Northern Rock

Gareth Thomas Excerpts

Monday 21st November 2011 Commons Chamber

[Mr Hoban]

I question whether the hon. Gentleman himself understands mutuals. There are situations where mutuals come forward and make bids. We have seen the consolidation of the mutual sector in recent years as a consequence of the financial crisis, so there are different ways in which a mutual option could arise. Let me reassure the hon. Gentleman and his hon. Friends. We looked closely at the mutualisation option, and we were open in reaching out to Mutuo, Adrian Coles, the Building Societies Association and Jonathan Michie to encourage them to come forward with a workable solution for how Northern Rock could be remutualised. No one came forward with such a solution. That is why this deal is the best one for the taxpayer.

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

The Minister was asked at the all-party financial mutuals inquiry to publish in full the Deutsche Bank report to UKFI on the future of Northern Rock. Why will he not publish any of that report or any of the details of the other conversations that he says he has had with Mutuo and others? Does he not recognise that his failure to do so calls into question the seriousness of his commitment to financial mutuals?

[Mr Hoban]

I say this to the hon. Gentleman and other Members on the Opposition Benches who represent the Co-operative party: we have worked hard since we came into office to find ways to strengthen the mutual sector. That is why we have finally pushed through the legislative reform order which will make it easier for credit unions to expand, why we set up a fund in the Department for Work and Pensions to encourage credit unions to expand, and why we have pushed through, after years of inactivity by Labour when in government, a new capital instrument for building societies. This party is committed to diversity in financial services. We have done more to help the mutual sector in the past 18 months than the previous Government did before they left office. I believe we have a strong message on mutuals, and what we have here is the best outcome for the taxpayer and Northern Rock.

Oral Answers to Questions

Gareth Thomas Excerpts

Tuesday 6th September 2011 Commons Chamber

[Danny Alexander]

I can certainly assure my hon. Friend of that. Unlike under the previous Government, No. 10 Downing street and the Treasury work very well together on these issues.

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

11. What recent assessment he has made of the level of economic growth.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Our economic policy objective is to achieve strong, sustainable and balanced growth, more evenly shared across the country and between industries. The independent Office for Budget Responsibility’s forecast, published at the Budget, takes full account of the policy measures announced in the spending review and in Budget 2011. The OBR forecast that the economy would grow throughout 2011, and in every year of the forecast. It will publish its updated forecast in the autumn.

[Mr Thomas]

As the level of economic growth over the past 12 months was lower in Britain than in the rest of the G7, is it not about time that the Minister had the courage to persuade his right hon. Friend the Chancellor to start work on a plan B?

[Mr Hoban]

It has been very clear, listening to all the international commentators talking about what is happening in the UK economy, that their advice has been to stick to the course and stick to plan A. That is the action that this Government are committed to—[Interruption.] This is interesting. We have one plan; the previous Government seemed to have more plans than they knew what to do with, and that is why they lost their credibility.

Summer Adjournment

Gareth Thomas Excerpts

Tuesday 19th July 2011 Commons Chamber

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

I wish to raise two issues. The first involves a group of eight banks, particularly the Royal Bank of Scotland, which has lent money to Davenham Trust Ltd. Davenham intends on Thursday to seek the bankruptcy of my constituent Mr Mark White, having lent one of his businesses £1.7 million. He has repaid approximately £2.2 million, so that is Davenham’s capital plus interest, albeit not the full sum that Davenham is demanding.

I have written to the Secretary of State for Business, Innovation and Skills to raise concerns about other aspects of the case, but there are four questions that the Treasury should demand that the Royal Bank of Scotland answer, in its role as administrator of a £300 million lending facility to Davenham. What knowledge of Davenham’s financial problems has it had; how involved has it been in the effort to keep Davenham afloat; what knowledge has it had of efforts to replace Davenham’s board; and finally, what knowledge and scrutiny of Davenham’s business strategy did it have before granting it extended facilities earlier this year, and does it have now?

Bankruptcy would not only mean my constituent losing his home—a bad enough outcome and traumatic for him and his family—but would put at risk a separate company with 200 employees. At that company’s request I spoke to representatives of the Royal Bank of Scotland on Friday, and they made it clear that it is anything but their normal practice to intervene in such a situation. However, I repeat in the House today the request that I put to them on Friday. The times that we are in are tough enough, and RBS should recognise the opportunity to do the right thing and intervene to try to prevent bankruptcy. I hope the Treasury will encourage it in that view.

The second case that I wish to mention involves my constituent Mr Ashok Chatterjee, who was allowed to submit claims for overnight stays that he made while working at RAF Wyton, first at the Alconbury House hotel and later, after it closed, at the Alconbury motel. The Ministry of Defence for a long time believed that my constituent had falsified claims for the one hotel, long after it closed, when in actual fact he was claiming, as allowed, for a stay at a similarly named but different premises. My constituent’s nightmare began when he was formally interviewed concerning possible abuse of his monthly claims. Over the next two years, he was suspended from duty, then reinstated, and then threatened with criminal charges, which were dropped. He was eventually reprimanded, but at the end of the MOD’s appeal process, when the then Permanent Secretary at the Ministry, Sir Kevin Tebbit, revoked the charges against my constituent, he noted significant procedural flaws in how the MOD had handled the case. Sir Kevin also concluded that the personal record of my constituent in his time at the MOD should be restored to one of integrity and honesty.

I feel a deep sympathy for Mr Chatterjee and his family, for whom this has been a terrible experience. He has not been able to put it behind him and move on with his life, suffering considerable stress and illness as a result. I have written to a number of Secretaries of State for Defence, who have not been willing to consider the case for compensation. Mr Chatterjee could not afford to take the financial risk of court action, so I use this debate to ask the MOD to look at all the papers relating to the handling of the original disciplinary charge, in particular, and his appeal, one further time, and consider whether the handling of his case does not in fact merit some out-of-court compensation for the trauma he has gone through, and indeed is still going through.

Oral Answers to Questions

Gareth Thomas Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Hoban]

The hon. Gentleman makes an important point. Work is under way to look at the regulatory position of Northern Ireland credit unions.

