Finance Bill

Grahame Morris Excerpts

Tuesday 3rd July 2012 Commons Chamber

[Catherine McKinnell]

rose—

[Grahame M. Morris (Easington) (Lab)]

rose—

[Catherine McKinnell]

I am sure that my hon. Friend will raise a much more relevant matter in his intervention.

[Grahame M. Morris]

I am grateful for my hon. Friend’s patience and tolerance in the face of such provocation. Does she agree that part of the problem that we are trying to address through new clause 13 is the culture of excessive bonuses? Opposition Members recognise that that is part of the problem and we are trying to address it with the bank bonus tax.

[Catherine McKinnell]

I thank my hon. Friend. I have not made much progress yet, but the point that I was trying to make is that a whole series of actions by the banks have let ordinary people and businesses down. It is time that the banks played their part in putting some of that right.

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[Grahame M. Morris]

Does the hon. Gentleman agree that part of the problem with the banking crisis is the excessive bonus culture? Perhaps shareholders and Governments should have dealt with that, but we will discuss that on Thursday. Is this proposal not an attempt to address that issue and to ensure that those with the broadest shoulders, who have done so well over the past 10 years with their huge bonus payments, make a contribution now that times are tough?

[Charlie Elphicke]

The hon. Gentleman makes an interesting point, but there are two problems with his argument. First, the tax would fall not on the greedy employees and bankers whom he wants to whip, but on the bank. Secondly, during his Government’s period of office—he will correct me if I am wrong—Fred Goodwin received some £15 million in bonuses, which he paid tax on at the old tax rate. The hon. Gentleman is therefore seeking to close the door after the horse has bolted.

[Grahame M. Morris]

The hon. Gentleman is being very generous and accommodating, as always. Does he know what the bonus figure has been for Bob Diamond over the past two years, while the hon. Gentleman’s Government have been in office?

[Charlie Elphicke]

For me, the issue is the size of the bonuses not in the private banks, but in the taxpayer-owned banks. That is the real concern that we ought to be focusing on. That is why the Government’s bank levy is the right way forward.

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[Charlie Elphicke]

The hon. Gentleman is simply suggesting that we give with one hand and take away with the other. He might think that he can throw lots of money at dealing with the problem of youth unemployment, but he would meanwhile be constraining businesses in getting the capital that they need to create new jobs and maintain their existing jobs. That is the central flaw in the Opposition’s argument. They want to take more money out of the banking system when capital and lending are already constrained.

The issue that we need to deal with is bonuses. The Government have taken action on bonuses in the taxpayer-owned banks. They have said that there will be no cash bonuses of more than £2,000 at the taxpayer-owned banks. It is right to have longer-term share incentivisation schemes, which align people’s interests with the success of the banks over the longer term.

[Grahame M. Morris]

The hon. Gentleman is developing an interesting argument. Does he agree that bonuses have been too high not just in the state-owned banks but in the privately owned banks, and that shareholders should do their duty and exercise some control over bonus pots? Bonuses have been paid in banks, such as Barclays, where performance has clearly not justified them.

[Charlie Elphicke]

Shareholders have been exercising control. Under this Government we have seen the shareholder spring and real action by institutional investors to restrain pay in the boardroom, which grew so much under the previous Government. Under the current Government, there has been action to ensure that shareholders have far greater power over remuneration reports and can push down the excessive rewards that have been given for not enough success.

It is right that an honest day’s work means an honest day’s pay and really good work deserves really good pay, but it is fundamentally wrong to say that the Government have not taken action. They have encouraged shareholders to do their bit as business owners to ensure that we do not have the excessive pay of yesteryear. A responsible Opposition would say, “We congratulate the Government on ensuring that excessive pay is stopped, and we take responsibility for the fact that when we were in government, we allowed a something-for-nothing culture in which everyone knew the price of everything and the value of nothing.” We need an understanding of the value of things once again. The Government have got it right by saying that there will not be excessive bonuses in the taxpayer-owned banks. Although the Project Merlin agreement was not perfect, it was a move in the right direction, as is the permanent bank levy that the Government have introduced, which raises £2.5 billion a year.

