Finance (No. 2) Bill

Fiona O'Donnell Excerpts

Wednesday 25th March 2015 Commons Chamber

[Mr Gauke]

My hon. Friend makes a good point. I will come back to that later.

Our long-term economic plan has delivered economic growth and record levels of employment, and it has put this country on a sustainable economic footing. Specifically on VAT, we have maintained the VAT registration threshold, which is now £82,000—the highest in the EU. That is of significant benefit to small businesses right across the country. While the bulk of the deficit reduction has come from spending, we chose to increase VAT from 2011. If it is necessary to raise large sums of money, as it clearly was in 2010 when we saw the structural deficit deteriorate—at least, the assessment made by the previous Government, and then by the independent OBR, showed a significant deterioration—then it is necessary to raise one of the bigger taxes.

Happily, we are no longer in that situation under the plans put forward by the Conservative party. I am afraid that Labour Members’ plans—not engaging in reducing the welfare budget and not committing themselves to controlling departmental spending in the way we would—mean that they will need to find a substantial tax increase. A Labour Government in 2010 would have put up the jobs tax—a different choice from ours. In those circumstances, it is hard to believe that we would have 1.9 million more people in work today than we had in 2010.

[Fiona O’Donnell (East Lothian) (Lab)]

If the Conservatives’ plan was so brilliant, will the Minister explain why, even at the height of the global crash in the UK, under the Labour Government we did not lose our triple A credit rating, but on his watch we did?

[Mr Gauke]

We have retained the confidence of the markets, and we have retained very low long-term interest rates. When we came to power, we were on a par with the likes of Spain and Italy; now, we are seen very much as a safe haven. The UK’s fiscal credibility has been maintained, and it would not have been had we stuck to Labour’s plans, even with a significant increase in the jobs tax.

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[Shabana Mahmood]

My hon. Friend is absolutely right. We have been debating whether VAT will go up, but new clause 1 is pretty innocuous. It calls only for a review and an assessment of the impact the rise in VAT has had on living standards. If the Minister wanted us to believe what the Prime Minister said today in Prime Minister’s questions—that he is ruling out a rise in VAT—then what is the problem? Adopt the new clause, add it to the Bill and let us have the assessment. He would be able to show how VAT has had an impact and why the Conservatives are doing such a good job, if they are elected again, in not letting it go up.

[Fiona O'Donnell]

Given the lack of a response from Government Members, may I suggest that seeing the impact of the increase in VAT written down might make it harder for the Tories and the Liberal Democrats to break their promise the second time around?

[Shabana Mahmood]

My hon. Friend is absolutely right. That is the only conclusion we can draw from what the Minister and the Prime Minister have been saying today. If the Minister really wanted to back up the Prime Minister’s claims, and to give us a hint that he might be believed, he should have just accepted our new clause. It is straightforward, and adding it to the Bill would shine some light on the impact of VAT. We are very clear that we will not raise VAT. It may be that the Government do not want the facts out in the public domain because they plan to do so.

[Shabana Mahmood]

I am going to finish now, because I want to give time to everybody else who wishes to speak in the debate.

We all know what is coming if the Conservatives are elected at the next general election: VAT will go up. That is what their record tells us and that is what their plans require. If the Minister wants to be even a little bit believable—even 1% believable—he should at the very least accept new clause 1 and set the cat among the pigeons, but I do not think he will take that opportunity today.

[Fiona O’Donnell]

It is pleasure to speak in this debate—I hope it will have been worth the wait—and to serve under your chairmanship, Mr Hood. I hope that we both have the opportunity to repeat the experience after 7 May.

I rise to support this excellent improvement to the Bill proposed by my hon. Friends on the Front Bench, because I would like to better understand the impact of the VAT increase in my constituency. The Tory long-term economic plan is a marketing con and a rebranding of a five-year failed economic plan—five years of broken promises on borrowing, the deficit and VAT. I do not know if Government Members have been watching a new programme—on ITV down here, but on STV in my constituency—in which hypnosis is used to shift people’s perception of reality. I am not sure if that is what they are doing, although there does not seem to be anyone asleep in the Chamber. We all seem to be wide awake—certainly Labour Members are wide awake to the impact of the Government’s failure to deliver on their economic promises. Simply saying, “We’ll now call it a long-term economic plan, because it has not quite worked out in the short term”, is not going to fool anyone.

On the increase in VAT, I remember meeting my local chamber of commerce. In East Lothian, we do not have large-scale manufacturing or large employers, apart from in the public sector, so the private sector is largely made up of small and medium-sized enterprises. When I asked them how they were coping with the changes in the economy they said that the single-biggest factor for them was the VAT increase. It had done the most damage to their businesses. Other Members have spoken about its impact on the poorest in our communities, but in East Lothian it has also had an adverse impact on entrepreneurs and businesses—the people who should be creating the jobs that could eradicate unemployment in my constituency.

[David Wright]

As my hon. Friend will have noted, the new clause states that the Chancellor should produce a report within three months of the passing of the Act. I suspect that the Treasury already have these figures and could probably move more quickly. If her point about businesses is right and businesses are complaining to Members, they must also be feeding this information back to the Treasury, so I suspect that it already has these figures and could publish the report any time it wanted.

[Fiona O’Donnell]

My hon. Friend has been doing this job much longer than me, so I suppose he has earned the right to be more cynical. I am still flush with the newness of this change of role in my life, and I would like to think that that was not the Government’s intention, but I shall bow to his longer service in this place and more expert analysis.

It was interesting to hear the Financial Secretary speak about the role that VAT had played in the Government’s short-term failed economic plan over the last five years. He talked about the mess the previous Labour Government had left, but the economy was growing when we left office, and, as other hon. Members have said, part of the reason it reversed was the increase in VAT, which stifled confidence and the spending power of many in our communities. I would also like to hear from a Government Member whether a great deal of the deficit resulted from the decision by the then Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling), to bail out the banks. Would Government Members have bailed out the banks, or do they think we should have left them to fail? Is anyone going to jump up? Anyone? No, they are all hypnotised, it would appear, and unable to respond. Bailing out the banks was the responsible thing to do. It might have seemed unfair, but it was important to people in my constituency that when they went to the ATMs the next day they could still draw out their wages.

The Financial Secretary talked about the Government’s sustained economic growth agenda. I do not remember sustained economic growth following the increase in VAT. I seem to remember the worst recession that this country has ever had, following that intervention by the Government. That has hurt people in my communities and, I am sure, in communities right across the country.

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[Sheila Gilmore]

Yes, it is gender-made law. We will all have received a considerable number of e-mails about that recently, and I am sure that the campaigners would be pleased to hear the Minister commit at least to reviewing the situation.

[Fiona O'Donnell]

On that issue, growing a beard is an option for a man, but being unhygienic is not an option for a woman. My local food bank is increasingly having to offer women sanitary products because they simply cannot afford them.

[Sheila Gilmore]

That is a very interesting piece of information, and it is something that people should bear in mind—

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[Fiona O'Donnell]

The Chancellor fought incredibly hard in the EU to protect bankers bonuses, so can the Minister tell us what efforts the Government have made to have that rule changed?

[Mr Gauke]

This has been a long-standing issue. The experience of trying to bring in new zero rates has been very difficult. If an opportunity arose, any future Government would want to pursue that.

Let me make a couple of points. We need to make progress on a number of items of business this afternoon. On living standards, this Government have taken many steps to help with living standards in difficult circumstances, such as the increase in the personal allowance, the freezing of fuel duty and the freezing of council tax. With reference to the impact on small businesses, this Government have a proud record of helping small businesses in the current difficult circumstances, not least by introducing the employment allowance, which is a cut in the jobs tax, and introducing an exemption for under 21s starting in April, which is a cut in the jobs tax. The following year, there will be no jobs tax for apprentices under the age of 25. We have a record of reducing the jobs tax. That is not the position of Labour.

My party has set out how we will reduce the deficit in terms of departmental spending, welfare and tax evasion and tax avoidance. Our plans are clear. The same is not the case with the Opposition. There is a black hole in their finances. As a consequence, the risk of a big increase in tax from the Opposition is clear. Their tax of choice is employers national insurance contributions. That is the one that the British public should be frightened of. The Leader of the Opposition refused to rule it out earlier. I understand that a panicky press release was issued this afternoon, but the British public know very clearly what will happen under a Labour Government—borrowing and taxes will go up. Consequently, I urge the British people not to allow that to happen, and I urge the Committee to reject new clause 1 today.

Question put and agreed to.

Clause 66 accordingly ordered to stand part of the Bill.

Clause 67 ordered to stand part of the Bill.

