Finance (No. 2) Bill

Gareth Thomas Excerpts

2nd reading: House of Commons
Monday 11th December 2017 Commons Chamber

[The Financial Secretary to the Treasury (Mel Stride)]

I beg to move, That the Bill be now read a Second time.

The Chancellor recently set out a bold and forward-looking autumn Budget. It reflected and responded to current circumstances, and it will build a Britain that is fit for the future. The UK economy has shown great resilience. Our GDP growth has remained solid, continuing for more than 19 quarters. Employment has risen by 3 million since 2010 and is close to a record high, while unemployment is at its lowest rate since 1975. Those employment trends are not being felt only in the south-east. Indeed, since 2010, 75% of the fall in unemployment has occurred elsewhere, and the biggest falls in the unemployment rate took place in Yorkshire and Humber, and in Wales.

The deficit has been reduced by three quarters from 9.9% of GDP in 2009-10—that figure was a shocking indictment of the last Labour Government—to 2.3% of GDP in 2016-17. In the coming years, borrowing is set to fall even further, reaching 1.1% of GDP in 2022-23, which will be the lowest level since 2001-02. However, at 86.5% of GDP, public debt is still too high and productivity growth remains subdued. This Budget therefore balanced short-term action with long-term investment, while rightly sticking to the principles of social responsibility that will continue to improve the health of our public finances, with our debt due to start falling from next year.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Given the recent terrorist attacks in this country and the fact that senior officers say that more funding is needed for community policing to help to tackle the risk of more terrorist attacks, will the Financial Secretary tell the House why there was no additional funding for policing in the Budget?

[Mel Stride]

As the hon. Gentleman will know, we made sufficient provision for policing prior to the Budget. We recognise the challenges that the police face, but I gently say to him that to secure our vital public services, including the police, the most important thing is that we have a responsible approach to bringing down the deficit and getting the public finances under control. Having looked at the proposals put forward by his party, I have my doubts that that would be the case were he in government.

It is sensible that all this is underpinned by the tax policies contained in the Finance Bill. The Bill is a mere 184 pages—under a third of the length of the previous Bill. Its length is partly the consequence of the Government’s move to a single annual fiscal event. In this transitional year, with less time than normal between Budgets, there is less legislation in process, which should prove some welcome respite for me, as I do not think that there are many Financial Secretaries who have presented two Finance Bills to the House within their first six months in post. The Bill’s size also reflects the Government’s serious commitment not to overburden people or to overcomplicate the tax system. It is a crucial plank in the Government’s legislative programme that will help young people to buy their first homes, improve UK productivity, and further the Government’s already excellent track record of cracking down on avoidance and evasion.

The Government support the aspiration of home ownership and are particularly committed to helping young people on to the property ladder. The Government’s package on housing that was set out at the Budget will boost housing supply and address the problem of affordability. In this critical endeavour, the tax system should not act as a barrier. First-time buyers are usually more cash-constrained than other purchasers, so to help these people—typically younger people—to get on to the property ladder, the Bill permanently scraps stamp duty for first-time buyers purchasing properties worth up to £300,000. Buyers will save nearly £1,700 on an average first-time buyer property, and those buying a house worth £300,000 to £500,000 will pay the existing 5% marginal rate of stamp duty only on the portion above £300,000. In doing so, they will make a saving of £5,000. This means that 80% of first-time buyers will not pay stamp duty at all, while 95% of all first-time buyers who pay stamp duty will benefit from the changes. Over the next five years, the relief will help more than 1 million first-time buyers to get on to the property ladder.

The joy of home ownership will be greatly diminished if, at the same time, we do not protect and preserve the environment in which we all live. Therefore, as a response to the Government’s national air quality plan that was published in July, the Bill establishes measures to improve air quality through the taxation of highly pollutant diesel cars. Diesel vehicles—even new ones—are a significant source of emissions. A test of the 50 best-selling diesel cars in 2016 found that on average they emitted over six times more nitrogen oxides in real-world driving than is permissible under current emissions standards.

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[Mel Stride]

I am gratified by the hon. Lady’s confidence in Ministers making commercial judgments in respect of our banks and businesses, but it is far better to allow those businesses to take sensible commercial decisions, even though those sometimes have consequences that, in an ideal world, we would not wish to see. I go back to the point I made to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone): we need RBS to improve its strength, grow, employ more people and, ultimately, pay more tax to support our vital public services.

[Gareth Thomas]

I am grateful to the Minister for giving way to me a second time. May I just remind him of the Competition and Markets Authority investigation into banking, which noted the lack of competition in banking and highlighted the lack of innovation and the fact that the big five banks control 85% of the retail banking market and make excess profits? Might keeping the bank levy at its current rate not be compensation to the consumer and the taxpayer for those excess profits?

[Mel Stride]

At the heart of the hon. Gentleman’s point rests the notion, which I agree with, that we expect the banks to pay their fair share and recognise that they received bail-outs some years ago, and tax policy towards the banks has been geared towards making sure that they make a fair and proportionate contribution to our tax take.

The hon. Gentleman mentioned the importance of competition in the banking sector, and I wholeheartedly agree with him on that, which is one reason why we are keen to ensure that as many banks as possible are headquartered in our jurisdiction rather than in others. That goes to the heart of the changes in the Bill to ensure that banks domiciled here are not penalised by being charged on capital assets held overseas—a situation that does not pertain to overseas banks that operate in our jurisdiction.

We have included an 8% surcharge on banks’ profits over £25 million. The package will help to sustain tax revenues from the banking sector in the long term, and it is forecast to raise an additional £4.6 billion over the current scorecard period.

The Bill continues the Government’s already vigorous efforts to crack down on tax avoidance, tax evasion and non-compliance. Since 2010, the Government have introduced over 100 avoidance and evasion measures, securing and protecting over £160 billion of additional tax revenue. This has helped reduce the UK’s tax gap to a record low of 6%, which is one of the lowest in the world.

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[Peter Dowd]

The hon. Gentleman is right. The only people to whom the Government seem to pay attention are the DUP and right-wing Tories.

The bottom line is that, since 2010, HMRC’s staffing levels have been reduced by 17%. The Bill creates even more powers for revenue and customs officers, with even more work, but very little if any resource to go with it.

[Gareth Thomas]

I know that my hon. Friend is a proud Liverpudlian, but on his point about children’s services, may I tell him—Londoners will agree—that over two thirds of London councils are reporting a huge increase in demand for very expensive placements? I hope he agrees that it would be good to hear from the Exchequer Secretary, when he winds up the debate, how the Government will help local authorities—particularly those in London, but also others across the country—to deal with that huge increase in the pressure on children’s services.

[Peter Dowd]

I say to my hon. Friend that—to use an old phrase—he should not hold his breath.

The Government need to wake up and face the cold, hard reality that the Exchequer is losing billions every year and letting multinationals, which do not pay their fair share, off the hook because HMRC simply does not have the resources.

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[Mel Stride]

The hon. Gentleman is being very generous in accepting interventions. From what I can understand, every time the shadow Chief Secretary is asked a question about what Labour promises and pledges will cost, he reverts to saying that people can go and look it up: they can dig into the documents and get on the internet. Equally, he is saying that the public are shifting his way. Is his message to the electorate to get on the internet and to look at his policies in order to understand them?

[Gareth Thomas]

Speech!

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order.

[Gareth Thomas]

I beg your pardon, Madam Deputy Speaker.

[Madam Deputy Speaker]

I am very pleased that the hon. Gentleman—from a sedentary position, which he is not allowed to do—has apologised. If the Minister was making an intervention that was too long, I would stop him so doing. I have allowed the hon. Gentleman and several other Members to make fairly long interventions because I thought we were having a meaningful debate, but we will not have shouting from a sedentary position. I will allow the Minister to finish his intervention.

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[Gareth Thomas (Harrow West) (Lab/Co-op)]

It was interesting to listen to the hon. Member for Ayr, Carrick and Cumnock (Bill Grant), not least because of his reference to that great Scot and great Brit Sir Alexander Fleming. If I remember rightly, he did his pioneering work on penicillin at what is now St Mary’s hospital in London. I raise that point to gently chide the hon. Gentleman about the funding crisis in the national health service, particularly in London, which has led Lord Kerslake, following a distinguished career in public service, to resign from his position chairing a key NHS trust.

I commend my hon. Friend the Member for Bootle (Peter Dowd) for his speech, but I want to make two different, broad points about the productivity challenge facing our country, and to propose some additional solutions that I hope the House will consider incorporating in the Bill. I also want to make a brief point about credit unions and, finally, press for further measures in the Bill to fund more investment in public services, not least policing.

The OBR’s devastating indictment of seven years of underinvestment and austerity and the prospect of many more such years to come was the real headline of the Budget. Productivity gains across all parts of the UK would mean higher wages and higher living standards, so if the OBR is right and productivity is to remain stagnant, the personal finances of too many people in our country will remain grim for the foreseeable future. We are already more than 15% less productive than the rest of the G7, Greece is the only developed country where real pay has fallen further, and the UK has now slumped to fifth in the G7 table for productivity.

To be fair, the Government at least acknowledge that there is a problem, but their solutions largely ignore, first, how to motivate employees, who are fundamental to productivity improvement, and, secondly, the growing concentration of power in key markets in the hands of a small number of very big companies, which stifles the innovation that is fundamental to productivity improvement.

Let me give some context for those two broad points. The average UK worker has not had a real-terms pay rise since 2006. Zero-hours contracts and bogus, Uber-style self-employment are creating an economy in which work is transient and precarious. Too often there are simply not incentives for a business to invest in its staff, and if there is no guarantee of work tomorrow there is not enough incentive, or indeed time, for staff to go the extra mile for the business they are with.

[Rachel Maclean]

The hon. Gentleman is talking about zero-hours contracts. Does he therefore welcome the work we have done in the Select Committee on Business, Energy and Industrial Strategy, chaired by his colleague the hon. Member for Leeds West (Rachel Reeves), looking at the Taylor review and making sure that, where there are zero-hours contracts, they are fair and are a mechanism of choice for a worker rather than being forced on them?

[Gareth Thomas]

I would always commend the work of a Committee chaired by my hon. Friend the Member for Leeds West (Rachel Reeves), and if the hon. Lady agrees with my hon. Friend, I welcome that. I commend the Government for setting up the Taylor review in the first place, but we clearly need radical measures to tackle the problem that it identified.

The context to my second broad point is that in all but a handful of cases, the major players in markets—particularly markets where there are fewer businesses operating—are plcs, owned by shareholders in the UK and abroad. Too often regulators treat this business form as the default, whereas in other European countries markets have a mix of plcs, publicly owned businesses, co-operatives, mutuals and social sector firms.

How might the Government use this Finance Bill to rectify those two broad problems? First, I hope that Ministers will find the courage to recognise that if productivity is to improve, workers and staff will have to drive that change. Basic measures such as a significantly higher living wage are essential, as is creating disincentives for businesses to opt for Uber-style employment practices. At the moment, there is too often too little incentive for the employee to go the extra mile, as they are unlikely to benefit directly from the extra profits that innovation and higher productivity might deliver.

This Finance Bill could have been the moment for that to change, and indeed even at this late stage I hope it will be, so let me offer the Minister the example of France, where businesses with 50 employees or more have to set aside 5% of their profits as a reward for their staff. If those who are helping to generate profits know they are going to share in them—if they know it is not just the chief executive and the rest of the executive team who are going to benefit—their motivation and commitment to helping the business prosper might just be a little stronger.

I was interested in the comments of the hon. Member for North West Hampshire (Kit Malthouse)—who, sadly, is no longer in his place—because I share his view that businesses in which employees have a say and a stake tend to be more productive; they tend to be better at incentivising their staff and channelling workers’ ideas and talents. Indeed, a 2007 Treasury review found that employee ownership can boost productivity by as much as 2.5% over the long run. So, as the hon. Gentleman asked, why are there no further tax incentives to encourage genuine employee share ownership?

The Government should revisit the idea of compulsory employee representatives on company boards, mirroring the success of Germany and Sweden, where employees have sat on boards for decades. Given that the idea was in the Prime Minister’s personal manifesto when she ran for leader of the Conservative party and that a significant number of Conservative MPs backed that manifesto, and given that we on the Opposition Benches support employee representation on boards, I suggest that there is a majority in the House willing to vote for such a measure if only the Government could find the courage to act. Why not, at the very least, have more favourable tax treatment for firms that are employee-owned? The hon. Gentleman also touched on that point extremely well.

Ministers must also overhaul the regulation of markets and recognise that key markets have become too uncompetitive and, in a number of cases, oligopolistic. This Bill could have begun the process of changing that. Let me give two examples. Banking and energy have both had highly critical regulator investigations, noting the lack of innovation and the excess profits in crucial consumer markets. Where is the commitment to create diverse and vibrant markets in those areas, with the plc model no longer favoured over other business forms such as building societies, mutuals and co-operatives? I suspect that regulators know that there simply is not the political will on the Treasury Bench to confront the Institute of Directors’ insistence that big plc businesses know best.

The Social Market Foundation is not necessarily a think-tank that we on these Benches would reach for first when it publishes a report, but it has recently produced an interesting interim report on the lack of competition in key markets. The Innogy/SSE merger is just the latest example in the energy sector of the trend towards even more uncompetitive markets. If it goes ahead, it will lead to two big firms dominating the energy market. It should be blocked by the competition authorities, and it would be good to see Ministers encouraging that to happen. We also need a new generation of energy co-operatives, mutuals and municipal businesses encouraged to put consumers in the driving seat in the energy market, holding real economic power in that market, and keeping the profit from the generation of energy in local communities.

In many industries there are, in theory, ombudsman services, able to support consumers to seek redress from large businesses offering poor customer service. In practice, such ombudsman services often have limited powers and limited ability to enforce any redress they suggest. What is needed now is a proper champion for consumers, with the teeth to hold businesses to account. A consumer ombudsman with class-action powers and the information-gathering ability to match has always been opposed by big business groups in this country, but it is needed to help the consumer stand up to powerful big businesses when their concerns are ignored.

I draw the Committee’s attention to the case of the consumers taking action against Bovis Homes for shoddy building work, which has recently attracted some media attention; they are having to crowdfund the funding for court action. If there was a strong consumer ombudsman, those people who have moved into Bovis homes that are badly in need of further work would not be having to raise their own funds; instead, they could have turned to that ombudsman to take their case forward.

The truth is that markets need robust competition, and big plc businesses need strong challenges from other types of business. When 85% of all current accounts are held in just five big banks, of course it is no surprise that the regulator should find that there is not enough innovation in the retail banking sector. I therefore gently ask Ministers why they are committed to a long-term future for RBS as just another private sector bank. Why not turn it into a mutual, or a new building society, to challenge what would then be just four privately owned plc-style businesses?

Why are we not learning from the USA and Germany in encouraging more regional, mutually owned savings and investment banks that are focused on driving long-term investment—perhaps the patient capital that the hon. Member for North West Hampshire referred to—rather than on short-term dividends for shareholders, which are then used to justify ever-higher levels of executive pay? With sub-prime lending on the rise, and with the UK having the largest and fastest-growing consumer credit market in Europe—mostly, sadly, in high-cost options—it is difficult to understand why Ministers and regulators alike do so little to champion responsible finance operators such as community banks and credit unions.

