in his introduction of the proposed measures—to “guidance”, which, unlike advice, legal protections are not associated with?
Mr Gauke
We made it clear, in the documentation that was published at the time of the March Budget, that the legal status of the support we have provided is “guidance”. That means that there is not a recommendation of a specific product; none the less, that support will be hugely helpful for those who will face choices. It is right that the role that we play—or facilitate—is about providing support in the form of guidance, rather than making recommendations of particular products.
I would like to provide Members with an overview of the different parts of the Bill. At Budget 2014, the Chancellor announced that everyone with a defined contribution pension could take it as they wished from age 55, and would no longer be subject to drawdown limits or income tests before being able to take their money flexibly. The current system denies people flexibility at the point of taking their pension. For those with the smallest and largest pension savings, there is the option to take their pension as cash, but for everyone else there are considerable restrictions. They have two main options: purchase an annuity or enter capped drawdown. Capped drawdown limits how much someone can take out each year to an amount calculated by reference to the amount they might have received from an annuity purchased with their fund.
Flexible drawdown already lets those with very high levels of savings to take their money however they want, taxed at their marginal rate, if they can prove that they have a guaranteed pension income for the rest of their life of at least £12,000. The Government have already reduced that from £20,000 to give many more people flexibility, but the first main change provided for in the Bill goes much further, making unlimited drawdown available to anyone with a defined-contribution pension and removing the limits on what can be withdrawn from those funds.
The Bill also ensures that existing drawdown funds can, if the individual wants, be converted to flexi-access drawdown, so that those currently in capped drawdown will be able to benefit too. The aim of the changes is to give all the 320,000 people who retire every year with defined contribution savings greater choice about how to access those savings, regardless of how big their pension pot is. The changes will take effect from 6 April 2015.
Some people think that this change—allowing everyone access to their own hard-earned money—will cause people to spend recklessly what they made sacrifices to save. The Government do not agree. Those who have saved the money over a lifetime should be trusted to make their own decisions about how best to use it to provide themselves with an income in retirement. Through the guidance guarantee, we are making sure that customers have access to impartial guidance on how to make the most of their money.
Mr Gauke
I would like to make a little progress. That brings me to the second main change in the Bill, which is to make annuities more flexible. Current tax legislation caters for two broad categories of retirement income: lifetime annuities and drawdown. As I have set out, we are making drawdown much more flexible. Let me explain how we are doing the same for annuities.
We think annuities will still be the right product for many people, as they provide the valuable security of a guaranteed income for life. The current requirements for a lifetime annuity, however, lead to an inflexible and restrictive product, and there is a clear demand for more flexible ways of getting income from one’s pension pot. We want these reforms to stimulate competition and innovation in the retirement income market. We want providers to innovate and create new products that will more closely reflect the changing needs of their customers. We have consulted extensively with industry on the changes that it would like us to make to enable this kind of innovation. The Bill will deliver those changes by allowing annuities to decrease, and by removing the 10-year guarantee period for guaranteed annuities. That gives significantly more flexibility to providers to offer products that meet individuals’ needs more closely. Those changes will apply to annuities sold after 6 April 2015.
The third major change in the Bill is a new method by which people can access their pension. Currently, people who want to take their pension as cash have to take their whole tax-free lump sum—25% of their fund—and place the other 75% in a drawdown fund. Any money they then draw down is taxed at their marginal rate. The Bill will introduce a new option by giving individuals the flexibility to take one or more lump sums from their pension fund—with 25% of each payment tax-free and 75% taxed at their marginal rate—without having to enter into drawdown. This lump sum is known as an uncrystallised funds pension lump sum, or an UFPLS. [Interruption.] It is perhaps not the most elegant of names, but try doing better with “uncrystallised funds pension lump sum”. These payments can be taken from funds that are uncrystallised—that is, have not yet been accessed. It will be open to schemes to provide this option from 6 April 2015 onwards. This does not change the amount of tax people pay on their pension, but it does provide them with extra flexibility and further choice about when and how to access their savings in a way that suits them.
I want highlight changes that we are making through the Bill to ensure that these reforms, which are intended to give individuals more choices about their income in retirement, are not exploited for tax purposes. If the Government were to take no action, an individual over the age of 55 could divert their salary each year into their pension, take it out immediately and receive 25% of it tax-free, thus avoiding income tax and national insurance contributions on their employment income. That is not the intention of the reforms.
