Finance (No. 4) Bill
Graham Stuart Excerpts(12 years, 2 months ago)
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Danny Alexander
I will give the hon. Gentleman time to cool down, if he likes. He will know that a draft statutory instrument has been published, which goes into the matter in some detail, and the House may well have an opportunity to discuss it in due course. However, the basic answer is that food that is hot and taken away is taxed as hot takeaway food. It is as simple as that.
We will stick to our plans on the economy because financial discipline is the essential pre-condition for economic growth, even though that requires difficult and sometimes unpopular decisions, and helps provide confidence and the low and stable interest rates that businesses need to invest in growth and job creation. That confidence was shown at the weekend by the reaffirmation of this country’s triple A credit rating by Standard & Poor’s, the same agency that called it into question when the right hon. Member for Morley and Outwood (Ed Balls) was a member of the Cabinet.
We are committed to securing a recovery led by private sector entrepreneurs, wealth creators and export industries—the sort of growth that the Opposition failed to deliver in more than a decade in government. That is why we are going even further in the Bill to boost our competitiveness and ensure that Britain is again one of the best places in the world to do business, reversing our fall down the global competitiveness league tables that took place under the Labour Administration.
Mr Graham Stuart (Beverley and Holderness) (Con)
This is a Budget for jobs—it lowers corporation tax and takes some people out of tax altogether. That is why it is particularly concerning that it proposes to introduce 20% VAT on static caravans, which are mostly manufactured in east Yorkshire and are deployed in coastal and rural communities throughout the country—the entire supply chain is in this country. The cost of the proposal in jobs will be thousands, and I am grateful that the Government are consulting on it. Does my right hon. Friend agree that Members of all parties are concerned? We need to get that right because the Budget will reverse the destruction of manufacturing that happened under the previous Government, and we do not want to make any inadvertent errors.
Danny Alexander
I am grateful to my hon. Friend for raising that point. I know that it is a matter of concern to several Members, particularly in his part of the country. The change is, again, intended to equalise the VAT system for caravans that are used for leisure purposes. There will certainly be an opportunity to consider the detail, and my hon. Friend will be free to make representations, along with, I am sure, colleagues from his part of the country. We look forward to hearing what he has to say.
Danny Alexander
No, I will make some progress, because, as my hon. Friend also said, and as the House knows, the Government have already set out plans to reduce the main rate of corporation tax to 23%, but this year’s Finance Bill goes even further for precisely the reasons that he gave.
Clauses 5 and 6 will reduce the main rate of corporation tax to 22% by 2014—a headline rate that is dramatically lower than that of our competitors, the lowest in the G7 and the fourth lowest in the G20.
Rachel Reeves
This Government are borrowing an extra £150 billion because of the costs of their economic failure. The reality is that, with more people out of work and therefore claiming benefits, and with fewer businesses succeeding and paying taxes, this Government are ending up borrowing more, because their risky gamble with their economic policies has failed.
Instead of continuing on the downward path begun under the previous Government, total unemployment has mounted to new highs. It is now at the highest level since 1997. Some 2.67 million people are out of work. More than 1 million young people are out of work. We have the highest level of youth unemployment on record. That is a cruel fate to be inflicting on people leaving school, college and university. Instead of going on to get a job or training, they are being left to rot on the dole queue. The truth is that—just as we on this side of the House, along with numerous independent economists, warned—the Government’s attempts to cut too far and too fast have choked off the economic recovery, squeezing households and businesses and sending unemployment soaring, with the result that, as I said to the hon. Member for Dover (Charlie Elphicke), the Government are now forced to borrow £150 billion more than they had planned.
This lesson is being learned around the world, as over-ambitious austerity plans founder. Last year the OECD warned credit rating agencies which press for rapid fiscal consolidation but
“react negatively later, when consolidation leads to lower growth—which it often does.”
Sure enough, Standard & Poor’s decision earlier this year to downgrade nine of the eurozone’s 17 member states was accompanied by the warning that
“fiscal austerity alone risks becoming self-defeating.”
The International Monetary Fund’s sharp downward revisions of its global growth forecasts—including for the UK—for 2012 was accompanied by a call to “reconsider the pace” of fiscal consolidation. Indeed, the IMF’s chief economist has said:
“Substantial fiscal consolidation is needed, and debt levels must decrease. But it should be…a marathon rather than a sprint”
and cited the proverb
“slow and steady wins the race”.
Our economic performance did not have to be this way. We need only look across the Atlantic to see the benefits of a more balanced approach to deficit reduction, with the US now enjoying steady falls in unemployment and accelerating economic growth. Let me quote the opinion of Adam Posen of the Bank of England’s Monetary Policy Committee. His forensic comparison of the US and UK experiences concluded:
“Fiscal policy…played an important role as well. Cumulatively, the UK government tightened fiscal policy by 3% more than the US government did…and this had a material impact on consumption. This was particularly the case because a large chunk of the fiscal consolidation in 2010 and in 2011 took the form of a VAT increase, which has a high multiplier for households.”
In other words, by hitting households as hard as they did, sapping confidence and sucking demand out of the economy, the Chancellor and his ready accomplice, the Chief Secretary, have got the UK stuck in the slow lane while other key players in the global economy are overtaking us.
Mr Graham Stuart
On the subject of others overtaking us, the hon. Lady will be aware that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) became Finance Minister at roughly the same time as the Finance Minister in Australia, but whereas at a certain point the right hon. Gentleman lost the plot and spent money that this country could not afford, Australia paid down its national debt. Thus, when the financial credit crunch came, Australia was able to stimulate its economy, whereas this country had overspent in the good times and was not able to do so.
Rachel Reeves
Between 1997 and 2007 this country’s debt ratio fell from 42.5% to 36% of GDP, so the debt burden fell; in 2007, our debt-to-GDP ratio was lower than when we came to power in 1997.
