amendment of the law

Frank Dobson Excerpts

Monday 24th March 2014 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

The Chancellor told the House last week that his policies had been vindicated. His basic case is that austerity is working so well that we need it for two Parliaments rather than one, as was planned. Of course, it is welcome that we have economic growth after so many lean years, but the inescapable fact is that the targets in the growth and spending plans set out at the beginning of this Parliament have been missed by huge margins. The cumulative effect is that cuts will last years longer than planned, and an extra £190 billion is being borrowed, compared with the figure in the plans set out after the election. If Labour had borrowed £190 billion more than was planned, I am not sure how Government Members would describe it, but I doubt whether they would be reaching for the term “success”. The return of growth cannot hide the fact that the outcome of the strategy pursued in the past four years is that one of the Government’s fiscal targets has been missed, and the other—the five-year rolling target—continues to be pushed into the future.

The increases in investment allowances are welcome, but let us be in no doubt: this is a U-turn from the Conservative manifesto and from the 2010 post-election Budget. At that time, when the Chancellor was talking about the “march of the makers”, he cut support for investment in manufacturing by £3 billion a year, and called it getting rid of complex allowances and reliefs. Rhetoric and policy were pulling in entirely different directions. I therefore welcome the U-turn, and on this point at least, rhetoric and policy are now pulling in the same direction, although needless barriers were placed in the way of investment by the policy previously pursued.

[Frank Dobson (Holborn and St Pancras) (Lab)]

Does my right hon. Friend agree that when the investment allowance was reduced, corporation tax was reduced, which did not benefit manufacturing but benefited the banks?

[Mr McFadden]

That is absolutely right: a cut in support for manufacturing was used for business as a whole.

Although it makes sense to support investment decisions through the tax system, we should not kid ourselves that investment allowances alone will be enough. The UK’s export performance has been routinely described as disappointing in report after report by the Office for Budget Responsibility. Speak to any manufacturer and they will most likely say that their key challenge is skills. If companies cannot get the right people with the right skills, they cannot innovate, they cannot meet orders in time and they cannot operate as efficiently as they want.

If the Government are really serious about supporting UK manufacturing, they should heed the call coming from their own Back Benches today to stop chasing UKIP and putting in place policies that stop the brightest students and workers from around the world coming to the UK. The Government’s arbitrary net immigration target is a barrier to our accessing the best talent in the world, and the exclusion of such talent is not in the interests of UK businesses or the economy; nor is the threat of withdrawal from our biggest export market, the EU. It is no good supporting investment decisions through the tax system with one hand, and threatening to pull away from our biggest market with the other. The stance the Government have adopted on this is a complete failure of leadership: it is party management first, and the interests of the country second. No amount of support through investment allowances would undo the damage that pulling out of our biggest market would do. I am glad that my right hon. Friend the Leader of the Opposition made the announcement he made a couple of weeks ago, exercising leadership on this issue and rejecting the option of following the Government down this path.

Perhaps enough has been said about beer and bingo in recent days. As someone whose father was a labourer and whose mother worked in a local authority children’s home, the only thing I would add is that a more serious working-class aspiration is an education system that opens up opportunity to all; social mobility that is not based on but challenges closed elites; and a path to rising living standards that has been sadly absent in recent years. I suggest to the Government that a poster based on those things might have been truer to the heart of working-class aspiration than the one that was produced.

I echo some of the sentiments expressed by my hon. Friend the Member for Sedgefield (Phil Wilson) on the pension changes. There has been an attempt to reduce this proposal to the question of whether people can be trusted with their own money. Of course people can be trusted in that way, and empowering them to make their own decisions is a good thing. It is something that we should support in politics. Choice in public services empowers people. It has worked well in the area of personal payments for social care, for example. As my hon. Friend said, however, what is in question is not trusting people but trusting the financial services sector that sells people these often complex financial products. I serve on the Treasury Select Committee, and we have seen many mis-selling scandals in recent years, ranging from endowment mortgages to payment protection insurance. We should have learned the lesson that there is often a serious information mismatch between those selling those financial products and those buying them, and that customers are not well served when things go wrong.

How do the Government propose to address that issue? Simply shouting that we should trust people with their own money is not enough, given that the PPI compensation alone has had to be set at £20 billion; and nor is it the philosophy that has been pursued on a cross-party basis for auto-enrolment into the pensions systems. If customers are to be well informed, they need good advice and alternative products in which they can trust. It is perfectly reasonable—indeed, a duty—for a responsible Opposition to ask questions about how that is to be achieved, and to point out the dangers if it is not.

The recent economic growth is welcome, but if it is being funded by consumer spending, people will rightly ask how can we ensure that it has solid foundations and is not simply the froth from another unsustainable housing boom, and how we can ensure that Britain remains engaged with the world and does not turn away from the trade and exports that we need.

[Sir Edward Garnier (Harborough) (Con)]

I agree with a certain amount of what the right hon. Member for Wolverhampton South East (Mr McFadden) has said. I am delighted to hear from him and other Opposition Members a gentle—or, in some cases, not so gentle—movement towards accepting that the saving public, the pensioners, should be allowed to choose their own vehicles to finance their retirement income.

I introduced a private Member’s Bill in 2003, entitled the Retirement Income Reform Bill. It was designed to lift the compulsion to purchase an annuity at the age of 75. The then Government opposed it, but it so happened that I got a majority of more than 100 on that Friday in the spring of 2003. These things happen on Fridays when Government Members are elsewhere. Eventually, however, the Government talked the Bill out. It was defeated on the basis that the public were unable to make their own decisions on the funding of their retirement. It was said that they would waste the money, or simply not do what the Government wanted them to do with their retirement funds. I happen to take the view that the Government are a poor parent, a poor business man and a poor manager of people’s old age. I was disappointed, but not surprised, that the then Government talked out my Bill. The number of private Members’ Bills that get talked out is too big to worry about.