On the point about credit unions, I welcome the limited moves in the Budget to help credit unions to expand, but I wonder why Ministers are not considering a wider package of reforms of the objectives and powers of credit unions, to allow for more innovation in services and in particular to enable them to provide a full retail banking offer, including in areas such as insurance and secured car lending. Why is there not more help for credit unions to market their low-cost credit offer to ordinary working people? If the Treasury were minded to take such action, that would bring UK credit union legislation into line with best practice in America, Canada and Australia. As the balance within the financial markets shifts farther and farther away from unsecured personal loans and cash savings, credit unions need the freedom to be able to rework their offer, and, as I understand it, legislation would be necessary to enable that to happen. I therefore encourage the Minister and his colleagues to consider that question sympathetically.

Lastly, I want to raise the issue of funding for public services. Sadly, there was no mention in the Budget of extra resources for policing. In my London borough, we have seen a reduction of 170 police officers since 2010. The recent terrorist incidents, which the whole House is familiar with, and the concerns of senior police officers that more resources need to be put into community policing—to ensure, among other things, that intelligence can be obtained about future attacks—should surely have prompted the Treasury to make additional funding available for policing.

[Stephen Lloyd]

Does the hon. Gentleman share my disappointment that the armed services were not even mentioned in the Budget, either generally or in relation to the pay and salary of their staff?

[Gareth Thomas]

The hon. Gentleman makes his point well, and I agree with him. He also made a point earlier that many Members have raised before, when he expressed disappointment at the paltry level of additional funding for schools. Similarly, we have heard about the scale of cuts to local authorities such as Harrow, which has lost some £83 million over the past four years. The council is facing huge difficulties in meeting the demand for increased children’s services, for housing people who are homeless and for meeting the growing social care challenge in our borough. Even at this late stage, I encourage Conservative Members to press Ministers for more investment in public services. Brutally, this was a grim Budget, and the Bill holds out no hope for anything better.

[Several hon. Members rose—]

Budget Resolutions

Gareth Thomas Excerpts

Wednesday 22nd November 2017 Commons Chamber

[Chris Evans]

I respect the hon. Gentleman as a parliamentarian, but he is wrong about this. He knows that that was a false statement made by the leave side to try to con people into voting leave. There is no point in standing by that claim anymore.

The thing is that we heard nothing in the Budget about Brexit; all we heard is that it will not be dominated by Brexit. Well, I am afraid the Chancellor is wrong: every Budget from here on in will be dominated by the consequence of leaving the European Union.

The Budget went on and on and on. There were terms that the Tories would love. We heard about a strong Government and that we will be resolute in our determination to bring about a strong economy. It took eight pages before we got to the real story of this Budget: quite simply, productivity growth is down and is continuing to fall. The Chancellor is the first since world war two—this is something he should be proud of —who has stood at the Dispatch Box and said that growth will be below 2%. It gets worse: the figure is 1.5% in 2017, 1.4% in 2018, and 1.3% in 2019 and 2020. It will hopefully then pick up to 1.5% and, finally, to 1.6% in 2022. At the same point, debt will be at its highest level ever—and there the Government are being over-optimistic.

If we are not going to talk about Brexit, we should at least talk about the fundamental weakness in our economy: productivity. Productivity has failed to return to pre-crash levels, and it does not look like that is going to happen any time soon. The OBR has revised its estimates of Britain’s long-term productivity gains and economic growth. It claims that this means that Britain’s economy will not bounce back from the financial crisis, and output per worker probably will not recover to its pre-crisis rate of 2.1%.

Our productivity crisis will mean larger budget deficits in future years. A downgrade in productivity, and therefore depressed earnings, will mean that future tax revenues take a serious long-term hit. The downgrade will create a £20 billion black hole in the UK’s public finances, according to the Institute for Fiscal Studies.

We cannot hide this problem anymore. The Government should not be so timid and so scared of their friends from Ireland. We need radical solutions. Things have not worked. We cannot go on all the time with this rhetoric that things are going to improve. We have to take action, and that must happen now.

For me, the most fundamental error the Government have made since they came to power in 2010 is failing to get to grips with the banking system. We need to boost business investment through a network of regional banks. Germany has thousands of banks, including vibrant state-run and co-operative sectors, many focused on lending specifically to small and medium-sized businesses. In Britain, just five banks hold 85% of all current accounts. The Chancellor could learn from the German model by enabling a new generation of mutually owned building societies and savings banks to focus on driving long-term investment, rather than short-term dividends for their shareholders.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Might not the Chancellor also rethink the future of the Royal Bank of Scotland? At the moment, the Government are committed to privatising it at some point in the medium term. Surely taking the opportunity to set a future for RBS as a mutual—the “Royal Building Society of Scotland”, perhaps—might be a better way to encourage competition with the other big four players in the banking market.

[Chris Evans]

My hon. Friend speaks from experience as the chairman of the Co-operative party, and he is absolutely right that we need a thriving co-operative sector in this country. Again, if we want to talk about the past and the reason why we do not have a strong mutual sector in this country, it is because of the raid that the Tory Government of the 1980s allowed on many of these institutions, with the most famous example being Bradford & Bingley. We allowed people to become members, and then turned these institutions into plcs—and look where that got us. We need fundamental reform from this Government.

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[Gareth Thomas (Harrow West) (Lab/Co-op)]

It is a pleasure to follow the right hon. Member for Witham (Priti Patel). She will not be surprised that I take a slightly different view of the decision our country made on Brexit, but nevertheless I thought she gave an interesting speech. I was also interested in the comments of the right hon. Member for Sutton Coldfield (Mr Mitchell) about the need to reform capitalism. I thought his proposals rather timid, but they were at least a start in terms of recognising how corporate culture needs to change. I gently encourage him that there are forms of public ownership that he should look at with a little more enthusiasm than his remarks suggested he did. If I have time, I hope to pick up on some of those.

The most striking features of the Budget thus far are the revelations about the cost of Brexit. The OBR’s downgrade of growth forecasts means that for the first time in modern history the official UK GDP growth forecast for every year being forecast is under 2%. The setting aside of an extra £3 billion to fund the cost of Brexit is quite extraordinary. I do not remember anyone in the leave campaign even hinting at such costs. Earlier this month, the Bank of England Governor gave his verdict on the economy, when he said that “Britain would be booming” were it not for the “Brexit effect”. Indeed, with favourable conditions and stronger growth in other parts of the world—sadly, notably in the eurozone—Britain has fallen from the top to the bottom of the league of G7 leading economies in the year since the Brexit vote. Perhaps most strikingly, foreign investment in Britain is 20% lower than the Bank of England forecast before the referendum result.

It is easy, therefore, to be even more concerned than we might have been about the cost of Brexit. The evidence that businesses are now beginning to produce to explain why they are falling back on investment decisions is perhaps not surprising, given that the Cabinet themselves cannot decide what kind of trading relationship they want with our European partners, and the truth is that ordinary households are paying the price. According to a report published this month by the Centre for Economic Performance, the impact of inflation and a weaker pound since the referendum means that the average worker has experienced a real-terms cut of nearly £450 in annual pay, the equivalent of a week’s salary. But, sadly, the Government march on, insisting that we will leave the customs union and the single market, and that no deal may well be an acceptable outcome.

Just recently, we have heard striking evidence from car manufacturers such as Honda about the potential cost of leaving the customs union. For some manufacturers, it will be up to £850,000 a year. Honda estimates that it would take 18 months for it to set up the warehouses and the procedures that it would need if Britain left the customs union, which the Government insist will happen in 17 months’ time. That is genuinely worrying for the future of jobs in this country.

The general election confirmed that there is no mandate for a hard Brexit, so even at this late stage I urge Ministers—and, if I may do so gently, those on my own Front Bench—to explore again soft Brexit options such as membership of the European economic area. Not only would that potentially allow new arrangements in respect of issues of concern to the British people such as judicial authority and freedom of movement, but it would, crucially, provide significant economic certainty for the future.

The second aspect of the Budget that I want to deal with is its failure to tackle the crisis in funding for public services. I found it striking, given the terrorist attacks that our country has experienced this year, that the Chancellor made absolutely no mention of additional funds for the police or, indeed, additional investment in tackling the ongoing threat of terrorism. Harrow has lost 173 police officers since 2010. Violent crime has risen, and knife crime in particular is up by 60%. There have been stabbings in both south Harrow and Harrow town centre, which is something that my constituency has not experienced for a considerable time. The fear of crime is therefore substantially on the increase.

[Mr Jim Cunningham (Coventry South) (Lab)]

My hon. Friend has mentioned police numbers and the rise in knife crime. The West Midlands has lost more than 2,000 policemen. How can knife crime, and other crimes for that matter, be tackled when a police force is being reduced? A more important point can be made about public services. Instead of telling the police, the fire brigades and the nursing and medical profession what they are doing, why do the Government not pay them a decent wage? Is that not the best way of thanking them for the services that they give?

[Gareth Thomas]

I strongly agree with my hon. Friend. It worries me that the Government have chosen to do nothing about the real threat of a further loss of 3,000 to 4,000 police officers, which the Metropolitan Police Commissioner, Cressida Dick, has said will happen if there is no increase in the Met police budget. As a consequence of the lack of funding, Harrow will be merged with Barnet and Brent. Barnet’s burglary rates have increased substantially of late, and Brent has a significant gang problem. Many of my constituents understandably fear that police will be taken out of our borough to deal with problems in the two other boroughs, and that crime in Harrow will not be tackled in the way that they might have hoped.

In the national health service, I think it significant that the extra resources that both the King’s Fund and the head of the NHS said were necessary have not been provided. There has been some uplift, and I obviously welcome that, but it is striking that just last year, 2.5 million people waited for more than four hours in accident and emergency departments, compared with the 350,000 when Labour left office, and 4 million people are currently on the waiting list for treatment in an English hospital.

Northwick Park Hospital, which serves my constituency, is the second-busiest trust in London, following the Government’s decision to close the A&E departments at Hammersmith Hospital and Central Middlesex Hospital. In my constituency, we worry that Ealing Hospital’s A&E is also due to close. Our trust ended the last financial year some £60 million in deficit with an underlying deficit of almost £100 million, and it is expected to make savings of £50 million in the current financial year, which the leadership of the trust says is an unprecedented challenge, so hon. Members can understand why my constituents will be deeply worried about the implications of this Budget for their hospital.

Similarly, many schools in my constituency are under considerable financial pressure, having to not fill teaching assistant vacancies and replacing experienced staff who leave with newly qualified teachers. The Budget does nothing to address those problems, and there is nothing on the financial crisis in adult social care or on the increasing crisis facing children’s services.

Lack of time prevents me from picking up the challenge that the right hon. Member for Sutton Coldfield laid down—a debate on how one reforms capitalism—but there might be potential in a series of co-operative and mutual solutions. We particularly need an increase in co-operative housing, and I think that the Royal Bank of Scotland should be converted into a building society. Far more also needs to be done to encourage an increase in energy co-operatives to challenge the dominance of the big six players.

Christmas Adjournment

Gareth Thomas Excerpts

Tuesday 20th December 2016 Commons Chamber

[Bob Blackman (Harrow East) (Con)]

I beg to move,

That this House has considered matters to be raised before the forthcoming adjournment.

I rise to speak on behalf of the Backbench Business Committee. Unaccountably, I must apologise for the Chair of the Committee, the hon. Member for Gateshead (Ian Mearns), who is unable to be with us this afternoon; he is no doubt very active in his constituency, regaling his constituents with festive wishes.

The theme of my introduction is thinking about those who are less fortunate than we are. First and foremost, I want to place on the record what I believe is the view of the whole House in expressing our horror and revulsion at the events at the Berlin Christmas market. Our thoughts are not only with those who are fighting for their lives, but with the relatives of those who have sadly lost their lives. It just shows what can happen and the horrors that can ensue at a simple Christmas market where law-abiding people are going about their business. We do not yet know who was responsible or what their motives were. However, our sympathies are with the relatives of those who have lost their lives and equally with those who have been severely injured.

Secondly, let us express our thoughts, as a whole House, for the people of Aleppo, who are in a parlous condition at the hands of a brutal dictator, and a brutal army that is basically eliminating anyone and everyone that stands in its way. I trust that there will be a resolution of this terrible conflict in the new year, and that people will be able to return to their homes in peace and harmony.

Thirdly, this is the first Christmas that Jo Cox’s family will experience without her. Members on both sides of the House have been touched by the brutal murder of a colleague who was just doing her job on behalf of her constituents. The best thing we can all do—even if we are not used to downloading tracks—is to download her single and help to make it the No. 1 for Christmas. That would be a fitting tribute for a late colleague whom we all mourn.

I want to move on to another set of people who are far less fortunate than we are—the homeless and rough sleepers. Madam Deputy Speaker, you will know all too well that my Homelessness Reduction Bill is making its way through Parliament. I am delighted to say that it has all-party support. It had an unopposed Second Reading on 28 October, and we have pursued the Bill in Committee, where I am pleased to say that we are more than halfway through its 13 clauses. I am told that it is the longest ever private Member’s Bill, and it will probably end up as the most expensive for the Government to fund.

Equally, the Bill is very important. The number of people who are homeless in this country is a disgrace, and the number of people who will sleep rough tonight is a disgrace. We owe it to them to make sure that we deliver a radical solution. First and foremost, that is about increasing the supply of housing so that people can have a decent roof over their head, but it is also about transforming local authorities to make sure that they look at the reasons why people are homeless and provide help and assistance at first hand.

I want to thank some of the people involved. I place on the record my thanks to Crisis, St Mungo’s and Shelter for all the work they do to assist people who are homeless at this time of year. I also thank them for giving me tremendous support in producing the Bill, together with the National Landlords Association, which has also given me exceptional assistance.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

Given that it is Christmas and that the hon. Gentleman has raised the subject of housing, will he take this opportunity to join me in praising Harrow Council for beginning to build council houses—for the first time in 28 years, there will be new council homes in Harrow—which is surely a key part of tackling the housing crisis that affects both our constituencies?

[Bob Blackman]

I thank the hon. Gentleman, who is my constituency neighbour, for raising that issue. It is important that affordable housing is developed right across London and right across the country. To me, the form of tenure does not matter too much; what matters most is that housing is provided for people at a price they can afford. It is good to see Harrow Council doing something right under Labour control. That is very rare—I have a whole catalogue of its errors. But in the spirit of Christmas, let us thank the council.

May I also place on the record my concern and that of more than 216 Members of Parliament about the plight of Equitable Life policyholders? It is a long-running scandal. Although the Government have now closed the compensation scheme to new applicants, the issue is far from over. The Government rightly provided £1.5 billion in compensation to people who suffered from the scam, but the former Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne), made it clear that the total sum owed to those people—as a result of saving their money, as was their right, for a reasonable retirement—was £4.3 billion. More than 1 million people have received only 22% of the compensation they are due. A great deal of money still needs to be found to compensate those applicants. That is without dealing with the most frail and vulnerable—those with pre-’92 trapped annuities, who deserve help on compassionate grounds. I am glad that the new Economic Secretary has agreed to meet a cross-party delegation in the new year to discuss the next steps.

UK Sovereign Wealth Fund

Gareth Thomas Excerpts

Wednesday 14th December 2016 Westminster Hall

[John Penrose]

At this point in my remarks, I envisage a consistently balanced budget across the economic cycle. That would be a major step forward and, given this country’s history since the second world war, it would produce a welcome degree of certainty for businesses, Government and everyone else. I will come on to how we might then build up the sovereign wealth fund; the hon. Gentleman might like to come back at me at that point if he thinks I have not covered the issue properly.