What hope did the Chief Secretary and the Chancellor offer in this Budget for the future of our economy? The answer is precious little. The Government’s own Office for Budget Responsibility predicts another year of low growth ahead; it predicts just 0.8% growth in 2012, followed by 2% growth in 2013. That is well below what was promised when the Government took office. According to this morning’s forecasts from the Ernst and Young ITEM—Independent Treasury Economic Model—club, even those dire outlooks now seem optimistic. Ernst and Young predicts just 0.4% growth for 2012, followed by 1.5% growth the year after. Meanwhile, on any prediction, including the Government’s, we will still have at least 2 million unemployed people by the end of this Parliament.
Even those figures conceal deeper failures and more disturbing trends. Some may remember the Chancellor’s promise of a new economic model for Britain, based on lower levels of borrowing, and higher levels of saving and investment. In reality, the promised renaissance of business investment has been repeatedly postponed. An 8% increase in investment was promised for 2011, but investment actually fell by 2%. A further 10% increase was predicted for this year, but an increase of less than 1% is now forecast. The role of investment in driving growth for future years has been significantly revised down, too. Ernst and Young said this morning that business spending
“has picked up nicely in the US”
but that UK plcs remain “extremely reluctant” to invest. It continues:
“Consequently, the economy is bleeding cash into company coffers at an alarming rate…This haemorrhage is sapping the strength of the economy, keeping it on the critical list.”
They are not my words, but those of the Ernst and Young ITEM club.
Meanwhile, figures from the OBR reveal that the Government have increasingly become reliant on household consumption for their growth forecasts. That consumption is not being financed by growth in real disposable incomes, which, as I said, have stagnated and which the OBR confirms are set to stagnate for at least another two years. The household consumption growth is being funded by a fall in savings every year from now until 2016 and by a rise in total personal debt of almost 50% over the next few years; it will reach a staggering total of £2.12 trillion by the end of this Parliament.
Amendment of the Law
Graham Stuart Excerpts(12 years, 3 months ago)
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Stephen Mosley
Ultra-fast is, I think, the current term. Mr Deputy Speaker, I know that you have been involved with the Parliamentary Internet Communications and Technology Forum. We recently arranged a series of meetings with parliamentarians and industry representatives, including the UK chief executive officers of some the world’s leading IT businesses—for example, Facebook, Intel, IBM and Fujitsu, among many others.
The universal message emanating from the meetings was that the UK technology industry must be promoted by Government whenever possible, and that greater care is needed if the UK is to attract, train and retain the highly skilled individuals who will help our economy to grow. Specifically, five key recommendations were made. The first had to do with the broadband issue: the Government must speed up the roll-out of superfast broadband. I totally support that, which is why I am absolutely delighted to welcome the Chancellor’s commitment to investing more than £780 million in broadband infrastructure to make sure that Britain has the best superfast broadband network in Europe by 2015. I am also pleased about the Government’s commitment to start the roll-out of 4G mobile networks, with the spectrum auctions planned for later this year.
Mr Graham Stuart (Beverley and Holderness) (Con)
Does my hon. Friend agree that we must reverse the disastrous collapse in the number of graduates coming out of universities with computer science degrees, which took place over the last decade in which the previous Government were in power?
Stephen Mosley
It is funny that my hon. Friend should say that, because our group’s second recommendation was that the Government should increase investment in ICT in schools. I was pleased to hear the Chancellor highlight the importance of education in building our skills base, because if any industry hopes to compete and thrive, the fundamental basis is the skills base of the domestic work force. My right hon. Friend the Education Secretary recently announced a shake-up in the way that computing is taught in schools. That follows calls from industry and academia, who suggest that ICT in schools is too focused on the use of specific software packages, and not focused on the underlying technologies or on learning the computer programming skills that will help to encourage young people to develop their own products and be on the cutting edge.
Rebalancing the curriculum is a vital step, but there also needs to be greater emphasis on the quality of ICT teaching in schools, along with a concerted effort to champion future careers in the sector. I have already outlined the huge significance of IT for the wider UK economy, yet since 2002 there has been a 33% reduction in applications for computing degree courses. More must be done to encourage our young people into an ICT career if we are to reap all the potential benefits to our economy.
Youth Unemployment and Bank Bonuses
Graham Stuart Excerpts(12 years, 5 months ago)
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Rachel Reeves
People are not getting jobs at the moment not because they do not have skills but because the jobs are not available. In all our constituencies, five or 10 people are chasing every job. That is why unemployment is rising. Until the Government take responsibility for that, the numbers will get worse, not better.
The price that families struggling with the consequences of redundancy and young people forced to abandon their career plans pay is incalculable. We cannot go on like that. Maybe some hon. Members—we have already heard from many of them—greet the prospect of rising unemployment with a degree of fatalism, perhaps resignation. They may feel that the punishment being inflicted on innocent families and young people is the sad but inevitable consequence of austerity and economic adjustment. Indeed, as I said earlier, there is a grim familiarity about the figures, which bear a depressing resemblance to the record of previous Conservative Governments.
Mr Graham Stuart (Beverley and Holderness) (Con)
The hon. Lady talks about a grim familiarity. Does she acknowledge that every Labour Government in history ended with higher unemployment than they started with? After a 40% rise in youth unemployment under the previous Government, some humility is required on both sides of the House, but not least on hers.
Rachel Reeves
Unemployment has reached 3 million twice, both times under Conservative Governments. At the last election, unemployment was falling; today, it is rising.
Rachel Reeves
In the 1980s and early 1990s, unemployment reached 3 million. Was that because Conservative Governments were clearing up a Labour mess? Really? I think it was because of the policies that Conservative Governments always pursue—policies that hurt young people and put more people out of work. That is the reality of Conservative Governments.
Labour Members are not complacent. We do not say that it is inevitable, that it has got to happen and that 3 million unemployed is a price worth paying. Labour Members are not prepared to give up on young people and we urge the Government not to give up on them, either.
