HMRC (Scotland)

Gregg McClymont Excerpts

Tuesday 22nd July 2014 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

It is a pleasure and a privilege to have the final Adjournment debate before the House departs for the summer recess. The future of HMRC jobs in Scotland is an issue close to my heart. It is hard to grow up and live in my constituency without developing personal connections with what is known locally simply as the tax office. A number of my friends and family have worked or work at HMRC Cumbernauld, and it is by some distance the largest employer in my constituency, currently employing about 1,400 staff working across the spectrum of tax, benefits, debt management and the like. It is the UK’s largest tax office. Hon. Members have doubtless at one time or another had communication with HMRC Cumbernauld—not, I hasten to add, because of anything untoward, but simply because that is where so many tax communications are sent from and to.

In 57 days, Scotland will make its decision on whether to remain in the United Kingdom with England, Wales and Northern Ireland or whether to leave, and Scots are weighing up a wide array of issues and interests as they come to a judgment on that decision. That is why every survey of Scottish public opinion illuminates the public’s desire for more information and facts on the issues in hand. Some things are, by definition, uncertain about what would happen if Scotland was to leave the United Kingdom—things that will depend on negotiations with the rest of the United Kingdom, which will depend on the future performance of the Scottish economy in particular. But Scotland’s role in HMRC is not one of those things about which there is uncertainty. The arithmetical facts are these.

Across the UK, HMRC employs 70,000 people. More than 9,000 of those posts are in Scotland. In percentage terms, 13% of UK HMRC staff are in Scotland, a significantly above-population-share of the total. More than 3,000 more posts are allocated in Scotland than a population share would provide. That is testimony to the excellent job that Scottish HMRC staff in Cumbernauld, in East Kilbride and elsewhere provide. It is hard to argue otherwise than that this indeed is a Scottish HMRC jobs dividend. Leaving the United Kingdom would bring to an end Scotland’s role in HMRC. That is surely uncontroversial—a fact, not an opinion.

[Pete Wishart (Perth and North Perthshire) (SNP)]

I congratulate the hon. Gentleman on securing the debate, but is not his timing just a little bit unfortunate? The Westminster Government are actually closing HMRC offices as he is on his feet. I know he does not like Scottish independence and I know he does not like what the Scottish Government are doing, but can he grudgingly accept the fact that we are having no compulsory redundancies in Scotland, which would mean that HMRC staff would be much better treated in an independent Scotland than they would be by the Westminster Tories?

[Gregg McClymont]

I will come to a couple of the hon. Gentleman’s points, but on the issue of HMRC jobs, I am sure he will agree that it is an arithmetical fact that Scotland has a significant dividend from UK HMRC jobs. That is because of the professionalism of staff in Scotland, but it is something that must be put on the record.

Let us tease out a little further these arithmetical facts and then, I think, what we might judge an outcome to be for Scotland after leaving the UK and ending our membership of HMRC. We know as a fact that Scotland has significantly more tax-collecting jobs relative to the UK as a whole. Is there any reason to imagine that an independent Scottish state would need those surplus tax-collecting jobs relative to the size of the UK tax-collecting system? It seems to me that it is hard to imagine why that would be the case. The jobs dividend in Scotland regarding HMRC posts does not reflect different Scottish conditions regarding tax collection, but simply historical decisions and the excellent work undertaken by the Scottish tax office staff.

I have also heard it said by those who might accept in a conversation the arithmetical facts around the number of Scottish HMRC jobs—perhaps by the hon. Gentleman and certainly by others—that there will be no compulsory redundancies, and of course new civil service posts will be needed in a separate Scottish state, the implication being that surplus tax-collecting staff would be transferred to those posts. As the hon. Gentleman said, the SNP Government have given a promise that there will be no compulsory public sector redundancies, but is that promise from Alex Salmond worth the paper it is written on? It is easy to promise something, as things stand, when it looks, as things stand further, as though that promise will never be tested, but let us think a little more about the state, the structure of the Scottish economy and the civil service and public sector jobs therein.

Scotland does not have a small public sector. Our public sector is significant— bigger than that of the UK as a whole. I was glancing through the Scottish Government’s most recent statistics, and they clearly show that Scotland has more public sector jobs and significantly more tax-related public sector jobs than the UK as a whole. I welcome that—it is a credit to the staff and their professionalism—but it suggests that the slack to absorb surplus tax-collection posts in a separate Scottish state will be hard to identify. I say that based on the arithmetical facts, but also as a judgment about the relative size of Scotland’s public sector. Indeed, if we add to that the difficulties that Scotland would inevitably face as it transitioned into an entirely distinct and separate state, as the Institute for Fiscal Studies and other independent experts have observed, one has to question, with some substance and credibility, what that would mean for those tax-collecting jobs in Scotland, and particularly in the largest tax office in the UK in Cumbernauld.

It is my judgment, based on those arithmetical facts, that defending existing public sector provision, not increasing the size of the public sector, is likely to be the reality faced by my constituents working for HMRC in Cumbernauld. In the end, the argument about what happens when we have a substantial surplus of tax-collecting jobs is about whether those posts can be absorbed in the wider Scottish public sector. That is a fundamental question in the referendum debate. There are facts, as I have set them out. There are also judgments, and the hon. Member for Perth and North Perthshire (Pete Wishart) takes a different view, but it is surely incumbent on all of us to give the Scottish people all the facts as they bear on the debate and to let them draw their own conclusions.

The role that HMRC plays is important for my constituency and for Scotland. The next Labour Government are committed to tackling the tax gap. It looks as though in the last financial year the tax gap widened again, despite the Government’s efforts to close it. In my judgment, closing that tax gap will not be achieved without using the professionalism and experience of Scottish HMRC staff.

I am not suggesting that this is the only issue we face in the debate before 18 September—not at all—but for constituents of mine who either work in the tax office or who have friends and family who work there, the issues need to be put on the record and the facts displayed; then a judgment can be made by the people of Scotland.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

As my hon. Friend knows, I share a very small part of Cumbernauld with him, and I know he is speaking for the people of the constituency. Does he agree that the problems he has identified, which are very clear, bring into focus the fact that in East Kilbride we have the headquarters of the Department for International Development, and there is no way that that can be sustained by a population reduced to 8.4% of the previous total?

[Gregg McClymont]

I thank my right hon. Friend for that typically wise intervention. Those are significant issues, and I think that it is incumbent on us all to put the facts on the table as Scotland approaches the decision it must make on 18 September. The role Scotland plays in an integrated United Kingdom, through DFID, HMRC and other public institutions, must be weighed, balanced and measured in that debate. I thank him again for his sagacious intervention.