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[Charlie Elphicke]

I believe that the OBR’s figure was for gross receipts, which were not £3.5 billion but £3.45 billion. We need to examine the net yield raised, which was £2.3 billion. That is a lower figure than the £2.5 billion raised under the current Government’s system. I appreciate that the difference between net and gross can be confusing, because not all of us are accountants—I certainly am not. Nevertheless, more cash is coming through the door under the current Government’s arrangements.

The hon. Gentleman’s argument misses a central point, which is that the Opposition want their bank bonus levy to be an additional impost on the banks. My concern is that that would pull more capital out of the banking system. Right now, we need to lend to business and kick-start the economy.

[Grahame M. Morris]

The hon. Gentleman says that accountants know the cost of everything and the value of nothing, but how does he weigh the cost to the banks against the cost to this lost generation—the 100,000 people in Dover, Easington and the constituencies we represent—consigned to a life on the dole?

[Charlie Elphicke]

If we get lending going again, the economy growing again and decent private sector jobs creating more wealth as a nation, we will do better over the longer term. Having short-term measures to create jobs out of thin air—the 100,000 jobs that the Opposition talk about, for example, which would broadly be public sector-type and make-work-type jobs—is not the way to create a sustainable economy. We need to expand the private sector, expand business and expand jobs, so that they are sustainable over the longer term, not just for a year or two.

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[Madam Deputy Speaker (Dawn Primarolo)]

I call Grahame M. Morris.

[Grahame M. Morris]

Thank you for the differentiation, Madam Deputy Speaker. It is a pleasure to be in such august company as that of my hon. and good Friend the Member for Livingston (Graeme Morrice)—

[Madam Deputy Speaker]

Perhaps the hon. Gentlemen are trying to confuse me, because now they are sitting next to each other—but only one has the Floor.

[Grahame M. Morris]

I am grateful to you, Madam Deputy Speaker, for the opportunity to speak in this debate and to follow my hon. Friends the Members for Wansbeck (Ian Lavery) and for Livingston, and indeed the hon. Member for Dover (Charlie Elphicke), who served on the Public Bill Committee. He is not in his place at the moment, but I found his contribution interesting, as always.

I support new clause 13, tabled by the Opposition Front-Bench team, which would introduce a bankers bonus tax to fund a job guarantee for every young person who has been out of work for more than 12 months. History will judge this Budget as chaotic. It has been a Budget of U-turns—on pasties, on caravans, on skips and on charities. It should be remembered as a Budget for “millionaires row”—admittedly, that is a little sparse at the moment—but I hope it will not be remembered as the Budget that let the greedy bankers off the hook. Tonight, I want to put on the record the impact on the north-east.

The north-east requires an alternative vision for economic confidence, growth and jobs. The proposals in new clause 13 of a guaranteed paid job for people who have been out of work for 12 months, as suggested by the Institute of Public Policy Research North, would boost the process of regeneration that is so badly needed in my region. According to economists at IPPR North, coalition spending cuts have worsened the impact on our region’s economy and added to unemployment—especially youth unemployment—in the north-east. Well over 32,000 public sector jobs have been cut. I remind the House that unemployment in my region stands at 11.3%; 145,000 people are out of work. The private sector-led recovery that was promised has clearly not materialised in my region, at least, and a recent report from Northern TUC shows declining employment in the private sector.

In the Public Bill Committee, I gave some examples of the private sector haemorrhaging jobs in my constituency, and I do not propose to repeat that tonight. The problem we face—the hon. Member for Beckenham (Bob Stewart), who is no longer in his place, raised this point—is that money is being sucked out of the region through public spending cuts, benefit cuts and the slashing of regeneration and infrastructure projects, worsening the economic problems. The Government, through their policies, are squeezing out demand from the regional and national economies. That is counter-productive, as it pushes up both the benefits bill and Government borrowing.

