Budget Resolutions

Debate between George Kerevan and Ian Blackford

1st reading: House of Commons
Tuesday 14th March 2017 Commons Chamber

[George Kerevan (East Lothian) (SNP)]

This was a dull Budget, although I do not necessarily say that as a criticism, because it was meant to be dull. The Chancellor did most of his heavy lifting in the autumn statement, in which he amassed a war chest by borrowing more than £120 billion. The criticism of the Budget is that rather than using that war chest now to raise productivity and improve education, he has put it aside because he does not know what will happen after the Brexit deal is done.

The Secretary of State for Education made a reasonable fist of trying to explain the new T-levels. If her explanation had lasted for two or three minutes, I would have believed her, but after half an hour, I began to think that she was arguing a little bit too hard, as if she did not really believe it herself. The T-levels were one of the more innovative parts of the Budget—I do not demur from that—but if we want a technical education of the standard that exists in Germany or the Netherlands, we must have the schools, and the workshops, computers and machinery in those schools, to do the teaching. In fact, the equipment in the schools has to be better than what people will find in the factory after they have graduated. The way to raise productivity is by training in schools at the highest and most advanced technological level.

If the money that the Budget gave to increasing selective education had been put into technical schools in line with the investment that takes place in Germany and the Netherlands, I might just have believed what the Government said. However, the T-levels are yet another blind by a Government who want to pursue selective academic education for a very narrow stream of people, which will not solve the problem of productivity.

The one significant change in the Budget that had the biggest impact was the rise in national insurance for the self-employed, so let us try to connect that to the whole question of educational productivity. Rather than Members listening to me, let us take the evidence of two companies: a construction and investment company called Chiswell; and a building company called Castlemead. Does anyone know who these companies are? They are both owned by the Chancellor of the Exchequer. To give him his due, he put those companies into a blind trust in 2010. He is an honourable man, so there is no question of him influencing these companies at the moment, unlike certain Presidents of the United States who we might mention.

It is interesting to see what these companies are thinking about the economy, productivity and skills. The 2016 accounts of Castlemead say that the building industry is

“suffering from supply bottlenecks, particularly of skilled tradespeople, driving up costs.”

What does the building company Chiswell say? It states:

“The scarcity of good quality and committed subcontractors is still an issue”.

The company is considering going back into house building. Of course, this skills and supply bottleneck is largely seen among the self-employed. To sum up, the Federation of Master Builders says that 60% of SME construction firms are struggling to hire bricklayers and carpenters.

The Secretary of State claims that the increase in technical training will help to supply some of this much-needed skill demanded by Chiswell and Castlemead. At the same time, however, the Chancellor is removing the incentive to work and to take up training because he is raising the taxes of the very workers whom his companies say they need. In other words, the Chancellor is so short-sighted that he is hurting not only his own businesses but, sadly, everybody else’s.

This is not just a dull Budget because, at its heart, there is a ticking timebomb. The OBR forecast about what happens next is interesting, as it relates to whether the money will be there to provide the training about which the Secretary of State has spoken. The Chancellor was concerned to tell us that, under his chancellorship, growth has been very strong in the past 12 months. Growth in this country has been powered by consumer borrowing. If we drill into this, we find that the OBR says that in 2016 the savings ratio in the UK hit a historical low—it has gone to zero and below. People are dissaving. If people are not saving, ultimately the funds are not there to finance the investment that will raise productivity. Moreover, because saving has collapsed, the OBR does not think that there is a potential for consumer borrowing and consumer expenditure to continue to carry the economy. The OBR predicts a downturn in the availability of consumer funds over the next 12 months, so the dissaving cannot continue.

Most of the boost to consumer spending last year was a hangover from 2015, when inflation was fairly low. As real incomes were rising—a rare occurrence in the previous 10 years—people felt that they were a bit better off. However, now that inflation is rising, because the pound has tanked, we can expect consumer borrowing to disappear, so how will the economy meet its growth targets? The OBR says that the borrowing will be replaced by a rise in business investment. When I asked the OBR officials who appeared before the Treasury Committee yesterday why they thought that—where was the evidence that business investment would rise?—they had a wonderful answer, which quite took my breath away: “Business investment has been so low for so long that it is bound to go up some time.” [Laughter.] That was what they said; Members can go and read the transcript.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Things can only get better.