Finally, I want to ask the Minister a couple of questions. I was delighted by the recent news that up to 170 new permanent posts are to be filled at HMRC Cumbernauld. Can he update the House on where HMRC is in that process? At the same time, around 40 jobs are threatened in the regional post room in HMRC Cumbernauld, and a decision will not be made until the autumn. I hope that he will agree that for the staff working there, that uncertainty is unwelcome. I seek further clarity from him on those questions.

On that note, I thank the House for the opportunity to put on the record some of the arithmetic on the role of Scotland and my constituency in HMRC, and to make a plea for these issues to be discussed in a spirit of constructive debate and starting from the basis of facts.

Finance Bill

Gregg McClymont Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Mr Gauke]

During the assessment of the policy announced in the Budget, we considered all the various issues, including the consequences for the Exchequer in both the short and long term. We will say more about the specific interaction with social care and so on in the near future. I would make the point that the very people restricted by the old regime were the people who, over the course of their working lives, saved responsibly and ended up with a pension sum that demonstrated their prudent approach to saving. It is not unreasonable to believe that the vast majority of those people will continue to act prudently when given greater flexibility. As a matter of philosophy, both parties in the coalition Government share the view that when we can give more power and responsibility to people, we should do so.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The Minister referred to the Budget and the documents published about this policy, but what was published was merely the estimated tax take for the Treasury. Nothing was published about the behavioural impact, the prospect of mis-selling or the interaction with social care. When I asked the Government via a freedom of information request to reveal the basis on which the policy was made, they refused to do so. Will we get more information as quickly possible about the basis on which the Government reached this policy position? The Minister is right, of course, that annuities need to be reformed, but the question is about the basis on which the policy was made.

[Mr Gauke]

On the question of social care, let me repeat the point that I just made: we will respond to the consultation in due course and set out our thinking on that point. As for the issue of mis-selling, we made it very clear on Budget day that it was important to have a guidance guarantee in place. We will set out details of how that will work in the near future, as the consultation period closed only relatively recently. It is important that we get that guidance guarantee right. That brings me to new clause 9.

New clause 9 would require the Chancellor to publish any analysis of the impact of changes made by clauses 39 to 43 of the Bill to schedules 28 and 29 of the Finance Act 2004. However, as I said in Committee, only clauses 39 and 40, which increase the amount that can be taken as a tax-free lump sum as a draw-down pension from 27 March 2014, make changes to schedules 28 and 29 of the 2004 Act.

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[Mr Gauke]

There are two points to make. First, we believe that individuals should be able to make their own choices. Of course, they should be provided with guidance, but essentially a system that relies on the state telling people precisely what their investment portfolio, as it were, should be is too restrictive, and does not perform the role that we should be performing. As for the systemic effect on the housing market, which was, I think, the hon. Lady’s central point, I do not think that our changes will have any such effect. Both the Governor of the Bank of England and the Chancellor of the Exchequer have made it clear that we need to ensure that we do not return to the bad old days and to the unsustainable housing market boom we saw some years ago. There are measures in place to reflect that, and we have the institutions in place to ensure that if there are problems they can be addressed quickly.

[Gregg McClymont]

I thank the Minister for giving way once again. Opposition Members become concerned—well, I certainly do—when Ministers refer to the state telling people what kind of investment portfolio to have. Most people have never invested in the way that that comment suggests. He is a well-intentioned and good Minister, but I become concerned when we think about investment for the majority of people in those terms. The fact is that on the day of the Budget the Chancellor said that there would be guaranteed advice, but that turned out not to be the case. It is now guidance, which is a very different thing. Unless we get that guidance absolutely right, there is a danger of the kind of mis-selling that Members on both sides will remember from the 1980s. It is crucial that we understand the way in which people tend to make decisions about these kinds of issues.

[Mr Gauke]

I agree that it is vital that we get the guidance right. I am sure the hon. Gentleman will understand that now is not the occasion for the Government to set out the details of how this will operate, but there will come a point when we will do that. There will be plenty of opportunity for the House to debate those matters. I have no doubt that he is looking forward to that opportunity and will scrutinise our policies on this matter with his customary vigour—[Interruption]—as indeed will the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). While it is very important to get the guidance right, we instinctively support giving people greater flexibility and freedom. Given the tone of the hon. Gentleman’s intervention, I am not sure that he is entirely comfortable with that.

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[Mr Gauke]

My hon. Friend is trying to draw me into the details of what we will say about how the guidance will operate. It is important that we have a system that is transparent and maintains the confidence of the general public, and that is at the heart of what we are trying to do.

[Gregg McClymont]

I will not try to draw the Minister into the details. He rightly refers to the instinct to give people more control over their own lives, and that is something we would all agree with. However, I urge him to read the debates involving a Tory Minister in his position in the 1980s who talked about the revolution in personal pensions using language very similar to that used by the Minister and, more exuberantly, by his colleagues about these reforms. He should compare that with what was said in the 1980s, which led to the mis-selling scandals and some of the loss of confidence in pensions. Greater control, yes, but let us also be aware of the lessons of history.

[Mr Gauke]

I take that point in the spirit in which it was offered. I maintain that it is right that we give people greater control and flexibility. This is about ensuring that individuals are in the best position to make the best decisions for them. Guidance is an important part of that, and, from day one, the Government have been very clear that that was the approach we wanted to take. I suspect that there is, at least at some level, a philosophical difference between Members on either side of the Chamber on this point. I do not think that a Labour Government would have brought forward these reforms, but I welcome any extent to which we can have a consensus.

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[Gregg McClymont]

On that point, my hon. Friend, as usual, is making an eloquent, precise case. There is an issue not just around informed choice, but around our ability to predict our own longevity; there are substantial issues. The evidence is that it is very difficult for us to predict our own longevity, both for obvious reasons and in terms of biases inherent in our human nature. Therefore, this is not just about choice—although we think that is important—but about how one makes such decisions on one’s own.

[Cathy Jamieson]

My hon. Friend makes an extremely important point. My understanding of the research is that, when asked to predict their longevity, people significantly underestimate it and do not always predict long enough into the future, particularly when anticipating their potential care needs or support needs. For understandable reasons, people do not want to think of those things during their earlier years, but increasingly they will have to do so.

I heard the Minister say that some of the issues that have to be dealt with, such as guidance and so on, do not form part of tax law. Of course he is correct on that, but there is an issue about a joined-up approach to government. Already we have concerns—I shall say more if time allows—about how all the Government’s policies on social care and some of the other economic issues that people have to think about will come together. It is important to ensure at every stage that there are no unintended consequences.

As the Minister accepted, we tabled our new clause, as always, in a spirit of being reasonable and sensible. Indeed, I was a wee bit excited when he seemed to suggest that some of the things we might be saying were worthy of further consideration. Of course, my excitement was short-lived, as he then said that he would not accept our new clause.