New Clause 1

Report on impact of value added tax

(1) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the impact of the increase in the standard rate of VAT which took effect from 4 January 2011.

(2) The report must estimate the impact of the increase in the standard rate of value added tax on—

(a) living standards;

(b) small businesses;

(c) the fairness of the taxation system; and

(d) economic growth.—(Shabana Mahmood.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

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[Mr Gauke]

That is a very good point, which leads me to the two quotations that I was about to give. Paul Johnson, the head of the IFS, said in a paper that was published on 27 January 2014:

“The best available estimate of what reversing the cut would raise is therefore about £100 million too.”

He also said that

“the best evidence we have still suggests that raising the top rate of tax would raise little revenue and make, at best, a marginal contribution to reducing the budget deficit an incoming government would face after the next election.”

[Fiona O’Donnell]

rose—

[Ian Murray]

rose—

[Mr Gauke]

I am spoilt for choice, but ladies first.

[Fiona O’Donnell]

I thank the Minister for his generosity in giving way again. The Institute for Fiscal Studies has said that the Government’s plans for tax cuts by 2020 would cost £7.2 billion. Can he tell us where that money would come from?

[Mr Gauke]

We have a record of increasing the personal allowance. This is a very good time to make that point, as we are debating, among other things, clauses 1 to 5, under which the personal allowance will move up to £11,000 during the next few years. We have a record of being able to deliver big increases in the allowance, and that is what we will do.

Let me now press on. The economic recovery is well under way, and last year Britain grew faster than any other major advanced economy in the world. The Government will not consider any action that would put the United Kingdom’s recovery at risk. While the additional rate has been reduced to ensure that the UK remains internationally competitive, the Government’s policy is to repeatedly increase the tax contribution of the wealthy. The share of income tax paid by the top 1% of taxpayers is projected to rise from 25.1% in 2010-11 to 27.3% in 2014-15, which means that they are expected to pay a greater share of income tax in 2014-15 than in any year under the last Government.

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[Shabana Mahmood]

This might be the one time during a Finance Bill debate when the hon. Gentleman and I have been in complete agreement. The uncertainty caused by the Conservative party’s positioning over Europe and the Prime Minister giving in to the needs of his party, rather than the national interest, have caused a huge amount of uncertainty. In every conversation that I have had with businesses ever since the Prime Minister made his announcement, that has been the No. 1 issue that they have raised when talking about their future in our country, their future ability to invest in our country, and their future ability to employ more people in our country. It has caused a huge amount of consternation and uncertainty, and the Conservative part of the coalition has been wrong to put its party interest ahead of the national interest.

Our amendment seeks to put flesh on the bones of what is happening to corporation tax by assessing the impact on and the benefit to smaller companies with 50 or fewer employees, which make up the vast majority of private companies in our country. At a time when there are still difficult financial choices to make and a relatively limited number of ways to raise revenue and help support businesses to grow, the evidence suggests that now is the time to give much more support to smaller businesses, and to prioritise smaller businesses for some change in their circumstances, ahead of larger businesses, which have, with the support of all parts of the House, fared pretty well when it comes to cuts to the headline rate of corporation tax.

There is general agreement that small and medium-sized enterprises are the engine of growth in our country, employing more than half the private sector work force and contributing to 50% of UK GDP, but times remain tough and they face wide-ranging challenges. They struggle with high energy costs that do not seem to be getting much better despite wholesale price cuts of 20% in the past year, and with late payments and charges. According to the Government’s own figures, 44% of SMEs had a problem with late payments last year, with the average small business owed over £30,000—an astonishingly high figure.

[Fiona O’Donnell]

Does my hon. Friend agree that it is important that we assess what the larger corporations do with their extra income as compared with small businesses? Small businesses in my constituency are more likely to create jobs, while larger companies are more likely to give the money to their shareholders.

[Shabana Mahmood]

My hon. Friend makes an important and interesting point. This is not only about how we how we make choices that prioritise help for those who particularly need it—my case is that SMEs need particular help with business rates—but the impact of the choices we are making and whether they are leading to the change that we hope to see. My case—I know she will agree—is that additional support for SMEs will yield greater gains for UK plc.

This is not about pitting one type of business against another. Government Members have tried to argue that the rise in corporation tax from 20% to 21% that we advocate is an anti-business move, but every single penny of the money from that change will be spent on SMEs, and I defy them to try to imply that they are not true businesses.

[Fiona O'Donnell]

rose—

[Shabana Mahmood]

If my hon. Friend wants to intervene, I will give way again.

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[Fiona O’Donnell]

I am grateful to my hon. Friend; I was enjoying her contribution so much that I was going to desist. Does she agree that in the Consumer Rights Bill the Government missed an opportunity to give small businesses consumer rights, and that is often leaving them open to abuses by larger organisations?

[Shabana Mahmood]

My hon. Friend is right. I am glad that she has put on record the interplay between the Consumer Rights Bill and small businesses. That was a missed opportunity. The Government should have taken the opportunities available to them during the passage of that Bill to offer a further boost to these struggling businesses—all 5.1 million of them. The vast majority of businesses in our country could have been supported.

Small businesses struggle not only with high energy costs, late payments and charges, but with access to finance. Every time we discuss these issues, the problem of access to finance comes up. I am afraid that the Government have failed to get a grip on this. Since 2010, lending has fallen by a colossal £56 billion. Even in the most recent quarter, net lending to small business fell by a further £1 billion. Research has shown that some 85% of small businesses are locked into the big five banks alone. It has also shown that most SMEs will approach only the larger banks when looking for finance, and that even then the rejection rate is about 50%.

Then there is the pressing issue of business rates. Business rates are levied on the estimated market rental cost of most non-residential properties, and currently based on 2008 rental values. In 2012-13, they raised £26.1 billion. Relief on business rates exists for low-value properties—those with a rateable value of below £6,000—which are subject to a 100% discount. Since April 2013, local authorities in England have been able to retain between a quarter and a half of the rates raised from new developments.

For many small businesses, business rates are a significant overhead that they need to factor in. More than one in 10 small businesses say that they spend more on business rates than on their rent. The only choice for many of those shops, workshops, start-ups and others that pay business rates is to pass the costs of the rates on to their customers.

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[Fiona O'Donnell]

It is an honour to intervene in what might be the hon. Gentleman’s last speech in this place. Has he considered the impact on the rural economy, which suffered particularly harshly during the recession? The recovery there is very fragile and corporation tax cuts will not help rural communities. Does he not think that this could be the wrong cause?

[Ian Swales]

The economy of the country is an ecosystem. No company exists in isolation and each relates to other companies. One measure that we are not talking about this afternoon is the cut in fuel duty, which is enormously helpful to rural citizens and rural companies, so the Government have taken some steps, although that is probably not relevant to this debate.

Of course, we expect people to pay their share of corporation tax and to do it properly. I remember the head of the CBI saying towards the end of 2013 that he was confused about what Parliament wanted because there was so much noise about tax avoidance. It is not very confusing at all: we want businesses to account for their operations in the UK properly and to pay tax on the money they make in the UK. I do not think that that is complicated, but some businesses appear to think that it is.

I welcome the successive measures that the Government have taken on tax avoidance. They are not just about individual avoidance but about corporate avoidance, too. The Bill contains many provisions, but I shall mention just three: it stops contrived arrangements on carried forward tax reliefs; it restructures bank loss relief; and it puts limits on research and development tax credits to deal with certain items. Once again, the Government are looking in great detail at how companies sort out their tax and picking up anything that looks anomalous. I welcome that.

We can go a step further. Both the Chancellor and the Chief Secretary to the Treasury said last week that we are now consulting on new criminal measures to deal with companies that advise on or enable tax evasion. I am choosing my words carefully. Aggressive tax avoidance, which we often hear about, is more of a grey term, but tax evasion is very clear. If a company advises people on how to evade tax or enables that through the provision of accounts or processes, it is not just the person evading the tax who is criminal. We want those who help—I think aid and abet is the legal term—to be in the dock, too. That will further help to change the climate and the number of prosecutions necessary will be much less than the amount of activity that the provision prevents just by existing.

I welcome the consultation that has started, which is yet another step that would be helpful. We are talking about corporation tax and it is relevant to mention the diverted profits tax. As we know, a lot of corporations divert their profits or do not account properly for their operations in the UK. The diverted profits tax is a good step forward. It is quite limited in scope, but it will help to put the initial stakes in the ground for how we want to deal with things in the future.

