Finance (No. 4) Bill

George Howarth Excerpts

Monday 16th April 2012 Commons Chamber

[Mr George Howarth (Knowsley) (Lab)]

It regularly seems to be my lot to follow the hon. Member for Cities of London and Westminster (Mark Field). Perhaps that is appropriate in some respects, as he represents a constituency at the other end of the spectrum from mine. He made a typically thoughtful speech, although he set out a couple of priorities that I would not share, and that he would not expect me to share—namely, supporting the banking industry, for example through the tax system.

However, one thing that I take issue with is the hon. Gentleman’s assertion about the rights of people in employment in this country compared with those elsewhere. When I speak to employers, as I am sure we all do in our constituencies, one of the questions I often ask is: “To what extent do employment laws have on impact on you? Do you feel they put you at a disadvantage?” Sometimes they will say, “Yes, they do,” but at the margin, if at all. If I ask employers to list their hierarchy of concerns, they put employment rights very low down, while concerns about our macro-economic direction and the way the economy is being run are very much at the top.

[Nia Griffith (Llanelli) (Lab)]

Does my right hon. Friend agree that what employers dislike is duplication of the various forms they have to fill in? The vast majority of employers are supportive of clear employment law, which helps both employees and employers.

[Mr Howarth]

My hon. Friend is precisely right. I worked in industry on the shop floor prior to the introduction of health and safety legislation. On another occasion—this is not the appropriate time—I might, if I get the opportunity, describe the conditions in which people worked in a lot of factories in those times. Often they were almost Dickensian.

[Mark Field]

No one is suggesting that we should try to encourage some sort of sweatshop regime; but equally, during these difficult economic times, there is a tendency for businesses—particularly small and medium-sized enterprises—to batten down the hatches. We want to encourage them to take the risk—“Yes, let’s take on an extra employee. Maybe some more business is coming through”; “Okay, but will we be able to expand in three or six months’ time?”; “Let’s try and take employees on.” The difficulty for small and medium-sized enterprises is not the idea of employment rights, but that the difficulties and costs of taking on new employees—particularly young employees—become so overwhelming that there is a massive disincentive so to do.

[Mr Howarth]

I am grateful to the hon. Gentleman for having rebalanced his view slightly, but I still think that he is wrong. When I talk to employers about the difficulties they have in recruiting, they tell me that they have two priorities, particularly in regard to young people. The first is that the young people should have the right skill set and should be capable of doing the job without needing too much training from the employer. The second, which is harder to pin down, is about attitude. Employers are looking for people who are disciplined enough to turn up at the right time and not to take days off on a whim. Such considerations come ahead of the concerns that the hon. Gentleman has described.

I want to talk briefly about the cumulative effect that the measures in the Budget will have on the people in Knowsley whom I represent. I also want to cover the proposals for minimum unit pricing for alcohol, as one of the major employers in my constituency will be affected by them. I have also received quite a lot of correspondence from individual constituents on that matter.

I am concerned about the impact that the working tax credit changes will have on my constituents, in conjunction with the other changes to the benefit system that are already taking place. To qualify for working tax credit, couples with children will now have to work at least 24 hours a week between them, instead of 16, with one of the couple working at least 16 hours a week. There are exceptions for people with a disability or incapacity. There is also an issue with the backdating of the entitlement to tax credit. It will now be one month, instead of three months. A further concern is that the main elements of the tax credit have been frozen for 2012-13.

I am unable to give the House any statistics to show how those changes will directly affect my constituents, but it is clear that changes to tax credits impact most heavily—indeed, entirely—on those on low incomes. That is another contrast between the situation experienced by the hon. Member for Cities of London and Westminster and me. It is estimated that, nationally, 212,000 working couples with children who earn less than £17,000 a year will lose all their working tax credit. Unless those people are able to find someone who will employ them for an extra eight hours a week, that could equate to a loss of £3,870 a year. That will be a substantial loss for the many families in my constituency who will be affected by the change. We must also take into account other things that have been going on. Low-income families are already disproportionately affected by rising fuel costs and rising food bills, for example, and these changes will only add to those pressures.