Quite simply, new clause 9 would require the Treasury, within six months of Royal Assent, to publish and lay before the House any analysis it prepared before the publication of Budget 2014 relating to the impact of the changes made in clauses 39 to 43 and the relevant schedules, and that the information published include any assessment made of the impact of the provisions for independent face-to-face guidance on the Finance Act 2004. That is important, because without it, as my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said in an attempt to elicit information, which has not so far been possible, it will be difficult to scrutinise provisions in a Bill that is to come in due course, shortly, when time permits—whichever one of the time scales so beloved of Ministers is utilised. The new clause also asks that we be provided with information on the distributional impact of the changes by income decile, a behavioural analysis and the financial risk assessment. As our new clause and the points I have made show, our concern about some of the reforms extends to the face-to-face guidance that the Government have committed to providing.

We discussed this issue extensively in Committee. I think Labour Members made a number of valid and reasonable points on the potential pitfalls for savers who have money at their disposal—those who, perhaps for the first time in their life, have a significant pot of money and have to make a decision. Lest anyone suggest that our concern is patronising or that we are somehow not trusting people to decide what to do with, essentially, their own money, let me say that it is important to understand that for many people, having significant pots of money at their disposal will be an entirely new experience at a time in their life when, as we have heard, they may not properly have predicted what resources they are going to need or their own longevity. It is therefore a bit disappointing that the Government have not been able to answer our questions. Looking back over the Hansard report of the Committee stage, I was struck by the amount of time we spent dealing with some of these questions and, unfortunately, not getting the answers from the Government. Some of the responses we got from Government Members were, I would say, misunderstandings if not misrepresentations of our own position, which led us to believe that the Government might simply not want to engage with those issues.

To ensure that the Government are held to account, we have set three tests for the pension reforms. The first is the advice test—ensuring that there is robust advice for people who are providing for their retirement and that measures are in place to deal with mis-selling. In Committee, I and others quoted a number of cases brought to us by financial advisers in our local areas and by constituents in which people had been given so-called advice—often, information provided by unregulated people—and had therefore made wrong choices, which cost them significant sums. We do not want that to happen again.

[Gregg McClymont]

On the question of guidance, the Pensions Minister’s comments about Lamborghinis were particularly unfortunate. Does my hon. Friend agree that the biggest danger is not that hard-working, sensible people will blow their own money, but that they will take it as cash and not invest it because they have no confidence in the financial services industry, so their money will not be working for them? Is not that as big a danger, if not a greater danger, than the Lamborghini sort of stuff the Pensions Minister raised?

[Cathy Jamieson]

If I did not know better, I would suspect my hon. Friend of having read my speech. I was just about to come to that very point. The infamous Lamborghini comment might have been made in jest, but that sort of joke is entirely lost on those who have already lost their savings because of poor or insufficient advice. My hon. Friend makes a very valid point indeed about people’s confidence in what they can do with their own resources. To an extent, the Government may have begun to acknowledge the need to expand the range of choices available and ensure that consumers have help to navigate those choices—I think that was the phrase used. That sounds pretty sensible and commendable, but we need to make sure that it actually happens.

The second test we have set is the fairness test—the new system has to be fair to those on low and middle incomes, which means they still should be able to access products that give them the certainty in retirement they want, and the billions we spend in pensions tax relief must not benefit only those at the very top. That is why we have called for restrictions on pensions tax relief for those earning more than £150,000 a year. The third test is the cost test: the Government have to ensure that the policy does not result in extra cost to the state. That point was made earlier, and I think the Minister, to his credit, understands that there is an issue with social care and pensioners having to fall back on means-tested benefits—housing benefit, for example—later in their life if they do not properly or sensibly manage their resources. As yet, however, the Government have not explained how all that will be joined up in policy terms. In our view, if the Government’s pensions reforms fail any of those tests, the negative impact on savers could be considerable.

In Committee, my hon. Friend the Member for Islwyn (Chris Evans) talked about protecting people from the “sharks in the market”. That brings us to the vexed question of guidance. Going back to the Chancellor’s no doubt innocent slip, there is a serious point to be made about definitions. When pressed subsequently, the Chancellor said:

“There is a technical distinction between advice and guidance. The budget document exists, I don’t get up and read it out because it contains all the technical details of the Budget and we publish it at the same moment. The speech needs to also communicate in English so people watching it can understand what is meant.”

I understand that, but as I emphasised strongly in Committee, there is a world of difference between advice and guidance in technical terms and in terms of legality. The Government need to deal with that.

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If guidance is a stepping stone to advice, does that leave the consumer with a considerable additional expense, which could run into hundreds of pounds? If it becomes routine to lead people from free guidance to paid-for advice, what is the point? Another question that we raised in Committee was whether guidance would be available to everyone, regardless of where they live. The Minister acknowledged today that some of the guidance may be made available through the internet, which will not be suitable for everyone and will not be face to face. We need more explanation of the comments of the Pensions Minister when he suggested that group sessions were an option worth exploring. Are we to conclude that the Government’s position has moved from face-to-face advice or guidance to face-to-faces advice? I am not sure that many people would want to sit with others to discuss their private circumstances. I hope the Minister will deal with the point about face-to-face guidance, as it is important that people understand what is being offered.

[Gregg McClymont]

Before my hon. Friend moves off the important topic of guidance, I am sure she will agree that the context to this is that the median pension pot is much smaller than many hon. Members imagine: it is well below £30,000 a year. Moving from guidance to advice potentially means that a significant proportion of a person’s pension pot is eaten up by the cost of advice. We should all bear that in mind during the debate.

[Cathy Jamieson]

Once again, my hon. Friend makes an important point and anticipates some of the things I want to mention before bringing my remarks to a close. I understand that in some instances pension pots are relatively small, and we do not want a scenario in which people find that a fairly high percentage of their pension pot must be spent on taking the advice to which he refers.

In that context, I would be particularly interested to know whether the Government have conducted any serious work on how and when savers will invest the money taken out of their pension pots, particularly when those pots are relatively small. Industry analysis from Australia, which has total flexibility at the de-accumulation stage, has found that over half of pension lump sums are spent on homes and cars.

Again, before people get excited and claim that I am somehow suggesting that people should not be in charge of their own money, let me make it clear that there is not necessarily anything wrong with that. For many people it might seem to be the reasonable thing to do. They might wish to pay off a mortgage or debt, buy the car they had not previously been able to afford, or make improvements to their home. Of course they ought to be able to make that choice, but they ought to be able to do so in the knowledge of what they might face in later years.

The potential impact of that change on the wider economy has already been mentioned, particularly in relation to the housing market. For example, what are the implications of people with substantial pension pots deciding to invest in property, particularly in the buy-to-let market? I also think that the Government must look at the impact on household savings ratios, given that the OBR has projected that they will fall from 5% in 2013 to just under 3% at the end of the forecast period. In the midst of any economic recovery that has been driven by consumer savings, any change in the way people choose to invest their savings and the consequent impact on the household savings ratio should be looked at very carefully.