The Government spend a considerable amount a year on pensions tax relief and have a responsibility to ensure that the money is used for genuine pension saving. Under the current system, individuals in flexible drawdown have no annual allowance. They are not entitled to tax relief on anything that they contribute to their pension after they have accessed it flexibly. Extending this rule under the new system would be disproportionate and would disadvantage average savers. We are in an era of much more flexible retirement. An individual might access their pension flexibly and then decide to return to work, or access it while working. They might still want to save into a pension. They might be automatically enrolled into a pension and be subject to a tax charge on the amount contributed. If we kept the current system, there would be a strong incentive to opt out of auto-enrolment.
Instead of having no annual allowance, individuals who access their pensions flexibly will, under the new system, have a lower annual allowance of £10,000, which will apply to their defined contribution savings. This approach allows people the flexibility to contribute to their pension even when they have flexibly accessed their pension rights. At the same time, it ensures that individuals do not use the new flexibilities to avoid paying tax on their current earnings. It will prevent those with the means to divert large sums into pensions from doing so, while allowing the vast majority of individuals to continue to save. The Government have worked very closely with industry to develop this measure, and will continue to do so to ensure that it remains fair and proportionate.
Mr Gauke
The Office for Budget Responsibility will return to the issue of the forecast at the time of the autumn statement. Mr Greenwood’s evidence featured some eye-watering numbers, but they were based on extraordinary assumptions about behaviour. All the changes resulting from the reforms that we have announced since the Budget will be announced in the autumn statement in the usual way. We certainly do not recognise some of the numbers that have been floated in relation to cost, but the numbers have not yet been certified by the OBR, so I cannot give the hon. Gentleman the answer that he seeks at this stage. Of course we have been mindful of the impact on the Exchequer, but we believe that our proposals will not put it at risk of losing substantial sums. As I have said, we are not preventing people over 55 from drawing down part of their pensions while continuing to make contributions, or retaining the flexibility to do so. We might have closed off that option, but we decided not to.
Debbie Abrahams
The Minister is indeed being generous with his time. May I ask when the Treasury is likely to publish its assessment of the risks associated with the delivery of this project? It has obviously identified a number of such risks, and it would be helpful for everyone to see the assessment.
Mr Gauke
A number of elements are involved. We have already estimated the costs resulting from the Budget announcement, and, as is customary, we will update the House about the cost of further changes that we have made in the autumn statement. We need to take account of a number of policy announcements that have been made since the Budget. The information will be available once the numbers have been certified by the Office for Budget Responsibility—that is, at the time of the autumn statement.
The last change that I want to explain is the change that the Government are making to the tax charges on pensions when someone dies. We will table amendments in due course to enact those changes in detail, but the Bill currently provides for certain lump sums to be paid from pension schemes when someone dies under the age of 75. It ensures that when someone dies with money in a drawdown account before reaching the age of 75 and a lump sum is paid from it, that sum can be paid tax-free. It also ensures that if someone dies with a pension after reaching the age of 75, the tax charge on a lump sum paid from it is reduced from 55% to 45%, and it reduces the tax charge when someone over 75 receives a serious ill-health lump sum to 45%.
The Bill makes a number of other changes, which I will summarise briefly. They include the introduction of a permissive statutory override, which will allow schemes to make the types of payments set out in this Bill without the need to change their scheme rules; provisions to ensure that the new system is reflected in the rules governing overseas schemes involving UK tax-relieved funds; allowing payments from guaranteed annuities to be paid to beneficiaries as a lump sum if they are under £30,000; and measures to ensure that people cannot gain an unintended tax advantage by becoming temporarily non-resident.
Our pension reforms have been extensive and fundamental. We have taken steps to provide a solid foundation for private saving by reforming the state support that is on offer and introducing automatic enrolment. However, it is also vital to give people an informed choice, and the Bill introduces welcome changes to ensure that that happens. It makes the tax system fairer by ensuring that people have more choice in regard to how they access their savings, while also preventing people from exploiting the new flexibility in order to gain unintended tax advantages. At the heart of it are three key principles: responsibility, fairness, and individual choice. I commend it to the House.
Debbie Abrahams
Is my hon. Friend concerned about the question of the capacity to deliver the advice that the guidance guarantee is meant to supply? According to evidence that the Pension Schemes Bill Committee took last week, the figure is less than 25%. It is not just that poor advice might be given; there may be none at all.
Cathy Jamieson
My hon. Friend makes an important point, and I read with interest the transcript of the Committee’s evidence session. People need good-quality guidance to help them make the right choices. We must guard against mis-selling, for example—we cannot afford a repeat of the payment protection insurance scandal. We must prevent people from falling victim to exploitation and illegality. We know that pension liberation fraud has already endangered millions of pounds in savings, affecting many people. That is the reason why I am concerned about the way the Government have handled these reforms, which to some seem a bit rushed and haphazard.