In the coalition agreement, the Government said that a fundamental goal would be to
“sustain the recovery and to protect jobs.”
Before the election, the Prime Minister told voters that jobs would be his top priority. He said:
“I understand if you leave people unemployed, and short term unemployment becomes long term, then it becomes a lifetime of unemployment. It’s a waste of life. I must stop it happening.”
He was right then, but he does nothing now. The Deputy Prime Minister said earlier this month that
“supporting people into work is my priority for 2012”.
He is right, yet he does nothing.
We must—and we will—hold the Government to their promises because we cannot allow the next generation to be denied the chance of expanded opportunities that has always been the promise of Britain.
Fuel Prices
Graham Stuart Excerpts(12 years, 7 months ago)
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Mr Robin Walker (Worcester) (Con)
I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on his passionate speech, on his many campaigns on this issue and on securing this debate, and I welcome the huge interest and support across the House for it. The price of fuel remains, week in, week out, one of the most important and pressing issues raised by people in Worcester. It is an issue on which I, like many other hon. Members, am determined to see real progress.
I wholeheartedly support today’s motion and was proud to put my name to it as a long-term advocate of fuel price stabilisers. I want to put forward one more argument for action that has not been sufficiently covered in this debate and I want to raise a couple of further concerns, which I hope the Minister will be able to respond to in her reply.
As my hon. Friend the Member for Cleethorpes (Martin Vickers) set out and as the hon. Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) acknowledged, the Government have to pay attention to balancing the budget. The motion notes, however, that fuel duty revenues are lower now than they were in 2008 despite the fact that the level of taxation has increased since. In my view, that makes but understates the case for rethinking further increases. As I have argued in Westminster Hall debates, that case was admirably set out by the Office for Budget Responsibility when it first looked at, and then rejected, the idea of a fair fuel stabiliser. It concluded that although higher prices added to Government revenues in the short term, by increasing the take from fuel duty, their longer-term impact was to reduce Government revenue through the combination of discouraging usage and the wider negative impacts of high fuel costs on the economy. Although the OBR used this argument to reject the original plan for a stabiliser, I have said many times that the logic of its argument is that lower fuel duties could result in higher tax revenues, and I am happy to put that case again today.
We should look not only at the impact on fuel duty receipts themselves, substantial though they might be, but consider the effect of sky-high prices on business profits and thence corporation tax, their impact on the rate of inflation and thus the rate of increase in costs to Government in everything from wage inflation to benefit uprating. We should consider the depressing impact of high fuel costs on the whole economy and in particular on business and enterprise.
Mr Graham Stuart (Beverley and Holderness) (Con)
Does my hon. Friend agree that it is a central Conservative insight that we can lower the rate and up the take so that small companies in rural areas such as mine are able to do more work, earn more, pay more tax and keep the economy going?
Finance (No. 3) Bill
Graham Stuart Excerpts(13 years, 2 months ago)
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Mr Jones
That is a very good suggestion. That is one of the issues that could be included in the review. Do the Government honestly think that they can con my constituents and others and that a 1p reduction in petrol duty will really be a vote clincher for them? Late last Friday I was in the excellent Sainsbury’s in Pity Me in Durham, and I noted that customers who spent £70 on their groceries could get 5p a litre off their fuel. It is a deal offered by other supermarkets—I do not want to favour Sainsbury’s. Are those on the Treasury Bench really convinced that constituents will be conned by the 1p reduction, when the cost is being increased by 3p, and if they can get 5p a litre off when they spend more on extra groceries?
My hon. Friend the Member for Ilford South (Mike Gapes) made a good point, which I accept, about the differences in fuel prices in different parts of the country. I think that there is a case for part of the review looking at why fuel is priced differently across the country. I hasten to add that at the weekend, when I was in Worksop in Bassetlaw visiting my father, I went to a Sainsbury’s—it happened to be the supermarket there—and noticed that diesel was £1.38, although down here in London and in parts of Durham it is £1.42. Clearly the constituents of my hon. Friend the Member for Bassetlaw (John Mann) are getting a good deal from the Sainsbury’s in Worksop. These are the issues that could be looked at in a review.
Mr Graham Stuart (Beverley and Holderness) (Con)
The hon. Gentleman is speaking movingly about his desire to see regional variations in taxation. He was a highly distinguished Minister in the previous Government, so will he tell us how many representations he made to the then Chancellor of the Exchequer when his voice stood a real chance of making a difference?
Mr Jones
If the hon. Gentleman had been listening, he would know that I was not arguing for regional variations in fuel taxation. I was saying that if we are to have variations in fuel prices, which we already have, and if the Government are to introduce a derogation and cheap fuel for certain island constituencies, clearly buying off the Liberal Democrats, the effects on the economy need to be assessed. I would also argue that if that is to happen for some of those rural communities, it must also happen for parts of County Durham where having access to a car is not a luxury, but a necessity for getting into work along the A1 corridor to Newcastle and other places. The fact that the Government are also reducing the public subsidy that local government can give to bus companies means that in the next few months parts of my constituency will have no bus services whatsoever on some days of the week.
Helen Goodman
That is a powerful point. What happened then contrasts with the total lack of consultation by this Government.
Mr Graham Stuart
The hon. Lady mentioned the Government’s policy on rebalancing the economy. One of the most important elements is to reverse the disastrous loss of employment in manufacturing under the Labour Government. More than 1.5 million jobs were lost and—
Amendment of the Law
Graham Stuart Excerpts(13 years, 3 months ago)
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Mr Redwood
It is a good point. We have heard figures from the Government indicating that we export less to the BRIC countries combined than we do to Ireland, but we have a close relationship with Ireland and we are close neighbours. It is understandable that we export a lot to Ireland and it to us. That figure conceals one important point, which is that British business has probably been a little more active than it suggests, but for various reasons the larger British companies tend to go into India, Brazil and China and set up joint ventures or factories of their own there to service the local market. It is easier to service those markets in that way, for reasons that we need not go into in detail today, but I agree that it would be good if we exported more, and it would be good if we helped small and medium-sized enterprises that do not have the capability to set up factories on the other side of the world to export in their turn.