In conclusion, I think that this is a crucial issue for thousands of people across the country. Many people do not think about pensions and long-term savings, and not because they have no interest in them or do not want to save, but because they are trying to manage their expenditure week by week and do not have the opportunity to look at the longer term. Everything we can do to encourage good-quality financial education is important, which is why we must get the guidance and advice absolutely correct. People also need to be confident that the information they get from the industry itself will be tailored and suitable for them.

[Gregg McClymont]

Perhaps this time I am not anticipating what my hon. Friend is about to say, as I think she is bringing her remarks to a close. It strikes me, having listened to the Government on this issue, that the employer is never mentioned. One arm of the Government is promoting workplace employer pensions, but what is the employer’s role in relation to greater flexibility and choice?

[Cathy Jamieson]

Once again, my hon. Friend makes a valid and important point. He is correct that I was about to conclude my remarks, so I will resist the temptation to go into great detail on that issue, other than to say—we raised this in Committee—that in some ways there seems to be no joined-up government here, with pensions sometimes seeming to be at odds with other aspects. Rather than all pulling together in the interests of the consumer, there could be tensions, which I think the Government should address.

As I have said, this is a crucial issue for thousands of people. We need to get it right. I am of course aware that there is further legislation coming down the line. However, given that the Minister indicated that at least some of our requests for information are reasonable and relevant to the matter being discussed, I hope that even at this late stage he will agree to our new clause, which we will want to press when the time comes.

[James Duddridge]

I find this issue rather exciting, although clearly the House does not, given how empty the Chamber is. The pension changes that the Government are bringing forward are absolutely essential and, I think, will transform the marketplace in the long term. However, I am concerned that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), having suffered the Finance Bill in Committee, seems to have spent the intervening time reading the Hansard reports of what we all said. Really, it is too much of a punishment to do that and then have to come back yesterday and today. Thankfully we will have Third Reading later this evening, if all goes well.

On new clause 13, my hon. Friend the Exchequer Secretary talked entirely about defined contribution schemes. When he winds up, perhaps he will update the House on what is happening with defined benefit schemes, or perhaps there are no transitional issues for defined benefit schemes in the new clause. I think it is entirely right to give people plenty of time to look at these issues, because a number of people were not expecting these changes and would not have predicted them, so they will need longer to consider their personal positions. As time goes on, I think that there will be less need for guidance and advice, whether provided by the state or privately, because people now going into defined contribution schemes will know what the options are likely to be when they come out. Indeed, five years from now it will be slightly more predictable. People should look at that years, rather than just a few months, before they retire. Of course, that is not possible immediately, given that these changes have only just come in.

[Gregg McClymont]

The hon. Gentleman will be aware that the other arm of the Government on this, the Pensions Minister, has developed a whole pensions policy based on the notion that inertia has to be harnessed for the public good, meaning that, as a rule, people are not aware of the complexities of pensions and there therefore needs to be a system in place so that those who do not exercise a choice still get a good outcome. Is the hon. Gentleman really that confident that we will very quickly reach a situation in which there will be informed consumers across the board who can make the kinds of investment decisions to which he is referring?

[James Duddridge]

I think that the default position will be that an annuity is purchased, rather than a lump sum being withdrawn. I think the hon. Gentleman is saying that that is the more cautious route, but I am concerned that it is not the right route for some people. Taking out a lump sum might make a lot more sense for them. However, it is an additional option. The guidance that the Government are offering is not perfect. In fact, perfect advice, if it is taken forward to a recommendation, is incredibly expensive.

[Gregg McClymont]

I thank the hon. Gentleman for that thoughtful response. I am not sure that the default position will be that someone is defaulted into an annuity. We need clarity on that as we discuss these clauses. I think that a choice will have to be exercised one way or another, but I might be wrong. Perhaps the Minister will provide clarity on that.

[James Duddridge]

The Minister, as ever, will provide clarity, and I will ensure that he has plenty of time to do so.

We need to look at these changes in the round and consider other changes being made, particularly the individual savings account legislation that is going through. In the longer term, I think that ISAs and pensions will be linked and that we will move towards the individual retirement accounts we see in America, but working more from the base of an ISA up to a pension, rather than a merging of the two or a dumbing down of pensions.

An earlier intervention referred to spouse-to-spouse transfers on ISAs, which I think are particularly relevant in relation to new clause 13 and defined contribution pensions, because some people will be taking larger sums of money out and investing them directly into an ISA with little awareness that it cannot then be transferred to their spouse. The earlier the Government look at making spouse-to-spouse transfers exempt for inheritance tax, the better, particularly during this early transition period. The Sunday Times and a number of other financial services campaigners are urging the Government to look at the issue of spouse-to-spouse transfer, but I have not heard it mentioned with regard to the release of lump sums and defined contribution lump sums. Through new clause 13 the Government are recognising that there are transitional issues, but the additional transitional issue relating to ISAs has not necessarily been covered.

I welcome the reduction from £20,000 to £12,000, which entrusts individuals to make decisions. Changes to trivial contributions are also very welcome, particularly as people move from employer to employer, building up large numbers of very small pots. It may not make financial sense to merge them, so it may be better to take them out of a pension tax wrapper and independently move them to an ISA.

On the issue of guidance, we should be open and honest that the Government cannot afford to provide full-blown advice and recommendation. It is very good of the Government to allocate a significant sum of money to pointing people in the right direction. If the average pot is £30,000, as we have heard, the thousands of pounds that full-blown advice and recommendation may cost would be totally disproportionate to the potential benefit.

It is good to get guidance, but I would exercise caution about what is best: face-to-face guidance is not always the best option. If I wanted to transfer money or enact a financial transaction, I would not want to sit down face to face with my bank manager. I would much prefer the tried and tested method of interacting with and getting advice and guidance through the internet, at least at an early stage. I would not want the Government spending all the money on face-to-face guidance. Guidance on the internet may well be better for an increasing number of people, including a mini fact find into which they put their basic information.

The change may be from face-to-face to face-to-faces. Financial services presentations can work face to face, but they can also work over the internet. Once people have completed an initial fact find or an overview of their financial position—they may want to use their lump sum to repay debt, for instance—they could be diverted to an individual webcast with the relevant financial guidance.

[Gregg McClymont]

I thank the hon. Gentleman, who is speaking from his experience of the sector, for giving way again. Would he care to comment on why the existing annuities market was not working? My understanding of the analysis is that the default position of individuals was simply to accept what they were offered and not to get involved in the type of process to which he refers. If that means that the annuities market was a failure because people were not getting value for money as a result of not shopping around, what confidence does he have that there will be an overnight revolution in people’s engagement with the type of guidance he suggests?