Once we have stopped borrowing, we can start saving, which is the point the hon. Gentleman just made. That is where the sovereign wealth fund comes in. Most of that huge national debt comes from our pay-as-you-go state pension and benefits scheme, so paying off Government bonds—gilts—will not be enough on its own. Even worse, we cannot just grow our way out of trouble, because the pension and benefits scheme’s liabilities will just grow with us. Instead, we need a sovereign wealth fund to pay for what we owe in our pensions and benefits system.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

As the hon. Gentleman is one of the more assiduous members of his party, he will have seen that the Co-operative party floated in September 2013 this very idea of a UK sovereign wealth fund. Does he see our proposal of turning the Crown Estate into that sovereign wealth fund as an attractive idea?

[John Penrose]

I have not included in my paper any proposal to take existing Government assets and pour them into the sovereign wealth fund, to give it a kick-start. It would be possible, and there are parallels. The previous Chancellor floated the idea of a regional shale gas sovereign wealth fund, based on the proceeds from fracking. A number of Government assets could be added to any sovereign wealth fund, though in my paper, I do not propose that they should be, but there are respectable parallels. For example, the Norwegian sovereign wealth fund is based on the proceeds of its North sea oil. That is certainly an option to consider. I am not proposing it here, but it is certainly not beyond the bounds of possibility. There are very respectable parallels and antecedents elsewhere in the world.

We need a sovereign wealth fund to pay for what we owe in our pensions and benefits system. It would give the scheme the same strong financial foundations as other occupational pension schemes in the UK for the first time in our country’s history. Like those other schemes, it should be managed through a fully independent board—in this case, a new stand-alone national insurance trust with a heavyweight board of trustees, like that of the Bank of England, to prevent political meddling.

Building the fund is rather like repaying a mortgage or saving for a pension: we have to put a little aside every month for a very long time. We would start by creating a new national debt charge, carved out of income tax, to pay the interest on the national debt, currently projected to be just over 2% of GDP by 2021. It would be set as a percentage of GDP and, as the economy grew, any surplus would be used to build up the fund. The process needs to take a long time—several generations—so that the costs do not all fall unfairly on current taxpayers. It is urgent too, because we need to start soon. There will be a brief moment, when the Government’s budget reaches balance in the next Parliament, when we could set the fund up, but old, bad habits die hard. As soon as there is a hint, a sniff, of a surplus, there will be dozens—hundreds—of proposals for tax cuts or extra spending from both sides of the House. Many of them will be excellent ideas, but we must ensure that we do not miss the golden opportunity to set the fund up at that moment, when we can, before it is too late and any surplus money is earmarked for other things.

We must ensure that all the effort and sacrifice of getting the budget in balance is not wasted. A balanced budget cannot be just a one-off episode of fiscal sobriety, in which our rock ’n’ roll economy detoxes for a few months before hitting the party scene again. We need a long-term commitment to clean living—to the fundamental rebalancing of our economy that the sovereign wealth fund would deliver.

Creating the fund would rebalance our economy; build stronger foundations, so that we invest more for the long term; deliver faster growth and extra jobs, so that we could afford stronger and better public services; insulate us against the next economic shock, such as the latest banking crisis; make us less dependent on foreign investors once Brexit is complete; build our international heft around the world; and answer some of those fundamental questions about the kind of country that we want to be after we leave the EU.

--- Later in debate ---

[Ian Blackford]

I agree, in so far as we have to establish the mechanisms to make sure that we have something left for future generations and the issue is not just about oil. What I want to do in this debate is talk about the missed opportunities and how we can learn from them.

I will come specifically to how we can deal with not only the financial crisis but the decline in oil prices over the past few years. We cannot run away from the fact. We know that oil prices are depressed at the moment and that revenues from North sea oil have declined alarmingly, and that that will remain the case for the next couple of years. However, there is still the value of 2 billion barrels of oil in the ground under the North sea, and at some point oil prices will recover: there will still be the opportunity to create that oil fund out of the North sea oil revenues.

[Mr Gareth Thomas]

In the words of Oasis, the hon. Gentleman is looking back in anger. I understand, given his political perspective, why he is doing that. Might I encourage him to look forward and to think about how we might establish a sovereign wealth fund going forward? Has he had the chance—assiduous politician as he most definitely is—to reflect on the Co-op party proposal, which envisages turning the Crown Estate into the beginnings of a UK sovereign wealth fund?

--- Later in debate ---

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I apologise to the Front Benchers: because of other commitments, I will have to read their responses to my contribution and others in Hansard.

I want simply to re-emphasise the proposal that the Co-operative party floated some three years ago: that the Crown Estate, which holds some £8.6 billion of land and property, should have changes made to its regulations to allow it to invest overseas and so essentially become the beginning of a sovereign wealth fund. It is appropriate to have a degree of realism about the size of other sovereign wealth funds and, therefore, about the task for a future Government who want to set one up. As others have suggested, one has to start somewhere if one thinks a sovereign wealth fund is a good idea.

For all intents and purposes, the Crown Estate acts like a sovereign wealth fund by investing in property—usually retail centres—and paying the surplus it generates back to the Treasury to help offset the costs of our royal family. We should encourage the Crown Estate to be a little more ambitious by lifting the restriction that says it can invest only in UK assets and by allowing it to invest in assets overseas, as other sovereign wealth funds do. The Crown Estate clearly has a track record of expertise in the retail sector, and one might therefore expect it to continue with that approach. I see no reason for the Crown Estate not being allowed to contemplate, under the Treasury’s watchful eye, investment in similar ventures overseas. The Crown Estate could then hopefully generate sufficient surplus not only to pay for the royal family, but to invest in the types of infrastructure projects that all Members want to see.

The Crown Estate has a comparatively smaller asset base than the funds held by Norway and a number of middle eastern countries. Nevertheless, I see no reason for not advocating a more ambitious strategy, with the hope and aspiration that the Crown Estate might begin to become a sovereign wealth fund. I have had no clear explanation from the Treasury of why it opposes changing the law to lift the restrictions that limit the Crown Estate’s investments to the UK market. I hope that the Minister—if not in this debate, then perhaps by way of letter—will think about that, because if the restriction were lifted, the Crown Estate would begin to act like a sovereign wealth fund.

[George Kerevan]

Does the hon. Gentleman accept that some of the Treasury’s reservations might be overcome if we followed the Norwegian example and had limits for classes of investment that a sovereign wealth fund could make? If we went down the route of investing in foreign equities or bonds, only a proportion of that investment would then qualify for the overall fund.

[Mr Thomas]

That is a helpful suggestion. If the Treasury could be persuaded to allow the Crown Estate to dip its toe in overseas markets, it might initially restrict how and where, and in what type of assets, the Crown Estate invests. The hon. Gentleman, cautious Scot as he clearly is, might wish to encourage the Treasury both to be open-minded about investment overseas and to carefully restrict such investment. I do not oppose such a restriction if it allows the Crown Estate to be a little more imaginative.

With that pithy contribution, I encourage the Minister and my Front-Bench colleague to embrace the Co-op idea with enthusiasm and consider how we might begin a UK sovereign wealth fund.

--- Later in debate ---

[George Kerevan]

In a spirit of compromise and reaching a consensus that might have an impact on the Treasury, I happily take the hon. Gentleman’s point.

All I am trying to say is that the crude default assumption that taking the money and giving it to individuals or companies will resolve the infrastructure investment problem has historically not proven correct. We come back to the need for some kind of overall public agency that saves and invests. The crude Thatcherite argument, if Members will forgive me for putting it that way, that says “Leave it to the public” is wrong. Short-term pressures on the public and on companies are just as great as those on Governments and Ministers. Somebody somewhere has to create an agency that thinks long term. That is what we are talking about.

[Mr Gareth Thomas]

The hon. Gentleman’s colleague was a bit sniffy about the idea of turning the Crown Estate into such an agency. Could the hon. Gentleman be persuaded to be more positive about the idea?

[George Kerevan]

I am not sure that I recognise that characterisation of my good friend, my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford). In case it has never been said on the record before, I will say that he was once my student when I lectured in economics—he is younger than he looks—so everything he knows about economics probably came from me. Anyway, I will come on to the Crown Estate in a minute.

What should we spend the money on? I agree with the hon. Member for Harrow West (Mr Thomas) that the Norwegian example of simply investing in foreign equity is too narrow. Given the primary crisis here in the UK, we should impose an injunction on whatever form of wealth fund we create to invest primarily—not totally, because for safety and balance it should have a remit to spread its portfolio—in infrastructure. The OECD reckons that a baseline of something like 3.5% of GDP should be reinvested in public infrastructure every year to maintain and develop reasonable levels of productivity. In the UK, that investment has fallen to less than 2%. I fully recognise that significant funds for infrastructure investment over the forecast period were announced in the autumn statement, but even so the figure will rise only to about 2.3%, and we need to get up to at least 3.5%, so there is an infrastructure investment gap. The flow of funds could come from a sovereign wealth fund, because above all a sovereign wealth fund can think long term, whereas the City and the financial institutions are being forced to think more and more short term. Again, one of the crucial things we get from a sovereign wealth fund is the ability to think long term rather than just talk about thinking long term.

How would we fund it? I share some of the disquiet about simply linking it to running a budget surplus. Running a budget surplus is extraordinarily difficult; it has rarely been possible to run one over any length of time, in this country or in others. Gordon Brown ran one for a few years at the beginning of the millennium, but it was largely done through artifice because he sold off the gold reserves at rather a bad time. Roy Jenkins, who some Members may be old enough to remember, ran a budget surplus at the end of the 1960s, but only with a hugely draconian austerity programme that actually undercut investment in the long run.

From looking closely at the autumn statement, I do not believe that there is much chance of our running a budget surplus at the end of the forecast period. I certainly agree that we should seek to have a balanced current budget over the medium term, but artificial controls on investment and on borrowing for investment are the wrong way to go. There is no reason not to have quite a healthy borrowing for investment, provided that it is roughly in line with trend growth, because it will make a return. Simply linking the sovereign wealth fund to running a budget surplus is offering a hostage to fortune.

We should therefore look at other sources of funding. The Crown Estate is one—clearly we have assets there that could be deployed. I also remind hon. Members of something that has not yet been mentioned: in the last decade, most of the sovereign wealth funds that have been created, particularly in China, have come from recycling the foreign investment earnings from a trade surplus. It is a bit difficult for the UK, given that we have a trade deficit. Fortunately, in Scotland, where we still have a trade surplus, that surplus would underline the re-creation of our sovereign wealth fund.

Clearly, this is an idea whose time has come and about which there is broad consensus across the parties. It is also an idea that the Treasury has always been reluctant to think about, but that stems from the short-termism of the Treasury. The new Chancellor has suggested that he wants to think longer term. A sovereign wealth fund would be his chance to prove that that is what he is going to do.

Savings (Government Contributions) Bill

Gareth Thomas Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 12th December 2016 Commons Chamber

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 2—Impact review: automatic enrolment and pensions savings—

‘(1) The Treasury must review the impact of Lifetime ISAs on workplace pensions automatic enrolment and pensions savings within one year of this Act coming into force and every year thereafter.

(2) The conclusions of the review must be made publicly available and laid before Parliament.’

This new clause would place a duty on HMRC to review annually the impact of Lifetime ISAs on automatic enrolment.

New clause 3—Lifetime ISAs: Advice for applicants—

‘(1) The Treasury must, by regulations, make provision for all applicants for a Lifetime ISA to have independent financial advice made available to them regarding the decision whether or not to save in a Lifetime ISA.

(2) Any applicant that opts in to the services offered under subsection (1) shall be given a signed declaration by that service provider outlining the financial advice that the applicant has received.

(3) Any provider of a Lifetime ISA must confirm whether an applicant—

(a) intends to use the Lifetime ISA for the purposes of paragraph 7(1)(b) of Schedule 1,

(b) has a signed declaration of financial advice under subsection (2), or

(c) is enrolled on a workplace pension scheme or is self-employed.

(4) Where the provider determines that the applicant is—

(a) self-employed and does not participate in a pension scheme,

(b) not enrolled on a workplace pension scheme,

(c) does not intend to use the Lifetime ISA for the purposes of paragraph 7(1)(b) of Schedule 1, or

(d) does not have a signed declaration of financial advice under subsection (2),

the provider must inform the applicant about the independent financial advice available to them under subsection (1).’

This new clause would place a duty on the Treasury to make regulations that ensure all applicants for a Lifetime ISA have independent financial advice made available to them.

New clause 4—First-time residential purchase: research and impact assessment—

‘(1) Within one year of this Act coming into force the Treasury must conduct a review into the potential impact of provisions within paragraph 7(1)(b) of Schedule 1 on—

(a) house prices in the UK, and

(b) the operation of the housing market.

(2) The findings of the review must be made publicly available and laid before Parliament.’

This new clause would require a review of the Bill’s effect on the UK housing market/house prices.

New clause 5—Distributional analysis of the impact of the Lifetime ISA and Help to Save—

‘(1) Within six months of this Act coming into force the Treasury must conduct an analysis of the distribution of benefits of Lifetime ISAs and Help-to-Save accounts including between—

(a) households at different levels of income,

(b) people of different genders,

(c) people with disabilities, and

(d) black and minority ethnic groups.

(2) The findings of the analysis conducted under subsection (1) must be laid before Parliament.’

New clause 6—Lifetime ISA and Help-to-Save: value for money—

‘(1) Within six months of this Act coming into force the Treasury must assess the value for money provided by the Lifetime ISA and Help-to-Save scheme.

(2) The assessment must in particular include—

(a) the cost to the Exchequer of the measures,

(b) the number of individuals who have benefited from the measures, and

(c) the average tax deduction received by an individual as a result of the measures.

(3) The findings of the assessment must be made publicly available.’

New clause 7—Advice for applicants—

‘The Treasury must make provision by regulations to ensure all providers of Lifetime ISAs or Help-to-Save accounts provide applicants, at the point of application, with advice about the suitability of the product in question for each individual applicant.’

This new clause would require advice to be provided to applicants for LISAs or Help-to-Save accounts which must include information on automatic enrolment and workplace saving schemes.

Amendment 15, in clause 1, page 1, line 1, leave out clause 1.

See explanatory statement for amendment 16.

Amendment 17, in clause 3, page 2, line 17, leave out “1 or”.

Amendment 18, page 2, line 19, leave out “Lifetime ISA or”.

Amendment 19, page 2, line 23, leave out “Lifetime ISA or”.

Amendment 20, in clause 4, page 2, leave out lines 32 to 36.

Amendment 21, page 3, leave out lines 9 to 11.

Amendment 22, in clause 5, page 3, leave out line 23.

Amendment 6, in clause 6, page 3, line 36, leave out from “on” to end of line 37 and insert “30 April 2019”.

This amendment would delay the commencement of the Bill until the end of April 2019, when all firms will be auto-enrolled and the increase in minimum contributions to eight per cent. will be completed.

Amendment 16, page 5, line 1, leave out schedule 1.

This amendment, together with amendments 15 and 17 to 22, would remove provisions for the Lifetime ISA from the Bill.

Government amendment 3.

Amendment 1, in schedule 2, page 16, line 3, leave out “48” and insert “24”.

Amendment 12, page 16, line 31, at end insert—

“(1A) The conditions specified under subsection (1) shall not include the condition that the individual be over 25 years old if that individual meets all other specified conditions relating to the working tax credit.”