Child benefit has been frozen for another two years, until April 2014. Before the Budget, there was a lot of negative publicity about the plans to withdraw child benefit from families with a higher-rate taxpayer in the household. The hon. Member for Cities of London and Westminster referred to that in his speech. In the Budget, however, the Chancellor backtracked a little. From January 2013 there will be no loss of child benefit until at least one parent earns £50,000, after which the benefit will be gradually reclaimed through increasing the take up to £60,000. Beyond that, people stop getting the benefit at all. That will be a very complex system to administer, and my major concern is how it will affect people in my constituency. If the benefit had been raised in line with inflation, a couple with one child would have received £88 a year more in child benefit or £145 a year for two children in 2012-13, but now they will simply not get that.

The latest Department for Work and Pensions figures show that in Knowsley 21,185 families were in receipt of child benefit, with 35,725 children between them. That is a substantial number of people who will be adversely affected by these changes in my constituency alone. It is inevitable that I should comment on that, as it is totally unacceptable for those families. I fear that one consequence will be—perversely perhaps, or even unintentionally—that some families that manage to convince the Jobcentre Plus people that they are genuinely unemployed, might decide that they will be better off if they are not working.

[Mr Chope]

Does the right hon. Gentleman realise that something like £100 million will be spent on administering the new child benefit arrangements—a figure very similar to the total amount that the Treasury thinks could be saved by putting a cap on charitable donations tax relief?

[Mr Howarth]

The hon. Gentleman makes a useful point. I said that the system would be complex to administer, and complex things cost more, so the hon. Gentleman is right to say that. I had not intended to cover the point, but he is also right to express concerns, as did my Front-Bench colleague, my hon. Friend the Member for Leeds West (Rachel Reeves), about the effect of these changes on charities. I happily endorse the sentiment behind the hon. Gentleman’s comments..

I mentioned the maximum pension credit, which is being cut by £1.98 a week for single pensioners and £3.36 a week for couples. The threshold at which people qualify for pension credit has increased by 8.4% to £111.80 for single pensioners and £178.35 for couples. That means that 27,500 pensioners in Knowsley could be affected by these changes. One important characteristic of the previous Government—I do not think it is open to dispute—is that the lot of pensioners steadily increased during the period in which they were in office. What we seem to be confronted with here is the potential for pensioners to get poorer and poorer, as happened under previous Conservative Governments. That is a real concern in my constituency. These changes, taken in conjunction with other changes to the benefit system, will mean real hardship in my constituency, which is one of the poorest in the country.

Let me say a few words about minimum unit pricing for alcoholic beverages. I shall quote a constituent who wrote to me. I shall not name them, as I do not have permission to do so. My constituent wrote:

“The reality is that minimum pricing will affect those less well-off and have little impact on those with a poor relationship with alcohol. It will enrich retailers without creating jobs, reduce investment and damage producers leading to the loss of jobs. The treasury will recover less duty and tax from the sector as a whole.”

I will give my view in a few minutes, but I think that when people write to Members of Parliament expressing such concerns, it is important for us to raise and address the issues.

I have also received some briefing from a company in my constituency, Halewood International. It employs 500 people in the north-west of England, most of whom are in my constituency. It produces some products of which Members may have heard—one is Crabbie’s Ginger Beer, which is a very popular drink; another is Red Square Vodka—and, as well as producing some important brands, it distributes brands for a large number of other companies.

Halewood has made a number of points, to which I hope Ministers will consider responding. First, it says:

“Alcohol consumption has declined since 2004 and more people are drinking responsibly.”

I think that there is evidence to support that assertion. Secondly, it says:

“There is no evidence that minimum pricing will reduce alcohol misuse. It will affect all consumers and punish the majority who drink responsibly.”