[James Duddridge]

The annuities market was not working effectively in a number of ways, but, in relation to the lump sum, it did not work for a lot of our constituents if they rationally expected a very low life expectancy. If they had been diagnosed with a particular illness, the question of what would happen to their money would cause them great stress. It is important, therefore, to enable them to release some of that pension money and put it into another instrument so that their family can share it or, indeed, so that they can enjoy it themselves in their final years. I understand there is a risk of people under-predicting their longevity, but the large number of people with a diagnosed illness would like to access that pot. That is a slightly extreme position, but it is at the other end of the scale.

Currency in Scotland after 2014

Gregg McClymont Excerpts

Wednesday 12th February 2014 Westminster Hall

[Ian Murray]

My hon. Friend is absolutely right: it is stupidity on stilts. Economist after economist, academic after academic, politician after politician and business after business has said that the SNP’s currency union plans are completely barking on stilts.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Is not the former deputy leader of the SNP on to something? The fundamental fact is that if the Scottish National party wishes to keep the economic and social union, there also has to be a political union; otherwise democracy is lost. Does my hon. Friend agree?

[Ian Murray]

I absolutely agree, because what the SNP wishes to do is cherry-pick what it wishes to have in an independent Scotland. It cannot have the economic and social union without having that political union. Let us just reflect on a hypothetical situation in which Scotland either is an independent country or has its own currency. After the eurozone crisis of 2008 and beyond, it would probably be in negotiations with the UK Treasury to get more of a fiscal pact and more of a monetary union to ensure that those stabilisers were in place to ensure that it did not happen again.

Let me go back to where I was—challenging the SNP on whether it had a plan B. It is quite clear that it has barely a plan A, and it will not tell us what its plan B is. The Scottish people deserve to know before they go to the polls. It is clear that leaving the UK means losing the security of the pound. The yes camp cannot even tell us what money we would have in our pockets. How can they ask us to vote to leave the United Kingdom?

The pound is one of the most trusted and secure currencies in the world. The eurozone crisis has shown us how important it is to have a strong and stable currency, and this is not just about what money is in your pocket; it is about what it will buy you. Losing the pound means more expensive mortgages, more expensive credit card bills and more expensive car loans. Anyone who banks, anyone who saves and anyone who borrows will be hit with higher bills.

Fairness and Inequality

Gregg McClymont Excerpts

Tuesday 11th February 2014 Commons Chamber

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Thank you very much, Mr Deputy Speaker. [Interruption.] I also thank the hon. Member for North East Somerset (Jacob Rees-Mogg) for his usual cheer as I start to speak.

We are having an important debate today. In recent months we have had a number of debates on subjects such as the minimum wage, the bedroom tax, and gender issues. Those are all important debates in themselves, but they are also, if I might be so bold, symptoms of a bigger issue that is afflicting our society and other societies—inequality and unfairness. In many ways, this debate has been screaming out to be had, especially in recent times as people are waking up to how things are arranged in our society or societies.

Yesterday, a commission headed by Church of England bishop, Dr John Sentamu, published a thoughtful report on the problem of working for poverty wages in the UK. Much has been written on this subject by eminent Nobel-winning academics and economists. Last week, when we realised that this debate was going to happen, my hon. Friend the Member for Moray (Angus Robertson) said that he was going to play word bingo during my speech and had chosen the word “Stiglitz”. I suppose that many of my thoughts and much of my further outrage on this issue have been ignited by Joe Stiglitz, and that propelled the idea for this debate. I would hope to do him justice, but I know I will not, so I recommend reading his book, “The Price of Inequality”, available on anybody’s Kindle app for £5—or, indeed, Paul Krugman’s “End This Depression Now!” Another interesting book I have seen but not read is “The Cost of Inequality: Why Economic Equality is Essential for Recovery” by Stewart Lansley. Perhaps the aim of economic equality is too far away, but certainly the aim of reducing inequality should be uppermost in all our minds; indeed, I think we shall see that it is becoming so.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Can the hon. Gentleman enlighten the House on how his proposal to cut corporation tax for the biggest businesses in Scotland will reduce inequality?

[Mr MacNeil]

It is quite simple—if we start to create jobs and opportunities for people, we will reduce inequality. I would certainly not be in the position of one of the hon. Gentleman’s colleagues who said last week:

“If the Scottish people are going to be better off economically and so on, I would still be against breaking away from the Union.”—[Official Report, 6 February 2014; Vol. 575, c. 467.]

It does not seem to matter whether we can cure poverty—Labour Members would still be against independence because they have made careers talking about it, and handsome careers at that.

--- Later in debate ---

[Mr MacNeil]

No, the hon. Gentleman is very happy.

[Gregg McClymont]

Can the Scottish Government not spend the block grant in any way they see fit?

[Mr MacNeil]

The hon. Gentleman is absolutely correct: the Scottish Government can do so, but they have to balance the budget. In fact, although John Swinney, the Finance Secretary, balances it every year, the Chancellor of the Exchequer does not. If the hon. Gentleman wants extra expenditure, he knows full well that, under the devolution settlement, he must explain what he will cut. It is, “Want, want, want,” but he has not made any suggestions about what he will cut.

--- Later in debate ---

[Mr Weir]

I am getting a bit tired of hearing that from the Labour party. I have explained our position on the energy price freeze time and again. The freeze will not work. There has already been a massive increase in bills prior to its coming in, and there is likely to be another after it comes in. We had a debate in the Chamber last week about inequalities in the system of billing by energy companies. Those inequalities will be frozen in place by an energy freeze, making things even worse for Scottish consumers. A freeze will also hit the investment needed to ensure that we have jobs for the future and can bring down energy prices through moving to renewables.

[Gregg McClymont]

Will the hon. Gentleman give way?

[Mr Weir]

No, I have given way enough for the moment.

The present UK Government have repeatedly said that they took powers in the latest energy legislation to implement the Prime Minister’s promise to put everyone on the lowest tariff. I have pointed out before, and I will do so again, that the measures in the Energy Act 2013 will not have that effect. The relevant sections do not require energy companies to do that, but only to make an offer, which may well be lost in the mass of paper that people receive from them.

Even if those changes work, they will do nothing to help some of the poorest in our society—those who have to rely on prepayment meters. It may be fine for someone on a direct debit tariff, but those on prepayment meters will be stuck on a higher tariff. Such tariffs are generally higher than those available to someone paying by direct debit, as would happen under Labour’s price freeze. That locks in price inequality. It seems to me that if the Government are truly intent on ensuring that everyone has the lowest possible bill, they need to ensure that that does not apply only within the type of contract people already have, but allows them to move to a cheaper type of contract.

I have already mentioned the particular problems with prepayment meters. As I have always said, they seem to me to be slightly perverse: it is one of the few examples of consumers ending up paying much more by paying cash in advance. It was interesting to see the hon. Member for Harlow (Robert Halfon) introduce his ten-minute rule Bill earlier this afternoon. I very much hope that it is successful, but given how many Bills are to be debated on 28 February, I somehow doubt it.