Currently those aged under 25 only qualify for Working Tax Credits if they work at least 16 hours a week. This amendment would ensure any individual aged under 25 would qualify for a Help-to-Save account if they met other specified criteria.

Amendment 2, page 17, line 36, at end insert—

“(d) a credit union.”

Amendment 8, page 18, line 16, leave out “maximum” and insert “average”.

See explanatory statement for amendment 11.

Amendment 9, page 18, line 19, leave out “maximum” and insert “average”.

See explanatory statement for amendment 11.

Amendment 10, page 18, line 19, after “means”, insert “an average of”.

See explanatory statement for amendment 11.

Amendment 11, page 18, line 19, after “£50”, insert

“across every two month period within the maturity period”.

Together with amendments 8, 9 and 10, this amendment would allow HTS to provide for “top-up” monthly payments above £50 so long as the average payment for every two months is £50.

Government amendment 4.

Amendment 14, page 19, line 2, at end insert—

“(e) provision for eligible persons to be auto-enrolled into Help-to-Save accounts through deductions from salaries or benefit entitlements unless the individual chooses to opt-out.”

This amendment would enable an ‘auto-enrolment’ workplace saving scheme which would see an individual automatically signed up to a Help-to-Save account. He or she must opt-out to stop money being deducted from their pay or benefits into a savings account.

Government amendment 5.

Amendment 13, page 19, line 31, at end insert—

“(3A) Where a bankruptcy order is made against a person with a Help-to-Save account any bonus paid into the Help-to-Save account will not form part of a debtor’s estate during insolvency proceedings.

(3B) Any bonus paid into a Help-to-Save account shall not be liable to be taken as repayment via third party debt orders.”

Amendment 7, page 20, line 23, at end insert—

“(ba) for a bonus in respect of a Help-to-Save account to be paid after six calendar months beginning with the calendar month in which the account is opened and at six month intervals thereafter;”.

This amendment would reduce the time before the holder of a Help to Save account would receive a government bonus to six months.

[Mr Thomas]

I am grateful for the opportunity to speak not only to new clause 1, but to amendments 1 and 2. I should declare an interest as a member of the M4Money credit union and as chair of the all-party group on mutuals.

New clause 1 seeks to give a statutory right to anyone wanting to save with a credit union via payroll deduction. Amendment 1 would reduce to one year the two years that those who are just about managing will wait before getting the Government top-up under Help to Save, to better incentivise saving under the scheme. Amendment 2, about which I shall speak a little more first, seeks to allow credit unions to offer the Help to Save product.

I took part in the Second Reading debate and raised the concern that credit unions would not be allowed to offer the Help to Save product. I have read through the transcripts of that debate and of the Committee proceedings and I can still see no good reason for the Government’s resistance to allowing credit unions to offer the Help to Save scheme. I recognise that Ministers want to ensure national coverage of Help to Save so that everyone who meets the criteria—the potentially 3.5 million people across the UK who Ministers think might do so—regardless of where they live can access the scheme. That clearly makes sense. I have no objection to the choice of National Savings & Investments as that national provider of choice. What I cannot see is any valid reason why credit unions cannot be allowed to complement the NS&I offer.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I too declare an interest as a member of the Cardiff and Vale credit union and I am also pleased to be, like my hon. Friend, a member of the Co-operative party. Does he agree that the Government need to be far more ambitious as regards credit unions playing a full part in financial services, and that, as I mentioned on Second Reading, we need to be heading in the direction of other countries, such as Canada, that have a much bigger credit union sector?

[Mr Thomas]

My hon. Friend makes an important point. We need much more ambition for credit unions and for financial mutuals and co-operatives more generally. I am thankful for his intervention.

Ministers claimed in Committee that a multiple provider model for Help to Save would not offer value for money, yet as far as I can see they have produced no costings to justify that claim. It is not as if Ministers are dealing in the case of NS&I with a private company demanding an exclusive arrangement as it feels threatened by the competition that credit unions can offer. NS&I is a state-owned bank, effectively, and is responsible to the Treasury. Indeed, I understand that the Minister responsible is the Economic Secretary to the Treasury, who is also responsible for policy on credit unions. NS&I has some 25 million customers and £135 billion in assets. By comparison, credit unions across the UK have £1.37 billion in assets, less than 1% of the value of NS&I’s investments. In short, credit unions are no threat to NS&I.

NS&I is under the control of the Treasury, as I have said, and it is in Ministers’ hands, or it was until the start of the House’s proceedings on this issue. The House now has the opportunity to decide whether credit unions should be allowed to offer the Help to Save scheme.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I thank my hon. Friend for giving way, and I am delighted to serve as a Labour and Co-operative MP alongside him. Does he agree that allowing such diversity is important in helping to change behaviour? Many of the issues with savings are about cultural attitudes, and having ways to reach out to communities that might not have engaged in such behaviour is an important part of changing the savings culture in this country.

[Mr Thomas]

My hon. Friend makes a good point, and I hope to deal with it a little more in due course. She is right that credit unions have scope to reach out to more of the 3.5 million people Ministers want to assist through the Help to Save scheme, whom NS&I might not be best placed to help.

Credit unions are not-for-profit financial co-operatives, owned and controlled by their members. They are, I would argue, more uniquely exposed to low and middle- income financial services markets and are used to offering financial services to those who are often excluded from other better known sources of finance. They provide safe savings and affordable loans, with some credit unions offering other products, such as current accounts, individual savings accounts and mortgages.

[Yvonne Fovargue (Makerfield) (Lab)]

Is it not true that what is key is that credit unions can also provide loans? We know that low-income families have more bumps in the road than the majority of people on a higher income, so that provision, combined with the opportunity to keep saving, is an important service that NS&I cannot offer.

[Mr Thomas]

My hon. Friend has stolen one of my lines from later in my speech. She makes an entirely appropriate point: credit unions can offer access to an affordable loan while encouraging people to save at the same time. When the loan is paid off, the incentive to keep saving is still there.

Credit unions have until now enjoyed the support of Members on both sides of the House. From 2006 to 2007 the growth fund, launched by the Co-op party’s—and now Strictly’s—very own Ed Balls, saw more than 400,000 affordable loans offered and saved recipients between £120 million and £135 million in interest that would otherwise have been paid to high-cost lenders. It is that type of success that, after a long Co-operative party campaign under the last Government, saw Ministers, led by the right hon. Member for Broxtowe (Anna Soubry), agree to allow three credit unions to offer services to our soldiers, sailors and airmen and to their families—in short, to offer an armed forces credit union. Given the funding from the Department for Work and Pensions under the last Government to expand credit unions, it seems odd that Ministers should tonight want to continue to exclude credit unions from offering a product in a market in which they already have significant interest and penetration.

--- Later in debate ---

[Mr Speaker]

The final words in respect of this group of amendments are for the hon. Member for Harrow West (Mr Thomas).

[Mr Gareth Thomas]

This debate has been short but interesting. I hope that Members will forgive me if I confine my brief remarks to the three amendments tabled in my name. My hon. Friend the Member for Walthamstow (Stella Creasy) made a characteristically excellent speech dwelling on the debt tsunami coming our way. She rightly alluded to the challenges that many credit unions face in providing a service through local employers to their employees.

My hon. Friend the Member for Bootle (Peter Dowd) made an excellent speech from the Front Bench—perhaps inspired by listening to the works of Shostakovich, of whom he is a devotee. Given the numbers who might be eligible, he is rightly worried that the number of people who sign up for Help to Save will not be as great if credit unions are not included among the providers that can offer Help to Save.

I was interested by the Minister’s response, and I hear her concerns about new clause 1, which I look forward to exploring more in a meeting with the Economic Secretary to the Treasury. I was grateful to hear the Minister offer some reassurance on amendment 1 and the possible reduction to 12 months from 24 months. As a result, I will not press amendment 1 or new clause 1 to a Division.

I will, however, seek a vote on amendment 2 because I gently suggest to the Minister that she did not make a convincing case as to why credit unions should not be allowed to offer this product. It is clear that NS&I will be a good national provider, but it is unclear why credit unions cannot be given the opportunity to offer the product at the same time. Given all the effort and expense that the Treasury is going to, it seems odd not to take advantage of the opportunity that credit unions can provide to get more people signed up. In that spirit, I intend to press amendment 2 to a vote, but I will not press new clause 1 or amendment 1.

Clause, by leave, withdrawn.

New Clause 2

Impact review: automatic enrolment and pensions savings

‘(1) The Treasury must review the impact of Lifetime ISAs on workplace pensions automatic enrolment and pensions savings within one year of this Act coming into force and every year thereafter.

(2) The conclusions of the review must be made publicly available and laid before Parliament.’—(Peter Dowd.)

This new clause would place a duty on HMRC to review annually the impact of Lifetime ISAs on automatic enrolment.

Brought up, and read the First time.

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

--- Later in debate ---

[Mr Gareth Thomas]

It is a pleasure to follow my hon. Friend the Member for Luton North (Kelvin Hopkins). I did not have the privilege of serving on the Bill Committee, but I spoke on Second Reading and on Report. I welcome Ministers’ commitment to continue to engage with credit unions, which was the primary issue I sought to raise.

There is one issue we did not address in relation to Help to Save. With a national provider—National Savings & Investments—it would be relatively easy to disaggregate the data on who is taking advantage of the Help to Save product and to publish them in an anonymised form. We could track the postcodes to see where people are taking advantage of it. I raise that issue in the context of work that the Treasury is doing with the British Bankers Association to encourage banks to publish data about what financial services products are being offered to whom and who is taking advantage of them. The banks have been forced, reluctantly, to reveal where they are lending, but the information being provided is not yet perfect—we are on a journey with the banks.

One thing the Treasury could do once it gets this Bill through both Houses, as it seems likely to, is to require NS&I to publish on a postcode basis where people are taking up the Help to Save product. I commend that point to Ministers, and I hope they will take it up. I also hope that Members of the other House will explore this additional issue in a little more detail.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Savings (Government Contributions) Bill

Gareth Thomas Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 17th October 2016 Commons Chamber

[Jane Ellison]

Obviously, we have the Government bonus, which I mentioned, but I go back to the point about this not being an either/or choice; this is about people having potentially complementary products that are for different purposes. This product is not about replacing a pension; it is about giving people a complementary product to help them save for later in life, while keeping open the option of building up money to put towards a house. As we have seen, many hundreds of thousands of people have taken that opportunity with the previous ISA product.

The lifetime ISA can be used by people to get on to the property ladder for the first time and can be put towards a home worth less than £450,000. Through this Bill, from April next year a new, more flexible way to save will be available to people, as one of a number of options.

The Bill also introduces Help to Save, which is about finding a better way to support families who are just about managing but are struggling to build up their savings. All Members will be aware of the research carried out by a number of bodies, particularly the excellent Centre for Social Justice, which estimates that 3 million low-income households have no savings at all. That is not a nice position for anyone to be in: living without having any kind of financial safety net in place and knowing that if they lose their job, they have barely got enough money to pay next month’s rent.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

Will the Minister acknowledge the concern of some that the two-year qualifying period for Help to Save is lengthy for people on very low incomes? Will she also acknowledge the credit union movement’s concern that as a result of the Government response to the consultation on Help to Save—this is how I understand it—it is going to be excluded from offering Help to Save products?

[Jane Ellison]

We have announced that we will be going with a single provider, National Savings & Investments, at the outset, but the primary legislation does not preclude more people providing the product in future; it was essential that we got national coverage for offering this product, but, like all of us in this House, I have huge respect for the credit union movement and we certainly see a role for it going forward, not least in respect of advice and support, a point referred to a moment ago. Perhaps we will tease more of that out in this debate, but I hope that gives the hon. Gentleman some reassurance.

The two-year period comes from looking at the advice and research that has been done by groups that deal with people in this category, and trying to capture the moment at which a savings habit is ingrained. This does not mean people cannot take money out; there is no penalty for taking money out earlier if they want to access it, but the bonus comes at the two-year point, and I will come on to deal with that. This is based on research by groups and charities that work with people in the target market for the product, so there is a robust reasoning for that two-year period.

If someone is trying to put some of that hard-earned money aside in an effort to be more financially secure, we want them to have the full support of their Government as they do so. That is why, through this Bill, we want to introduce the new Help to Save accounts by no later than April 2018. They will be open to any adult who is getting working tax credits or universal credit and working enough to earn the equivalent of at least 16 hours’ pay at the national living wage. That means about 3.5 million people are likely to be eligible.

As has been mentioned, people can save up to £50 a month for two years—we are talking about £1,200 in total—and the Government will give them a 50% bonus. If after those two years someone wants to do that again for the next two years, they will be able to do so. This way to save also offers complete flexibility. What people want to do with the money they have saved and with the Government bonus they have earned is completely up to them, and if they want to take their money out at any time, they can; there will not be any charge or penalty for doing so.

--- Later in debate ---

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

It is a pleasure, as always, to debate opposite the Minister. I thank her for outlining the overarching principles of the Bill, which will introduce the new lifetime ISA and the Help to Save scheme. As we have heard, the lifetime ISA is a new savings product that will be available from April 2017 in which people under 40 may deposit up to £4,000 a year. The Government will then top up those savings by 25%. The savings accumulated in the LISA can be used as a deposit towards a first home, or can be accessed once a person is 60 to “complement”, to use the Government’s word, their retirement income. In the absence of using the product to save for a house deposit, it will be possible for a person to remove funds from the LISA before they are 60, but there will be a charge of 25%, effectively to remove the Government top-up from the funds withdrawn.

The Help to Save scheme will be available for people in receipt of either universal credit or working tax credit. If they receive working tax credit, they must have minimum weekly earnings equivalent to 16 hours at the so-called national living wage.

[Mr Gareth Thomas]

I was grateful to the Minister for her response to my question. Will my hon. Friend commit our Front-Bench team to probing the Government further on whether there should be a two-year qualifying period, or if the period should be reduced to 12 months? Similarly, will she commit our Front-Bench team to exploring in Committee whether credit unions can be allowed to take part alongside National Savings and Investments? NS&I already offers national coverage, so there is no reason why credit unions should be excluded.

[Rebecca Long Bailey]

My hon. Friend makes important points and we would support him in pushing the Government to respond to those questions. I will highlight some of the concerns of our Front-Bench team about the Help to Save scheme in particular. Credit unions are vital for the roll-out of any savings scheme that targets the most deprived communities.

--- Later in debate ---

[Rebecca Long Bailey]

No, that is not what I am saying at all. It is important that we address this issue, but we have to be clear about how we do so. Dealing with the root causes of poverty and people’s inability to save is the first important thing that the Government need to look at, and then the second element they need to consider when rolling out the measures in the Bill is the specific groups they intend to target. If they do not target the 3.5 million people who are eligible to take part in the scheme, how will they help those who do not take part in it?

There is considerable unease about the lifetime ISA policy across the pensions industry, the trade union movement, the Office for Budget Responsibility and Select Committees of this House. The Opposition support the idea of incentivising people to save for the future, especially for retirement income, but we are concerned that the scheme could create a diversion from saving in traditional pension products, rather than being an add-on to one’s main pension plan. Even a former Pensions Minister stated that the LISA “could even destroy pensions”. The UK faces a pensions time bomb. Eleven million people are signed up to defined benefit schemes in 6,000 pension funds in the UK, but PricewaterhouseCoopers recently produced data showing that the collective deficit in those 6,000 schemes had risen by £100 billion in just one month so that it stood at £710 billion at the end of August. Earlier this year, the OECD reported that we were facing a “global pension crisis” in which a person buying an annuity today who had saved 10% of their wages into a pension for 40 years could expect just over half the earnings of someone who had saved the same amount but retired 15 years ago.