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

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

[The Chancellor of the Exchequer (Mr George Osborne)]

As set out before, the core purpose of the Treasury is to ensure the stability of the economy, promote growth and jobs, reform banking and clear up the mess in the public finances that we inherited.

[Mr Thomas]

In Harrow, five police sergeant posts have been axed and Wealdstone police station is being closed. Is that the Chancellor’s fault for cutting public services too far and too fast, or should I blame Boris?

[Mr Osborne]

I blame the Labour Government. During the election campaign, the Labour Home Secretary said publicly on television that police numbers would have to be cut if Labour was re-elected.

Finance (No. 3) Bill

Gareth Thomas Excerpts

Wednesday 4th May 2011 Commons Chamber

[Mr Gauke]

I am grateful to the hon. Gentleman for acknowledging that it is a significant gap. It is a considerable tax cut for businesses in order to get them to grow. Reducing corporation tax will reduce the revenue we take from an inefficient tax, thereby increasing the rate of return on investment and resulting in greater business investment, greater productivity, higher wages and salaries and more jobs. It is important that we have a dynamic private sector, and that is exactly what we are about.

We have to be internationally competitive. Our tax system is not as competitive as it once was. Over the past decade, our competitors have seized the opportunity to cut their corporation tax rates faster than we have. In 1997, the UK had the 10th-lowest main rate of corporation tax among the 27 EU countries, but by 2010 we were 20th. As a result of the reforms announced in the Budget by my right hon. Friend the Chancellor, the UK will have the fifth-lowest corporation tax rate in the G20, and by the end of this Parliament, it will be the lowest of any major western economy and the lowest rate this country has ever known. By taking our corporate tax rate right down to 23%, we are going further in restoring Britain’s international competitiveness with a corporation tax rate 16 percentage points lower than America’s, 11 percentage points lower than France’s and seven percentage points lower than Germany’s. It will be the lowest corporation tax rate in the G7. We are pleased that we have been able to make progress in this area.

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

I am sorry to have missed the many speeches yesterday by the Exchequer Secretary and in particular my right hon. Friend the Member for Delyn (Mr Hanson). I missed them because I was campaigning in west Worcestershire with 50 young people protesting against the decision of Worcestershire country council to withdraw funding from Rubery youth centre, which has played a key role in lowering antisocial behaviour in the area. Have the Exchequer Secretary or his Treasury colleagues considered the impact of the corporation tax cut on the funding of crucial public services, such as youth services?

[Mr Gauke]

I am a little disappointed that an Opposition Front Bencher should be so negative about the reduction in corporation tax, given that his colleagues seem to be more enthusiastic.

[Mr Thomas]

That is not answering the question.

[Mr Gauke]

Let me make this point. The hon. Gentleman talked about being in west Worcestershire. I was there two weeks ago for a meeting with local businesses. I met manufacturers who had full order books and were expanding, investing, welcoming the opportunity to expand their businesses and recognising that the Government were putting in place the conditions for strong private sector growth. It is through such growth that we can have sustainable public finances and we can afford to have the public services that we would all like. However, it is no good spending money that we do not have. The move towards a lower rate of corporation tax will enable us to have stronger, sustainable public finances and a dynamic private sector. It supports the Government’s ambition to achieve the most competitive tax system in the G20, and I therefore commend clause 4 to the Committee.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 10

Plant and machinery writing-down allowances

Financial Mutuals

Gareth Thomas Excerpts

Wednesday 16th February 2011 Westminster Hall

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

I am grateful to Mr Speaker for offering me the opportunity to have this debate. At the outset, I need to declare that I have a mortgage with Northern Rock. I am privileged to be chair of the Co-operative party and one of the party’s 28 Labour/Co-op MPs. It is in that spirit and with their support, but from the Back Benches, that I have sought the debate.

Yesterday, as the Minister will recognise, was business as usual for banking. Barclays bank was carrying on as if Ministers had never been worried about its bonuses or its profits. This is also the week for yet another re-launch of the big society. It is a concept in crisis, unloved by many of the Minister’s colleagues and viewed with profound scepticism by many people in the charity world. What better time, then, for the Minister to offer up a vision—and, crucially, the action to back it up—of the big society that is not an excuse for an attack on public bodies and hard-working public servants, but that instead leads to real change in an area of the corporate world, financial services, where the whole country has wanted a change in culture and behaviour?

Despite a coalition commitment to help mutuals, thus far in financial services there has been little of note. Mutuals and financial mutuals in particular are proof that there is another way—that, important as the public and shareholder-led private sectors both are, there is a way to combine the best of both traditions, to drive enterprise, to foster ambition and to cherish community throughout our country. Financial mutuals, building societies, friendly societies and credit unions were not responsible for the global financial crisis. They do not have a culture of large dividends or excessive bonuses, and they have much more, surely, to offer, but astute Government regulation will be required to foster and encourage the sector.

Both my parties—the Co-operative party and our sister party, the Labour party—were right to call for the remutualisation of Northern Rock at the last election, and I urge the Minister now to set out clearly the Government’s position on that issue. The Banking (Special Provisions) Act 2008 allows state-owned banks to be converted into mutuals. That could be by sale, merger with an existing mutual or the creation of a new entity.

The long-term ownership solution for Northern Rock should take into account some key principles. Taxpayers should not be out of pocket as a result of the change. Hard-working families and small businesses should be protected. The institution that emerges should be secure and responsible and add to the financial stability of the UK economy. The new organisation should act in the long-term interests of its customers.

[Jonathan Evans (Cardiff North) (Con)]

The hon. Gentleman knows that I share his interest in the promotion of mutuality. I am therefore a little disappointed by this being couched in Labour terms. Does he not think it would be helpful if the proposition put to the Minister were that there should be a proper review and examination of the opportunity of mutuality in relation to Northern Rock, rather than it being asserted to him that that is the only option? We should be examining it as fully as we examine any other option.

--- Later in debate ---

[Mr Thomas]

I end up at the same point as the hon. Gentleman, although I took a different journey to get to that point. I will come back, if I may, to the excellent work he has been doing in chairing the all-party inquiry into financial mutuals.