The devaluation that happened more than a year ago has given us one nasty result, which is a much higher inflation rate than comparable economies, but it has given us one pleasant result, which is that it is very easy to export out of a British base now because British industry is so much more competitive at the current level of the pound. We should have that on our side. Paradoxically, quite a bit of British business in the manufacturing sector is close to capacity, and those businesses are tending to put the prices up a bit to collect a little more revenue and improve their balance sheets because it is not that easy to expand turnover. That is where the things that the Chancellor is talking about are vital and need to be done speedily.
Britain needs to be able to put up factories more quickly and get them into use more quickly. It needs to define the skilled engineers and the other skilled individuals who want to work in an industrial setting rather than in an advisory or City setting, and then expand the capability of their companies as a result. Modern manufacturing requires a very high degree of skills input, talented people and good management. It does not require so many people to operate machines because really good manufacturing now is highly automated. It needs the precision of expensive machinery. Indeed, the easiest way to compete out of a German or a British base is to have highly automated plant, so labour costs are a rather unimportant part of the total cost. The intellectual property content, the skill content and the plant and equipment content are much higher, but they are affordable with a quality product.
Mr Graham Stuart (Beverley and Holderness) (Con)
Further to my right hon. Friend’s points, a director from JCB gave evidence to the Select Committee on Education yesterday and said that he had 57 vacancies for engineers that he cannot fill order to ensure that JCB’s products remain globally competitive, reduce energy usage and so on. That, unfortunately, is a legacy of too many years in which we have not delivered the technical, vocational, practical education that is required. Is my right hon. Friend, like me, enthusiastic about the Government taking forward the programme from the Wolf review and supporting Lord Baker with his university technical colleges?
Mr Redwood
I am happy with those proposals. The Government are clearly on the right lines and I hope there will be cross-party agreement that we need to raise our game at skills, training and education, particularly in engineering, pharmaceuticals, chemistry and so forth, where we have an advantage and can have a much bigger advantage if we do more. Yes, we need to review how easy it is to buy or build a factory and how easy it is to equip it. Anything that can be done to lower the effect of tax rate on business will make Britain a much more attractive place to be.
As hon. Members know, I take the view that if we set lower rates, we normally collect a lot more revenue. If we want that kind of growth rate, the lower the realistic rate that we can set, the more revenue growth and the more overall growth we will have. It would be a great tragedy to abort the recovery in certain sectors because the tax rate was too high. I am pleased to see the progress on corporation tax. We need to see the details of some of the individual tax schemes and how the carbon tax rebate would work. If we went ahead as trailblazers in Britain and set a high carbon price, we would price our energy-intensive business out of Britain into a less clean or less acceptable venue. It is important that the rebates and discounts are properly thought through, so that at a time when the Government are trying to promote more industry, they are not taxing it too heavily.
Sammy Wilson
I am a bit miffed, because I wanted to use that point later in my speech, so I will have to scribble it out. When we look at some of the issues, whether they are the delays, the amount of money being put in, the offsetting of increases in taxation when some tax cuts have been made, the regulations or the consultation that has still to take place with Europe to see whether we can reduce red tape, we have to ask whether the predictions for future growth based on the supply-side measures in the Budget are as fragile as the autumn predictions that were wiped out by a fall of snow. If that is how fragile the predictions are, then I have concerns.
There is another side to the coin, because not only do we have to increase the productive potential of the economy, but people must be willing to purchase the goods that can be produced, and aggregate demand can be made up of several different factors. The Government have already ruled out one for very good reasons, and I accept that the deficit has to be reduced. I may have some issues about how quickly it is being reduced, but the one thing we do know is that Government spending is not going to take up the slack that already exists in the economy.
Consumer spending is not going to take up the slack, either, because the Chancellor made it quite clear that he would not make any tax giveaways. Indeed, if one looks at what he said about the indexation of direct taxes, one finds that he has now built automatic increases into the tax system for the next four years. There will not be discretion on a year-to-year basis; inflationary increases are now built into the tax system.
That leaves investment demand and exports, and it seems that the Chancellor is emphasising the role of exports. Given that over the past year and a half the exchange rate has fallen by 20%, our export growth is still one of the weakest among the OECD countries. Investment might improve competitiveness, but the only direct measure that the Chancellor has produced today is the export credit guarantee. I have quickly looked through the Red Book to see how much the guarantee involves, and I cannot get a figure, but that is the only measure to increase the one component of aggregate demand on which the Chancellor is relying to improve growth in the economy.
If we look at the supply-side measures and the lack of demand-side measures, we have to ask, “Can we really be confident that this is a Budget for growth?” The conclusion that I come to—not because I want to take a pot-shot at the Government, but because I want to get in behind the figures to see whether the hope being held out is genuine—is that I am left with some concerns.
Mr Graham Stuart
The hon. Gentleman is right to be sombre because of the situation the country is in. The Chancellor mentioned what is happening in other countries, and we are in a fragile position because of the appalling inheritance. The growth predictions, however, are no longer the predictions of a politician; they are the predictions of the OBR. We are in a very fragile state, and it is no wonder that predictions change, but the prediction is that over this Parliament this country’s growth will be higher than the EU average. That, considering where we started, would not mean golden times, but it would be a solid achievement.
Sammy Wilson
Of course, the earlier growth figures were also OBR-ified, if one wants to use that term, yet they did not prove to be realisable over a six-month period. We cannot simply rely on the assurances that the OBR has looked at the figures and thinks they are okay, as there could well be a revision. I am merely pointing to some aspects within the Budget document that give me cause for concern as to whether these growth figures can be achieved. If they cannot, there are implications for the deficit, for employment, for living standards, and for the ability to provide public services in future.