This situation is very worrying, especially when the state pension in its current form certainly cannot be relied on to plug the gap. Last week, the OBR published a report concluding that recent pensions and savings measures introduced or announced by the Government would create a £5 billion a year black hole in the public finances. The report states:

“The net effect on the public finances is positive in the early years, peaking at £2.3 billion in 2018-19 before turning negative from 2021-22—the year after our March 2016 forecast horizon…But the small net gain to the public finances from these measures over the medium-term is reversed in the long term as the net cost continues to rise, reaching £5 billion by 2034-35. Expressed as a share of GDP—a more relevant metric when considering fiscal sustainability—the net cost builds up until it reaches a steady state toward the end of the period of just over 0.1 per cent of GDP. If that steady-state effect was to continue to the end of our usual long-term projection horizon of 50 years, that seemingly small cost would add 3.7 per cent of GDP to public sector net debt.”

The report also said that these measures

“shifted incentives in a way that makes pensions saving less attractive—particularly for higher earners—and non-pension savings more attractive—often in ways that can most readily be taken up by the same higher earners.”

That is a pretty worrying assessment of the Government’s pensions and savings policy, in which the LISA will play a large part.

I am also worried about the level of assessment that the Government have carried out about the impact that the LISA could have on pension savings, and, more specifically, their auto-enrolment scheme. The Work and Pensions Committee has outlined its concerns about the threat to automatic enrolment in workplace pensions, the roll-out of which is having a great deal of success. The Committee was particularly worried about the risk of people opting out of a workplace pension in order to save in a LISA, thinking that it will be more of a beneficial pension savings product when it is not. The Committee highlighted extreme ambiguity about whether the LISA is intended to be a pension replacement.

As the House will recall, the previous Chancellor stated in his Budget speech that the LISA was for

“those under 40, many of whom have not had such a good deal from the pension system”.—[Official Report, 16 March 2016; Vol. 607, c. 966.]

That was something of an indication that this was a new-generation pensions product. On the other hand, the Department for Work and Pensions has stated that the LISA is

“not a part of the pension system but an additional flexible savings product”.

I am pleased that the Minister has, once and for all, clarified this point and stated that it is a complementary product. None the less, many witnesses who gave evidence to the Select Committee said that all indications so far suggested that the LISA was being interpreted as a pension product, including those from the Centre for Policy Studies, which actually developed the LISA and stated that many employees not already in a pension scheme would have to decide whether to save through a LISA or enrol in the pension scheme. Royal London stated that many people could in fact opt out of workplace pensions.

Will the Minister therefore confirm whether she has made any assessment of the impact of the LISA on automatic enrolment into workplace pensions? Will she confirm what safeguards will be put in place to ensure that people do not opt out of auto-enrolment? Will the Government mount a detailed advertising campaign, as suggested by the Select Committee, to ensure that people do not wrongly view the LISA as their main pension product? The Pensions Regulator has argued that by 2017, when the LISA is available, thousands of small and micro-businesses will not have rolled out auto-enrolment. Have the Government considered timing the LISA roll-out to coincide with the full completion of auto-enrolment to avoid the risks I have outlined?

It is acknowledged that LISAs will be successful among those who have savings elsewhere. There might simply be a case of them transferring those savings into LISAs, but will the Government provide the distributional analysis of the income groups who will specifically benefit the most? Will they confirm what impact the scheme will have on women and minority groups, especially, and therefore provide a much more detailed impact assessment, as the Work and Pensions Committee suggested? Will the Minister confirm what the Government will do to assess those groups that are not currently saving or unable to save, and what will they do to ensure that these people will be able to avail themselves of the scheme? The Select Committee has suggested that those who might benefit most from the scheme could be those who can afford to contribute to a pension scheme and deposit additional savings in a LISA to complement their retirement savings—higher earners, in other words. In these difficult economic times, Opposition Members question whether the scheme is an effective use of up to £2 billion of public funds.

Another concern is not simply that people will use the LISA as an alternative pension product, but that there will be nothing to stop them from taking the money early for other purposes, aside from as a deposit for a house. The Bill enforces a 25% charge for the early withdrawal of funds, which effectively removes the Government bonus, but people will not lose anything from their savings. That will therefore not be a significant deterrent from removing money early, so there is a significant risk for those who use the product as their sole pension income.

LISA funds may be used towards a deposit for a first home. That is not a bad thing, but the Government are failing to address the wider problems that are causing the housing crisis. There is no point having a deposit if there are no houses to buy. We need a significant private and social house building programme supported by the Government, not populist policy making. It is a shame that fewer new homes were built during the previous Parliament than under any peacetime Government since the 1920s. Labour has committed to build more than 1 million new homes over the next Parliament, and that is the level of intervention that is required of any Government who truly want to ensure that everyone can live in a decent and secure home.

[Mr Gareth Thomas]

Before my hon. Friend concludes her speech, may I suggest one further area on which Labour Front Benchers could press the Government in Committee? The Bill does not include a requirement that any employer should offer payroll deduction services, but that could help all savers, especially those on low and middle incomes. In that way, people could, if they wanted, have money deducted from their pay at source by their employer. Ideally that would go into a credit union, but it could go into any other source of savings. I suspect that that would create a significant boost to savings in this country.

--- Later in debate ---

[Robert Jenrick]

I am interested in the point that the hon. Gentleman makes, and I will say more about the lifetime ISA in a moment. The point of it is that many of us in our 20s and 30s—I am just about in that category—are more preoccupied with getting on the housing ladder than we are with looking out for our retirement, and that is a major worry for the Government and for future Governments. The lifetime ISA is flexible, however, because it enables people to spend money in the early years to try to get on the housing ladder, and later to convert the product into something else with a view to retirement. The hon. Gentleman raises a major problem, and we need to look at many solutions; this, I am afraid, is only one.

There needs to be a fundamental change in all our attitudes. We should not purely seek instant gratification; we, as individuals, and the Government must promote ways in which to defer gratification through saving, in contrast to our present, quite corrosive, consumer attitude.

I warmly welcome the lifetime ISA. It is an extremely popular product and there has been a lot of interest in it. I do not represent a particularly wealthy constituency— the average wage is just below the national average—but many of my constituents have said to me that they would like to take up the lifetime ISA. Clearly, offering a 25% top-up as well as the usual tax advantages of an ISA gives us all a strong incentive to save. ISAs are popular, as we know from the millions of people who have taken them up over the years. Contrary to some of the comments that we have heard today and comments in the press, ISAs are simple. We all understand them, and they are part of our saving culture.

I welcomed the news in April that the limit would be raised on the standard ISA from £15,000 to £20,000 a year. That might sound like a great deal of money to many people, but as the problem of insufficient saving affects all income levels, it is an important measure. This is an exciting development for those of us—particularly the younger generation—who will not benefit from generous final salary pension schemes. Although the scheme is not intended to take over from pensions, it creates more flexibility in the sector. Under the previous Chancellor, we saw that across a whole range of issues to do with pensions, flexibility is key.

The lifetime ISA will help younger people to save for a deposit, which is, as we all know, the primary preoccupation of every young person with more than a basic level of income. If this vehicle allows us to help any of them to get on to the housing ladder and then to convert to a product that will help them to save for the rest of their working lives, it will be very useful.

Help to Save explicitly does the same job for those on very low incomes. I appreciate that there are many people, including many in my own constituency, for whom saving seems like another country; it is extremely difficult for them to do. But the alternative is to do nothing and to accept that we live in a country where people cannot save in that jam jar, and where the Government cannot create mechanisms to incentivise them to do so and top up what they have saved. The 50% contribution rate is clearly a great incentive, which we should all appreciate and welcome.

Rather as the IFS has said, it would be helpful for the Government to do more work on understanding which groups are the most critical in terms of saving, and to develop more products that specifically target the core group that we are most worried about—the people who have only £100 or £1000 in the bank as a rainy day fund. That is a very worrying state of affairs.

What else should I raise? One area we should look at is savings interest tax. I am in favour of simple and bold tax reforms that will not complicate the already far too complicated tax code even further, but send everyone in society the extremely clear message that the Government believe we need to save more and will back that up with action. I would strongly welcome a further move to take more people out of paying savings interest tax. The announcement in April, creating a £1,000 threshold for those on the basic rate and a £500 threshold for higher rate taxpayers—was excellent, and we should look at more changes, not least because current levels of interest rates are so pitifully low that the Government are receiving very little, and rapidly declining, tax revenues from savings income. In 2013-14, the income to the Treasury was £2.8 billion, but it is estimated to be £1.1 billion this year and to continue to decline further. Those are obviously large sums, but what would create a greater incentive and give a stronger signal than to say that we will no longer charge tax on savings interest?

My last point is simply to reiterate the one made in debates in recent weeks, which is that interest rates are too low in this country. That has had a very corrosive impact on pensioners and anyone trying to save in this country, on the gap between the rich and the poor, and on the wider economy. I, like many others, was delighted to hear the Prime Minister imply in her speech in Birmingham that she would like to take action on this matter.

[Mr Gareth Thomas]

The hon. Gentleman is making a very powerful application to serve on the Public Bill Committee. Given his point about low interest rates, does he not share the concern of many outside the House—indeed, it is a concern of mine—about the fact that the qualifying period to get the Government’s bonus payment under the Help to Save scheme is two years, rather than just 12 months? Would not a shorter period be a further and more sensible incentive to get people saving more quickly?

[Robert Jenrick]

I listened to the hon. Gentleman’s intervention earlier, and I would be interested to hear the Minister’s views on that. We want to create as many incentives as possible for everybody—from the rich to the poor, from the young to the old—to save because, as I hope I have made the principal point of my remarks, this country is facing a crisis and we all need to take responsibility for it.

On interest rates, the Bank of England now needs to take action. I did not believe there was any real cause to lower interest rates earlier this summer. It misread the initial signals after the referendum and acted too soon. We have already seen that the consequences of the referendum, at least in the short term, will not be as severe as it imagined. I hope the Bank of England—of course, it is independent—does not reduce interest rates further, and that we can now move away from the policy of quantitative easing as soon as possible for many reasons, but particularly for the sake of pensioners and savers.

I want the Government to create a long-term strategy on saving that tries to change the culture in this country towards looking to the future and putting money aside. The Government need to back that in many ways, some of which will involve extremely difficult decisions. One of those decisions will, of course, be to continue to raise the state pension age to protect the triple lock, which I would like to happen as soon as possible. The two schemes we are considering today are excellent. I fully support them, and I hope that they will be the first of many from the new Administration.

--- Later in debate ---

[Kit Malthouse]

The hon. Gentleman will not be surprised to know that I disagree with him. I hesitate to get into a bit of economic argy-bargy in this debate—I was hoping to keep my comments short—but inflation is currently running at 0.6%, and as a result we have extremely low interest rates. The Bank of England’s target is 2%. I am pleased that the low pound may help it to get to that level because there is no doubt that low inflation, or a deflationary environment in real terms, is extremely damaging to the economy. The hon. Gentleman will be pleased to hear that the effect he desires of the drop in the pound has happened: my wife and I decided just this week that this February half-term we would go to Scotland on holiday rather than overseas. We would like to explore the glorious land of his birth. I hope that more and more British consumers will do the same. We may even see the rejuvenation of the tourism industry in lovely places such as Blackpool.

[Mr Gareth Thomas]

The hon. Gentleman has set out three concerns, if I remember rightly, about Help to Save. I wonder whether he shares my view and that of the hon. Member for Newark (Robert Jenrick) that the Government need to do more to explain why they think there should be a two-year qualifying period for the Government bonus for Help to Save, as opposed to just 12 months.

[Kit Malthouse]

I completely agree with the hon. Gentleman. The Government should look at exactly that. The barriers to saving that are in the way of people on low incomes should be removed as much as possible. I like his suggestion that people should be able opt to save out of their payroll—that employers should make the deduction. I like anything that makes it painless. The Government opt for PAYE because it takes our taxes away from us painlessly; we do not actually have to give them over. Doing the same with savings would be a good idea.

Throughout my life, my granny, until she sadly died when she was 94, put £5 every month in a post office savings account for me. She gave the savings to me on my 21st birthday. I have always been grateful for that money. I still have it sitting in that savings account. I hope and believe that I will be able to pass it on to my three children as a sign of what can be done by putting £5 away every month—a sign of the change that is possible from the first generation, from the back streets of Harrogate, to me now as a Member of Parliament.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

It is a pleasure—on this occasion anyway—to follow the hon. Member for North West Hampshire (Kit Malthouse). I rise in particular to support the remarks of my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey) and to dwell on a number of the points that I have made in interventions.

The hon. Member for Ross, Skye and Lochaber (Ian Blackford), who speaks for the Scottish National party, the hon. Member for Newark (Robert Jenrick) and my hon. Friend, in particular, addressed the scale of the savings crisis. In their own different ways, they underlined the need to do a lot more to encourage those on low and modest incomes to save. It is in that spirit that I gently underline, in this, I hope, more substantive contribution, the need for the Government to look afresh at their decision on Help to Save.

The Government have decided that they will make their bonus payment after two years, as opposed to 12 months. The hon. Member for Newark talked about the person who has only £100 in their bank account and dwelt on the difficulties they have saving. Two years is a long time. I think of a constituent of mine who does the right thing and is working. She is a teaching assistant and therefore on a low income. She has faced, given the scale of the housing crisis, to which my hon. Friend the Member for Salford and Eccles rightly alluded, significant increases in rent, and she struggles to manage her income and to pay all her bills. She is surely exactly the sort of person we would want to benefit from a scheme such as Help to Save, but I suspect that, if she thought that she was not going to get any benefit from her savings for two years, the struggle to make ends meet in the intervening period would be a significant disincentive to her setting even small amounts of money aside in a savings account. I share the concern of others that the scheme will benefit only those on in-work benefits. Again, I encourage the Government to be a little more imaginative on the scheme.

I understand and see the logic of the Government’s need to have a Help to Save implementer with national coverage. Clearly, the Government have failed to persuade traditional banks or big financial players to offer the scheme, so I can see the attraction of NS&I. What I fail to understand is why credit unions cannot be allowed to offer the service to communities in their areas alongside NS&I. I hope that the Government will reconsider that point.

I have the great privilege of chairing the all-party group on mutuals. I commend the contribution of the Building Societies Association which, in its comments on the lifetime ISA and its briefing for the debate, shares the concern that others have expressed about the risk of the lifetime ISA conflating savings for a house deposit and savings for retirement in one product. Again, there are concerns that the scale of withdrawal charges will be punitive. I hope that the Minister will pick up those two points.

I welcome the support of the hon. Member for North West Hampshire for the idea of making payroll deduction a statutory right. He is right to say that the Government have a statutory right to take tax through PAYE, so why should they not also support a statutory right to allow people, with their employers, to save through a credit union, a standard mutual or a mainstream bank product?

Giving people the right to payroll deduction would be of huge long-term benefit. Many of the credit unions that are highly successful underline regularly how important the facility of payroll deduction is to their ability to offer financial services, particularly in the savings context, to their members. For a while, one issue prevented an armed forces credit union from being established. When one considers that before credit unions came along often the only products that were available for those serving in our armed forces on comparatively low incomes were those offered by legal loan sharks—the payday lenders charging huge sums of interest—one understands the scale of the benefit that credit unions are beginning to offer to armed forces personnel.