An expert think-tank based in the university of Oxford set out in September 2009 how and why Northern Rock could and should be remutualised, ensuring that its debt to the taxpayer was paid down, creating a stable financial services provider and constraining it from making the previous mistakes, while helping to secure a more competitive retail financial services market.

The next step, which the hon. Member for Cardiff North (Jonathan Evans) hinted at, would be a full feasibility study examining in detail the financial, governance and leadership issues in respect of a remutualisation. Will the Minister encourage such a feasibility study to be undertaken, either as a Green Paper examining the issues in all their complexity or, if the Treasury wants to maintain some distance, requiring UK Financial Instruments to do that instead? In short, will he now actively investigate the feasibility of the case for remutualisation?

In 2003, PA Consulting Group—not a body that one would naturally think of as being on the left—published an interesting analysis of the relationship between the profits of commercial banks and the market share of mutuals. In short, as mutuals gain market share—in other words, as competition between the various private banks and their mutual competitors increases—bank profits from the retail banking market come down. Potentially, that gives the Minister a significant opportunity to deal with the criticism that, under a Tory-led Treasury, it is business as usual for the banks; he can promote greater competition through the growing mutual sector.

The biggest advantage that mutuals can offer is their long-term view. They are not faced with the short-term need to secure profits. Indeed, Nationwide estimates that the mutual pricing benefit that it enjoyed between 1997 and 2007 because it did not have to put shareholders ahead of members totalled some £3.7 billion. New research, using the published accounts of six shareholder-owned insurers, shows that more than £2.2 billion was paid to shareholders in dividends. That is the dividend drag—the loss incurred by all who seek insurance as a result of buying from a business owned by shareholders. That helps to explain why mutuals, which do not suffer that drag, typically pay higher investment returns, provide better standards of service and pay more claims.

Treasury and Financial Services Authority orthodoxy appears to be that corporate form does not matter, but that what counts is what those various corporate bodies do for their consumers. Such a view is simplistic and not sufficiently considered to warrant the hands-off approach to corporate diversity that often appears to characterise the approach of the FSA and the Treasury. Let me be clear: I do not advocate a mutual-only way, but robust diversity is important in ensuring real competition and giving consumers a real series of options in the market.

New capital rules being introduced in the wake of the global financial crisis may give rise to insufficient care being given to protecting and increasing the remaining strength of the building society movement. The FSA’s new interpretation of the rules on capital may, over a number of years, bring about the end of friendly societies. Both sets of draft capital requirements could profoundly damage the competitiveness of financial mutuals, and they do not reflect the fundamental difference between financial mutuals that are run for members, and the basic banks or private insurers, which are run for shareholder gain.

The European capital requirements directive is designed to enable financial services businesses better to absorb losses following the introduction of the new Basel standards. I accept that that is an important part of the response to the global financial crisis; it focuses on improving the quantity and quality of capital, particularly what is called core tier 1 capital. Over the last 20 years, building societies’ capital reserves have been supplemented by permanent interest-bearing shares. However, they will not meet more demanding definitions for core tier 1 capital.

I recognise that building societies need to have access to new ways of securing capital that are permanent and that fully absorb losses. At the moment, the rules are being framed with only one type of corporate form in mind—the private bank. They do not recognise the fact that mutuals are structured and function differently, providing value to their customers over the medium and longer term. If building societies are forced to adopt plc-like capital, they will have to adopt plc-like behaviour. Building societies are trusted, safe and responsible precisely because they are not part of what “St Vince” calls the casino economy. Surely it would be a mistake to force upon them a new type of equity capital that would import excessive risk-taking.

I realise that there has been movement in the discussions between building societies and the Government on this matter, but I ask the Minister what progress has been made—and, just as important, what has he done personally to move things forward with his European counterparts?

There has been less progress in discussions with friendly societies. The FSA, revisiting its own rule book, seems hellbent on clinging to a piece of legal advice that has not been shared with the industry and which is at odds with every legal opinion that the industry has received. It seems to be based on a ministerial view from the mid-1990s that the then Minister publicly acknowledged was not intended for mutuals. Why cannot the FSA share its legal advice with the industry? If its motivation is that it does not want to damage friendly societies, why cannot a joint solution be found? If a solution cannot be found, mutual insurers would have to pay out a significant proportion of the capital held in their organisations; the consequence of that could be that they had little or no working capital and would have to shut up shop or demutualise.

I am grateful that Hector Sants attended the inquiry of the all-party group on building societies and financial mutuals, but frankly I doubt whether he has yet grasped the seriousness of the situation that friendly societies face as a result of his organisation’s proposal. Even now, I hope he will agree to an urgent review of the FSA’s legal advice and step up efforts to find a solution. If he does not, and if the Minister does not intervene, consumers will have less choice, plcs will take greater profits and customers will face higher charges. I would welcome the Minister’s response.

The Minister is responsible for ushering in changes to financial services regulations. They offer the opportunity to lock in a new requirement to champion corporate diversity and, crucially, new structures to ensure that we have people of sufficient calibre and status in the regulatory landscape to deal with building societies and friendly societies. Will the Minister support a requirement to promote corporate diversity in financial services when bringing forward the Bills to set out new arrangements for the City? What action is he taking to ensure that mutuals will be the responsibility of those high enough in the pecking order to make a difference when needed?

I turn to credit unions. The Minister will recognise that there is widespread concern about high interest rates for consumer credit and the activities of illegal loan sharks. I hope he realises the opportunity that properly managed credit unions can provide in meeting the needs of those wanting relatively small sums of money at affordable rates. Access to credit unions in the UK has been growing. For example, I understand that Wales has a credit union in every part of the country. That is not the case in England, although things have been slowly improving in recent years.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

My hon. Friend may be aware that access to credit unions in Scotland has improved of late. I hope he will join me in paying tribute to Hamilton credit union, which is developing financial services for children and young people to help get them into the culture of saving, so that in future they will be more financially responsible.