The Prime Minister and the Chancellor pretend that there is no alternative, but the Opposition recognise that politics is about priorities and making choices. Sadly, the Chancellor has chosen to give a £40,000 tax cut to 14,000 millionaires, while more and more people in my area are losing their jobs and young people in particular have little prospect of finding paid employment. He has also chosen to keep VAT, a deeply regressive tax that hurts the poor, at 20%.

IPPR North has said that business confidence is failing. The lack of confidence among employers has created a hire freeze across the north that looks likely to get worse. The unwillingness of employers to take on permanent staff only increases economic insecurity for ordinary households. Where vacancies do exist, they are often for low paid and insecure work. Given that more than 1 million young people are out of work, we need real action from the Government to stop the next generation from wasting away on unemployment benefits. That is where the real jobs guarantee comes in. We need to offer a jobs guarantee, especially to young people, to stimulate the economy and offer personal hope to each individual.

[Richard Fuller (Bedford) (Con)]

General Government expenditure accounts for 50% of the economy, our debts are at record levels and we have the highest deficits. Does the hon. Gentleman think that the answer to debt, deficit and the Government’s massive share of the economy is for the Government to do more or to do less?

[Grahame M. Morris]

I would have more respect for the hon. Gentleman’s intervention if he had sat through the whole debate, because those points have been raised. It behoves the Government to do more, not less; we have to learn from the lessons of history. I urge hon. Members to support new clause 13.

[Mark Lazarowicz]

I want to say a few words in support of a bank bonus tax. I emphasise that I am supporting that not to bash the bankers, but to end the unacceptable face of banking in the form of an excessive bonus culture that is still far too widespread.

As I said earlier, the vast majority of people who work in financial services certainly do not get vast bonuses; many thousands of people in my constituency work hard behind bank counters or in bank offices serving customers, and they are often on modest incomes. Many have paid with changes in working conditions, while others have paid with their jobs, when redundancies flowed from the financial crisis caused by the irresponsibility of senior executives. We are not targeting those people; we want to do something about the small minority who are still getting excessive rewards.

A study published at the end of June showed that average pay for chief executives at 15 leading banks in the US and Europe increased by 12% over the last financial year. That may be less than the 36% increase in the previous year, but whatever the increase—it is about 50% when we add both increases—it is wildly out of line with falls in profits and share prices that have frequently characterised the sector. That is not performance-related pay in any sense that most people would understand and it is certainly not a performance that would justify what is effectively a further tax cut on top of a tax cut for the highest paid.

A tax targeted on bank bonuses is necessary because the existing attempts to curb the bonus culture have so obviously failed. That is the key point. The issue is not about saying that people should not be very well paid at the top of banks and financial institutions, but we want to get away from a position in which sums wildly in excess of anything that could be said to be deserved are paid as a matter of course. None of the steps taken so far has changed that culture, even in an era of financial crisis among the banks and beyond.

The second reason why we want a bank bonus tax is that it would raise money for some valuable purposes. The issue of jobs for young people affects all our constituencies. My constituency normally comes in the middle range of unemployment across the UK, and we have seen a substantial increase in youth unemployment. I certainly want that issue to be tackled in my constituency.

We are also saying that the bank bonus tax would be used to provide affordable housing. That, of course, would bring two benefits. First, it would bring more housing into the sector. Constituencies such as mine have to some extent, although on a lesser scale, experienced the same phenomenon as happened in London, where high rates of pay in certain sectors such as financial services have pushed up house prices and made it harder for people on lower incomes to get affordable housing, so this proposal would be important for those people as well. Of course, building affordable housing and new homes also gives a boost to the economy through providing new jobs in the construction sector and helps people who have been out of work because of the collapse of that sector in many parts of the country.

Our proposal of a bank bonus tax would not only tackle the excessive bonus culture but provide jobs for our young people and affordable homes, giving a boost to the construction sector. I therefore hope that the House will support it.