The Financial Secretary to the Treasury has a reputation as a shrewd and effective operator around Whitehall. Now that she is in the Treasury, she has even more power at her disposal. Many parts of government, whether Whitehall directly, agencies outside Whitehall, the NHS, individual academies, academy chains or indeed some parts of local government, still do not offer payroll deduction services for credit unions that want to serve their employees. One thing the Minister could do if she is not immediately persuaded—I hope she will be by the time the Bill completes its passage—would be to use the weight of the Treasury to encourage all Whitehall Departments to check that every bit of government for which they are responsible allows payroll deduction and lets credit unions offer savings and other financial services to their employees. If the police can offer payroll deduction services—many police officers and other police staff are signed up to credit unions—and if our armed forces can do it, why cannot all of government offer this service? I therefore hope the Minister will not only lead a drive on allowing payroll deduction, but will be willing to contemplate amending the Bill to make payroll deduction a statutory right.

It is worth reflecting briefly on the appetite across the House for more diverse financial markets. Arguably, one of the reasons why organisations within the financial services community can sometimes make high charges for their services is that there is not enough competition. Encouraging more savings through building societies, and in particular trying to build up the credit union sector, is surely something that every Treasury Bill, and indeed every Government Bill, should have at the back of its mind. Might there be an opportunity to encourage more tax incentives for savers? The armed forces credit union has been established. Why should there not be tax incentives to encourage more of our soldiers, sailors and air force personnel to sign up and support that credit union, and benefit from its services?

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I thank my fellow Co-operative MP for giving way and apologise for not being able to be in the Chamber to hear the whole debate—I was at another debate in Westminster Hall. I wholeheartedly agree with my hon. Friend’s remarks and pay tribute to his work on the armed forces credit union. I will certainly support the amendment that he suggests tabling. Does he agree that we should also look at countries such as Canada and Germany, where there is diversity in savings, and where much stronger credit unions are available to a much wider group of the population?

[Mr Thomas]

My hon. Friend makes an important point. Many financial services markets around the world are far more diverse than the UK’s, and therefore far more competitive. We need to build up our building societies and other mutuals such as credit unions, and further tax incentives that encourage saving and taking up other financial services through mutuals can only be a good thing.

I have no intention of voting against the Bill, but I share the concerns of my hon. Friend the Member for Salford and Eccles. I hope that both Front-Bench teams will reflect on my suggested amendments and that we will see progress on the concerns that they address during the Bill’s passage.

--- Later in debate ---

[Simon Kirby]

I thank the hon. Gentleman so much for that intervention, but the Government are not doing what he suggests. We are offering people a choice, and these two schemes are complementary and serve very different purposes. The genuine choice and flexibility to which I alluded are at the core of this Bill, but now let me deal with the specific points raised today.

The hon. Members for Salford and Eccles (Rebecca Long Bailey) and for Harrow West (Mr Thomas) mentioned credit unions. The Government recognise that many credit unions were interested in offering accounts, but it was not clear that a multiple provider model would guarantee national coverage for the scheme. We will continue to explore further options for credit unions to support delivery of the scheme, and I am sure that we will have that conversation in more detail as the Bill progresses.

The hon. Member for Salford and Eccles talked of this scheme being a substitute for benefits, but it is about increasing the financial resilience of low-income families so that if they are hit with an unexpected bill or if someone loses their job, they will have money for a rainy day. If something unexpected happens to their income, they will have savings to bridge the gap. She also asked why two years was chosen. This is the period of time needed to encourage account holders to develop a regular savings habit—a habit all too lacking in many people, especially younger people. I reiterate that the amount is up to £50 a month. People may not be able to afford that amount, but any regular saving is something that all of us should encourage.

I wish to clarify one point. The hon. Lady mentioned that there would be an additional penalty if people took money out of a lifetime ISA. An additional charge will be applied to reflect the long-term nature of the account, and that will act as a disincentive to people removing money unless it is essential or if there is a very important change in circumstances to be taken into account.

I wish to thank my hon. Friend the Member for Newark (Robert Jenrick) for his contribution. Our constituents are looking forward to the introduction of these products, and I agree with him that they contain significant incentives. He also mentioned the abolition of savings tax. It is worth putting it on the record that 95% of people have no savings tax to pay thanks to the new personal savings allowance.

The hon. Member for Ross, Skye and Lochaber (Ian Blackford) mentioned a smorgasbord of issues, a few of which I shall pick up on. He said that women were disadvantaged by automatic enrolment. Before it began, 65% of women employed full time in the private sector did not have a workplace pension; as of 2015, that had fallen to 35%. He said that a lifetime ISA was just for the rich, but it is for anyone between the ages of 18 and 40. They can open it and save into it until they are 50. The maximum annual contribution that an individual can make is £4,000. People can pay less than that and still enjoy the Government bonus. We expect that a large majority of those who use the lifetime ISA will be basic rate taxpayers.

The hon. Gentleman mentioned StepChange. Well, this is what StepChange has said:

“We welcome Government recognition of the need for a savings scheme aimed at those on low incomes. Our research shows that if every household in the UK had £1,000 in rainy day savings, 500,000 would be protected from falling into problem debt.”

He also mentioned the Association of British Insurers, which said in August:

“The industry supports the Lifetime ISA as a vehicle to help people save, in addition to a workplace pension.”

I hope that is fairly clear.

My hon. Friend the Member for North West Hampshire (Kit Malthouse) asked very sensible questions and made some thoughtful points. In particular, he asked about the limit of £50 a month. Individuals saving £50 a month for four years will earn a generous bonus of £1,200. It is probably an appropriate limit for people on low incomes, at whom the scheme is targeted. There has to be a ceiling.

The hon. Member for Harrow West asked about payroll deduction. I have to thank him for a very sensible and measured contribution. There is no reason why payroll deduction cannot take place. I cannot make a commitment to him today, but I can confirm that I am happy to see whether there is more that we can do in that area.

[Mr Gareth Thomas]

I am grateful to the Minister for his considered response to my request for payroll deduction. Would he be willing to meet me and the Association of British Credit Unions Ltd to discuss this issue further?

[Simon Kirby]

Yes, I would be very happy to do that.

I thank my hon. Friend the Member for Gloucester (Richard Graham) for his thoughtful contribution. Clearly, he feels very strongly about a vast number of issues. I respectfully disagree with some of his opinions, but I hope that he continues to contribute to this important debate, as it is important that we get it right. At the end of the day, this is about helping younger people and poorer people get into the habit of saving.

Bank Branch Closures

Gareth Thomas Excerpts

Thursday 30th June 2016 Commons Chamber

[Christian Matheson]

I have to say that the thought had not occurred to me, but I think that dreadful case illustrates a problem on which we should all focus. We can have a lot more confidence in dealing with a bank when we are inside a physical bank and dealing with an individual as opposed to being subjected to one these terrible scams. I am most grateful to the hon. Lady for bringing that awful case and awful problem to our attention.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

The trend is towards bank branch closures, and we tend to see that more in areas of deprivation and of the greatest need. Given that in these areas people often face high interest rate alternatives, does my hon. Friend think that we should hear more from the Government about how they intend to create more responsible finance options in areas where bank branch closures are happening—such as more support for credit unions and for community banks, of which there are a number in the UK?

[Christian Matheson]

My hon. Friend has a long, proud and honourable history of working within the co-operative movement, and he is an expert in this area. I intend to touch briefly on the role of credit unions as I progress through my speech.

Let me return to the problems faced by pensioners in accessing bank branches. I realise that this is not necessarily the responsibility of the Minister who is present, but at the same time as branch closures in the satellite districts are forcing people into the town centre, privatised bus companies are cutting the bus services on which pensioners rely more than any other group in society, this making it even harder for them to make that journey into the centre.

It is clear that local post offices have taken up some of the demand. Members, both current and previous, have fought long and hard against the closure of those post offices, whose continued existence has been aided by their provision of banking services. I am pleased that they have that role, but it does not constitute a suitable total replacement,

I suspect that Members may criticise the banks for the manner in which they undertake their closure programmes. I, too, am critical of the seemingly hasty and often desperate way in which those programmes are conducted, based solely on cost-saving and with no eye to service. Today, however, I want to be positive, and to propose a new solution which I hope the Minister will consider.

My suggestion is that high street banks should come together where they are closing branches to form local banking hubs. In other words, they should maintain provision on local high streets, as opposed to major town centre high streets, in shared premises and with shared costs. They could provide the automatic paying-in and cash withdrawal machines that we see in bank branches now, along with, perhaps, booths containing phones so that clients could contact bank call centres if necessary. As was suggested by the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier), it might also be helpful if staff were present to assist.

I accept that there are technicalities to be resolved—who would employ the staff, and who would own or lease the properties?—but today I am concerned only with floating the principle, and, indeed, it is not my role to be prescriptive to the banks about the specific business model. It is possible that various models could be tried and tested, and I wish to offer Chester as a test bed where the banks could come together and provide a model community banking hub. Perhaps Chester’s credit union could be involved as well.

Let me therefore throw down the gauntlet, and challenge the banks to take my proposal seriously. I invite them to come to Chester—or Wells, or Aberystwyth—to set up a joint hub, and give it two years to see if it works. That is a serious offer, and I will help the banks to make a success of it in my patch. Either that, or they should stop using advertising that suggests that they are more human and accessible, while continuing to close local branches and make access harder. Banking is a private sector business, but it is also an essential service. A bank is an essential part of the local high street ecosystem. There must be no more cavalier closures of branches which, in turn, damage the local economy: banks are too important for that. In 2008, we learned that some big banks were—apparently— too big to fail. Perhaps the message today should be that some local banks are too important to local communities to be allowed to close.

--- Later in debate ---

[James Heappey]

I am grateful to the hon. Gentleman for his intervention. While of course the Treasury will have an interest in the provision of banking, DCMS will have an interest in the provision of broadband, and the Department for Communities and Local Government and perhaps the Department for Environment, Food and Rural Affairs might concern themselves with the overall impact on the viability of communities in both rural areas and towns.

I am also concerned about the capacity of the post office network to pick up the slack. They are offered again and again as the route out of a bank closure, yet too often there are reasons why the Post Office cannot do more, and I will come to that shortly.

Finally, there is the availability of free-to-use ATMs in our town centres. Replacing an ATM outside a bank with something we need to pay a few pounds to use is not fair on the community that then finds itself needing to access its cash at that expense.

[Mr Gareth Thomas]

In the United States, when banks take significant deposits from particular communities, they are required by regulators to demonstrate that they are offering significant financial services to those communities in return. Does the hon. Gentleman think that such a requirement might have meant that his Glastonbury constituents might have had some confidence that the banks were at least going to help a credit union or community bank to get up and running, to offer an alternative service if those banks were still determined to leave?

[James Heappey]

The hon. Gentleman steals my thunder, because I had indeed read Congress’s Community Reinvestment Act and I think there are some very interesting things in it. For the benefit of Members who might not be familiar with it, it does exactly as the hon. Gentleman suggests: it is a safety net that means that those getting a banking licence in the United States can of course bank in all the affluent areas, but they are also required to offer equal access to banking in less affluent areas, and there are ways to make sure that that is happening, which the Government may wish to consider.

The hon. Member for City of Chester (Christian Matheson) picked up on the very worrying Reuters research reported by Andrew MacAskill and Lawrence White. I hope that the Treasury is aware of it. That 90% of closures are in areas where the median household income is below the national average is deeply suspicious and I am sure cannot be just a coincidence. It concerns me enormously that the two banks that have closed the most branches since 2008 are those that benefited the most from the bail-out by the hard-working taxpayers whom they have subsequently turned their backs on. As a good Conservative, I do not propose to advocate interference with the business plans of those banks, but I do think it is important to make sure that they are not focusing their branch network on the areas where they can make the most cash, when the nation collectively bailed them out not so long ago.

Worse still, as those bank branches close—we are now down to fewer than 9,000 branches on UK high streets—payday lenders are opening branches at an alarming rate. I draw no connection with the fact that payday lenders are targeting high streets where the conventional banks have gone. However, if the Reuters research is correct and the banks are closing at a quicker rate in less well-off areas and the payday lenders, as we know, are targeting the very same areas, it bothers me enormously that on those high streets there is no access to proper conventional banking products but plenty of access to payday lenders. I am not sure that that is socially just and it must be a concern for us all.

The impact on small businesses is significant. Representatives of the Federation of Small Businesses met with me at the Royal Bath & West Show, having heard that this debate today had been granted, and were falling over themselves to say that they would be able to provide me with information. They have been hugely helpful. The reality is that the bank branch network is most valuable to small businesses. Yes, we must worry about the vulnerable and the isolated, but they are a relatively small number of those who need to access banking. It is the small business community that has no other choice. Small businesses rely on cash, and sometimes they have no other staff.

Glastonbury is a great example of a high street where there are lots of small shops. If you are in the market for all sorts of crystals or joss sticks and everything else, Glastonbury is the place. There are dozens and dozens of tiny shops that have only one person working in them at a time. So when the moment comes in the afternoon to clear out the till from that day’s takings and leave just the float for the next day, the shop must close. A year ago, the person would run round the corner, do their banking and then be back in the shop about 15 minutes later, and that was all the custom they lost. Now, unless they are fortunate to bank with one of the banks with which the Post Office has agreed full functionality, they must get in their car, or on the bus, and travel a few miles away and potentially be closed for an hour. It is unworkable. The travel is simply not an option for them and digitisation will not change that. People going into small shops such as these, where they are buying knick-knacks—I am sure Hansard will enjoy that term—for relatively small amounts of money, will invariably pay in cash.

The Competition and Markets Authority has also done some research, and has found branch convenience to be the second most important factor when choosing a bank. Some 84% of respondents classed bank branches as important to their business. Further research by McKinsey found that one third of small and medium-sized enterprises use bank branches at least once a week, and 52% of respondents to the FSB rural banking survey said that they communicate with their bank in branch and three quarters said that if they still had a branch they would prefer to be doing their communication there, face to face. It is important to state that what they are concerned about is not just their ability to bank in cash; they are also concerned about that relationship—their ability to informally access advice from someone in a branch who understands the business climate in their area. That is being taken away from them. They want something that is tailored, trusted and freely available from somebody they know and who lives and works amongst them, rather than somebody on the end of a phone in a call centre located who knows where.

The basic backing that is required for business is coming; this process is not entirely without mitigation. There is greater online functionality—the ability to pay in a cheque by taking photographs of it on your smartphone and so forth is all great. The arrival of smart ATMs that will be able to process cash deposits is also very welcome. G4S—who we remember from the Olympics—now says it will drive around and collect people’s cash from them and return cash to them; businesses can make their own minds up about that. But the reality is that whatever G4S may or may not do and however brilliant smart ATMs may be, their roll-out is not happening before these branches close and, as a result, communities are being left with a gap.

As I have said, the post office network is the alternative. The Post Office is enthusiastic about the opportunity, of course, as it is a significant opportunity for it as a business, but the banks cannot have it both ways. If post offices are going to be offered up as the alternative when a bank branch closes, the bank must be willing to surrender full functionality to the Post Office so that businesses and private users are able to access the full suite of banking services. As I understand it, the banks are offering up post offices as an alternative in their community impact statements, only to say subsequently that they will not give up those functions to the Post Office because they are worried that it will steal their business. I believe that if they are worried about losing out to the competition in that town, they should stay in the town. If they have made the decision to leave, they should accept that they need to surrender some of the functionality so that their customers will have the mitigation that the banks have promised in their community impact statements.