[Mr Thomas]

I welcome the progress that has been made in Scotland, and particularly the work of the Hamilton credit union outlined by my hon. Friend. What action will the Minister take to champion the further growth of credit unions across the UK?

Mutuals make a vital difference by generating more competition in financial services, and they help to create more value for the consumer, as opposed to the shareholder. I look forward to the Minister’s response to my questions.

--- Later in debate ---

[Mr Hoban]

My hon. Friend makes an important point and it is one that he and I discussed before this debate. His argument, which he has expressed publicly, is that his statement was not intended to be applied to all forms of with-profits funds. The FSA is aware of that view. None the less, it is important that this issue is treated very carefully. I am well aware that for many mutual insurers, their capital comes from with-profits funds. Without that with-profits fund, they would not be able to function in the way in which they do now. It is also fair to say that for a proprietary-owned business, the with-profits fund belongs to its policyholders. We have seen a number of firms go through a reattribution process in recognition of the fact that those funds belong to the members of that fund. There is a challenge there that we need to address and we need to be very careful about the impact of decisions on the ecology of the mutual insurer sector.

[Mr Thomas]

As I suggested in my remarks, the FSA’s position appears to be based on a particular legal opinion that it has secured. Will the Minister ask the FSA to revisit that legal opinion, bearing in mind that all the other legal opinions that the industry has received are at odds with that opinion? Will he also specifically ask the FSA to share that legal advice with the industry, as part of the process of trying to facilitate a solution?

[Mr Hoban]

The best route for resolving this is through the response to the consultation paper, which the FSA will publish later this year. It is for the FSA to decide whether or not it should disclose legal opinions, because it is an independent regulator. The consultation paper is an important way in which to resolve these issues.

I was talking about the need to create a modernised legislative framework for mutuals, and capital is part of that. The Government are also implementing legislation to allow mutuals to modernise the way in which they communicate with their members and to enable them to prosper. The Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2010 has been a long time coming. It will be re-laid before Parliament next month and will introduce many quite basic, yet far-reaching reforms that will enable credit unions to modernise and grow.

--- Later in debate ---

[Mr Hoban]

That point about access to credit unions in Wales was made before the hon. Gentleman came into Westminster Hall for the debate. We need to learn the lessons. The Treasury is very open to new ideas and any thoughts that he has about why Wales has that degree of access to credit unions would be much appreciated.

We will also implement the Co-operative and Community Benefit Societies and Credit Unions Act 2010 once the legislative reform order comes into force. That will modernise the industrial and provident society name and the powers available to update the legislation in the future. Other reforms include a consultation on the use of electronic communications in the mutual sector. That consultation closed at the end of January, and we will lay an order shortly to enable mutual societies to have the option of using electronic communications to engage with their members, which would reduce their costs.

Before I go on to talk about the regulatory framework, let me address the issue of Northern Rock. That issue was raised in the Treasury Committee, and I am aware of the work that has been done on it by Kellogg college. There is a degree of elegant circularity about remutualising Northern Rock, given its antecedence. But of course the responsibility for managing the Government’s investment in Northern Rock rests with United Kingdom Financial Investments Ltd. UKFI gave evidence to the Select Committee, and if the hon. Member for Harrow West reads the transcript of that sitting, he will see that it is open to ideas about the remutualisation of Northern Rock. The principal objective of UKFI is to promote and create value for taxpayers from its management of our stakes in banks, but it also has to pay due regard to financial stability and act in a way that promotes competition. Clearly a remutualised Northern Rock might help it to do those things.

[Mr Thomas]

rose—

[Mr Hoban]

Before I give way to the hon. Gentleman, I will just say that the taxpayer has a £1.4 billion stake in Northern Rock, so any solution in terms of remutualisation would need to identify a clear way in which the taxpayer would receive a return on that investment. Furthermore, it is not clear how a large Government shareholding in a mutual would affect mutual status.

[Mr Thomas]

As I said in my opening remarks, I absolutely acknowledge the point about the taxpayers’ interest in Northern Rock. However, rather than just allowing the people at UKFI to sit there waiting for ideas, will he write to them and specifically ask them to conduct a feasibility study into the remutualisation of Northern Rock, addressing the taxpayer issue that he quite rightly mentioned as well as other wider issues? Will he take proactive action on this issue?

[Mr Hoban]

If the hon. Gentleman reads the transcript of the evidence given by UKFI to the Treasury Committee, he will know that remutualisation is very much on its agenda. In conjunction with Northern Rock, it is about to appoint advisers to advise it on the disposal process. I know that UKFI is looking at remutualisation. However, I have yet to see a proposal that demonstrates why remutualisation is in the interests of taxpayers. Nevertheless, we are open-minded on this issue, and we will wait to see a viable proposal emerge.

Regarding the regulatory framework for mutuals, we will bring Northern Ireland credit unions within the regulatory structure that is in place in the rest of Great Britain. That will enhance consumer protection and ensure that those credit unions become part of the Financial Services Compensation Scheme, which will enable their members to appeal to the Financial Ombudsman Service. It will also enable those credit unions to seek approval to enter new markets and therefore help them to grow. In addition, we are looking at the registration and regulation of industrial and provident societies as part of our review of the regulatory architecture. I know that that is a concern of the co-operative movement and we will seek views on it shortly.

The hon. Member for Harrow West raised the issue of an objective on diversity for the new regulatory structure. Again, that point has been raised with me before. My concern is to ensure that the new regulators, learning from the mistakes of the past, focus on what matters—confidence in financial services, and the stability and soundness of institutions. That should be their driving force and I do not think that an objective on diversity would fit within the new framework.

We want to see mutuals grow and thrive. We are introducing measures on legislative reform and new capital levels, and we are offering greater support to the mutual sector. Mutuals have a big role to play in the future development of financial services, and this Government are keen to do all we can to ensure that they continue to provide an important service to communities across the UK.

Question put and agreed to.