That is clearly true: it will affect everyone. The company adds:

“It will hit people on the lowest incomes hardest.”

That, too, is clearly true.

Thirdly, Halewood says:

“Minimum unit pricing is likely to be illegal under European Law. It is inconsistent with the operation of the free market for the state to intervene on price.”

The company is not alone in that view. The Economic Secretary to the Treasury has said:

“the Scottish Government have recently introduced a Bill that seeks to bring in a 45p per unit minimum price… we believe that it could be incompatible with article 34 of the treaty of the functioning of the European Union… That is the position.”—[Official Report, 14 December 2011; Vol. 537, c. 341WH.]

So it is not just companies with an interest in the matter that believe that minimum pricing is likely to be problematic in terms of European law. In December last year, the Government thought the same.

Fourthly, Halewood says:

“The UK alcohol industry already pays some of the highest rates of alcohol tax in Europe. The Budget delivered a 5% increase in duty.”

Finally, it says:

“The drinks industry is committed to helping to tackle alcohol misuse. It is delivering a range of initiatives to encourage responsible drinking, such as through the Public Health Responsibility Deal.”

That is the case being put by the industry, and by some of my constituents. Personally, I have an open mind on the introduction of minimum unit pricing. I recognise that problematic drinking exists throughout the country—not just in urban areas, but in every constituency—and that there is a growing problem of young people drinking too much, too often, and ending up with serious health problems as a result. If I could be convinced that these measures would address that adequately, I could be persuaded to support them, but I do need to be convinced.

[Lorely Burt (Solihull) (LD)]

I cannot agree with the right hon. Gentleman about minimum pricing, because I think there is a lot of evidence to suggest that the most responsible drinking goes on in our public houses. Although the alcohol manufacturers may have some reservations about minimum pricing, does the right hon. Gentleman agree that low charging by supermarkets, whereby our young people buy alcohol in them and get tanked up before going out, is detrimental both to our society in general and to our pub industry, which I am sure all Members cherish and are keen to see survive?

[Mr Howarth]

The hon. Lady makes an effective point. I am tempted to enter into a debate about what has happened to the pub industry over the last decade, but I doubt whether that would be in order. I will say, however, that people’s habits have changed, including in respect of the places they go to for entertainment. That is particularly the case for young people. Many of them no longer go to pubs for entertainment. Some of the new places they go to serve alcohol, but others do not. More is going on here than the hon. Lady suggests, therefore. She is right, however, that some young people buy alcohol from supermarkets and drink it at home, so that they are already half-filled up, as it were, when they later go out to a nightclub. One of the reasons they do so is that the drink prices in nightclubs are so expensive. I hasten to add, however, that I am not an expert on young people’s drinking habits.

[Diana Johnson]

Will my right hon. Friend give way?

[Mr Howarth]

I fear that I am at risk of straying into a separate debate, but I shall give way.

[Diana Johnson]

Minimum alcohol pricing alone is not a magic bullet. A range of other policies must be pursued, too, including making personal, social, health and economic education mandatory in schools so that young people learn about what happens to them if they drink too much.

[Mr Howarth]

I am sure my hon. Friend is right, and, as I have said, I have an open mind on the subject.

I fear, however, that if the alcohol products that young people take home to drink before going to a nightclub—or wherever—are no longer available to buy in supermarkets or other licensed retail establishments, there will be an increase in the sale of illegal products on the streets, and that is also a fear that I have in respect of minimum unit pricing. We have already seen this happening to some extent in respect of tobacco products. Also, such products that are illegally imported and then sold on the streets are not subject to quality controls.

If we do not get the education messages mentioned by my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) right, young people will drink anyway, but they will not be able to afford the products on offer in supermarkets and other licensed retail establishments. Instead, they will buy products off the back of a white van outside the park on a Friday night. That is a big fear of mine, and I have yet to hear a satisfactory response to it.