There is more to do. I was pleased to hear the Minister talk in his opening remarks about the need to look further at internet companies, because we all know that they can position themselves anywhere. It is quite wrong to assume that the address of the server is where the business is. It is really where the customer is. In fact, the HMRC small print already says that, but it is quite difficult to implement. There is a lot more to be done for internet companies, not least because they are competing against bricks-and-mortar companies, particularly the small businesses that the shadow Minister has been very vocal on and quick to talk about. That is another step that needs to be taken.

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[Sheila Gilmore]

It is a great pleasure to follow the hon. Member for Redcar (Ian Swales), because we have served together on a number of Finance Bill Committees during the past five years. The debates on the details of a Finance Bill in Public Bill Committee are often better than those on the parts of the Bill taken on the Floor of the House. The theory is that the debates on the more important and bigger parts of the Bill are taken in the Chamber and then the Bill goes upstairs, but the Public Bill Committee often allows us to have quite fruitful debates on many of the issues.

One thing that has been very clear during this Government—perhaps this has always been the case, but it seems to be growing—is that all the political parties are falling over themselves to talk about the importance of small and medium-sized businesses, and we are all the friends of small business. Small businesses are probably very pleased to hear politicians talk so much about them, but then the issue becomes one of whether it is talk or action. It is very easy to praise small businesses, but such businesses, especially new ones, sometimes feel that the system is set against them.

One new business in my constituency involved two young women who set up a fitness studio. They went into premises on what was effectively a redevelopment area after our old hospital had been relocated. Largely because of the financial crash and the recession, the whole redevelopment took longer than expected, so the population to support new businesses had not arrived at the expected rate. Although they got a rent holiday for the first 18 months from the developer who was renting them their premises, which was welcome, they were struggling with business rates. Oddly, even though my local council said that it wanted to encourage economic development and had particularly encouraged the redevelopment of that site, it was not particularly forthcoming with help for a new business.

Those young women were not in the region of having to worry about corporation tax—that was not where their business was. They had to worry about the rates. It was touch and go, but I was pleased to see recently that they are still there and have managed to overcome their initial difficulties. Some of the other redevelopment is beginning to happen, so I hope that they will continue to be successful. However, we do not always join the dots either locally or nationally. Things such as rates are essential for a lot of small businesses, and we have to support such businesses to the greatest extent that we can.

I have some sympathy with the hon. Gentleman in his points about business rates being retained locally. We have to work through the conflict between that and redistribution to ensure that different areas of the country are assisted in developing. When I was on the council in Edinburgh, we often raised the issue. It was and still is an expanding city, and it generates a lot of business. We have big events that generate worldwide attention, and a lot of businesses feel that they bear the cost of all that without necessarily seeing the rates coming back to the city. It is all very well to say that we get rates in because we have events such as the festival and big tourist attractions, but sometimes it feels that the rates are not coming back. I understand the tension between that and looking at the region or country as a whole and trying to build wealth. It is not easy, but we have to incentivise businesses as far as possible to feel that keeping on growing is to their advantage as well as to wider advantage.

Politicians and political parties must not just pay lip service to the importance of small business. We must do specific things to assist, and that is what amendment 2, moved by my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood), is intended to do.

The hon. Member for Redcar probably has a different view of economics from mine, but he appeared to be of the view that if a company is making a profit, it will be ploughing it back in the right directions. I do not think that is necessarily always the case. Big businesses in particular should make a good contribution to our society, and we have to ensure that they do. I urge the House to support the amendment.

[Fiona O’Donnell]

It is a pleasure to see you back in the Chair, Mr Hood.

I wish to talk particularly about the rural economy and the opportunities that the Government might be missing, given the importance of small and medium-sized enterprises to rural economies. Given that this may be my last contribution in this Parliament, I also want to reflect briefly on the political situation in Scotland.

We have had more than one eclipse in Scotland in recent weeks. It seems to be a daily occurrence that Alex Salmond’s moon blocks out Nicola Sturgeon’s sun. At one time, the current leader of the Scottish National party—people might easily be confused as to who that is these days, but I remind them that it is Nicola Sturgeon—did a U-turn on the SNP’s proposal in its White Paper “Scotland’s Future” to reduce corporation tax by 3%. I welcome that, because I do not think it would have been a progressive move or have provided the right environment for the stability, job creation, employment rights and pay and conditions that we want in a fair, modern and successful Scotland. The Minister may wish to reflect on that and the debate that went on around the referendum, because the measure was not popular with working people or businesses—certainly not with SMEs that would not have seen any benefit.

The Financial Secretary said that he does not want to do anything to risk the recovery, but I urge him to think about what more his Government can do to aid recovery in rural areas. Most of the conversation and discourse I have heard from Government Members—for example in the Enterprise and Regulatory Reform Bill Committee—was about employment rights. The Minister seemed to think that the way to help small businesses was to erode workers’ rights, but I think that has the opposite effect because it can be more difficult for them to recruit staff.

Much as I admire the beautiful city of Edinburgh, our capital, I am concerned that so many people from my rural constituency commute there for work. At a time when the population of East Lothian is set to grow at the fastest rate of anywhere in Scotland, with 10,000 more homes, we need jobs in our own communities. We must look at the impact that the Budget will have on SMEs with 50 or more employees, and we are asking the Government to pause and reflect on what that impact might be.

We are losing many skills in local, rural and remote economies, especially in the construction industry—that relates to the point raised by my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) about difficulties with lending. Small construction firms are finding it very difficult to access lending, which means that they are disadvantaged when it comes to procurement contracts. If they take on small housing developments in the community, the people working on the construction sites will often be local young men and women who are benefiting from an apprenticeship and learning skills, and they will be spending money in that local community. The healthy cycle of the rural economy is thus given new impetus and energy. Will the Minister at least reflect on that?

When small businesses fail, it does not make the headlines in the same way as when a large manufacturing company announces job losses. The news about Longannet, which is across the water from my constituency and where many of my constituents are employed, is deeply concerning. When a small business fails, it does not make the headlines in the same way, but for the rural economy and community it can be devastating. The village where I live in East Lothian, Pencaitland, has two village shops and a pub, and the thought that any of those could fold at any time would have a devastating impact on our community. At that point, community cohesion goes and the place becomes just a dormitory, somewhere people go to lay down their head at night, rather than the vibrant community we want.

We have heard much about devolution during this Parliament. When it comes to how we support and drive growth in the SME sector, we need to trust people at local authority and community level to make decisions about how businesses are supported, how they grow and create jobs and wealth, and how they provide sustainability. We must trust the people who know the area and the skill requirements to make those decisions. Talking about who gets to vote on what Bill does not have the same impact; it does not empower. It may take power away from individual MPs, but it does not empower communities, which is what devolution should be about.

I ask the Financial Secretary to consider the intervention I made on my hon. Friend the Member for Birmingham, Ladywood who spoke from the Opposition Front Bench. What evidence do the Government have that cutting corporation tax will create more jobs than supporting SMEs, particularly in the rural context?

I am very grateful to Members who have been sitting patiently and silently for allowing me to make this pitch on behalf of the rural economy. I look forward to hearing the Minister’s comments.

Finance (No. 2) Bill

Fiona O'Donnell Excerpts

Wednesday 25th March 2015 Commons Chamber

[Chris Leslie]

The retail sector is edging towards greater and greater insecurity, as companies feel that the only way to make that extra margin is by eroding standards of contract security for many of their work force. In that context, I have to reiterate the position of those of us on the Opposition Benches: someone who works regular hours deserves a regular contract. That is why we intend to abolish exploitative zero-hours contracts.

[Fiona O’Donnell (East Lothian) (Lab)]

Following on from the previous intervention, in Scotland we are seeing an abuse of apprenticeship payments to young people in the retail sector. There are a lot skills involved in working in retail, but to call three months working in a shop an apprenticeship undervalues them. That does, however, help the Scottish National party to massage the figures.

[Chris Leslie]

My hon. Friend should bear that in mind when we hear Ministers trumpeting their apprenticeship numbers in aggregate, because there is always a story behind them. We need genuine apprenticeships to help the next generation obtain skills and career assistance, rather than what has been happening: the re-badging of many apprenticeship programmes, existing training courses and other arrangements that have been rebranded to allow tax support for applications for apprenticeships.

The Bill is not just divisive and unfair but a missed opportunity. There are several omissions. It is not just that the Chancellor could barely drag from his lips those three little letters, NHS, which I think got one mention in the Budget—Agincourt got twice as many. We should have had action to help the next generation, for example by reducing tuition fees to tackle the burden of debt facing students. Students graduate typically with £44,000 of debt, which is a burden not just on those individuals but on the national finances. Government Members should be very scared by some of the projections. Owing to their inability to collect tuition fees from some students, barely half of all tuition fees will be collected, which is adding to the national debt in the hundreds of billions of pounds. That needs to be tackled.