Business without Debate

Gareth Thomas Excerpts

Tuesday 7th December 2010 Commons Chamber

[Mr Speaker]

Order. I am grateful to the right hon. Gentleman for his point of order. The concern of the Chair is always that matters should be handled in an orderly manner. [Interruption.] Order. That has happened, whatever the disquiet or consternation the right hon. Gentleman or others may feel. I know that he will understand that it would not be right for me, from the Chair, to say anything more on the matter. His concerns have, however, been forcefully registered.

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

Further to that point of order, Mr Speaker. I expected to be debating with the Minister for Universities and Science tonight, yet we have not had even the courtesy of an explanation why the Government have not moved their motions tonight. Have you been given an explanation? How can it be acceptable that students will be saddled with £39,000-worth of debt after just three hours of debate in the House—£13,000 of debt for each hour of debate?

[Mr Speaker]

My simple response to the hon. Gentleman is that it would not be right now to rehearse matters of substance relating to the tuition fees debate, which there will be an opportunity to develop on Thursday. I am sure the hon. Gentleman looks forward to that opportunity. He, too, has put his concerns explicitly on the record.

Equitable Life (Payments) Bill

Gareth Thomas Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

Yes. Although we encouraged people to make representations by early September, I and my officials will still listen to any later representations. If anyone feels that they have not expressed their view, I will happily entertain their representations.

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

As the Financial Secretary has just said, and as the explanatory memorandum makes clear, under the Bill eligibility for some state-funded, means-tested support may be affected by compensation payments. Will he confirm whether any Equitable Life policyholder who receives a compensation payment and who is currently on housing benefit, disability living allowance or income support might be affected in that way?

[Mr Hoban]

The Bill provides for matters within the remit of the Treasury. My understanding is that the Department for Work and Pensions has the power to take into account the impact of compensation on other means-tested benefits, and we will discuss with it how the matter can best be dealt with.

--- Later in debate ---

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

This has been a most interesting debate with very important contributions from many hon. Members. The hon. Member for Congleton (Fiona Bruce) made an excellent maiden speech. She gave a poetic description of the beauty of her constituency and, just for a second, all of us who heard her were transported back up to the north. She made the people of her constituency sound almost as good as the people of Harrow West. It was a pleasure to listen to her speech.

My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) and my hon. Friends the Members for Leeds North East (Mr Hamilton), for Ochil and South Perthshire (Gordon Banks), for Kilmarnock and Loudoun (Cathy Jamieson), for Bolton South East (Yasmin Qureshi), for Llanelli (Nia Griffith), for Derby North (Chris Williamson), for Edinburgh East (Sheila Gilmore) and for Foyle (Mark Durkan) all made strong speeches on behalf of their constituents. It would be remiss of me not to take this opportunity to praise in particular the contribution of my hon. Friend the Member for Leeds North East in jointly chairing the all-party group on Equitable Life policyholders. My right hon. Friend the Member for Holborn and St Pancras made the telling point that his general election opponents—like, I suspect, the opponents of all Opposition Members—did not mention any caveats when they signed the Equitable Life pledge in the run-up to 6 May.

To be fair, we also heard passionate speeches on behalf of their constituents from the hon. Members for Argyll and Bute (Mr Reid), for Angus (Mr Weir), for Chatham and Aylesford (Tracey Crouch), for Eastbourne (Stephen Lloyd), for Gillingham and Rainham (Rehman Chishti), for South Down (Ms Ritchie), for Witham (Priti Patel), for Worcester (Mr Walker), for Strangford (Jim Shannon), for High Peak (Andrew Bingham), for Redditch (Karen Lumley), for Macclesfield (David Rutley), for Richmond Park (Zac Goldsmith), for South Basildon and East Thurrock (Stephen Metcalfe), for Portsmouth North (Penny Mordaunt), for Central Devon (Mel Stride), for Brigg and Goole (Andrew Percy), for Mid Norfolk (George Freeman), for Warrington South (David Mowat), for Waveney (Peter Aldous), for Wells (Tessa Munt), for Newton Abbot (Anne Marie Morris), for Wycombe (Steve Baker), for Weaver Vale (Graham Evans), for Carmarthen West and South Pembrokeshire (Simon Hart), for Halesowen and Rowley Regis (James Morris), for Nuneaton (Mr Jones), for Sittingbourne and Sheppey (Gordon Henderson), for Oxford West and Abingdon (Nicola Blackwood), for Dover (Charlie Elphicke), for Harrow East (Bob Blackman), who is my constituency neighbour, for York Outer (Julian Sturdy) and for South Northamptonshire (Andrea Leadsom).

It was striking how much concern was expressed by those on both sides of the House about the lack of clarity in the Government’s position, with every Member noting the very big gap between the Chadwick approach and the ombudsman’s approach—albeit, I accept, that some did so very directly, while others did so with some sound and fury directed at those on the Opposition Benches. Members also noted the very different impression that Equitable Life policyholders are getting about the stance of Government Front-Bench Members now and that which they adopted before the general election.

As my right hon. Friend the Member for East Ham (Stephen Timms) said, we welcome the Bill and we will not oppose it, but we will seek to amend it in Committee, and we will want to probe the Government’s plans further. The Bill provides no detail on the criteria under which payments will be made, so we are no further forward in knowing what Equitable Life policyholders will get. No provision has been made for the independence of the compensation scheme to be established on a statutory basis. The Bill does nothing to ensure an independent appeal process for those who feel they have been unfairly treated—a point made by my hon. Friends the Members for Llanelli and for Ynys Môn (Albert Owen) and the hon. Member for Harrow East. There is also still no clear timetable governing when payments are to be made. The Bill makes no mention of the work of the independent commission. We will want to explore further in Committee how the commission is working.

I recognise that there are two serious tensions between the Treasury and the Department for Work and Pensions, but I was surprised to learn that the Financial Secretary has not resolved whether means-tested benefits will be affected by any compensation that Equitable Life policyholders on such support receive. Equitable Life policyholders on such means-tested support will now be worried that they will be hit by coming benefit cuts and then hit again because of any compensation they might get. I hope that when the Economic Secretary replies she is able to offer some further clarity, and we will certainly want to explore this matter in Committee.