I fear that the overall impact of this Bill will be far worse on the people of Knowsley than on the people of the Cities of London and Westminster. I hope the Government give more thought to the effect these measures will have on poorer pensioners, people on low incomes and those struggling to bring up children on a relatively low income. They are important members of our society. If we do not offer them the right level of support, I fear for the future.

--- Later in debate ---

[Nia Griffith]

If the hon. Gentleman had been listening earlier, he would have heard me explain that those people have already lost that money through the VAT increase. That is a stealth tax and a regressive tax, which always affects the least well-off the most. Many of the people who will get a little more in their pay packet because they will pay a little less tax when the personal allowance goes up will find that because of other taxes that have been implemented, they have lost that money already. Sadly, those people will not do so well.

The personal allowance helps people nearly all the way up the income scale, particularly those in two-income families. Frankly, although it is an expensive measure, it is not a well targeted one. As I mentioned, I would have liked to keep the tax credits system, which helped those who really needed it and took account of people’s different circumstances because it was based on the household income.

There is nothing to incentivise people to put their money back into the local economy and nothing to encourage people to unlock their savings and help the economy. We had the car scrappage scheme, so that people who were planning to buy a car that would last them for the next 10 or 12 years would bring the purchase forward by a year or two to take part in the scheme. We did the same thing with the replacement of boilers. Those schemes were introduced specifically to get the economy going. What have this Government done? They have thrown out of the window the one such scheme that they did have, which was the solar panels scheme, under which people were unlocking £10,000, £15,000 or £20,000 of their savings and spending it immediately in the local economy. Even if the panels were not made locally, all the fitting work to install the solar panels was done by skilled plumbers and craftsmen, so the money went directly into the local economy.

The Government completely messed that scheme up and destroyed the industry’s confidence by incompetently changing the rules before the consultation was finished. They did not scale the scheme down in a sensible way, as the industry had asked. People in the industry accepted that the tariff would change over time, but they could not stomach being treated like idiots. The Government just said, “We’re going to change all this,” even though people had invested a lot of money. Some people had spent £3,000 on a course learning how to convert from being an ordinary central heating plumber to a solar panel installer. Some firms had expanded for the purpose, and firms in my constituency are laying people off because of the ridiculous changes.

What other scheme do the Government have in mind to get people to unlock their savings for an excellent investment that is environmentally friendly and provides local jobs? We have not seen such a scheme in the Budget. We have made some suggestions, but it seems that the Chancellor has ignored them. For example, we suggested a cut in VAT on repairs and improvements to houses. With the construction industry on its knees, that would have enabled plumbers, carpenters, electricians, plasterers and so on to find extra work, and people would have been encouraged to take on home improvements. What did the Chancellor do? The exact reverse. He slapped additional VAT on alterations to listed buildings.

[Mr George Howarth]

I fully support my hon. Friend’s point about a cut in VAT on home repairs. Does she accept that because of the high level of VAT, many repairs are now being undertaken in the black economy? If we could bring VAT down to a level that people could afford, that might have a positive effect on revenue.

[Nia Griffith]

That is extremely worrying, because there is not much point in having VAT on anything if it is not collected. Groups in my constituency that want to do up listed buildings, such the Cwrt farm project, with which I have been involved, and the Llanelli Railway Goods Shed Trust, which I chair, care for all manner of buildings in the town. The fact that they will have to pay much more VAT means that they will spend the same amount of money—the amount that they have raised, or that individuals have available to give them—but have less work done. Less of that money will be spent on wages for local people, so less money will be circulating in the local economy. Rather than finding ways of stimulating the amount of work being done, the Government seem to be trying to close everything down and provide fewer and fewer opportunities for anybody to make money.

Practically everywhere I have gone in Llanelli over the past four weeks, I have met people struck by the fact that pensioners are being punished and millionaires are getting away with a tax break. That has incensed everybody from all walks of life.