Tax Avoidance (HSBC)

Fiona O'Donnell Excerpts

Monday 9th February 2015 Commons Chamber

[Mr Gauke]

My hon. Friend has raised an important point. There was a problem with the way in which our system was working, and, as my hon. Friend says, the fact that cleaners paid a higher rate of tax than some people in private equity demonstrates how the last Government went awry.

[Fiona O’Donnell (East Lothian) (Lab)]

The Minister spoke about the leadership that the Prime Minister had shown on the issue of tax and transparency, but let us not forget that this was the same Prime Minister who said that he was relaxed about publishing his own tax return, and we are still waiting. Can the Minister update the House on his progress, and success, in the Crown dependencies and overseas territories? How many of them have committed themselves to, or ruled out, a public register?

[Mr Gauke]

We are still putting pressure on overseas territories and Crown dependencies, but all of them have signed up to the automatic exchange of information, which is a substantial breakthrough. I do not agree with the idea of putting all of them on a blacklist when France, Germany and the United States—indeed, 33 out of 34 OECD countries—have still not signed up to a public register. They are signed up, by and large, to a central register, but not yet to publishing it.

Oral Answers to Questions

Fiona O'Donnell Excerpts

Tuesday 9th December 2014 Commons Chamber

[Mr Gauke]

By April this year the Government’s measures, including increases in the personal allowance for those born after 5 April 1948, are estimated to have taken about 3.4 million individuals out of the income tax system altogether. Some 248,000 of these individuals live in the east midlands region, which of course includes the constituency of Kettering in Northamptonshire.

[Fiona O'Donnell (East Lothian) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

[The Chief Secretary to the Treasury (Danny Alexander)]

The core purpose of the Treasury is to ensure economic stability, promote growth and employment, reform the banking system and restore sanity to the public finances.

[Fiona O'Donnell]

On Wednesday I asked the Chancellor about public registers of beneficial ownership in the Crown dependencies and overseas territories. He replied that

“they are all consulting, right now, on the creation of these registries.”—[Official Report, 3 December 2014; Vol. 589, c. 328.]

The fact is that two are not consulting and the others have all finished their consultations, although none has published its submissions or its policies. Will the Chief Secretary now set the record straight?

[Danny Alexander]

I will set the record straight. The record shows that under the previous Labour Government the Crown dependencies and these bodies did not make any progress on registers of beneficial ownership. Progress is being substantially made now because of the lead this Government showed at the G8. By the way, these same places have also now agreed to the automatic exchange of tax information, to make sure that for the first time—this is something the Government of the hon. Lady’s party never did—we can get tax from people who are trying to hide it in these jurisdictions.

Autumn Statement

Fiona O'Donnell Excerpts

Wednesday 3rd December 2014 Commons Chamber

[Mr Osborne]

Like my right hon. Friend, I too have the challenge of HS2 going through my constituency, although of course she is further along in the process because her constituency is affected by the first phase of the route. I know, from my experience and from talking to her, that this has a big impact on communities. We have tried to make the compensation generous and to make the process for accessing it easier. It is certainly a lot easier than when I, as a constituency MP, had to deal with the compensation relating to the second runway at Manchester airport. Of course, I will look at any ideas that she puts forward, but any measure has to be affordable. I should also point out that in today’s document we set out further reforms that we intend to make to the compulsory purchase regime.

[Fiona O’Donnell (East Lothian) (Lab)]

The Chancellor talked tough on tax evasion today, but so far none of the Crown dependencies or overseas territories has committed to a public register of beneficial ownership. I know that my right hon. Friend the shadow Chancellor will act tough on this issue. Why will not this Chancellor and his Government make some progress on it?

[Mr Osborne]

Frankly, the hon. Lady is not being fair to the Government or to those territories and dependencies. There had been no progress at all when we came into office. They have all now committed to the automatic exchange of information; they all attended the conference in Berlin where they made the international commitment to do that; and they are all consulting, right now, on the creation of these registries. They are doing that because my right hon. Friend the Prime Minister put this issue centre stage on the G8 agenda in Lough Erne.

Consumer Rights Bill

Fiona O'Donnell Excerpts

Tuesday 13th May 2014 Commons Chamber

[Jenny Willott]

If the hon. Gentleman will bear with me, I will come to those matters later in my speech and address the points that he raised.

[Fiona O’Donnell (East Lothian) (Lab)]

With an increasing number of consumers shopping online, will online traders have any duties under the Bill to provide information about consumers’ rights?

[Jenny Willott]

I am sorry; could the hon. Lady repeat the question?

[Fiona O’Donnell]

I am happy to repeat the question—it might even be better this time. Will the Minister say whether, with an increasing number of people shopping online, there will be a duty on online traders to provide consumer rights information to their consumers?

[Jenny Willott]

I apologise to the hon. Lady. That was a very sensible question. That is being looked at. As she says, more and more people are buying online, so this is an important outlook for retailers. We need to ensure that consumers are aware of their rights, whether they are buying things on the high street or online. As we discussed in Committee, some requirements are being introduced in June that will provide more information and safeguards for consumers who purchase items online. The implementation group is looking at all the ways in which consumers buy goods and services to ensure that they are protected and know what their rights are.

The hon. Member for Nottingham South (Lilian Greenwood) asked a number of questions about rail conditions of carriage, but such questions would be much more properly put to the Department for Transport. If I may, I will direct her points to Ministers in that Department and ask them to write to her with details of how the conditions of carriage are being reviewed. That is not a matter for the Bill but it is being considered by the Department for Transport, and I will ensure that her points are raised.

[Jenny Willott]

I understand that rail conditions of carriage are more detailed and already go further than the fundamental backstop rights in the Bill. However, the Department for Transport is reviewing them, and I will ensure that her questions are passed to Ministers so that she receives a more detailed answer. We will ensure that the Bill is not confused with the rail conditions of carriage, and that they take primacy.

The hon. Member for Rutherglen and Hamilton West (Tom Greatrex) raised an important constituency case, and I understand why he wished to do that. It concerned a business that had to pay a deposit for a telecoms contract, but the Bill does not affect business-to-business rights; it is about consumer rights and affects consumer-to-business rather than business-to-business contracts. I cannot comment specifically on the case, but it would probably not be covered by the Bill since it is a business case. Generally, however, we are doing more to protect deposits that are paid under contract.

Under the Bill, if a consumer enters into a contract for services and pays a deposit but then cancels, the trader does not have a free hand to retain that deposit. Any term in a contract that allows a trader to retain a deposit must be transparent and prominent to avoid challenge in the courts on grounds of fairness. Where such terms do not also provide equivalent compensation for the consumer when the trader dissolves the contract, they are liable to be challenged as unfair, even if they are transparent and prominent.

Our reforms also include clearer cancellation rights in consumer contracts regulations for consumers who buy at a distance or at home. Consumers must be informed that they have 14 days to change their mind and cancel such contracts, and a trader must reimburse them within 14 days of being informed by the consumer about a cancellation of the services. Those regulations will come into force in June, which will give consumers additional protection.

[Fiona O’Donnell]

The Minister is generous in giving way again. Is she not missing the point that my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) made, which was that the Government missed an opportunity to protect small businesses in the Bill, to treat them as consumers and give them those rights? That £900 can be the difference between a business sinking or swimming.

[Jenny Willott]

As the hon. Lady will remember, we discussed this issue at length in Committee. The Government consulted on whether small businesses should be covered by consumer legislation in 2008 and 2012, and on both occasions the result of that consultation was that they should not be. Recent work by the Federation of Small Businesses considered whether micro-businesses should be covered by consumer law, and it too came to the conclusion that they should not be. There is work to be done on the protection of micro-businesses, and some regulators are considering treating them in a similar way. However, the Government consultation on consumer law resolved that it was far more complicated to include micro-businesses as consumers, and that was not the response to the consultation.

The hon. Member for Rutherglen and Hamilton West raised the issue of guarantees being sold with products. Consumer protection regulations already prohibit traders from presenting statutory rights as a distinctive feature of their offer, so a guarantee that offered no more than a consumer’s statutory rights would already be prohibited. We have now made it easier for consumers to get their money back when they have been mis-sold something to which they already have a legal right.

--- Later in debate ---

[Damian Hinds]

I will always follow the hon. Member for Walthamstow, so I shall pay great attention to what she has tweeted after the debate.

I have a lot of sympathy with any measures proposed to help support the growth of the credit union sector. A lot of things in the IPPR report are welcome and positive, such as the idea of having credit unions in post offices, Church of England facilities and so on, but with respect to all concerned I would say that those are hardly first-time-out occurrences of the proposals. A back-stop reclaim facility, through the benefit system, could also have some benefits.