What was most striking about the Financial Secretary’s opening speech was the absence of any effort to resolve the lack of clarity about whether he favours Sir John Chadwick’s approach or the ombudsman’s approach. The manifestos of the Conservatives and their Liberal Democrat partners, and also the coalition agreement document, appeared to be clear. The Conservative party said:

“We will implement the Ombudsman’s recommendation”

So the ombudsman’s recommendation was clearly mentioned there, and it was referenced yet again in the coalition agreement document, which committed both parties to “implement” the parliamentary “Ombudsman’s recommendation”. Even though the parliamentary ombudsman has been crystal clear in her profound disagreement with what Sir John Chadwick has recommended, the Minister notably did not clear up whether he agreed with her assessment of the Chadwick proposals as

“an unsafe and unsound basis on which to proceed.”

We now have a clear assessment of the estimated scale of relative loss, yet clear hints have also been given that the total payout will be very much less than those estimates. EMAG, which was rightly praised by those on both sides of the House, for the skill and persistence with which it has campaigned on this issue, invited candidates to sign its pledge and

“support and vote for proper compensation”.

Crucially, it said that that was to be as

“recommended by the Parliamentary Ombudsman.”

As my right hon. Friend the Member for East Ham said, every Treasury Minister signed that pledge and every one of them would have known then that they were committing themselves to a far higher figure than the sums now being suggested as a result of Sir John Chadwick’s conclusions.

In case there were any doubts, EMAG went out of its way, in the run-up to the election, to sweep away the possibility of confusion by making it very clear that it did not accept Sir John Chadwick’s work and wanted candidates to champion the ombudsman’s approach, which offered very different financial costs and scheme details from those that Sir John’s work would produce. Like the Grand Old Duke of York, the parties opposite have marched the Equitable Life victims up the hill only, once the election was over, to march them promptly back down again. Their hopes and expectations so cunningly built up before the election have been crushed in an exercise that, by any definition, looks breathtakingly cynical.

[Charlie Elphicke]

Speaking of breathtaking cynicism, it ill behoves the shadow Minister to offer thruppence and criticise others who offer sixpence or more.

--- Later in debate ---

[Mr Thomas]

I recognise the hon. Gentleman’s difficulty. He signed the pledge—he confirmed that in his speech—but because of the actions of his Front-Bench team he is going to be embarrassed in front of his constituents. I suggest that he, along with some of his colleagues, needs to put urgent pressure on his Front-Bench team.

As my hon. Friend the Member for Central Ayrshire (Mr Donohoe) pointed out in his intervention, what has also been telling in this debate has been the Conservatives’ unwillingness to take any real responsibility for the failure of regulation surrounding Equitable Life. The Penrose report made it clear that a significant part of the regulatory failure occurred before 1997. Indeed, proposals were put to Conservative Ministers before 1997 that would have updated life insurance regulation, both domestically and within Europe, yet those Ministers either did not think that they were a high priority or argued against reform. A light-touch, low-intervention culture existed in which regulators were poorly resourced or simply not up to the job, so it is hardly surprising that the ombudsman herself, in charting regulatory failure, should set out in July 2008 10 findings of fact relating to regulatory failure, five of which related to events prior to the start of the Labour Government in 1997.

As my right hon. Friend the Member for East Ham has noted, the Government of whom we were members issued a clear apology to Equitable Life policyholders, and I associate myself with those remarks. However, there has yet to be any apology for the mess that passed for financial services regulation under the Conservative party’s last watch.

[Andrew Percy]

While we are in the spirit of apology, will the hon. Gentleman, from that Dispatch Box, apologise to my constituents for not providing them with a single penny of compensation before his Government got voted out in May?

[Mr Thomas]

I think that the hon. Gentleman should have been listening to my earlier remarks, but I recognise the difficulty that he has, along with that of many of his constituents. He marched his constituents up the hill, promising them great sums of money in compensation, and it is now becoming clear that his Front Benchers will not deliver on that commitment. The hon. Gentleman should start to put a bit of pressure on his colleagues. Perhaps he will join us in supporting the amendments we will seek to table to improve the Bill further.

[Mr Tyrie]

Will the hon. Gentleman say how much more than Chadwick proposed that policyholders would have had any chance of getting had Labour won the last general election?

[Mr Thomas]

I say gently to the hon. Gentleman that rather than looking back, we need to look forward. The hon. Gentleman, who serves as Chair of the Select Committee on the Treasury, will, I hope, work with his hon. Friend the Chair of the Select Committee on Public Administration to hold those on his Front Bench to account.

Even though Lord Penrose concluded that regulatory system failures were secondary to the society’s own behaviour as a cause of its problems, the last Government, rightly in my view, recognised that many policyholders had been disproportionately affected. The ombudsman suggested a scheme with a case-by-case review that considered 30 million investment decisions by 1.5 million people, but that would have taken an estimated 4,000 staff years to resolve. That is the scheme to which the Conservative party committed in its manifesto. Case-by-case comparison for policyholders was not something that we thought was practicable.

Sir John Chadwick has proposed a simpler arrangement. If Government Members are now accepting the fundamentals of Sir John’s approach, they should at least be honest with the ombudsman and, crucially, with the hundreds of members of the Equitable Members Action Group and with this House. Is it not the truth that the parties on the Government Benches knowingly allowed members of EMAG to believe that they were opposed to Sir John Chadwick’s work and that they wanted a far greater sum to be available for compensation? In reality, yet another manifesto commitment is being ignored and yet another group of electors is having to come to terms with the fact that, despite what they were led to believe that Government Members wanted, their Front Benchers now have no commitment to the original pledge and no intention of following it through.

Oral Answers to Questions

Gareth Thomas Excerpts

Tuesday 13th July 2010 Commons Chamber

[Danny Alexander]

I am very grateful to the hon. Gentleman for his comments in support, I think, of the policy that we are pursuing. The local enterprise partnerships will be able to choose for themselves and direct where they think investment is needed in their localities. One major tool that they will have at their disposal is the ability, as a public-private partnership, to apply to the regional growth fund for investment in their areas. Obviously, that will be allocated in ways to be announced, but I hope that it will provide a tool for those new bodies to do precisely the sorts of things that the hon. Gentleman set out.