Let me turn to some of the measures that apply to Northern Ireland. As we heard in an earlier intervention, tomorrow morning an announcement will be made about the corporation tax proposals for Northern Ireland. I am waiting to see that. I have no doubt that the ability of the Northern Ireland Administration to reduce corporation tax could be a useful lever. As a Unionist—I know that the hon. Member for Dundee East (Stewart Hosie) will probably be totally appalled that anyone from a devolved Administration should say this—I do not want to see huge fiscal powers devolved to Northern Ireland. I am part of the United Kingdom, I want to remain part of the United Kingdom, and I wish fiscal powers to stay part of the United Kingdom.
There has been a groundswell of opinion for some variation in corporation tax; indeed, the Secretary of State for Northern Ireland has been very enthusiastic about it. However, there is no point in devolving corporation tax if the price tag attached is such that it savages public expenditure, which has already suffered a huge cut as a result of the Budget decisions made last October. There would be a gestation period between a reduction in corporation tax and the impact on jobs on the ground, whereas any cut in public spending or in the block grant would take immediate effect. There would be no increase in private sector employment, together with an immediate decrease in public sector employment, and that cannot be good for economic recovery.
I fear that the figures in the document that we have tomorrow will be neither a fair reflection of the cost of devolving corporation tax to Northern Ireland nor the kind of opportunity and offer that would be attractive to the Northern Ireland Administration. We will want to see that the Treasury and the Government have not made a savage reduction in the block grant even though it bears no relation to what the real cost of devolving corporation tax might be.
Fuel Prices and the Cost of Living
Graham Stuart Excerpts(13 years, 3 months ago)
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Mr Graham Stuart (Beverley and Holderness) (Con)
The hon. Gentleman is making a powerful speech about the impact of high fuel prices on his constituents and mine. Like him, I should like to see action from the Government, but will he tell us what he would do to secure the reduction in the deficit to which all the tax rises are contributing? I understand that, because of the legacy of the last Government, the present Government’s net debt will rise in every year of the current Parliament—that, in the final year of this Parliament, we shall still be borrowing more money because of the deficit left to us by the last Government. We should love to be given some idea of how, in the real world, we could both make the savings and deliver the benefit.
Ian Murray
I am delighted that the hon. Gentleman has managed to ingrain himself with the propaganda being put out by the Conservative and Liberal Democrat parties about the deficit. He has given me a wonderful opportunity to go back to the start of that list so that he can take it all in.
There is no doubt that the Government’s cuts in public services are going too far, too fast and too deep. Everyone knows that the deficit must be reduced, but reducing it over time would protect my constituents from the ideological cuts that the Government are introducing under the veil of the deficit.
Let me return to what is happening to that squeezed middle manager at HMRC. He faces increased national insurance contributions and an increase in VAT to 20%. His pension will be cut because it will be linked to CPI instead of RPI. He faces tuition fees for his two children. He has lost his child benefit because he is a higher-rate taxpayer, and record commodity prices are pushing up food prices. He faces a high inflation rate, partly owing to the increase in VAT to 20%. His salary has been frozen. He has job insecurity. He faces increased energy prices, increased borrowing costs and lower interest on his savings, all because of this Government. Moreover—this brings us back to the motion—the price of fuel means that the cost of filling up the family car has gone through the roof. The Chancellor of the Exchequer is taking an extra £59 million from the Scottish people because of the increase in VAT, which is directly related to the cost of the fuel that they put in their cars.
Stephen Williams (Bristol West) (LD)
First, I want to strike a note of empathy with people both in my constituency and around the country who are struggling with the spike in prices that we have all witnessed in recent months—and, indeed, the last couple of years. This morning, I asked those in my office to check the petrol prices at the garage nearest to my home in St Andrews in Bristol: the Texaco garage on Gloucester road. For the first time, prices in Bristol have risen above 140p. One of the most popular places to fill up in the city is Tesco in Eastville; my constituency neighbour, the hon. Member for Bristol East (Kerry McCarthy), will be familiar with it. Prices there are now 136.9p. Everywhere in the city of Bristol, prices are now above 130p, yet only a couple of years ago I remember being surprised when prices went through the £1 barrier.
In cities, there is competition: there is competition on the forecourts, and there are also alternatives on public transport. Many rural constituencies, such as those in the south-west, mid-Wales or, indeed, Scotland, cannot benefit from that price competition, however. My hon. Friend the Member for Argyll and Bute (Mr Reid) was present for the earlier part of the debate, but has had to leave to attend a Scottish Affairs Committee meeting. He told me that on the island of Colonsay in his constituency, the price of diesel is 163.3p, a full 23p higher than the price in my constituency.
We face a fourfold political challenge. We have to decide how to respond to the pressure on household budgets, how to make that response against a background of having to maintain the taxes and duties necessary to tackle the appalling fiscal legacy left us by the last Government, and how to continue to incentivise a switch to a lower-emissions and lower-carbon economy. Finally, we must consider the background of international factors, such as movements in the oil price and in exchange rates, which are effectively beyond our control. We have to respond to those factors and political challenges responsibly, not in the blatantly opportunist way set out in this motion.
Mr Graham Stuart
My constituents, like those in many rural areas, are not just suffering from the price of fuel at the pump. As they do not have gas at home but oil-fired central heating, the price of which has increased too, there is a double whammy of cost. There is therefore a strong moral case for making sure that the Government find ways to help the most vulnerable people in rural areas, despite the appalling legacy left, as my hon. Friend rightly says, by the Labour party.
Stephen Williams
My hon. Friend makes a powerful point about the price of heating oil, which many households in rural communities have no choice but to use.