[George Kerevan]

Indeed, but I will believe that when I see it, and I will believe that pigs can fly.

[Ian Blackford]

May I amplify the point that my hon. Friend is making? On page 7 of its book, the OBR states that investment intentions have been put on hold, but when we turn the page, we find that business investment is forecast to grow by between 3.7% and 4.2% between 2018 and 2021. It simply does not add up, does it?

[George Kerevan]

Not only does it not add up, but it means that we will not have the investment in plant and machinery that will raise productivity. We will miss our productivity targets yet again. Since the Chancellor has amassed his war chest, he should be using it. He should not wait for two or three years to see what happens after Brexit—no general does that. What is needed is investment now. Let us get on with the T-levels. Let us invest in English schools. I think that that would be a good thing to do, but it is not what the Budget says.

[George Kerevan]

I accept that proposition but, having spent 25 years of my life teaching in further education, I know that £300 million for the whole of England and Wales becomes a tiny amount when we drill down to all the individual institutions. Can the Government not confront reality? If we want the productivity levels of Germany, we should not be talking about £300 million; we should be talking about £30 billion. If the Government do not want to spend £30 billion, that is fine, but they should not pretend that small amounts of money somehow solve the problem.

[Ian Blackford]

I learned a lot from my hon. Friend because about 35 years ago he was my economics lecturer.

We have delegated responsibility to the Bank of England through the quantitative easing programme, and that has led to a lack of balance. We have seen £435 billion of QE that simply has not worked, but we have not seen enough fiscal responsibility from the Government to create the circumstances that will deliver sustainable growth.

[George Kerevan]

My hon. Friend is right. However, it is important to pin the blame where it is deserved, because perhaps the Chancellor gets too much of it. The blame actually lies in Downing Street with the Prime Minister. When she launched her bid for leadership of the Conservative party on 30 June 2016, she said:

“If before 2020 there is a choice between further spending cuts, more borrowing and tax rises, the priority must be to avoid tax increases since they would disrupt consumption, employment and investment.”

Yet now we have a Budget that will raise the taxes of the self-employed and entrepreneurs—the people whose motivation is required for growth in the economy and an increase in productivity. It is the Prime Minister who has reneged on her leadership promise; the Chancellor is only doing her bidding.

This Budget claims to address the questions of education and productivity, but it is actually about selectivity and privilege for the narrow few. Let me tell the House what it has not done. For the first time in 100 years, the millennial generation is earning less than its parents. The Budget does not deal with that, because the Chancellor has sat on his war chest. Home ownership among middle earners is falling for the first time in 50 years. Mrs Thatcher would be turning in her grave if she heard that that was happening under a Conservative Government. By 2020-21—the end of the forecast period—average incomes will be a fifth less than they would have been if growth had continued at pre-crisis levels. There will be £5,000 less for every household.

The Conservative Government have not delivered a return to wealth for the ordinary person. The Chancellor’s freeze on universal credit and housing benefits means that one person in seven will have a lower real income in five years’ time. This is a Budget that does not address the real issues of inequality in this country. It is a Budget for inertia and complacency, and I will vote against it.

UK Sovereign Wealth Fund

Debate between George Kerevan and Ian Blackford

Wednesday 14th December 2016 Westminster Hall

[George Kerevan (East Lothian) (SNP)]

I begin in time-honoured fashion by thanking the hon. Member for Weston-super-Mare (John Penrose) for securing this debate. I say that genuinely because we do not get enough chance to think long term or to debate issues in detail, and this is a practical issue on which to do so.