I was interested to hear my right hon. Friend the Chancellor of the Exchequer announce in the Budget statement last week that he intended to liberalise the way in which we deal with pension income. I was even more interested when the shadow Secretary of State for Work and Pensions, the hon. Member for Leeds West (Rachel Reeves), announced that her party and her Front Bench were coming round to accepting that the public should be trusted with the management of their own financial affairs in retirement. She made that announcement rather half-heartedly, but she made it none the less. I think that that is practically and philosophically the right thing to do.

In the course of this afternoon, I have smelled the burning rubber of handbrake turns from Labour Back Benchers who are beginning to realise that they need to catch up with those on their Front Bench, who in turn are deciding that they need to catch up with those on our Front Bench and with public opinion that is in favour of greater liberalisation of the pension and retirement income system. The fact that criticism has been made of the banking system and of the financial services sector does not undermine the practical and philosophical benefits of liberalising the system.

[Frank Dobson]

I agree that those criticisms do not undermine the philosophical side of things, but it is the practicalities that people are bothered about. Most of the concern arises from the fact that the various institutions have been giving people a bad deal on annuities and that, unless they actually go out of business, they are likely to be offering the products that are the alternative to annuities. Does the hon. and learned Gentleman really believe that those self-same institutions will be offering people a good bargain, if they have not done so in the past?

[Sir Edward Garnier]

Yes, I do. I find that view deeply depressing, although not in the least surprising. The right hon. Gentleman is a good old-fashioned socialist and I respect him for that. I wish that more of his colleagues were as clear in their views as he is. I happen to take the view, however, that Mr and Mrs Retirement Person should be allowed to do what they like with their pension funds and that if the financial services sector misconducts itself, we should prosecute it or take regulatory action against it. We should not act to prevent the vast majority of individuals from doing what they think best for their financial future, either pre-retirement or post-retirement, simply because we fear that there might be one or two bad hats in the financial services sector. If those of us who are about to retire wish to invest our pension funds in property or in stocks and shares—

--- Later in debate ---

[Frank Dobson (Holborn and St Pancras) (Lab)]

I wish to speak about a huge sum that was not mentioned in the Budget statement, but that will loom large over Chancellors of the Exchequer in years to come: the £50 billion that is committed to the building of High Speed 2. To put that amount in perspective, it is about what we spend on our entire school system each year.

Both the Higgins and Deighton reports on HS2, which were recently produced for the Government, demonstrate that, whatever was wrong with the Government’s original plans, they were amateurish and ill thought out. Most importantly of all, they show that massive additional investment will be needed in the areas that HS2 is supposed to serve if its promised benefits are to come about. The Government have agreed to a huge saving by abandoning the preposterous proposal of a High Speed 2-High Speed 1 link. That link, which would have run through my constituency, was opposed by local people and businesses, as well as Transport for London, the rail freight industry and the Institution of Civil Engineers, but it is still included in the hybrid Bill and was supported by the House when it voted through the paving Bill. Fortunately, now that the Higgins report has said, “Dump it,” the Secretary of State has, to his credit, agreed to dump the link, but I wonder whether any of the people and businesses that spent a lot of time, effort and money opposing the idea will get any compensation.

The other proposition that affects my area involves the redevelopment of Euston station and its use as the terminus for HS2. Long before HS2 was dreamed up, there was an outline proposal to redevelop Euston station, which is awful, on its existing footprint. That proposal would have involved building more than 1,000 new homes. HS2 originally said, “We could incorporate that in our scheme and it would be 1,500 new homes,” but then the masterminds behind the proposition concluded that as the cost of the scheme had increased from £1.2 billion to £2 billion, it was unaffordable and they would drop all the planning gain and extra housing and industrial premises, and replace that with a lean-to shed approach. However, while speaking in Hong Kong, the Chancellor of the Exchequer suggested that there should be a reversion to something like the original scheme, which is what the Government now propose. The proposal is still awful, but it is better than what is included in the hybrid Bill.

Other investment will be needed beyond the budget for HS2 if its benefits are to flow. According to HS2 itself, Euston will not be able to cope with the extra passengers and it will therefore be necessary to build—God help us—Crossrail 2, at a cost of anything between £16 billion and £20 billion, but that is not included in anyone’s budget at the moment. So much for the idea that HS2 will transfer transport spending from London to the north, because although that has already been identified as necessary expenditure, similar expenditure will be necessary in Birmingham, Manchester, Sheffield, Leeds and in the east midlands if the benefits from HS2 are to flow. There is no money in the Chancellor’s Budget for that investment, nor is there money in anybody else’s budget.

My constituents’ great fear now is that, after the announcement that there will be a huge redevelopment at Euston, all sorts of property speculating vultures will descend and want to build a huge office city there and not provide the housing that people desperately need. When we consider that the biggest problem in London for Londoners is the fact that average Londoners are being priced out of the city—and average Camden dwellers are being priced out of Camden—we want to make sure that if the redevelopment of Euston goes ahead, it includes housing that ordinary people can afford and does not include a lot of speculative blocks of penthouses to be bought, but not occupied, by Russian oligarchs. They are the people who are driving up the cost of housing in this country, and as a final offer to the Government, I suggest that if they want a sanction, they should stop the oligarchs buying residential property and take back what the oligarchs have bought up to now if they are not occupying it.