The first challenge is how to respond to the pressures on household budgets that I was describing. The coalition Government have said that their priority is to ensure that as we make difficult decisions, the poorest and most vulnerable households are protected. We have already made progress on reducing income tax for the lowest-paid, and I look forward to further progress being made in the Budget. We have a triple lock in place for pensioner households and we are going to introduce work incentives in order to tackle worklessness, which is the major cause of poverty in our country.
However, we also have to tackle the deficit. We have been waiting 10 months for a specific proposal from the Labour Opposition on tax, and this motion is the first detailed one that we have received. The critique that we have heard repeatedly from them is that they want fewer cuts in public expenditure and more emphasis on raising tax, yet their first detailed proposal is for a reduction in tax. In effect, this is another uncosted spending pledge. The hon. Member for Wallasey (Ms Eagle), who led for the Opposition, rightly said that the increase in VAT represents about 3p on the pump price that we all have to pay. We know that each penny of that pump price raises about £500 million for the Exchequer, so the motion is proposing a £1.5 billion spending pledge. However, the Opposition cannot tell us, other than in an allusion in the motion to the banking levy, how on earth they are going to find that £1.5 billion. As has been said, they are in effect proposing a new VAT rate of 17.5%, but they know that under international law, they cannot do that.
This duty as a whole raises about £30 billion as a contribution to reducing the deficit, and it makes up about 62% of the pump price. That is a considerably lower proportion than a decade ago, when the share of the pump price represented by taxes was in excess of 80%. I well remember, when I was on the Opposition Benches and the Labour party was in government, that the person who is now leading the Labour party had much promise when he became Energy Secretary. He certainly talked a good talk in that post, although he was perhaps making up for the rather “brown” years of the Labour Government. Now that he is in opposition, we find that his words were hollow and he has moved on to opportunist ground.
We need to move to a transport system that is more sustainable, with more efficient engines, a different mix of fuels, and electric cars, as proposed in the coalition agreement. As our dependency on hydrocarbons declines, we also need to move to a completely new fiscal model for taxing the use of road space, because road fuel duty and vehicle excise duty are a blunt fiscal instrument.
Nic Dakin (Scunthorpe) (Lab)
It is a pleasure to follow the hon. Member for Devizes (Claire Perry), who spoke with her usual panache, confidence and strength of purpose—rather like the Economic Secretary to the Treasury did in setting out the agenda from the Government’s point of view, which she set out very well. I do not agree with that agenda at all, but at least she was here to set it out, unlike the Chief Secretary to the Treasury. Like my hon. Friends who have made this point, I wonder where he is. I am rather reminded of a children’s book that was very popular with my children and I wonder, where’s Wally?
Mr Graham Stuart
It is admirable that Labour Members should be so disciplined in following the line they have been given, but does the hon. Gentleman agree that those on the Front Bench should spend as much time crafting their message so as not to table a motion that is illegal, impractical and careless? They should pay more attention to that rather than just drilling their Members to keep asking where’s Wally, which perhaps sums up the state of their politics today.
Nic Dakin
I think I was the first person to ask that in this debate. Of course, we have a clear economic message that runs counter to the posturing successfully used by the parties in government to suggest that there is a need to cut fast and deeply. Our message is that there is no need for such cuts. Three tools are at our disposal to manage our way out of the economic challenge: growth, taxes and service reductions. The Government are using only taxes and service reductions, at a heinous rate, when we should have a policy for growth. Their policy is for the opposite of growth.
Let me draw attention to the headlines sought by the Conservative party as long ago as 2008: “Tories vow to slash fuel duty”, from the Press Association on 6 July 2008; and “Tory tax cut to beat hike in fuel” from The Sun on 7 July 2008. In a sense, since 2008 the Conservative party has made promises to the British people on fuel duties that it has singularly failed to meet in government.
Independent Financial Advisers (Regulation)
Graham Stuart Excerpts(13 years, 7 months ago)
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Mark Garnier
I can see no reason at all for not introducing grandfathering rights. Indeed, when the FSA was set up it introduced grandfathering rights when IFAs came over from the personal finance authority.
Mr Graham Stuart (Beverley and Holderness) (Con)
I congratulate my hon. Friend on opening this important debate this evening. Jon Marris, a constituent of mine and an IFA, came to see me on Friday. He has already passed the exams that will be required—he has done the 400 hours of study—but, even from his position, he believes it is ridiculous that those who have been in the industry for many years should be forced to go through that. Although he has been able to do this, he thinks that the removal from the market of people who are perfectly capable of doing their job but who might not be able to get through the exams, even though they have shown for many years that they can look after customers, is completely wrong.
Mark Garnier
I think my hon. Friend’s constituent agrees with us all.
The IFA community is broadly in support of raising excellence in the profession, and many are opting to take qualification exams on their own initiative without the dead hand of the FSA pressing them to do so. Indeed, the website unbiased.co.uk lists IFAs by their qualifications, so the move towards improved excellence is already going ahead under its own steam. A significant number—possibly as many as a third—feel that their 20, 30 or 40 years of experience not only trumps any exams but covers a significant depth of knowledge in their chosen areas, which will surpass any exam requirements. In taking exams, they will also be tested on areas they choose not to specialise in. As I and many hon. Members have said, the FSA seems blind to their expertise. The FSA does not recognise that experience and is determined to put out of business any IFA who is reluctant to take their exams or to subject themselves to the FSA’s ill-thought-through in-house assessment.
Chris Leslie (Nottingham East) (Lab/Co-op)
I congratulate the hon. Member for Wyre Forest (Mark Garnier) on initiating this well-subscribed and, so far, very moderate and well-tempered debate on behalf of the 33,000 independent financial advisers in the industry. Clearly, the matter is of concern. I suspect the Minister is thanking his lucky stars that we do not have a votable motion at the end of tonight’s portion of the debate, as we did in the earlier section on banking reform.