This has been a limited debate, and I begin my summing up by agreeing with many of the hon. Gentleman’s reasons for having some kind of sovereign wealth fund. In the current context, the most important reason is that a sovereign wealth fund would provide inter-generational justice. There have been discussions about a UK sovereign wealth fund since the 1970s; the issue has come and gone. There have been many arguments for a sovereign wealth fund and, in the ’70s, the North sea oil money had arrived and we needed to do something sensible with it.

Such reasons are episodic. On both sides of the House, we have all come to understand that inter-generational fairness is an issue. Successive generations have repeatedly used up available funds, often making a mess of the economic situation, and left it to future generations to pick up the pieces, as the Women Against State Pension Inequality Campaign is at the moment.

In the absence of any inter-generational mechanism for creating such fairness, we have to consider some kind of sovereign wealth fund. The Government are on record as seeking some form of inter-generational justice, and this is the only mechanism currently under discussion that has any chance of success. Without prejudging how we do it, a sovereign wealth fund is worthy of discussion because it exactly fits the kind of programme that the Government have suggested.

The hon. Gentleman did not examine in any great detail the other argument for some kind of sovereign wealth fund. During a periodic economic crisis, a sovereign wealth fund, provided we do not touch the capital, would give us an emergency revenue stream that can be put to use without unbalancing the broader fiscal mix. Since 2008, at the same time as building up the equity base of their sovereign wealth fund, the Norwegians have been able to tap some of the income stream temporarily, to offset lower tax revenues as a result of the global economic crisis. Again, that would seem to recommend itself to the Treasury.

[Ian Blackford]

I applaud what Norway has done, but one of the weaknesses of the Norwegian model is that it invests primarily in equities and bonds. If we get this right, there is an opportunity to invest in infrastructure. My hon. Friend is right that we should draw down only on the income streams, but there is a real opportunity to invest in infrastructure to build capacity and growth opportunities, as well as investing in financial assets.

State Pension Age: Women

Debate between George Kerevan and Ian Blackford

Wednesday 30th November 2016 Commons Chamber

[Ian Blackford]

I will make some progress and then take more interventions. I am aware that many people want to speak.

The Government have changed the entitlement for something that women have paid in for with an expectation of retiring at 60. When the goalposts were moved, the Government could not get around to informing the women affected in a timely manner. A woman born on 6 April 1953, who under the previous legislation would have retired on 6 April 2013, received a letter from the Department for Work and Pensions in January 2012 with the bombshell that she would now be retiring on 6 July 2016. That is three years and three months later than she might have expected, but she received only 15 months’ notice. That is what this Government have done to many women throughout the United Kingdom: 15 months’ written notice on what they thought was a contract they had with the Government, but which has now been ripped up. That is the contempt that this Government have shown for the 2.6 million Women Against State Pension Inequality campaign women throughout the UK.

[George Kerevan (East Lothian) (SNP)]

Does my hon. Friend agree that the attack was made on the WASPI women because they were an easy target, and that it is the first stage in a Conservative plan to downsize and dismantle the state pension altogether?

[Ian Blackford]

My hon. Friend may well be right. The Government are of course hoping that with the passage of time this issue will go away, but it will not go away, because the women are angry. If they do not begin to recognise the need to do something, each and every Member of the House will have the WASPI women coming to their surgeries and demanding action. Not only will they be demanding action, but that will run the risk that this Government will be taken to court.

Guaranteed Income for Retirees

Debate between George Kerevan and Ian Blackford

Tuesday 17th November 2015 Westminster Hall

[Ian Blackford]

I thank the hon. Gentleman for his contribution. I agree that all of us in this House have a responsibility to ensure that an adequate level of protection is in place for consumers. We must learn from the large number of mis-selling scandals that have happened over many years. I am concerned that, as things stand, there are not yet adequate safeguards in place to protect consumers from the changes.

The Work and Pensions Committee described the scarcity of information about Pension Wise as being

“not conducive to effective scrutiny”

and asked the Government to publish statistics on a quarterly basis, including on the take-up of the different channels of guidance and advice, and on the reasons for not taking them up. The FCA claims that eight out of 10 savers would have got a better deal if they had shopped around when choosing the best product for retirement. That illustrates another reason for clear, understandable, accessible guidance for consumers. The untested nature of the reform demands close monitoring and data collection.