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

Businesses in the north-west will have seen the National Institute of Economic and Social Research arguing that growth will now be lower as a result of the Budget; they will have seen two reports of business confidence in their region and throughout the UK tumbling as a result of the Budget; and, just last week, they will have seen the International Monetary Fund’s devastating downgrading of its forecast for UK growth. Are not people in the north-west listening to the Chief Secretary trying to sell the Budget as a Budget for growth entitled to feel that, actually, they are being sold the emperor’s new clothes?

[Danny Alexander]

People in the north-west and elsewhere will have seen the Office for Budget Responsibility’s forecast, which predicts that during the course of our Budget over the next four years we will see rising economic growth, falling unemployment and rising employment. They will have seen also the OECD’s forecast and review of the UK, which was published today and includes the title, “A Strategy To Instill Confidence and Boost Growth”. That is precisely what our Budget is.

Alignment (Clear Line of Sight) Project

Gareth Thomas Excerpts

Monday 5th July 2010 Commons Chamber

[Mr Hoban]

We will look at it, but incorporating NDPBs into the clear line of sight project so that their results are reported in estimates and departmental annual accounts is something that should be done, and the principle underlying these reforms is to do it in a way that does not compromise their status.

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

While the hon. Gentleman is on the subject of NDPBs, can he clarify now for the House the future of the Tenant Services Authority, about which there has been some speculation in the media? Apparently, the Housing Minister described it as “toast”, and the Financial Times has speculated that the Chief Secretary overruled the Housing Minister.

[Mr Hoban]

I am sure you would rule me out of order, Mr Deputy Speaker, if I started responding to questions as detailed as that.

[Mr Thomas]

Will the hon. Gentleman give way again?

[Mr Hoban]

No, I want to make some more progress. A number of Members on both sides of the House wish to participate in this debate, and I am conscious that there is also private business after this.

I want to talk now about the next stage of the alignment process: the coverage of estimates and budgets by including all non-voted budgetary expenditure and income in the estimates presented to Parliament. Parliament will not be asked to approve this spending as it will already have separate legislative authority, but Members will see the full picture of departmental budgetary expenditure. For example, spending financed from the national insurance fund will now be included in the accounts and the estimates, even though it does not have to be voted on annually. Going back to the point raised by my hon. Friend the Member for Gainsborough (Mr Leigh), we will align the treatment of income in estimates with budgetary controls. Income will be retained by the Department, provided it is of a type allowed to be netted off budgets and included in the description of income in estimates. To this end, a new description of all relevant categories of income will be included in estimates and replicated in Supply legislation. That will ensure that such information is disclosed in the estimates, and those bodies will therefore be accountable for those sums.

We will simplify the presentation of expenditure information by fully aligning budgets and estimates, reducing remaining differences with accounts to those that are absolutely necessary, and providing clear reconciliations between any necessary misalignments that remain.

[Mr Hoban]

My understanding is that that is the case. What we will also be able to do—this deals with something that frustrated me when I first came into the House—is track information from budgets set by the Treasury to estimates and to the out-turns. That consistency of information will help Members of this House to hold the Government to account on how public money is being spent.

These changes have been the subject of constructive cross-party consultation over the past three years. During the previous Parliament, the then Chief Secretary to the Treasury submitted three memorandums on alignment to the Chairmen of the Treasury Committee, the Public Accounts Committee and the Liaison Committee, in November 2008, March 2009 and February 2010. The March 2009 memorandum contained detailed proposals for achieving alignment and was published as a Command Paper. All the Committees indicated their support for the proposed changes, and the Liaison Committee took the lead in providing detailed responses. I am grateful to that Committee for its engagement with, and support for, the alignment proposals throughout. The Committee noted in its report on financial scrutiny published in April 2008 that the alignment project was “potentially an historic development”. I fully endorse that view.

The Liaison Committee published a further report in July 2009, which was, again, strongly supportive of the proposed changes. It also made reference to wider issues related to the parliamentary scrutiny of public spending, including the number of days available for debates on the estimates and the outcome of spending reviews, and the scope of such debates. This Government’s establishment of the Backbench Business Committee represents a significant step forward in this area. That Committee has at its disposal 35 days in each Session, some of which are taken in Westminster Hall, to schedule debates on subjects of its choosing, including the scrutiny of public spending.

This Government are fully committed to enhancing transparency in public spending and supporting effective scrutiny by this House. We have already published data held on the Treasury’s public spending database going back to 2005-06. Further measures are being taken that will see details of all new spending of more than £25,000 published from November 2010.

[Mr Thomas]

rose—

[Mr Hoban]

I am sure that the hon. Gentleman will wish to welcome that.

[Mr Thomas]

The Financial Secretary rightly made reference to the support of the Liaison Committee and to the work of the Backbench Business Committee. However, the Liaison Committee also made it clear that the Government should give an undertaking to provide a day’s debate on the outcome of each spending review and on each year’s pre-Budget report. Can he confirm that it is the Government’s intention to do that from now?

[Mr Hoban]

Clearly, the Liaison Committee’s recommendations preceded the decision by this Government to set up the Backbench Business Committee. The Backbench Business Committee has the power to use one of the 35 days available to it to deal with the issues proposed by the Liaison Committee, and that is the right way to proceed. It is right to give the House a power to engage in that degree of scrutiny.

The House is today being asked to approve formally changes that will further support the move towards greater openness and transparency, and make effective scrutiny of spending plans by this House far easier to achieve. An explanatory note outlining the purpose of the alignment project has been made available in the Vote Office. With the authority of this House, these changes will be implemented for the financial year 2011-12, and I commend this motion to the House.

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

I, too, welcome this opportunity to debate the clear line of sight project. What happened this weekend will have dispelled any last remaining doubts about the need for more clarity, transparency and scrutiny of the Government’s plans for public spending. The measures that we are debating will help to make that process a little easier.