However, the idea—this is the main point—that some huge one-off capitalisation of credit unions would help to facilitate their growth, is not right. Under the previous Government, we had the growth fund, and I am not here to diss that. It was a well-intentioned initiative and will have done a lot of good. Such things are also eroded over time, however, and by definition if one has a big one-off capitalisation one ends up having to address a slightly more costly part of the market, which contributes to that erosion. What we need to do to help support and facilitate the growth of credit unions is what this Government are doing. We are trying to get them on to a sustainable footing with modernised systems, working collaboratively together to get the marketing and branding right so that the sector does not need a subsidy for ever but reaches a scale at which it can address more and more consumers, meaning that fewer and fewer consumers need or want to access the types of lenders we have been discussing today.

[Fiona O'Donnell]

Despite appearances, my hon. Friend the Member for Walthamstow (Stella Creasy) and I are not taking part in a mother and daughter catalogue photo shoot later. We should perhaps co-ordinate in future on what to wear when we are both taking part in the same debate.

It is a pleasure to follow the hon. Member for East Hampshire (Damian Hinds). He said that his Government are taking an interest in issues around payday lending. They are certainly taking something, although I am not sure whether it is just an interest. When he criticises Labour, saying that for 13 years we did nothing, he fails to recognise that there has been an incredible growth, certainly in my constituency, in the number of people having to resort to payday lenders. They are having to increase the amount they are borrowing from those lenders as well as their general debt levels. There is a cost of living crisis and poverty is the root cause, and the Government should have acted more quickly. The hon. Gentleman is on the record as having said that self-regulation works, but even he has had to admit that self-regulation of payday lending has not worked and that it is time for action.

Figures reported by StepChange last December showed that among its clients, people seeking debt advice in East Lothian, my constituency, are now saddled with average payday loan debts of £1,864, £466 above the Scottish average.

[Justin Tomlinson]

I want to reassure the hon. Lady that a number of us have worked on a cross-party basis to push for the extra regulation the Government are introducing. At no point were we saying that self-management would be fine. We were pushing for regulation and I am delighted that the Government are taking that forward to protect vulnerable consumers.

[Fiona O'Donnell]

I wonder whether I can ask the hon. Gentleman which door he pushed. Was it in the Aye Lobby or the No Lobby when we voted on this issue? Taking an interest is what we do in this House, but it is the action we take that matters. I am not aware of his having rebelled but perhaps I am misjudging him. I will gladly give way to him again on that point.

[Justin Tomlinson]

I am afraid that the hon. Lady is confusing two issues. A huge amount of work has been done by the hon. Member for Makerfield (Yvonne Fovargue), the hon. Member for Sheffield Central (Paul Blomfield) and Members from all three parties. They have come together to influence Government regulation that has been introduced to protect vulnerable consumers. The hon. Lady is simply confusing two issues.

[Fiona O'Donnell]

The two issues I am confusing are what people say and what people do.

I want to be helpful to the hon. Member for East Hampshire on the e-mails that he is receiving from BrightHouse. I suggest that he follow up the matter with the Financial Conduct Authority. The last time we debated high-cost loans, I spoke about my experience with Wonga. I had received an e-mail offering me another loan when I was not aware that I had ever had a loan. I was told that the e-mail had not come from Wonga, that it was some kind of fraud and not to worry about it. I have recently taken this up with the FCA, which now has some authority to deal with the issue. I think that the authority will be asking the Government for more powers to get to grips with this. It suggested to me that a fraudulent application for a loan had been made in my name; my contact details were supplied, but Wonga failed to notify me of that and has retained my data on its files, and that is why it has been marketing products to me. He may wish to take up his case with the FCA and perhaps check out his credit rating—as I immediately did, to see whether the application had affected me. I admire his restraint in not rushing from the Chamber at this very moment to do that.

The exploitation that we have seen is plain and simple. Payday loan companies are not called legal loan sharks for no reason. They are predatory. They sniff out hunger, home in on and exploit the difficult situations in which so many of our constituents find themselves. The figures from one of my citizens advice bureaux in Haddington showed that debt-related cases accounted for 51% of its total inquiries from April to June 2013, a rise in East Lothian of more than 40% from the same quarter the previous year. That is why Opposition Members have been urging the Government to do something as quickly as possible. It is why we are saying that the cap needs to be introduced. It is welcome that the Government have changed their mind, but we would like to see that brought forward to 2014. People in my constituency and all our constituencies who are struggling with debt need help now.

While not everyone who borrows using a payday loan gets into difficulties, enough do as a result of the terms of the loan that the industry is now making billions of pounds. When one in three such loans are being used to pay off another payday loan, we need to call time on these lenders breaking their own codes of conduct and step in to reform the industry. It is time to have a levy on the industry so that companies have to give something back to the communities who are swelling their coffers but suffering at the same time. The hon. Member for East Hampshire said that the money suddenly injected into credit unions would not have the impact that we hoped. My constituency is served by a credit union, but it does not have a presence on the high street; it lacks visibility. It works through employers such as East Lothian council encouraging their employees to save with them, but it does not reach the people who wander off the high street into The Cash Store or BrightHouse. A cash injection to the credit union in my constituency to give it a high street presence would tackle the exploitation that I see among the poorest and most vulnerable people.

I understand that Members have worked on a cross-party basis—I will now try to take back some of the earlier sour remarks—but let us not be limited in our ambition today. I hope that they will get behind the new clause and make a difference to the people who are suffering in our constituencies.

[Sir Edward Leigh (Gainsborough) (Con)]

This is a useful debate. The trouble with the new clause is that, unless we are careful, if we legislate in haste on complex legal matters, we may be subject to the law of unintended consequences and make things worse. No one denies that a lot of people are under tremendous financial stress, and we all want more transparency. I agree that on many occasions the law needs to be updated.

The hon. Member for Walthamstow (Stella Creasy) talked about bills of sale and described them as a Victorian product. In fact, bills of sale have been around for centuries. The Bills of Sale Act dates from 1878, and was amended in 1882. That does not necessarily mean that bills of sale are wrong in themselves. I looked up the definition of “bill of sale”, which is

“a legal document made by the seller to a purchaser…that on a specific date at a specific locality and for a particular sum of money or other value received, the seller sold to the purchaser a specific item of personal property, or parcel of real property, of which he had lawful possession.”

It is a written instrument which evidences the transfer of title to personal property from the vendor or seller to the vendee or sellee. For instance, a typical bill of sale would be something very simple: “for the sum of X pounds I hereby sell to Larry Smith full ownership of a green John Deere harvester.”

A bill of sale is a simple, historic or traditional way of ensuring the transfer of title. I agree with the hon. Member for Walthamstow that things can become complicated, and that is evidenced in legal sources when a bill of sale is attached to a loan, as it can be used as evidence of a loan and security for a loan; so someone’s car, for instance, may be used as security for a loan.

Just because some bills of sale are misused and some people suffer as a result of the process or are under legal stress, that does not mean that we have to throw a century of careful legal practice and growth out of the window, as we might make things worse. If we over-regulate legal loan providers, we may well force people into the clutches of unregulated loan sharks. My suggestion to the Minister—and I agree that this is a serious problem—is that rather than attack bills of sale, which have been around for a long time and have been used in an entirely reputable and correct way and entirely transparently to transfer ownership, or just throw them out of the window by accepting a new clause that has not been thought through, the issue should go to the Law Commission, which can study all the evidence and practice and ensure that we protect consumers, achieve full transparency, and modernise the law. We should not rush through Acts of Parliament that can make things worse for people under stress and force them into the hands of loan sharks.

Finance (No. 2) Bill

Fiona O'Donnell Excerpts

Wednesday 9th April 2014 Commons Chamber

[Tim Loughton]

I do not think that the Opposition are being honest with us. Last week, they tabled a reasoned amendment declining to give the Bill a Second Reading, one reason being that

“it offers a marriage tax allowance which will help only a third of married couples, rather than a 10 pence starting rate of tax which would help millions more families”.

Coming from a party that dispensed with a 10p tax rate when it was in government, those reasons show inconsistency and brass neck, while the opening speech of the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) made a good case for extending the transferable married couple’s tax allowance to make it fairer and more inclusive.

Amendment 3 does not offer outright opposition. It is a fudged amendment, which calls for a review, including

“a calculation of the proportion of married couples and civil partners who are eligible…;…an assessment of the impact…;…the cost to the Exchequer…; and…an assessment of alternative tax reliefs”.