The Financial Services Authority started the retail distribution review many years ago. A consultation paper came out in 2009. Earlier this year, we had the proposals, although they will not come into force until 2012, so this is a useful period when the House should debate and consider them. It is a matter of regret that too few of these crucial regulatory issues are subject to parliamentary scrutiny, as Government Members have observed.
Some extremely legitimate points have been made about the need for sensible transition—if we are to have change—to new arrangements, which, in the words of the hon. Member for South Derbyshire (Heather Wheeler), do not throw the baby out with the bathwater. That is one of the phrases in the debate that particularly comes to mind, but a number of points were very well made, especially when we think about the comments of the chief executive of the FSA. Is it really acceptable that between 10 and 20% of the profession could leave as a result of the retraining requirements, shrinking the availability of independent advice? The hon. Member for West Worcestershire (Harriett Baldwin) rightly questioned what would happen if a Minister were to stand at the Dispatch Box and announce the demise of a similar proportion of an industry.
It is important that we take a pro-consumer approach to regulatory change—as the Opposition certainly do. Undoubtedly, it is necessary from time to time to look at the framework within which consumers get that advice, and I do not begrudge the FSA’s moving in that direction. However, there are some serious questions. On balance, it is right that we move away from fee structures that are, to a certain extent, hidden in the margins, where sometimes commission may not be transparent for customers and products are recommended even though it does not necessarily say on the tin how much of the fee will be returned to the adviser, but—
Chris Leslie
I just want to make a point about the ending of the commission system and the placing of the fee, perhaps straightaway, in an up-front form for the consumer. There may be risks that are similar to those related to the argument about up-front tuition fees, because people may be deterred from taking the advice in the first place. They may feel that the system is too difficult. As my hon. Friend the Member for Barrow and Furness (John Woodcock) said, we have to ensure that any fees are disbursed throughout the period of the product.
Mr Stuart
There will always be some form of bias in the system, at least conceptually, regardless of how we reward IFAs. Whether or not there is a fee-based system, they will still be more likely to receive a fee if they propose the sale of a product. Does the hon. Gentleman believe that getting rid of commission is the right way to go? Why not regulate from the product end? Why not get rid of 10% commission, if that is felt to be a gross abuse? Why not limit the size but allow commission, which the public understand and quite like if it does not force them to pay up front, which it seems from surveys they do not wish to do?
Chris Leslie
As I say, this is a good time to debate those matters. There are options that must be explored. We have not bottomed out the debate. Perhaps the Financial Services Authority can consider not necessarily the hon. Gentleman’s suggestion in particular, but why commission changes are not being made across the wider financial services sector. There have been historic problems with mis-selling of products, not solely from an IFA perspective, and I can see why many people feel that these changes are necessary.
I would not counsel hon. Members to take issue with every section of the RDR—many of those who spoke in the debate did not. It is right, for example, that there should be proper clarity between independent and restricted market advisers, and that rather than waiting for the customer to inquire, there should be full disclosure on that up front.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I congratulate my hon. Friend the Member for Wyre Forest (Mark Garnier) on the way in which he opened the debate this evening. He gave a balanced perspective on the changes that we are trying to make to improve standards for consumers, how that sits with the IFA sector and some of the challenges that a change in standards will create.
It is worth reflecting for a moment on the responsibilities of Parliament and of the FSA. Parliament set out the framework by which the FSA operates. The Financial Services and Markets Act 2000 sets out its objective, powers and how it goes about exercising its responsibilities. For example, there is a requirement to consult. As we know, there has been a long process of consultation on the RDR since the previous chairman of the FSA raised the matter in 2006. There have been a number of iterations and debates about consultation documents and discussion papers. Consumer groups, product providers, IFAs and their trade bodies have participated in a very lively debate, but the FSA is rightly responsible for implementing day-to-day regulations, and I know that it takes very seriously parliamentary scrutiny of its role. I spoke to the chief executive this morning about the Treasury Committee’s scrutiny last week and the debate this evening, so the authority is well aware of parliamentarians’ concerns. It is right that the FSA gets on with its job but listens to the issues being raised.
I counsel caution, however. It is all very well to think that we should engage in the regulatory regime when we think we are going to help one group or another, but there are times when regulators make difficult decisions on behalf of Parliament and our constituents, so we need to think very carefully about where the balance is struck. It might be very attractive in the context of this debate for Parliament to take more responsibility, but hon. Members might feel it less appropriate at other times.
Mr Hoban
I have about nine minutes to respond to quite a long debate in which a number of points have been made, and I want to take the opportunity to address some of those issues.
Let me put on the record the importance that I place on independent financial advisers. They play a key role in helping people make financial product purchases and financial choices. High-quality, independent financial advice is vital in ensuring that people are encouraged to save and plan for the future and make the most out of their money. I have used independent financial advisers and been happy with the service I have received, because they have provided me with good-quality advice.
I cannot overstate the detriment to consumers from poor and biased advice. Indeed, the FSA estimates the detriment to consumers from inappropriate advice to be £200 million per annum, and it thinks that the figure could be significantly higher. Consumer detriment has led organisations such as Which? and the consumer panel that advises the FSA to support the measures in the retail distribution review. We need to get that balance right and to address some of the issues that undermine consumer trust in the IFA sector, and the FSA has sought to do so through the RDR.
I have become very conscious—in particular, over the past six or seven months as a Minister—of the financial services sector’s increasing complexity, and consumers must be confident that IFAs are fully up to date and that their advice is underpinned by good technical knowledge. There can be few hon. Members who do not support that stance or recognise the benefits that increased professionalism can bring. Indeed, the FSA finds a clear link between increased qualifications for financial advisers and improved consumer outcomes. Under its reforms, consumers will be confident that their adviser has a minimum level of understanding and expertise that is maintained each year through continuing professional development.