Citizens Advice Scotland recently issued a report on energy that shows the true difficulties people face. It states that

“the cases highlighted by bureaux regarding difficulty paying are most commonly with regards to prepayment meters recouping an unaffordable amount for arrears every time the consumer tops up.”

Citizens Advice Scotland quotes an example that sticks in my mind of a single parent with two children who has to lose £7 towards arrears every time she puts £10 in the meter; the £3 remaining is entirely insufficient to heat her home. That is totally unacceptable and is a clear example of the inequalities facing many of our fellow citizens. In those circumstances, she has no chance of getting out of the cycle of debt—the hon. Member for Bedford (Richard Fuller) made that point—or even keeping her home warm.

Many of our people are being forced into household debt by the difficulties they find themselves in. The rise of the payday lenders is one of the horrible side effects. We heard last week about the difficulty for those who cannot pay for their energy by direct debit and who have to pay higher prices. It was pointed out that some £2 billion sits with the energy companies, making money for them rather than for consumers—another inequality that afflicts our society.

[Gregg McClymont]

The hon. Gentleman is being most generous. He is talking about the profits made by energy companies. Is he aware that anyone in Scotland listening to this debate will be surprised that he and his party do not support a price freeze, but instead are in the same position as the energy fat cats?

[Mr Weir]

The hon. Gentleman is like a broken record. I have explained already, and have done so on numerous occasions, our objections to the energy price freeze. It is easy for Labour to say, “Let’s have an energy price freeze.” It sounds great and I am sure many people love to hear it; unfortunately, it simply will not happen. It will not lead to lower bills, it will freeze in the inequalities already in the system, and it will leave people with higher bills, while his party leader flails about trying to find some flesh to put on the bones of that policy.

Payday Loan Companies

Gregg McClymont Excerpts

Monday 20th January 2014 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

This is a timely debate. The issue has captured the public’s imagination because people cannot understand why apparently high and exploitative interest rates are charged on short-term loans, and the Government have faced mounting pressure. It is important to pay tribute to Members on both sides of the House, but particularly my hon. Friends the Members for Sheffield Central (Paul Blomfield) and for Walthamstow (Stella Creasy). Their work, in combination with the public’s feeling that this is somehow unfair and wrong, has brought the issue to the Government’s attention. The Government have recently crossed the Rubicon in announcing that an intervention in this market would be justified. They said not only that the FCA now has the power to impose a cap on the total cost of credit, but that they feel that that will happen.

In a moment, I will draw an analogy with the pensions market, which I know something about. I was struck by the fact that the hon. Member for East Hampshire (Damian Hinds) said that Conservatives were against caps in general, but that this was an exceptional case. I am sure that he is aware that the Government are consulting on a pension price cap for somewhat similar reasons, particularly the fact that consumers in the marketplace are not sovereign because they do not know what they are being charged.

A few reasons have been given for why we find this to be such an issue in 21st century Britain. My hon. Friend the Member for Glasgow North (Ann McKechin) noted the extraordinary growth in short-term loans being taken out. Members on both sides of the House have suggested that that is something to do with either bank overdraft charges or, perhaps more fundamentally, the growth of a low-wage economy. The latter is absolutely true. We cannot understand this problem without reference to the growth of low-wage employment. However, it is important to refer not only to low wages but to irregular and insecure employment.

What we see in the 21st century phenomenon of payday loans is something that we commonly found 100 years ago in the form of the pawnbroker: the debt-credit cycle, which appears in economies and contexts where low pay and insecure and irregular employment are a reality. One hundred years ago, the pawnbroker was ubiquitous for a simple and straightforward reason: weekly wages did not cover outgoings. Therefore, in a world where weekly wages could not meet the cost of living, what was the rational response of people in that position, of whom there were many millions? The rational response was to pawn their good claithes at the point in the week when their wages were exhausted and then to redeem their good claithes—that is, clothes, for non-Scottish Members of Parliament—when their wages were paid. That continued week after week. They pawned when their weekly wages were exhausted but their outgoings had not been met, and they redeemed when they were paid—over and again, week after week.

Of course, the world has changed enormously in the past 100 years. Everyone’s standard of living has increased significantly. I would argue that it is not coincidental that that happened at the same time as the Labour party was formed to advance the interests of people in those situations. [Interruption.] Government Members are laughing. I did not even think that that would be a point of controversy. Surely, the past 100 years have seen a significant—[Interruption.] The hon. Member for Brigg and Goole (Andrew Percy) shouts something. The point is that, 100 years ago, the pawnbroker was a reality; in the 21st century, the payday lender is a reality. The standard of living is much higher of course, but we find this problem emerging once again. It used to be a weekly problem; it now might be a monthly, six-weekly or bi-monthly problem.

[Ann McKechin]

There is one advantage of the pawnbroker: at least, the debt could only go so far—the amount of credit that someone put up. The problem with payday lending is that interest rates keep increasing and people are caught in a vicious cycle of debt, which is why it is becoming even more difficult for ordinary people to cope with it.

[Gregg McClymont]

My hon. Friend takes the words right out of my mouth. That, indeed, is the big difference. This is a much more exploitative form of lending than pawnbroking.

The hon. Member for East Hampshire, in a thoughtful speech, got on quickly to what sort of cap one should look to the Government to construct. I mentioned that the Government are consulting on a pension cap, and my involvement in that from the Labour side leads me to make a couple of observations that might seem obvious. The most obvious is that one must be absolutely clear about what one is encompassing in the cap—a point that he made very well—while being clear about when the cap will be introduced. As things stand, we have an undertaking from the Government to move towards a cap on the total cost of credit, but until we are clear what the total cost of credit includes, the dangers of leakage are significant.

Alongside that, we must be clear about what the objective of regulation is in that context. It must be to end the exploitation that is widely thought to be taking place—Members on both sides of the House feel that, and the public certainly do—but at the same time to ensure that legitimate access can be maintained to short-term loans that are not exploitative. That is the principle from which the Government must proceed.

However, to pick up on a point made by more than one Government Member today, when all that is done and exploitation through payday loans has been reduced, or hopefully ended, we will still not solve the problem unless we can build securer and more regular forms of employment with a higher wage. My hon. Friend the Member for Glasgow North is absolutely right that that form of lending can be much more exploitative than pawnbroking has been over the past 150 years, but the lesson from the era when pawnbroking was ubiquitous in working class communities is straightforward: as long as there is low pay and irregular and insecure employment, it is rational for people to have to find a way to make ends meet.

We welcome the view that the Government have taken on regulation. It is fair to say that they are moving on to the territory that the Opposition have staked out, but I think that we can agree—we might disagree about the method of achieving it—that unless we can a securer and more regular employment economy with a higher wage, the problem will not disappear.