For starters, we know all that. There is a contrast between that and the Labour Opposition’s new clause 1 on child care provision, which was considered yesterday. It asked for a different sort of tax relief or public subsidy, but it did not have any conditions attached to it about a review after six months, a calculation of the proportion of people who benefit, or an assessment of its impact.

The Opposition are entirely disingenuous and inconsistent. Why do they not just come out and say, “We fundamentally—completely and utterly—disagree with and oppose the concept of transferable married couple’s tax allowances”? Why have they not done so in the amendment that we are debating? That would have been more honest, and we could then have had a proper debate. I think that the Opposition are being disingenuous.

[Fiona O'Donnell (East Lothian) (Lab)]

On the subject of inconsistency, the hon. Gentleman voted against giving same-sex couples the right to marry, so having opposed that union, does he now support their having a tax break?

--- Later in debate ---

[Tim Loughton]

Interestingly, the Joseph Rowntree Foundation has done a lot of work in that area—this also relates to what the hon. Member for Stretford and Urmston (Kate Green) said about child poverty—and its report states:

“The risk of poverty is much higher for children in couple families where only one parent works; sole earner families account for a significant minority of poor families with children. Many fathers”—

this applies to mothers, too—

“have to work long hours, making it harder for them to get involved in family life and more difficult for mothers to work. To enable more low-income families to have both partners in work”.

The Joseph Rowntree Foundation makes a case for why such recognition helps lower paid families, too. My long-term aspiration is that we should fully extend the allowance, but at this stage, as I stated in my proposed amendment to last year’s Finance Bill, I would like us to concentrate on families with children under the age of five. If it meant that we could extend a more generous allowance to families with children under that age, I would be happy for the allowance not to extend to married couples generally. Such an amendment has been costed at between £700 million and £750 million, which is affordable in the context of what else is happening.

[Fiona O'Donnell]

What is the hon. Gentleman’s definition of a family? He keeps talking about families, rather than married couples with children. Does he consider a family—I hope this is not what he intends—only to be one in which a couple is married?

[Tim Loughton]

I am talking about married couples, which now take different forms. As we have already discussed, the definition includes same-sex marriages, civil partnerships and conventionally married couples. That is to whom the allowance should apply, which has never been in doubt. The allowance is about making it easier for parents to choose the best way to bring up their children. Frankly, it is insulting to describe the measure as discriminating against single parents.

--- Later in debate ---

[Fiona Bruce]

I support clause 11, and acknowledge and support the excellent speeches made by my hon. Friends the Members for Peterborough (Mr Jackson) and for East Worthing and Shoreham (Tim Loughton). I support marriage, not for moral, religious or ethical reasons, but because, as they said, and as all the evidence shows—I shall provide evidence shortly and will not be deterred by the fact that others have quoted it—marriage promotes stability, security and better life outcomes for children; improves health and well-being for the parties to the marriages, notably as they age; and strengthens the wider community, as those in married families are more likely to be actively involved in it.

The Opposition, as the debate has shown, do not get it that the proposal benefits not only those couples who will receive the allowance, but the much wider society. Supporting the proposal, and supporting marriage through the tax system, is a matter of social justice. Underlying so many social problems that the country faces is the problem of family breakdown and, in particular, family breakdown outside marriage. Many hon. Members are reluctant to talk about that for fear of being branded judgmental, but the fact is that helping to strengthen health and well-being through supporting marriage is to help to tackle a key, root cause—relationship breakdown—of so many contemporary problems, such as addiction, abuse and mental health issues, and the increasing problem of acute loneliness, especially in old age.

The proposal is even more a matter of social justice because, as the Centre for Social Justice reports, indications show that, whatever the liberal press might say, the better off in our society get the fact that the benefits of marriage are worth buying into and are marrying while the less well off are increasingly not getting married. According to the CSJ, that is causing a widening gulf between better-off married people and less well-off unmarried people. The latter do not access the health and well-being benefits that I and other hon. Members have mentioned and that marriage can bring. Rather, they are falling into an increasing cycle of negative outcomes and social instability, which is inter-generational. If we really care about building a society that promotes social equality rather than inequality, and one that offers a key route out of poverty for those who may otherwise be trapped within it, and if we are really serious about social justice, one key policy is backing marriage.

As my hon. Friends the Members for Peterborough and for East Worthing and Shoreham have stated, the statistics are stark. Children aged five are five times more likely not to be living with both parents if their parents are not married. The position is far worse for children aged 15. Women and children are significantly more vulnerable to violence in unmarried families. Teenagers living outside married family relationships have much higher delinquency rates than others. Seventy per cent. of young offenders come from unmarried families. The prevalence of mental health issues among children living outside married family relationships is 75% higher than among children of married parents.

[Fiona O'Donnell]

Does the hon. Lady believe that, if a tax break acts as an incentive or a reward, more couples would marry, and that those problems would then go away?

[Fiona Bruce]

The measure sends out a clear marker from the Government that marriage works. That is why it is important. I absolutely agree that it will not be an incentive, but I hope it will be an encouragement. I hope it is a start that will be built upon.

On old age, 90% of all care beds in hospitals and care homes are occupied by unmarried men and women. Couples who separate and who have never been married are less likely to support each other in old age and, apparently, their children are less likely to support their elderly parents.

On the positive side, the commitment that marriage requires in terms of the emotional, economic and social investment in the relationship in turn generates security, health and longevity. As we have heard, even the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. The health gain from marriage could be as large as the benefit from giving up smoking, leading some researchers to suggest that, if marriage were a drug, it would be hailed as a miracle cure. I could continue, but the evidence is legion.

None of that is to suggest that all married families enjoy better outcomes than any single-parent family or cohabiting couple. Clearly, there are dysfunctional married families and successful single parents and cohabiting couples. However, the weight of evidence is firmly in favour of stable, publicly committed married families being the most beneficial structure.

Oral Answers to Questions

Fiona O'Donnell Excerpts

Tuesday 11th March 2014 Commons Chamber

[Danny Alexander]

I have not heard a definitive refusal directly from the Welsh Government, although I have heard some very disappointing comments from members of the Labour party in this House. The changes we are proposing to make following the Silk commission, including the devolution of income tax powers to the Welsh Assembly, subject to a referendum, constitute an important package of reforms that will strengthen the accountability of the Welsh Government as well as the economic levers available to them.

[Fiona O'Donnell (East Lothian) (Lab)]

T4. I hope that the Chief Secretary thinks that I am a woman who merits an answer. Given that he has recently found his mojo, can he tell us whether he supports any changes to the way in which levels of child poverty are calculated?

[Danny Alexander]

I think that the hon. Lady merits answers to all her questions. There is a good case for retaining the existing measures, but it is also important that we have an understanding, through the measures we use, of the wider factors that influence child poverty—the barriers to life chances and so on. I do not propose getting rid of the existing measures, which I think are important, but supplementing them with further measures to ensure that we have policies which are properly targeted to deal with the long-term causes of child poverty would help us all.

Currency in Scotland after 2014

Fiona O'Donnell Excerpts

Wednesday 12th February 2014 Westminster Hall

[Ian Murray]

My hon. Friend hits the nail on the head. The SNP has ditched its euro credentials and its wish to join the euro in favour of a currency union with the United Kingdom that it is already in. I believe its slogan was “independence in Europe” but it now seems to be “independence in the UK with the pound.” Will it rush to adopt the euro—indeed, will Scotland actually be in the EU—or will it join the only other two countries in the world that tie their currency informally to another? This is a great quiz question: which countries are those? The answer is Panama and El Salvador, which use the dollar. [Interruption.] I can hear the hon. Member for Perth and North Perthshire (Pete Wishart) chuntering, “Greece”, and that is exactly the point that I have been making.

The First Minister and Deputy First Minister of Scotland this morning made the unedifying assertion that Scotland will default on its debt if no currency union is forthcoming. That ill-thought-through, toys-out-of-the-pram threat is a recipe for economic crisis and political conflict. It is reckless and irresponsible, to say the least.

[Fiona O'Donnell (East Lothian) (Lab)]

My hon. Friend is making an amazing speech. Is not that statement—that throwing of the toys out of the pram—proof that the SNP would be incapable of conducting normal relationships with the rest of the UK post independence?

[Ian Murray]

My hon. Friend is absolutely right. A currency union requires some kind of political co-ordination to ensure that the stabilisers make the currency work. What better political stability could we have than being the United Kingdom, with a strong Scottish Parliament as part of that overall economic and political framework?

--- Later in debate ---

[Stewart Hosie (Dundee East) (SNP)]

It is slightly disappointing that we cannot have a longer, more detailed debate on this issue. There is a great deal to say to answer the points that have been raised.