Some anomalies have been identified. It is rumoured that there are issues over the limit on the amount of cash that the post offices are willing and able to deal with. That limit clearly needs to be removed. If someone with a small business has a monster day of trading, they need to be able to go round the corner and pay in the full amount that is in their till rather than having to sleep uneasily that night through worry that a great day’s take is still in the shop. There is also an issue over paying-in slips, which we must surely be able to get over. The banks need to sit down with the Post Office to ensure that post offices are fully able to deliver the banking the businesses need, not just the bits that the banks will allow them to deliver.

The Government obviously also have a part to play in this. The Post Office’s arrangement with the Government is up for review in 2018, and I know that the Minister will speak forcefully in that renegotiation to stand up for the needs of the banking community, given how important post offices are becoming to communities around the country for the purposes of doing their banking.

My asks to the Government also include, first, that the access to banking protocols review should be thorough and candid. Community impact statements are too debatable, as I have said. The transport data that are used in them are too often inaccurate, as are the data on the number of people using a branch. Banks say that regular users number a couple of dozen, but campaigners standing outside the branch counting people in and out say that there are many thousands. The catchment areas are shrunk right down almost to the postcode in which the branch is situated, yet the reality is that they serve a rural hinterland that is much larger. [Interruption.] I will be about one minute, Mr Deputy Speaker, if you will indulge me. The connectivity issue is also often not fully understood in the impact statements.

When I spoke to Messrs MacAskill and White from Reuters, they told me that it was extraordinarily difficult to access the data on what had closed and where since 2008. If their research is right, this is happening disproportionately in poorer areas, but I am sure that the banks will want to make it clear that that is not the case by publishing their data in full. I am sure that the Government will be keen to check the data and we in this House will also be keen to know that that is not the case. This is a simple matter of fairness. People value their access to a bank. There are many reasons why the access to banking protocols need to be strengthened, and I am sure that the Treasury will take note of this debate today.

--- Later in debate ---

[Mr Lammy]

The hon. Lady makes an excellent point; that is also my experience.

I am talking about consultation with democratically elected people. Banks certainly ought to speak to the local authority leader before making a decision to say, “We’re thinking about it. What do you think the impact might be?” All of us, as professionals and Members of Parliament, are used to having private, confidential conversations every day of the week. We are sometimes able to say, in private, “Have you thought about this or that?” We can talk about the future economic context of a community of which the bank may not be aware. But there was none of that; I was presented with a fait accompli. Frankly, HSBC was patronising.

When I was a 16-year-old with what felt like very little prospects way back in the mid-1980s, I got a little job over the summer holidays in that local HSBC branch—it was then Midland Bank. I feel personally affronted that the bank where I saw my first prospects, and where I had put on a suit and thought that I might have serious job one day, is to be shut down without HSBC even thinking of consulting me. It meant a lot in the local community that I used to work in the bank, but HSBC was not interested. That is what big banking has come to in this country after all that we have paid in. I am frankly appalled by HSBC’s behaviour.

Given that the Government talk about being a friend of small business and the high street, it is important that they think carefully about this issue. In June 2014, research by YouGov for the British Bankers Association found that over 50% of people see a branch as important, with that figure rising to 68% for SME customers. The impact of branch closures goes far beyond local businesses having nowhere to go to get credit or to do their banking. The consequences are grave for the whole high street.

Local retailers are hit hard by the fact that customers go elsewhere when they do not have easy access to cash, which is still the preference for many, despite the rise of chip and pin and contactless payments. Cash still accounts for 46% of high street sales, with that figure rising to 75% in newsagents and convenience stores. On average, local ATMs inject some £16 per withdrawal directly into nearby stores, which amounts to £36 billion a year. More than a third of total high-street spending is contingent on the ready availability of cashpoints.

I was told by HSBC that one reason why it was closing my local branch was footfall on the high street. I pointed to the fact, which it had seemed not to realise, that we had had riots just a few years before and that we had found wonderful businesses that wanted to support the high street, not desert it, as it made its way back from the riots. Given that this bank was meant to be one of our national institutions, citing footfall as its reason was deeply painful to my constituents.

In tough times, people remember who their friends are. The banks should think carefully about their customer base and how their customers feel when banks desert a community that has already been through the mill and is trying to build its way back. I think of parts of this country that not so long ago had floods, for example. It takes a long time for a high street, a village or a town to get over a flood. Are the banks going to blame lack of footfall and say, “Things were a bit depressed for a few months so we just couldn’t stand by you. We’re disappearing”? Customers have stood by them, so it is about time that they grew some, as my mum would say, and stood by the community.

[Mr Gareth Thomas]

Can I tempt my right hon. Friend to agree that perhaps part of the solution would be more action by regulators and the Government to encourage different kinds of banks to emerge—banks that are profit-making, but not necessarily profit-maximising? Many banks, including those he has listed, will always face pressure from shareholders, in their management’s view, to reduce costs. Bank branch closures are always likely to be among the options available, so perhaps a different kind of bank is necessary.

[Mr Lammy]

My hon. Friend is right. The House will recall the hugely important role that building societies played in local communities 20 years ago. We destroyed that important relationship as they all merged and became banks, and now we are left where we are. That local proximity and that different structure were lost and now we have to reinvent it. I hope that the hon. Member for Wells is part of that reinvention. The Government should think carefully about whether we need a review of such new structures. If we do, the man to do it is my hon. Friend the Member for Harrow West (Mr Thomas), who knows a lot about mutualisation and co-operatives. We need that back on our high street.

The access to banking protocol is undergoing independent review by Professor Russel Griggs—I am sure that the Minister will refer to it. In response to my written questions last month, the Government revealed their belief that

“banks should act in the best interests of their customers and continue to serve the needs of the consumer as well as the wider economy”,

and that

“it is imperative that the banks live up to the spirit, as well as the letter, of the commitments in the protocol.”

However, the Government also revealed that they have not

“assessed the impact of the protocol or banks’ compliance with their commitments in the protocol”.

Perhaps the Government have not bothered to assess the protocol because they know that it is irrelevant. It cannot and does not aim to alter any decision and, as such, pays mere lip service to the idea of access to banking. The protocol states that after a bank has decided to close a branch, it will engage with local stakeholders in order to understand the impact on the community, businesses and consumers. What is the point of a consultation after the decision has been made? That is not a consultation in the proper sense of the word—it is a notification of the closure. May we change the wording from “consultation” to “notification”? Once the horse has bolted, it does not make a blind bit of difference how customers or local businesses will be affected, so surely it would make sense to have a proper, full and open consultation process in place when the bank is considering the future of a branch, before serving notice on the local community in question.

Another problem with the protocol is that there is no firm definition of adequate replacement services; it is left up to the bank to assess and even define those. Leaving the elderly and disabled with no choice but to take a 90-minute bus trip is not an adequate replacement service by any stretch of the imagination. It is clear that when banks make their decisions, they do not take into account the public interest or the likely damage that a closure will cause. I cannot see how the access to banking protocol is anything other than a woolly and inadequate attempt to protect the bank’s name.

The Government have not assessed banks’ compliance with the commitments in the protocol, I assume because their conclusion would be that there is no mechanism in place to police whether banks have fulfilled the commitments that they made in relation to closing down a branch. If a bank says that it is closing a branch but will work out an arrangement with the post office so that customers can bank there, or will move its ATM so that customers can still use it, are those promises worth anything if there is no way to enforce them? The access to banking protocol is merely being used as a Trojan horse on both sides. Banks can claim they have followed the protocol, no matter how meaningless it is, and that therefore their hands are clean and they do not need to do any more.

On that basis, it really is time the Government got a grip of this quiet scandal and tragedy that is taking place across our country and really hurting a lot of local communities. I commend my hon. Friend the Member for City of Chester for bringing this debate to the House.

--- Later in debate ---

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

It would be naive to suggest that the world of banking has not changed with the rise of apps and internet banking. However, this debate is important, not least because the continuing closure of bank branches is emblematic of insufficient access to affordable credit, both for individuals—particularly those who, for whatever reason, are in challenging financial circumstances—and for small and medium-sized businesses that struggle to access the capital they need to expand. In that context, it is a pleasure to follow my hon. Friend the Member for Clwyd South (Susan Elan Jones), who made several particularly good points about the specific challenges that bank branch closures cause for people and businesses in rural areas.

I will, if I may, dwell on a number of areas. My right hon. Friend the Member for Tottenham (Mr Lammy) mentioned the difference mutuals make. He is right to suggest that the mutuals sector is smaller than it once was, but building societies such as the Nationwide, the Skipton, the Yorkshire, the Coventry and so on still play an important role in the communities they serve. They are much slower to close branches, which is an important symbol of their determination to do the right thing by their communities. They are helped in that by the fact that they do not have shareholders putting pressure on them always to maximise profits.

In that spirit, I encourage the Minister to dwell in her winding-up speech on what she and her Treasury colleagues might do to encourage the expansion of the mutuals sector. That sector covers not just the traditional building societies, but organisations that are part of the responsible finance movement—the community development finance institutions—of which I know she is aware.

I am thinking of the excellent work done by responsible finance institutions, such as Fair Finance, to encourage lending for individuals who cannot get loans from traditional institutions. I am also thinking of the work done by CDFIs focused on businesses, such as Greater London Enterprise, which are much more willing to provide loans to organisations set up by individuals in London which cannot access traditional sources of finance.

The responsible finance sector lends some £250 million annually to small and medium-sized enterprises, social enterprises and individuals unable to access mainstream finance. I give the Government credit for the fact that, under their regional growth fund, many community development finance institutions—or whatever we want to call them—have been able to access small additional funds to enable them to expand a little. I wonder whether it is not now time for the Treasury to be a bit more ambitious for the responsible finance sector and to look at what more it can do significantly to expand its capacity to lend more, particularly to small and medium-sized enterprises.

I ask the Minister to reflect on the way in which credit unions might be expanded. My hon. Friend the Member for City of Chester (Christian Matheson)—I commend him and the hon. Members for Ceredigion (Mr Williams) and for Wells (James Heappey) for securing this debate—mentioned the significance of credit unions. They are expanding fast, but they are still a relatively small sector within the financial services world.

The previous Government initiated a project to consider whether credit unions’ back-office functions could be significantly improved. I wonder whether it is not now time to look at how the Government can help to improve the front end of the credit union world. What can be done to encourage better marketing of credit unions? I wonder whether it is possible for the major credit unions in London to come together, perhaps with a bit of Government support, to offer a common platform of services across London. As a result of a bit more marketing support, credit unions would get more attention than they do at the moment.

Similarly, I wonder whether there should be a duty on public services actively to encourage their employees to consider the promotion of credit unions to their staff. I find it unbelievable that some public service bodies, such as Transport for London, still do not have an arrangement to enable staff to pay money directly from their wages so that they can be members of a credit union, if they want to. Many NHS hospitals do that, as do some Departments. I ask the Minister to reflect on whether the gentle prod of a letter from her, sent around the civil service and devolved institutions, could be a positive step forward in encouraging the better promotion of credit unions.

I commend the hon. Member for Wells for taking the time to look at the Community Reinvestment Act from the United States. That Act should serve as a model for further UK debate about financial services regulation and what can be done to ensure that those who take money from us in the form of savings accounts and so on also put proper financial services back into our communities.

The Community Reinvestment Act arose from US civil rights activists’ concerns that banks were redlining areas where black people lived and were not providing financial services for those communities. There are similar concerns about under-served communities in the UK. I do not think that anyone is suggesting that that is happening on racial lines, by any means; rather, there are significant areas of deprivation that are not being served properly by major financial services institutions.

I think of the Thamesmead estate of about 50,000 homes in south London. There is no major bank on the estate—the nearest is a 30 to 40 minute car or bus journey away—and, needless to say, the high interest credit providers are extremely active there. Again, that is a worry, as it can increase the cycle of indebtedness. Volunteers on the estate are making efforts to encourage access to credit unions, but there should be more support from the Government to put pressure on the big financial institutions either to lend to those communities themselves or to work with other organisations such as community banks, responsible finance providers and credit unions to offer a more comprehensive service on site. Such pressure is extremely important.

To give the Government credit, they have required the British Banking Association to publish data on the level of lending in particular communities. That is welcome. But I wonder whether the Minister has had the chance to review the quality of those data, and consult those who actively look at what banking data reveal, to see whether there are more detailed requirements for better data from banking institutions. Certainly, I have had representations from the Community Investment Coalition suggesting that banks are not yet providing detail of the right granularity to enable effective conclusions to be drawn about where lending is appropriate. Will the Minister look at that?

Lastly, I commend the work of the think-tank Demos, which in 2015 published the case for a network of independent local banks across the UK. It noted in particular that the 2014 Breedon report, commissioned by the Government, showed a lending gap for small and medium-sized businesses of between £26 billion and almost £60 billion. Given the current level of uncertainty that all of us in the House are all too conscious of, doing more to make it easier for businesses and entrepreneurs with great ideas to get access to the finance they need to expand is clearly hugely important.

The work by Demos also revealed the significant differences in the rates of lending to small and medium-sized enterprises, with rejection rates for bank loans for SMEs highest in Wales, Yorkshire and the Humber, the north-east and the north-west. That suggests there is a strong case if not for regional banks then for putting more effort into securing new types of banking institutions with a stronger reach in those areas in particular. Many community banks, responsible finance banks and so on, which are already in existence, could be scaled up in those areas, but again that would require Government commitment to move in that direction. I gently encourage the Minister to look upon that idea with enthusiasm going forward.

--- Later in debate ---

[Harriett Baldwin]

The hon. Gentleman knows that that is worth a whole Adjournment debate in itself, so I will talk about the access to banking protocol instead.

The protocol means that when a bank decides to close a branch it must think carefully about the consequences of doing so, particularly when it is the last bank in town. We have heard today—this debate is timely—that Professor Russel Griggs has been appointed by the BBA to review how it has been working in its first year. All the points raised by Members will be excellent submissions to that review. I hope he will take the opportunity to meet hon. Members to hear at first-hand the feedback on the independent review of the protocol. I would like practical recommendations to come out of the review on how we can move forward. I think we all recognise there will be an ongoing review by banks on how they can best use their branches.

[Mr Gareth Thomas]

The Minister has a reputation for being one of the most reasonable of her colleagues on the Government Front Bench. Is she willing to receive a deputation from the people in the credit union and the responsible finance industry to see what else might be possible to help them to grow?

[Harriett Baldwin]

I am glad to confirm that all the occupants of the Government Front Bench are entirely reasonable and sane. I regularly meet members of the credit union industry. The hon. Gentleman’s point brings me on to credit unions specifically.

We think that credit unions are very much worth backing. As the hon. Gentleman will know, we have put a great deal of money into improving their technology. One of the challenges they have is scale: the smallness of some credit unions means that they need a communal IT platform. We have subsidised that to the tune of £38 million. I also want to highlight to the House that we have, in the past few days, launched a consultation—people may have missed it, with all the other news that has been coming out—on how the Help to Save product will work. I encourage credit unions to come forward with proposals on how they could be a part of this really important saving product.

Many Members have alluded to the important role that the post office network can play in solving this problem. As we know, this Government, like the last one, have committed to subsidising the network and making it viable. I dispute what the hon. Member for Ynys Môn (Albert Owen) said about the network having fallen from 11,900. The figure has stayed above 11,500—just over 11,600, I think—so there has been a small decline, but not the precipitous decline we saw when Labour was in government. Post offices are an important part of the solution. For example, the network’s opening hours have increased by nearly 200,000 as a result of the modernisation process.