[George Kerevan (East Lothian) (SNP)]

I, too, congratulate my hon. Friend on securing this debate. To add to what he has said, when I questioned the FCA in the Select Committee on the Treasury, they said they were worried that not enough time had been given for new products to emerge for savers drawing down their pension pot. The Chancellor announced the change rather precipitously, and a longer timescale might have allowed those new products to emerge.

[Ian Blackford]

I agree with my hon. Friend, although I come back to the fundamental point that what we need is reform of the annuity market. I am not sure that the products that may come to the market over the coming period will do what we need them to do, in allowing the level of consumer protection and choice that we are talking about.

Witnesses to the inquiry by the Work and Pensions Committee, such as the Financial Services Consumer Panel and the Pensions Policy Institute, said that it was essential to enable the policy to develop in the light of experience. The Committee recommended that the Government publish regularly data encompassing

“customer characteristics including pension pot size and other sources of retirement income…take-up of each channel of guidance and advice…reasons given for not taking up guidance and advice…subsequent decisions taken; and…reasons given for those decisions.”

Royal Bank of Scotland

Debate between George Kerevan and Ian Blackford

Thursday 5th November 2015 Commons Chamber

[George Kerevan (East Lothian) (SNP)]

I associate myself with the comments from hon. Members congratulating the hon. Member for Edmonton (Kate Osamor) on securing the debate. The advantage of having this debate is that we have moved the agenda forward, rather than looking back. Yes, we have castigated and held RBS to account, but the Minister should also note that Members on both sides of the House want to move the banking agenda forward.

We have spent seven or eight years, in the Treasury Committee and in the House, trying to refashion the regulatory machinery. In fact, the new regulatory machinery is yet to come into force, because it will be another two years before most of Vickers and the ring-fencing is in force, and another four years before it is fully operational. That means that we will have spent more than a decade trying to sort out the problems of 2007, and when we get there, we will discover that economic and banking problems have moved forward. Therefore, the advantage of today’s debate is that we have tried to start moving the agenda beyond 2007. I think that the Government should bear that in mind. That is why the motion, despite being drafted in very general terms, expresses the will of the House, which is that we need to look forward at how we can make the banking system more responsive, rather than simply protecting it from replicating the previous bubble.

I associate myself with the words of the hon. Member for Horsham (Jeremy Quin) and my hon. Friend the Member for Caithness, Sutherland and Easter Ross (Dr Monaghan). In criticising the strategy pursued by various managements of RBS, which hopefully was largely in the past, we should never extend the criticism to the work done by the ordinary workers in the branches and call centres. They have struggled to cope with the crisis of 2007-08, and with the various restructurings that have taken place. I remind Members that employment in RBS was around 200,000 when it was taken into public ownership, and now it is about 92,000, so there has been a massive shedding of labour.

[Ian Blackford]

It is interesting that my hon. Friend is referring to the challenges that some of the staff at Royal Bank of Scotland have faced. They are fully deserving of our support. Does he agree that we should reflect on the employees of RBS and other banks who were encouraged by their managements to own shares pre-the crisis, and who, among others, have suffered parlously from the mistakes by those managements?

[George Kerevan]

My hon. Friend, and old friend, makes a very good point. There is not a wall between the customer and the rank and file staff of RBS; they too are customers and shareholders, and they too suffered.

That brings me to where we go next. I do not think that Members of this House would stand in the way of returning RBS to private ownership. When the Minister replies, she must not define our difference of opinion as being that the Government support a return to private ownership while the rest of us are demanding that RBS stay in the public sector. That is not the issue. The issue is the emphasis placed by the Treasury and the various Treasury agents in their approach to the various generations of management in RBS. In public ownership, the key goal given to RBS management was to pay down the level of debt—to reduce the balance sheet. During that period, RBS reduced its balance sheet by some £1.3 trillion. To put that in numbers that people can understand, it is equivalent to the entire balance sheet of Lloyds plus the entire balance sheet of Standard Chartered.