I congratulate the hon. Member for Edinburgh South (Ian Murray) on securing this debate, although from what we have heard so far, it is less of a debate on currency and more of a quick canter through some of the no campaign’s scaremongering. I would like to address one or two of the points that he made. He suggested that the Scottish economy would be run on ginger bottles—that is, old lemonade bottles. What a patronising and insulting way to look at a modern, productive economy.

[Fiona O'Donnell]

Will the hon. Gentleman give way?

[Stewart Hosie]

No. I have only five minutes.

The hon. Member for Edinburgh South suggested that so much money had been put into Scottish banks. I draw his attention to chapter 1, paragraph 1 of the report by the Parliamentary Commission on Banking Standards. The cash cost at peak is reported to be £133 billion—that was £47 billion to Royal Bank of Scotland in return for 82% of the stock, around £25 million into Lloyds, and smaller amounts to the Icelandic and other financial institutions. Where taxpayers are still on the hook is the near £50 billion owed to them from Northern Rock and Bradford and Bingley, which may be many things, but they are not Scottish banks. The notion that the argument was ever about Scottish banks bad, English banks good, must be knocked on the head.

The old chestnut about Scotland in a sterling currency zone being like Greece was also raised. Greece’s problem had nothing to do with being in a currency union and everything to do with appalling productivity. As we know, Scottish productivity is nigh on identical to that of the rest of the UK. That would avoid such problems entirely.

--- Later in debate ---

[Katy Clark]

I am very grateful to you, Mrs Riordan. As I was saying, I have been a Member since 2005 and I am very aware that, frankly, it is often far easier for a member of one of the minority parties to be called to speak than someone from one of the larger parties, because of the way that the rules in this place operate.

[Fiona O'Donnell]

On a point of order, Mrs Riordan, I am very sorry to interrupt the flow of the debate, but it would be helpful if you could clarify something. The hon. Member for Perth and North Perthshire (Pete Wishart) has made serious allegations about the conduct of this debate. Could you clarify whether any hon. Members from the SNP asked to speak in it? Have they been prevented from speaking in it? Have they ever even requested a debate on the issue of the currency in Scotland?

[Mrs Linda Riordan (in the Chair)]

That is not a point of order. I call Katy Clark to speak.

--- Later in debate ---

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

It is a pleasure to see you in the Chair in this important debate, Mrs Riordan. It has been lively at times, and there has been more heat than light on occasions, but none the less it is about trying to ensure that we have the opportunity to discuss the important issue of currency.

I congratulate my hon. Friend the Member for Edinburgh South (Ian Murray) on his superb opening contribution. He laid out clearly and articulately the issues that we have to discuss. We then heard useful contributions from my hon. Friends the Members for East Kilbride, Strathaven and Lesmahagow (Mr McCann), for Inverclyde (Mr McKenzie), for Glasgow Central (Anas Sarwar), and for North Ayrshire and Arran (Katy Clark).

I want to pick up on a couple of points made by my hon. Friend the Member for North Ayrshire and Arran, because she articulated clearly that although many people in Scotland may have an emotional attachment to the idea of Scotland being an independent country, they none the less recognise the importance of the political, social and economic union that has existed over the years, and what an important decision this is for the people of Scotland to make in September. The Scottish National party would sometimes have us believe that everything will stay the same and nothing will change, but at the same time it tries to advance the notion that everything will change. That is not so. Increasingly, people are beginning to see through that false prospectus. A number of hon. Members spelled that out in some detail.

Increasingly, people are beginning to realise that the currency issue is important. For them, it is not just about the macro-economics, because some will, perhaps, not take an interest in that. However, they will take an interest in the money in their pay packets and in their pockets, in their ability to pay their way in the world, and in the impact on their mortgages, credit arrangements, store cards and car loans.

[Fiona O'Donnell]

My hon. Friend is summing up the debate in her usual excellent fashion. Is she struck by the views of young people, who will live with this decision far longer than any of us, particularly the youngsters in Fife who, having heard my hon. Friend the Member for Glasgow Central (Anas Sarwar), voted no yesterday?

[Cathy Jamieson]

My hon. Friend makes a valuable contribution, as always. I recognise that this is of huge importance to young people in Scotland. Obviously, young people aged 16 and 17 are, for the first time, have the vote in an important election. Of course, there are many young people here today in Parliament, including some members of the Scottish Youth Parliament, who are here to lobby on votes for 16-year-olds. I am struck by the intelligent way that young people have approached this debate. When it comes to the independence cause, they have not simply rushed to the barricades, as the SNP may, at one stage, have thought they would. They have thoughtfully debated, considered and put forward the arguments, and will come to their own conclusions, as indeed the rest of the people in Scotland will.

I have to say to the SNP that it is becoming rather tiresome to hear, every time anything is said that is not in agreement with the First Minister or his team, that we are somehow scaremongering. It is right and proper to scrutinise the proposals, including the White Paper and all the policies. [Interruption.] Indeed, the hon. Member for Dundee East (Stewart Hosie) is agreeing with me. He is an intelligent and articulate man who takes a close interest in all Treasury, banking and financial services sector issues; I gently say to him that it is rather odd that despite that, he continues to trot out the SNP line the whole time, without giving that degree of scrutiny to the proposals made by his political party.

On that point, Professor John Kay, former economic adviser to the First Minister and professor of economics at the London School of Economics and Political Science, said:

“If I represented the Scottish government in the extensive negotiations required by the creation of an independent state, I would try to secure a monetary union with England, and expect to fail…So Scotland might be driven towards the option of an independent Scottish currency.”

He also said:

“Alex Salmond has said I think rather stupidly that there is no plan B. The trouble with having no plan B is you don’t have any negotiating power if you don’t have a Plan B. So there has to be a Plan B. And Plan B has to be an independent currency.”

We are not getting that honesty in the debate, as far as the people of Scotland are concerned. That is important.

Payday Loan Companies

Fiona O'Donnell Excerpts

Monday 20th January 2014 Commons Chamber

[Fiona O’Donnell (East Lothian) (Lab)]

I was rather hoping that you would not be in your seat when I rose to speak, Mr Speaker—not because it is not always a pleasure to speak under your chairmanship, but because you will realise that I am being rather greedy this evening, having secured an Adjournment debate on pre-payment meters and fuel poverty. I think there is a link between the two topics of debate, and it is a pleasure to follow the hon. Member for Brigg and Goole (Andrew Percy), who I thought seemed to be arguing rather dangerously in respect of financial education: those who can’t should teach.

I congratulate my hon. Friend the Member for West Bromwich West (Mr Bailey) on the work he, his staff and members of the Select Committee did in bringing this report before us. At last, we are seeing some serious progress on regulation of the payday lending sector. I also congratulate, and express the gratitude of my constituents to, my hon. Friends the Members for Sheffield Central (Paul Blomfield) and for Walthamstow (Stella Creasy) on the work they have done, because it takes real courage to take on payday lenders, especially when a Member does not have the support of the whole Committee. To go out there alone to take on these payday loan companies can be a terrifying experience.

My first encounter with Wonga was very similar to that of the hon. Member for Belfast East (Naomi Long), so we must catch up later. I received an e-mail, saying that I had previously secured a loan from them and they wanted to be back in touch. I tried to contact the customer care service and then phoned. They told me it was a fraud, so I asked why I was being put through to customer care service when I replied to their e-mail, but I really got nowhere. My next encounter with Wonga was when a constituent had two loans fraudulently taken from her account. I put out a press release on my website, mentioning legal loan sharks. Within a few moments, Wonga was on the phone in my constituency office. It was presumably whoever it is who tries to promote the good name of Wonga. He said, “If you have a problem with Wonga, I really wish you had lifted the phone to us.” I explained that I had not found phoning to be the most fruitful way of dealing with Wonga in the past. He then said that my description of them as “legal loan sharks” was not helpful to Wonga. I responded that I had not waited 50 years to come to Parliament to be helpful to Wonga. The conversation pretty much ended at that stage!

We have definitely reached the stage where we need regulation and reform of this sector. The hon. Member for East Hampshire (Damian Hinds), who is unfortunately not in his place—I am sure he has something very pressing to attend elsewhere—spoke in praise of markets. I do not want to bury them, but I believe different markets work in different ways. In the food retail sector, for example, competition drives down prices. Generally, people in areas of larger population concentrations have access to other companies offering the same service. Other markets, however, do not operate in that way, and it almost seems that the different players are colluding to drive up the price rather than drive it down. I certainly think that that applies to payday lenders.