We should also recognise that a number of IFAs already comply with those standards. Just under half of IFAs already hold the required qualification and, indeed, many go beyond QCF level 4. Some 89% of advisers already meet the required hours each year for CPD, and we need to recognise the progress that has been made since examinations were introduced in 2008.
I recognise the strength of the debate about grandfathering, and it is an important debate to have, but we need to think about how much experience is sufficient for people to be grandfathers, and about how we can ensure that that experience covers the range of products necessary to provide whole-of-market, independent advice. We ask people to advise on a range of products, such as pensions, insurance bonds and ISAs, and they need such technical knowledge to do so. Consumers are entitled to know that their adviser has a high standard of technical knowledge, and a minimum qualification standard should deliver that.
The increase in standards will not discriminate against those who have kept up to date with market developments, and they should not have to commit a significant amount of time to study. As I have said, 90% of advisers already undertake the required number of hours for continuing professional development, and I think that over the next two years the measure can be used to fill any gaps between existing and revised standards. As a consequence of lobbying by the IFA community, the FSA has relaxed the regulations, so there will be non-exam-based alternative assessments, rather than formal written exams. That is an important move forward that the FSA has already made, but high standards of technical knowledge will be crucial to help IFAs navigate their clients through the increasingly complex choices that they have to make.
I want to touch on the issue of adviser charging. I am strongly committed to increased transparency in financial services; it is important that consumers—whatever they are buying, be it advice or a product—understand the charges and the returns that they are likely to get. That underpins a whole range of work that we are doing at the moment in the Treasury.
Currently, financial advisers can earn different amounts as commission payments, depending on which product they recommend and from which provider. How much they earn is not always transparent; indeed, Which? found that 82% of advisers failed either to explain the “key facts of cost” document or have a meaningful discussion with their clients about how their advice would be paid for. It is important that remuneration arrangements for advisers work in the best interests of consumers and promote independence of advice.
A number of IFAs have already moved away from commission to a fee-based approach. I know that AIFA, the trade association for IFAs, is helping IFAs change their business model. I do not doubt the integrity of the vast majority of advisers, but no one can doubt the financial detriment caused to consumers as a consequence of mis-selling scandals of the past. Following the FSA’s pensions review in 2002, 1.7 million consumers received compensation totalling £11.8 billion due to pension mis-selling alone.
Advisers should welcome changes in remuneration as a clear way of building consumer trust in the sector. Consumers already pay for advice, as commission is deducted from their premiums or initial investments. Advice is not free; that money comes out of the contribution that consumers make to their pensions, their investment bonds or their savings for the future. However, it is important that both the cost and the value of advice is clear to consumers. These reforms will provide clarity on price and service and that will promote competition. Just as we want transparency on interest rates paid on ISAs to promote competition among ISA providers, I believe that transparency on IFAs’ remuneration will also promote competition and provide a better understanding of the value of advice. It will increase consumers’ confidence in that area.
We want to broaden the range of advice available. A number of hon. Members have raised the annual financial health check that CFEB is going to organise. Let me be clear. The cost of that will be borne by a social responsibility levy that will be paid by institutions from Goldman Sachs through to the high street insurance broker. The cost will not be borne by independent financial advisers alone. The biggest firms, such as Goldman Sachs or Barclays, will make the biggest contributions, and they will make a far bigger contribution than IFAs. Furthermore, consumer credit organisations have also been brought into the scope of this; they will also have to pay their share towards the annual financial health check. It is important that the burden should be shared.
Mr Hoban
I wish to conclude my remarks so that my hon. Friend the Member for Wyre Forest, who opened the debate, can conclude.
We want a more responsible savings culture in Britain, in which people can plan confidently for their futures and are better able to realise their plans. Financial advice has a key part to play in that, and I want to see improved levels of expertise and knowledge and much greater clarity over transparency. It is important that the FSA should work closely with IFAs to get to that point. This evening’s debate has helped the FSA understand the concerns of Members of Parliament. I am grateful to my hon. Friends for securing this debate.
Equitable Life
Graham Stuart Excerpts(13 years, 11 months ago)
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Mr Graham Stuart (Beverley and Holderness) (Con)
Equitable Life was a poisoned pill left by the previous Government, even if no note accompanied it. As my hon. Friend the Member for Northampton South (Mr Binley) rightly said, 30,000 people have died waiting for justice. Conservatives, who have long pushed for justice for policyholders, recognise that there will be an element of rough justice no matter what happens. Will the Financial Secretary ensure that the process is speedy? Even if interim payments are not possible, will he bring the matter to a close quickly, so that people can have certainty, because they did not get that from the previous Government?
Mr Hoban
I accept my hon. Friend’s point about speed, but I also accept the point made by the hon. Member for Ynys Môn (Albert Owen) on the need for appeals mechanisms, because rough justice works both ways, and we need to ensure that people are treated fairly under the scheme.
Finance Bill
Graham Stuart Excerpts(13 years, 11 months ago)
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Mr Redwood
The hon. Lady is protesting. I know it is in the Government document, but I am suggesting that the Government might be wrong and might have underestimated the number—it is extremely difficult to know how many people might take advantage of the provision. I also think it will not necessarily be only rich people who are affected. I know that Labour never wants any successful people to make money and be able to spend their money sensibly.
Mr Graham Stuart (Beverley and Holderness) (Con)
It did a really good job stopping them.
Mr Redwood
Indeed, it tried to stop them on many occasions. If we do too much of that, however, we have a poorer country, a smaller tax base and all the rest of it. It is a pity that the Labour party still has such a downer on success, prudence and savers, but it might be surprised—hopefully, pleasantly surprised—in due course to find that people on more modest means take advantage of this flexibility as well. We no longer live in a world in which everybody retires at 65 and does no more work. I see around my constituency many people taking on paid work into their late 60s and early 70s, either because they want to or, in some cases, because they have to in order to supplement their resources. Why should we debar them from this flexibility any more than richer people, if they have savings?