Annuities for Pensioners

Gregg McClymont Excerpts

Tuesday 7th January 2014 Westminster Hall

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Dobbin. I congratulate the hon. Member for Gloucester (Richard Graham) on securing the debate, because annuities continue to rise up the political agenda. I was struck by the hon. Gentleman’s speech, which I interpreted as a clear message that the market is not working properly. Indeed, I understood him to say that the annuities market was broken and cannot be fixed simply through individual engagement by consumers. The repeated references to the Financial Conduct Authority’s consumer panel report were helpful, because the whole thrust of that report was that the market cannot be fixed purely by increased transparency.

Several Government Members referred to mortgages. A big difference between mortgages and annuities is that annuities are one-off products, so consumers cannot learn more about annuities over time through repeated purchases. I agree with the hon. Member for Fareham (Mr Hoban) that the idea of tradeable annuities, which was floated over the weekend by the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb)—I was a little surprised that the hon. Member for Gloucester repeated that suggestion—will not get far.

The hon. Member for Gloucester provided compelling evidence of the fact that the market does not work effectively and cannot be fixed by individual engagement. His speech might stand as a metaphor for the Government’s approach, because there is general agreement that the market does not work properly—the hon. Member for Warrington South (David Mowat) made that argument eloquently. Moving from diagnosis to solution, however, the Government’s cupboard is pretty bare. I listened carefully to the solutions that the hon. Member for Gloucester suggested at the end of his speech. He noted that the Treasury had acted to remove the default retirement age and that people are no longer required by law to annuitise by 75. As the House of Commons Library made clear earlier this year, however, someone with a secure pension of less than £20,000 essentially has to annuitise by 75. Draw-down works well for those with big pension pots, but the rest of us still have to annuitise our defined contribution pot, so that is not a solution.

The hon. Gentleman was good enough to mention the Association of British Insurers code, but he was absolutely right to say that that is not enough. Let us be clear about what the ABI has done so far. The open market option gives people more information about their ability not to take an annuity from their existing pension provider. The hon. Member for Fareham was somewhat generous when he suggested that the results were not in yet to show whether that will deal with the lack of shopping around. It will not deal with the problem. All the evidence in the market shows that inertia is a powerful force on consumers that leads to excess profits for providers.

[Mr Hoban]

The code of conduct came into place only on 1 March last year, so it has run for less than a year. It is therefore hard for either of us to say that it has or has not worked.

[Gregg McClymont]

The hon. Gentleman referred to the Turner commission. The thrust of its conclusions—and, indeed, of the auto-enrolment pensions policy pursued by the previous Labour Government and the current Government—was that inertia is a fact of pensions markets. Auto-enrolment is an attempt to use inertia for the good of the public and the consumer. That is the basis on which pensions policy is developing under the pensions Minister—a process that began under the previous Labour Government.

There is a massive lack of engagement and involvement in pensions. Leaving aside the ABI, there is general recognition in the pensions world that the open market option is simply not going to do the job. That is the thrust of the FCA consumer report, which has been mentioned several times. Having looked at the matter closely over two years, and based on the Turner commission consensus, which we wish to maintain, I am prepared to say that inertia in the annuities market is a reality that leads to excess profits. That is not only my description, but the description given by the pensions Minister, who said in a recent television documentary that excess profits were being made by insurers, which is a product of inertia.

[Richard Graham]

The interesting point about inertia is that that is precisely the context in which I recommended that a change be considered to the current requirement for an individual to buy an annuity for life, whatever their circumstances or however those circumstances change. That crucial change would affect the inertia about which the hon. Gentleman is concerned, because it would enable people to reconsider and change their annuity if circumstances demanded that. Does he agree?

[Gregg McClymont]

No, I do not agree. The problem in the market is that people do not shop around, but the hon. Gentleman suggests that we should solve that problem by creating an even more complex product, in which people will magically start to engage in trading and moving from one annuity to another.

[Richard Graham]

Will the hon. Gentleman give way?

[Gregg McClymont]

No, let me continue. It is simply not feasible or credible. The idea of tradable annuities is a non-starter, and I will set out the response to it from across the industry. Phil Loney from Royal London said they had not been thought through by the Minister. Mark Wood from JLT Employee Benefits described it as misleading to compare annuities to mortgages. Tom McPhail, who is present in the Public Gallery, said that the Government

“should not try to invent products which…aren’t likely to be…value for money.”

The Actuary magazine described the wider response from the industry as “scathing”. The idea is a non-starter.

[Richard Graham]

Will the hon. Gentleman give way?

[Gregg McClymont]

We have heard from the hon. Gentleman, who gave a long and interesting speech, and it is now my duty to respond. I shall make a little more progress and then I will let him back in. He diagnosed the problem effectively, but provided no solution. The airy-fairy, half-baked suggestion that we should think about tradable annuities does not deal with the reality, which more than one Conservative Member has set out this morning, that hundreds of thousands of people are annuitising every year, right now. What are the Government doing about that now, in real time?

Interestingly, the hon. Member for Gloucester diagnosed the problem very well, and understood that transparency will not solve it. The solution cannot be based on a utopian hope for greater individual engagement; it must be like what the OFT report did more widely for pensions. The demand side—the buy side—is too weak; how can we strengthen consumer weight or consumers’ ability to get a good deal? My view is that although individual engagement is a good thing, and anything that encourages it should be welcomed, it will not solve the problem, given that inertia is a central fact of the pensions marketplace.

The Opposition tabled a sensible amendment to the Pensions Bill which would at least have begun to tackle the problem, by ensuring that in the existing market—in the real world, right now—those who annuitise would get access to properly regulated, independent brokerage. That is not a panacea, but it is a reasonable starting point. It bears positive comparison with the Government’s lack of action. They have done nothing on annuities; there are no clauses about them in the Pensions Bill. That may or may not be an indictment of Government policy. No one says that the problem can be solved overnight, but surely an amendment of the kind tabled by Labour is a reasonable starting point.

More widely, the only answer is more purchasing power on the side of the consumer. That means we need to move to mandatory independent brokering, ideally in-house rather than external. [Interruption.] The hon. Member for South Derbyshire (Heather Wheeler) looks puzzled. In 2012, the National Association of Pension Funds, which is represented in the Public Gallery, rightly suggested that the annuity-buying process should be part of a pension scheme—that goes to the point that building up a pension pot is entirely part of the same process as producing an income at the end. Pension schemes should have a role in providing annuity brokering advice—that is what I mean by “in-house”.