As the Financial Secretary said, this project to align better the measures of Government spending was initiated by the previous Government and was strongly supported by many of the Committees of the House. I should, at the outset, acknowledge the important contributions made by the Hansard Society—its contribution went back as far as 2006—the National Audit Office, and, of course, the Treasury Committee, the Public Accounts Committee and the Liaison Committee in championing these reforms.

The Financial Secretary alluded to the fact that in our June 2007 Green Paper, “The Governance of Britain”, we announced the establishment of the clear line of sight project. In a memo in November 2008, we published the first broad ideas, which were then developed into a clearer set of proposals published in March 2009. These ideas set out to do the following: first, to modernise the public spending process to make it more transparent and easier for parliamentary scrutiny purposes and, therefore, to make the Government more accountable; secondly, to make the public finances easier to understand by reforming the way in which the Government publish financial information; and, thirdly, to create greater incentives for value for money by improving the way public spending is managed.

In short, the project was designed to resolve the basic problem that Treasury budgets, which are announced in spending reviews and published in the departmental annual reports, estimates laid before Parliament and resource accounts each currently measure and report expenditure in different ways. That inevitably makes it difficult to compare figures, thus creating, on occasion, confusion and a lack of understanding. Given the Budget that we have just seen, with the scale of impact on the poorest, this has never been more necessary to resolve.

In March 2009, we set out a series of specific proposals in a Command Paper proposing key changes. The first was that the estimates presented to Parliament would be organised, so that when Parliament voted on them it was voting on the same totals as the Treasury would be using to control Government spending—as the Financial Secretary has said, that is particularly significant for non-departmental public bodies. The second was that parliamentary controls over expenditure would be on a net basis, rather than on a gross and net basis. The third was that Parliament would actually approve the capital spending plans of Departments, rather than just be made aware of them. Other proposals were that there would also be changes to the format of the estimates to help simplify them further, and that financial publications would be rationalised to three annual publication events.

The March 2009 proposals had identified misalignments between budgets, estimates and resource accounts of almost £500 billion from the 2008-09 departmental resource spending plans. The extent of misalignment after today’s proposed changes would have reduced to approximately £22 billion—that is a very significant and substantial improvement. Nevertheless, I hope that the Financial Secretary will undertake to keep under close scrutiny, in partnership with Parliament, the scope for any further reductions in this level of misalignment.

We demonstrated our further commitment to this project by taking forward within the Constitutional Reform and Governance Act 2010 the one aspect of these proposals that required a change to legislation. That proposal—the consolidation of non-departmental pubic bodies within department resource accounts—was included within the Act and passed in the wash-up period before the general election. I welcome the fact that the explanatory note that the Financial Secretary has put in the Table Office gives some indication of the timetable for introducing the order that will list the bodies to be consolidated into the estimates and accounts—that relates to part of the point raised by my right hon. Friend the Member for Barking (Margaret Hodge). However, I would welcome his including in his winding-up speech an explanation for the somewhat lengthy time lag between the primary and secondary stages of this particular process.

In the previous Government’s original proposals of March 2009, we said that we wished

“to develop, over time, a set of ‘mid-year’ departmental reports giving a provisional view of spend and performance for each department during the current financial year”.

The Liaison Committee strongly supported that proposal, so will the Financial Secretary explain how he sees the Treasury developing that particular part of the March 2009 proposals?

Perhaps, the Financial Secretary could also set out how the proposals might impact on some of the new bodies that he and his Department have announced. The Office for Budget Responsibility has not had the best of starts, with its independence being questioned and its statistical analysis set for early scrutiny. At the moment, the OBR sits within the comfortable embrace of the Treasury and I wonder whether the Financial Secretary can explain to the House whether he has plans to establish the OBR as a non-departmental public body. I ask because, if that were to be so established, under these proposals the House would be able more clearly to see what the OBR was costing and on what it was spending its money. The House would be more able to make a clearer assessment of whether the OBR’s communications and economic analysis were genuinely independent of the Treasury. If he does not plan to establish the OBR as a non-departmental public body, perhaps he can explain how he plans to offer the House the same level of scrutiny over the OBR’s spending and therefore help the House to assess how independent of the Chancellor and his spin doctors the OBR is?

Perhaps the Minister, too, can set out how these proposals will impact on the independent Equitable Life commission that he plans to establish. Again, will he establish this commission as a non-departmental public body? I ask this without prejudice.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

I am slightly puzzled by the shadow Minister’s speech, because it sounds like a debate for tomorrow.

[Mr Thomas]

With all due respect to the hon. Gentleman, if he had done some research into what these proposals are about, he would understand the significance of including non-departmental public bodies in the estimates and accounts and would therefore understand the advantages for the House of these proposals.

If the Equitable Life commission that the Government plan to establish were to be set up as a non-departmental public body, the House could assess how much the Government were spending on the administration of the commission as well as on the payments of the scheme. The House could therefore potentially understand more easily how the functions of the commission, which, incidentally, are yet to be made clear, were being implemented. If the Financial Secretary and his colleagues do not intend to set the commission up as a non-departmental public body, will he tell the House how it will be able to scrutinise how the commission is funded and what it spends its money on?

Similarly, the Financial Secretary’s proposals, announced in this House, for a consumer protection and markets authority and a new economic crime agency have not so far been subject to any scrutiny other than that given to the original statement to the House. Under the alignment project proposals, the House could scrutinise more effectively their spending plans and compare them to their predecessors in that regard if they were established as non-departmental public bodies. If he does not propose to establish these two bodies as non-departmental public bodies, will he explain how Parliament will be able to approve their spending plans and scrutinise their accounts? Again, I ask that without prejudice.

One of the real concerns about the Minister’s proposals was the loss of energy within regulatory agencies as individual staff focused, inevitably, on their own futures. The Minister still needs to explain how such a loss of energy in regulatory oversight is being prevented. Will he recognise today that clarity on the status, budgets and ultimately expenditure levels for the new bodies will be fundamental in giving the House confidence in the ability or not of these agencies to do the job that the coalition plans for them?

I welcome this further opportunity to confirm support for the sensible changes that the last Government created under the alignment project, which have taken place after considerable useful debate, but I look forward to the Financial Secretary giving some more clarity on the questions that I have asked.