Achieving that has required the management of RBS to focus only on internal issues. Of all the weaknesses that have been identified by Members—I agree with all of them—the central weakness is that the management has concentrated on RBS’s problems and not on the customer. I will explain how I would crystallise this debate for the Minister. In choosing when and how to send RBS back to private ownership, the test must not be, “Did we get all our money back? Is the Treasury satisfied? Has the balance sheet been paid down to a certain amount?”; it must be the impact on the customer and whether RBS has returned to a customer-led focus. I think that the current chief executive, Ross McEwan, and his staff are struggling to do that. Since the senior management was changed two years ago, there has been some refocusing. I remind the Minister that the proximate reason for the change in chief executive was that the then chief executive had disagreed with the pressure that he was being put under to get the bank ready for full privatisation when he was saying, “No, we need to restructure in favour of getting the bank ready to meet the needs of the customer.” The test is not about ideological machismo—are we in favour of private ownership or public ownership?—but the fact that the bank can be privatised and move forward only when it is capable of winning back its customers and its customers’ confidence.

The fundamental break with RBS’s customers has been the loss of faith of its small business customers. That has not changed; we have heard a number of examples today. Whether or not RBS was ultimately culpable, through the global restructuring group, in driving viable businesses to the wall, that is what RBS’s customers feel happened. Until that is resolved, the bank will never become the bank that we all want that can drive the economy forward.

The Government have to be very careful about how they approach privatisation in case they further break the confidence of small businesses. In August, when there was the first wave of privatisation in which the Government started to sell off their shares, that produced bad headlines yet again. I personally think there was evidence of short selling. The Treasury certainly lost more money than it needed to in trying to sell off 5% of shares. That brought further bad headlines, which cannot be allowed to happen again.

At this stage in the game, after seven to eight years of constant restructuring at RBS, it will not be easy to start again and ask RBS management and staff to have a whole new business model. We might come to that point, but I give a word of caution. If we look at the long and sorry history of the attempt to hive off Williams & Glyn, which is a disaster still waiting to happen, we will see that it is not possible simply to wave a magic wand and break up RBS into a dozen or so regional banks. I believe we need to create regional and stakeholder banks, but breaking up RBS may be more difficult than some Members imagine.

Williams & Glyn was not a standalone bank—it was a brand that was totally integrated into RBS. Hiving it off again has taken so long that the original investor, Santander, walked away. The RBS management has been forced to enter into a bizarre arrangement with Corsair Capital, which is an interesting name for the partner RBS has joined in order to bring in capital to Williams & Glyn and then float it off. I do not think that RBS will make any money when it is floated off, so the taxpayer and the Treasury will not get any more money back. Corsair Capital is an American group with a long history of consolidation in the banking world, so I do not think it will be very long before Williams & Glyn is bought by somebody else, precisely so that the Corsair group makes a return on its money and effort. In the end, therefore, we will be no further forward when it comes to small businesses.

I am being chided by you, Madam Deputy Speaker, so I will be brief in offering some practical suggestions.

[Ian Blackford]

Will my hon. Friend give way?

[George Kerevan]

I will not take another intervention, because I am mindful of the time.

The Government have to rethink the idea of extending the new bank surcharge, which they have applied to the larger banks, to the smaller banks and mutuals. If we want to strengthen the mutual stakeholder section, we need to reduce the bank surcharge on it.

There is a growing issue—we have not mentioned this today, but it is beginning to emerge in the banking community—of access to the interlink payment system that binds together all the banks. The electronic system, which relates to cashline machines, standing order payments and contactless payments in a shop, is commonly owned by the big banks, but it is very difficult for smaller banks, new challenger banks and, ultimately, stakeholder banks to access it. We need to open it up. Finally, we need to open up the pricing structure so that SMEs can see how much it costs them to run accounts with a bank

Members on both sides of the House have collectively offered suggestions to the Government. There should be no rush to judgment. Let us think about what we are doing. RBS must have a customer-led focus and we should not just look at what the Treasury wants to do in order to get its money back.