Members have mentioned the importance of mobile phone signals, digital connectivity and our commitment on universal access. Those things are also an important part of the solution. Moreover, we currently have a record number of free-to-use ATMs in this country—about 45,000—and there is a commitment from the LINK network to continue expanding their number, particularly into harder-to-reach communities.

We have heard powerful and passionate contributions from the right hon. Member for Tottenham (Mr Lammy), my hon. Friend the Member for Brecon and Radnorshire (Chris Davies) and the hon. Members for Clwyd South (Susan Elan Jones) and for Harrow West (Mr Thomas), the last of whom talked about the affordable credit sector and the help we are giving to the mutuals sector. We have also talked about lending to small and medium-sized enterprises and the importance of the community finance network, which I know from my own constituency is very important. There are also now other platforms through which small businesses can access finance, such as peer-to-peer platforms and so on.

I do not have time to make all my points, but my door is open. We all aspire to ensure that as we go through this evolution we maintain good access to finance for everybody. Healthy competition is also important. The new starter banks—five have got a banking licence in this Parliament so far—are an important part of the solution, as too is the way firms are adapting branches to use technology to provide more services. I have run out of time—I want to hand over to the hon. Member for City of Chester to conclude—but this has been a very important and well-timed debate.

Draft Representation of the People (England and Wales)(Amendment) Regulations 2016

Gareth Thomas Excerpts

Tuesday 7th June 2016 General Committees

[The Parliamentary Secretary, Cabinet Office (John Penrose)]

I beg to move,

That the Committee has considered the draft Representation of the People (England and Wales) (Amendment) Regulations 2016.

I was going to start off, Sir Roger, by saying, “My, Madeleine, how you’ve changed,” but I thought better of it. It is a pleasure to see you in the Chair until Mrs Moon arrives. We look forward to making good progress under your firm and well-judged hand.

This instrument contains the first small steps towards the Government’s vision for a quicker, cheaper, more accurate, more complete and more digital system of electoral registration. The current system was designed in a pre-digital era and specifies analogue processes in huge detail rather than outcomes, which local councils could achieve far more effectively if they were allowed to use basic modern technologies such as email, or data that they already hold on local residents about everything from council tax to parking permits and library cards.

The result is the so-called missing millions, who are not registered to vote. Everyone will, I hope, have seen the huge efforts that are being made to get people to register to vote in the run-up to the EU referendum later this month, but we need to redesign the underlying system and processes if we are to prevent the same problems from recurring in future after the referendum. The instrument contains the first step towards that new world.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

The Minister has set out his grand vision and how this instrument fits into it, but what resources will be made available to electoral registration officers to take advantage of the new processes? Without those resources, all his great efforts may come to nothing.

[John Penrose]

I plan to come to some of the cost savings that will be made by doing some things more efficiently. These changes should be pretty much self-funding. In future, when other developments are announced, we may have to have that conversation and answer that question case by case. However, these changes, at least, should be self-funding. There are substantial savings to be made by being more efficient in these cases. I will try to give the hon. Gentleman some more detail so that he can see what I mean.

First, the redesign will be achieved by amending the individual electoral registration—IER—application forms to allow applicants to identify that they are the only person aged 16 or over resident at the address, and to provide discretion to electoral registration officers—EROs—as to when canvass forms must be sent where such information has been given. That means that they will not waste time and effort—returning to the question asked by the hon. Member for Harrow West—in following up people who no longer live at a particular address.

Secondly, the regulations will modernise the system of registration by enabling EROs to send invitations to register—ITRs—and ITR reminders by electronic means if they so wish. I apologise, Sir Roger, for all the three-letter acronyms we are dealing with. The provisions aim to reduce the potential for confusion for members of the public by cutting down on unnecessary ERO correspondence and contact, and to reduce the overall cost of registration and the administrative burden on councils. It is estimated that the single occupancy provision will reduce the overall cost of individual electoral registration by about £1.1 million, and the provision regarding email invitations to register by about £7 million per year.

Budget Resolutions and Economic Situation

Gareth Thomas Excerpts

Monday 21st March 2016 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

The Scottish National party approach the Budget with some degree of success compared with last year, having secured measures relating to the tampon tax. We have not yet secured those on VAT relating to police and fire, but perhaps we can pursue them as the Budget winds its way through the House.

I am glad that this Government are picking up on the success of the Scottish Government, whose small business bonus scheme has for some years helped many small businesses across Scotland to survive in these very difficult times. We are now moving towards a considered review of business rates, but we are including the business community in the process and will take until 2017 to establish what the new system might look like. We are taking our time to get it right. Our Government like to consider these things more carefully and we do not like to jump, as this Government seem to do, from one crisis to the next.

Similarly, a cross-party commission on local tax reform has looked at council tax in Scotland. The cross-party review carefully considered all the different options relating to council tax and how we could make it a fairer system. The review took evidence, had public meetings and came up with a set of recommendations to which all parties could sign up. That had real credibility and an evidence base behind it. The right thing to do is to give clarity and certainty in order to try to make tax fair.

It would be good if this Government took on board that lesson, because they are so different from ours in Scotland. They are in chaos over welfare reform. There is a black hole in the Chancellor’s Budget, and that is on top of the targets he has failed to meet. He is responsible for local government tax hikes—the social care precept is a tax hike by any other name. He also claims to be helping tenants by cutting 1% of social rent for those in housing association accommodation, but he is ignoring altogether the rise in private rents, which is contributing to the housing crisis in England.

Members may have heard me say during DCLG questions earlier that the Communities and Local Government Committee took evidence from Crisis and Shelter that suggested that soaring rents in the private rented sector are now the leading driver of homelessness in England. There are already 3,600 people sleeping rough every night in England, and that figure has gone up 30% in the past year. There has been a 250% increase in the past five years in the number of people who end up homeless because they cannot afford to pay their rent. We are taking a different approach to the issue in Scotland. Our recent housing legislation has provided greater protections for people in the private rented sector, as well as for those in the social rented sector who have long enjoyed protections.

Tenants are being forced into poverty. There is, of course, a place for the private rented sector in the housing mix, but in England families are increasingly being forced to rely on that sector. They have no certainty in their tenancies and they cannot afford to get by, while social rented properties are being sold off, left, right and centre, with nothing similar to replace them.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

The Scottish Government have the power to control the housing market, so they could introduce a rent cap if they wanted to do so. Should not the regions of England have the same powers as Scotland to control our housing market, so that if our London Mayor and Assembly, for example, wanted to introduce more rent controls, they could do so?

[Alison Thewliss]

Yes, I think that would be a very useful idea. Rents in the private sector are soaring compared with those in the social rented sector, so it is perverse that this Government view the social rented sector as the source of the problem, not the acceleration of rents. That would be a useful power for local government in England.

It is evident to just about everybody outwith those on the Government Benches that the solution to the housing crisis is not starter homes of £450,000. A salary of £77,000 with a deposit of £90,000 is the going rate for these starter homes, but that will not exist in perpetuity for the next generation, who will go back into the very expensive retail housing market.

The Budget includes a welcome commitment to combat homelessness, but the funds involved are a drop in the ocean, given the size and scale of the housing crisis facing England. Virtually nothing is happening to encourage growth in the social rented sector in local government and housing associations. This Government are providing a sticking plaster when the patient needs urgent CPR. In Scotland, homelessness is falling and we are continuing to invest in the social rented sector, despite the cuts we face from the Government down here.

I will now turn to issues relating to devolution deals and draw Members’ attention to the “Pitch Book” on the Scottish Cities Alliance website, which outlines the scale of the ambition for some of Scotland’s cities. This Government could be doing a lot more to support growth deals in Scotland. Work is already going on in my own city of Glasgow and the partnership authorities in that city deal. That is making a significant contribution to the growth of local economies, and doing so in a sustainable manner that brings people on board and gets them back into work in communities that have been neglected over generations and that are still recovering from the cuts of the Thatcher years.

I reiterate my and my colleagues’ disappointment about the Aberdeen city and shire deal. The plans were for an ambitious deal comprising a £2.9 billion infrastructure delivery programme and an associated investment fund. Members will appreciate our disappointment when the Chancellor could find only a measly £125 million down the back of the Treasury sofa. Aberdonians often get unfairly maligned for being thrawn, but this Chancellor is in a different league entirely when it comes to being stingy towards a city whose oil has kept the UK economy afloat for years. There is news that the Inverness and highlands city deal may be announced tomorrow in Inverness, and I welcome that development. The people of Inverness and the highland region have been waiting for some time—since before the elections last year, in fact—to hear whether they will receive anything from the UK Government.

Significant investment is required to grow the economy of Inverness and the highlands, and to provide opportunities that enable young people to stay in the area. For too long, the brightest and best have had to leave the highlands to seek their fortunes elsewhere—[Interruption.] Especially my hon. Friend the Member for Glasgow North (Patrick Grady). The technological advances that we have in 2016 give us real opportunities to reverse that trend, which has damaged the highlands for so long. Doing so would not only allow local young people to stay in the area, but attract new families to enjoy the excellent quality of life afforded by that part of the world. Inverness deserves its share of UK Government support to innovate and make changes. I urge the Chancellor and Ministers to be generous and to find the money that the area needs to stimulate growth.

Young people are making life choices as we speak. They are filling in UCAS forms and deciding where they will go to take their next steps in life. They need to know that in this Budget, the UK Government, as well as the Scottish Government, are thinking of their futures.

--- Later in debate ---

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

This Budget does not tackle the still evident fundamental weaknesses in our economy. Despite the lofty rhetoric of the Secretary of State today, the Budget still says that Whitehall knows best. It takes from the poorest to boost the incomes of the richest, and it will make the challenges facing our public services even more difficult.

In recent years, the weaknesses in our economy have become ever more marked. We remain hugely dependent on financial services and London. The jobs being created are predominantly short term, low paid and with little employment protection. Critically, too many small and medium-sized businesses still cannot get the capital and the lending they need to create jobs and wealth. Unsurprisingly, therefore, our productivity is lower than that of all our biggest competitors.

Among the many specific disappointments with this Budget is that faster progress towards full fiscal devolution was largely notable by its absence. There is little chance, for example, of really tackling the housing crisis in London if the Mayor and Assembly cannot match the tax regime around housing to help to meet Londoners’ needs. Full devolution of all property taxes to London and, in time, to other cities and counties in England, is essential.

This Budget offers little for investment in public services, as others, particularly my hon. Friends, have already mentioned. The NHS is struggling to balance its books, with a number of NHS trusts, including those covering my constituency, in what the National Audit Office calls

“serious and persistent financial distress”.

Our local hospital, Northwick Park, has had a deficit in every year but one since 2010, and that deficit has steadily risen to almost £30 million last year. It is therefore hardly surprising that Northwick Park has had one of the worst performances of all English hospitals for waiting times in accident and emergency in the past 12 months.

Our clinical commissioning group, from which Northwick Park receives much of its money, receives less funding than any other London area. It, too, is in deficit, and has been since it was set up. By last year, its underlying deficit had risen to some £20.1 million. So it certainly does not look as though the Budget is going to lead to much improvement in NHS finances nationally or, I suspect, in my area either.

The position of other public services in Harrow is little better. As a result of the new funding formula, many of the schools in my constituency are expecting a budget cut of up to 1.5%, which is the equivalent of an experienced teacher or four teaching assistants, and that is before the vast costs, in time and money, of being forced to become academies. The number of police officers in Harrow has decreased by 137 since 2010; indeed, we have fewer police officers than virtually every other London borough. Our council is being hit by some £83 million of cuts over the next few years, and according to a Library analysis it remains one of the worst-funded local authorities in London. Westminster, Brent, Camden and Islington all get double the revenue support grant funding that Harrow does. Our other neighbours, Barnet and Hillingdon, get between 25% and 50% more than Harrow does. I hope that, even at this late stage, perhaps in the course of the Finance Bill, the Chancellor will recognise the need fully to change tack, to invest more in public services and to do so in a fairer way. My constituents certainly hope so.

Housing and Planning Bill (First sitting)

Gareth Thomas Excerpts

Tuesday 10th November 2015 Public Bill Committees

[Seema Kennedy]

Q 74 Mr Orr, I want to ask you about affordable housing in rural areas, and the portable discount in particular. Will you expand on that? How do you think it will affect the affordability of housing in rural areas?

David Orr: In the voluntary deal, we have agreed with the Government that in small, rural areas, in most cases, housing associations will almost certainly say no to a request to sell a home that a tenant is currently occupying, but they will have the opportunity to use the portable discount, which I hope will help to stimulate the development of new supply.

The fundamental challenge in rural England is that we need to build more homes, especially ones that are affordable for young families. Rural England is being hollowed out. As the 25-45 population grows in the country at large, it is declining in rural areas, because people cannot afford to live in villages that are often becoming like theme park villages, and that are in danger of becoming mausoleums. How we invest in new supply to keep rural England dynamic is a huge strategic challenge. The portable discount might create some of the financing that will allow that to happen, but we need to take a broad view and say it is time we addressed what is a genuine crisis in rural England.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

Q 75 What is your estimate of the net impact of the Bill on London?

David Orr: I do not have a detailed estimate.

[Mr Thomas]

Q 76 You must have an instinct, though.

David Orr: Well, it is quite difficult to assess how many homes would be sold under a voluntary right to buy in London, because values are so high that although—

[Mr Thomas]

Q 77 With respect, the housing associations among your membership must have given you some indication of their view of the Bill’s effect in London.

David Orr: They have. If you assume that over time 5% or 10% of homes might be sold under the right to buy, that will raise very considerable sums that can be invested in new supply. I do not have a statistical analysis to back this up—we can ask our research team and provide further information if we have it—but my view is that it is likely to deliver an increase in both the number of homes built and the number of homes for social rent. Under the existing arrangements, it is very difficult to build for social rent unless you trade, sell and make a profit, and then use that profit to create the subsidy. The voluntary right to buy has the potential to release some of that trapped equity and allow it to be used for building new homes. It is likely that London housing associations will focus on building for social rent, as well as shared ownership and other products.

[Mr Thomas]

Q 78 What is your sense of the impact the Bill will have on co-operative housing?

David Orr: Fully mutual co-operatives are not contained in the deal, because people who live in them are not tenants of housing associations.

[Mr Thomas]

Q 79 Do you think that the rest of the Bill will help to increase the supply of co-operative housing, or will it just leave it as a tiny fraction of the housing stock?

David Orr: I think it is likely to be relatively marginal.

[Kevin Hollinrake]

Q 80 Ms Butters, I think you referred to the provisions under clause 74 on high-income social tenants as a blunt instrument, yet you conceded that there is provision to charge a proportion of market rent—I think you made some cursory reference to the taper. Is that not proof that the clause is not a blunt instrument?

Sinéad Butters: For us it is about the freedom and flexibility to set our own rents—decisions for our local areas, made by our boards, working with our communities and our local authority partners. I can understand that the taper has been set to mitigate some of the negative impact of applying that blunt instrument, in terms of an immediate move to market rents from social or affordable rents; however, that would not be my answer. My recommendation would be locally set rents, determined by local areas, with boards and local authority partners. We would still see the potential for those choices about higher-income tenants, but they would be based on real evidence and real income data and analysis, not on a judgment about what level is set nationally.