The hon. Member for Brigg and Goole spoke about walking down his local high street. I urge him not just to walk down it, but to stand in it and campaign against payday lenders. I did that in Musselburgh high street, in partnership with my Labour colleague in the Scottish Parliament, Kezia Dugdale, whom I must praise for her work on the Debtbusters campaign. I was goaded by the hon. Member for Edinburgh West (Mike Crockart) to put on a shark costume in the high street, which I duly did. I must add that, after I had positioned myself outside the premises of each of the four providers of expensive unregulated credit in Musselburgh, each one came out and challenged me about my right to be on the pavement.

I think that it is time for action, and that it cannot come soon enough. I had the strong impression that people in Musselburgh did not like the fact that those shops were in their high street. I agree with my hon. Friend the Member for Makerfield (Yvonne Fovargue) that we should look at other sectors as well, including pawnbrokers. One of them kept saying, “We do not lend money”, but there were signs all over his shop saying “cash loans”, which seemed to contradict that. The whole sector needs a thorough examination.

We need to look at the total cost of credit. I realise that that will be difficult, but we must find a way of doing it. We also need to deal with advertising as rigorously as we have dealt with it in the alcohol industry. Advertising should not just make the facts clear, but should not be able to glamorise credit.

[Neil Parish (Tiverton and Honiton) (Con)]

I think that we are now seeing a cross-party attack on payday loans, along with a wish to attract people to credit unions and create more of them. We should put pressure on payday loan companies not to charge huge interest rates and huge fees for late repayment, and try to give people access to credit at an affordable rate through credit unions.

[Fiona O’Donnell]

I want to finish what I was saying about advertising, but I shall then say something about possible alternatives.

I was very disturbed and disappointed to learn that Kerry Katona was advertising Cash Lady. I saw no reason for her to be involved in a project that was aimed specifically at women. Car insurance is a different matter, because, as we all know, we are better drivers than men, and a separate service may be appropriate in that context. I was pleased when many people complained and the advertisement was removed, but Kerry Katona then appeared in another one. Advertising in this sector must be rigorously controlled.

The hon. Member for Tiverton and Honiton (Neil Parish) mentioned alternatives, and I agree that we should think about them. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) said that credit unions needed to have the same sort of presence as payday lenders. Unfortunately, the credit union shop in East Lothian closed, and credit unions have no high street presence in the area. That makes it far more difficult to reach out to people, and makes competition much more difficult. One Member said that the sector did not need support, but I think that that is unlikely. We do not want the cost of credit from credit unions to rise, because that would defeat the purpose.

The hon. Member for Dover (Charlie Elphicke) spoke of watching “It’s a Wonderful Life” at Christmas, with its talk of mutuals and building societies, and the Building and Loan company. This evening’s debate has been cordial, apart from, as ever, the contribution of the hon. Member for Stratford-on-Avon (Nadhim Zahawi), who also reminded me of “It’s a Wonderful Life”, because in his account of where we are today he seemed to be saying, “Imagine what it would have been like if the Conservatives had never been in government.” I think that the hon. Gentleman was the only Member who—as he often does—struck the wrong chord. There are links between increased poverty and welfare changes, and the fact that more and more people are having to turn to payday lenders.

The Select Committee report and the debate are welcome, and I hope that they will result in more protection for many of my constituents, such as those who came out of Loretto primary school to find people from the cash store in Musselburgh giving balloons to the children and providing fliers that did not contain any information about the cost of borrowing money. I hope that we shall see an end to practices of that kind, and an end to some of the poverty that is driving people to these lenders.

--- Later in debate ---

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

We have had a very thoughtful and interesting debate this evening, with 17 speakers in total as well as interventions. Most of the speakers seemed to reach a consensus on a way forward, although, as my hon. Friend the Member for East Lothian (Fiona O'Donnell) pointed out, the slight exception might be the hon. Member for Stratford-on-Avon (Nadhim Zahawi), who has just returned to his place. He tried his best to be consensual, but every now and again he was straining at the seams—[Interruption.] I hear someone say that he cannot help himself.

We heard an excellent speech introducing the report from my hon. Friend the Member for West Bromwich West (Mr Bailey), the Chair of the Select Committee on Business, Innovation and Skills. I know that we have had a number of debates on the issue and I wondered whether we would be able to reach consensus on the report this afternoon. That has happened and, as a number of hon. Members have said, this is an important time for such a debate, not least because the FCA is considering the responses to the consultation and will be publishing the rules shortly. It is also debt awareness week. I always feel that we should be concerned by debt awareness week—it is good for us and for the organisations that support people as it focuses our attention, but for many people the harsh reality of debt is something of which they are aware not just for one week of the year but every single day.

We have heard once again this evening examples of the cases with which we are all only too familiar that involve people in our constituencies. The Chair of the Select Committee highlighted a number of issues with advertising. He put it very powerfully when he talked about the suggestion that there could be a one-minute verification to decide whether someone could access such a loan. That highlighted why we need action on advertising.

My hon. Friend the Member for West Bromwich West also highlighted the impact of television advertising on children and young people aged 12 to 15. I have raised concerns about the issue in a previous debate, and about how advertising normalises payday loans and such borrowing. Someone might not normally consider such an option, but it can be instant and they can do it without thinking. I was also concerned to hear the story from a teacher about children’s awareness of the payday loan sector as one way of getting the things that one wants quickly. A strong case has been made this evening about advertising on television during daytime, early evening and children’s programmes.

My hon. Friend also made an important point in his opening speech about the need for the Advertising Standards Authority to work with the industry on a code of practice. If everyone were to come together to work on the matter and agree on how to take things forward, that would be excellent. If that does not happen, however, and if there is any delay, we should be prepared to ensure that action is taken.

My hon. Friends the Members for Glasgow North (Ann McKechin) and for Glasgow North East (Mr Bain) raised some of the particular concerns of the city of Glasgow. Let me take this opportunity to pay tribute to the new scheme introduced by Glasgow city council whereby pupils going to secondary school for the first time will be given the opportunity to have a credit union account, with £10 put into each account. That is one way of providing financial education while working creatively with the credit union movement in the city.

A number of Members stressed that it is now time for the FCA to act and various evidence was given from the CAB and StepChange about the level of debt. My hon. Friend the Member for Makerfield (Yvonne Fovargue) raised concerns that she has pursued for a long time now about the database and access to real-time information. A number of hon. Members talked about the Callcredit announcement and questioned whether it went far enough, as it does not necessarily provide real-time information on how decisions are made. That must be considered in more detail because, essentially, it is no good having information if it is not up to date.

As we have heard, indebtedness is not a new issue. As a former social worker, I well remember spending a lot of time trying to work with families who had to borrow money to pay for the basic necessities of life, without understanding the ongoing costs and how they would pay the money back. Of course, access to online systems and the “press the button, do it now” approach of the payday loan companies make it even easier to borrow now than in the days when the payday lenders of the time went around the doors and persuaded people to take out loans.

We heard some interesting comparisons with work that has been done in the US, Canada and Australia, particularly on roll-overs, and some good questions have been asked. For example, if someone cannot deal with one roll-over debt, why on earth would we want to let them have a second roll-over debt without that being challenged? We have heard concerns about the fact that payday originally meant payday. Of course, now it does not always relate only to people who are in work; many people on benefits and very low fixed incomes are also encouraged to take out these loans.

We have heard concerns about the continuous payment authority and people not understanding what they were getting into. We have heard a call for mainstream banking services to look more at how they support people on low incomes and the important point about financial education being about not only what happens in school but what happens particularly at key points in people’s adult lives, when there is an opportunity to intervene and to work with people to ensure that they understand what they are getting involved in.

A couple of hon. Members, including the hon. Member for Belfast East (Naomi Long), mentioned fraud. We heard from my hon. Friends the Members for City of Durham (Roberta Blackman-Woods) and for Rochdale (Simon Danczuk) about the implications of the planning system and the problems of payday loan companies opening shops in the high streets.

[Fiona O'Donnell]

Does my hon. Friend agree that, for her constituents and mine to be protected, we also need action from the Scottish Government, so that they use their powers to protect our constituents?

[Cathy Jamieson]

My hon. Friend makes an important point, but I do not have time to develop it now because I must now come to a conclusion.

I hope that the payday lending industry will understand the strength of feeling in this debate. To be fair, some Government Members said that they had come round to our way of thinking and are now prepared to back some of the actions that we have been calling for. The industry should look at that. The FCA should take note of the issues that have been raised this evening, and it should listen to the calls for action and the suggestion that it has perhaps not gone far enough.

I will finish by congratulating again the Business, Innovation and Skills Committee on the thorough work it has done on the issue and, indeed, all the campaigners who have brought it into the mainstream of opinion and concern, rather allowing it to be seen as something on the margins.