Of course, that leads us into the argument about pension schemes being big enough for that to happen. I know that the hon. Member for Gloucester is aware, although it was not mentioned in the debate, that the market is fragmented. There are hundreds of thousands of pension schemes, but the providers of annuities are four or five insurance companies and three or four specialists. It is worth asking why market entrants do not emerge to compete with the giants. It is probably to do with the amount of capital needed, and the fact that on the insurer side it is possible to cross-subsidise products, because of being involved during the phase of building up the pension pot, as well as in the creation of a retirement income at the end. We need pension schemes to be involved as a matter of course in ensuring that their members get the best possible annuity at the end of the saving process. That seems a sensible way to proceed.

The hon. Member for Warrington South, who has done doughty work in the area we are debating, suggested that there should be a Government-backed annuity provider, and the hon. Member for Gloucester intervened and said that that was nationalisation. If it is, then so is the National Employment Savings Trust, which the Government support. NEST is a Government-backed scheme intended to bring down the benchmark for charges during the phase of building up a pension pot, and it has been very successful. That is not nationalisation, and nor is the suggestion of the hon. Member for Warrington South.

[Richard Graham]

The hon. Gentleman’s earlier reluctance to give way is uncharacteristic, especially as 45 minutes were left in the debate for Front-Bench spokesmen. He has two or three times confused issues, especially on my exchange with my hon. Friend the Member for Warrington South about nationalisation. My hon. Friend clarified that and explained that he was looking for participation in the market, not domination of it. Members on both sides of the House have an opportunity today to express their views and reach a consensus; the review by the Financial Conduct Authority and the consultation by the Department for Work and Pensions provide an opportunity for the House to move forward on an issue of concern to all our constituents. Does the hon. Gentleman agree? He should surely reach for consensus, not political division.

[Jim Dobbin (in the Chair)]

Order. I remind hon. Members that interventions should be short.

[Gregg McClymont]

I am not sure what the point of the hon. Gentleman’s intervention was, other than to show that he had not understood the point made by the hon. Member for Warrington South. Everyone else understood that he meant proceeding in the way NEST does, rather than nationalisation. For people who understood the point, no clarification was needed.

[Mr Hoban]

There is a fundamental difference between NEST facilitating the building up of pension pots and the state bearing additional longevity risk by providing annuities. The additional longevity risk would be borne by taxpayers if it were not correctly assessed. That would add to the existing longevity risk that taxpayers face through changing demographics and increased care bills and pension costs.

[Gregg McClymont]

That sounds a plausible point; I should say it is for the hon. Member for Warrington South, who put the idea forward. My observation is that the idea is not nationalisation, but something along the lines of NEST, and that it would at least be worth thinking about for the Government.

[David Mowat]

Since we are discussing the point I made, I feel I should chip in. Of course it was about participation. Two of my hon. Friends have made points about risk. The state already carries risk of inadequate pension provision, which is manifested daily. To talk about further risk in that context is disingenuous.

[Gregg McClymont]

That is clearly a matter for Conservative Members to debate among themselves after we leave the Chamber.

We face a broken market; the question is what to do about it. It seems to the Opposition that the way forward is increasingly to involve pension schemes in—I am wary about using this term, as I try not to use the jargon—“decumulation”. Pension schemes are involved in building up savings pots for members. They should also be involved in turning those savings pots into retirement income, which is what the process is all about, after all. Moving to a system in which pension schemes ensured that their members got decent, well regulated brokerage advice would mean bigger pension schemes, because many very small pension schemes do not now have the ability.

We have mentioned NEST. What does it do about annuities? It has sealed panel bids from annuity providers for each cohort coming to retirement. That is not the whole of the market, because NEST must annuitise for people with very small pots, as part of its public service objective, but that is the road we must go down. The Royal Mail pension scheme is another one that recently announced that it would provide an in-house brokerage service for its members.

The hon. Member for Gloucester was absolutely right in his analysis of the market. The problem—it is not his problem; he is an august Back Bencher, but not on the ministerial team—is that so far the pensions Minister and, I assume, the Treasury have not come up with anything concrete. Until they do, the hundreds of people who are annuitising as we speak and the 400,000 people who annuitise every year will surely look at the Government and ask when they will end the rip-off and the excess profits. If the pensions Minister says that insurance companies are profiting excessively from annuities, when will the Government act? Surely it must be sooner rather than later.

I make this point again to the Government, in the hope that they might listen. Any solution that depends solely on increasing individual consumers’ engagement in the process of buying an annuity will not succeed. The whole thrust of Government pensions policy since Turner, which this Government have continued, is that inertia is a reality that we must make work in the public interest, rather than in the interests of pension company shareholders. That has been the thrust of pensions policy for a decade now. Any solution to the annuities market dysfunction must start from that assumption. In the spirit of the Turner consensus and co-operation on auto-enrolment, I urge the Government to take heed of that reality in the annuities market.

--- Later in debate ---

[Mr Gauke]

Let me put it this way: the industry, the Government, the regulator and consumers all have roles to play in ensuring that consumers get the best deal. So far, action by the Government, the industry and the regulator has focused on ensuring that the market works more effectively to ensure that consumers shop around; identifying conduct risks that prevent them from doing so; and ensuring that they have the right tools and information to make informed choices and provide competitive pressure on the market. However, as I said earlier, those measures are only as effective as the changes they bring about, and they should not stop here.

The Government look forward to the results of the ABI’s evaluation of the effectiveness of its code, and to the FCA’s findings following its thematic review of the market and how consumers are being treated. They will complement the Government’s review of the evidence on how the market is operating and whether improvements are necessary. However, to answer directly the question put by my hon. Friend, the Government are serious about ensuring that the action already under way has a clear and positive impact. We have not ruled out further action in future.

[Gregg McClymont]

Does the Minister accept that the thrust of pensions policy has been to accept the reality of inertia and harness it for the public good? Everything that he has read so far from his script has been about individual engagement. Does he think that individual engagement is enough in this market?

[Mr Gauke]

The hon. Gentleman is too quick to dismiss the role of individual engagement—it seems to me that he dismisses it almost completely. It is important that we engage individuals in such hugely important decisions, that we increase transparency and that we remove any hidden barriers that may exist. There is consensus—we all want the market to work. If we are to succeed, we must take every measure available to improve individual engagement. We should not dismiss it.

Oral Answers to Questions

Gregg McClymont Excerpts

Tuesday 25th June 2013 Commons Chamber

[The Chief Secretary to the Treasury (Danny Alexander)]

I do agree with that. The Government established the Commission on Devolution in Wales to consider, as part of its remit, how to increase the fiscal accountability and autonomy of the Welsh Assembly Government. We are carefully considering the commission’s recommendations and we will respond in due course, having discussed the matter with the Welsh Assembly Government.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

T5. May I take the Chancellor back to the question posed by the shadow Chancellor and by my hon. Friend the Member for Rochdale (Simon Danczuk)? Did Government borrowing rise in 2012-13, as compared to 2011-12?

[Mr George Osborne]

Figures from the Office for National Statistics show that the deficit fell from 7.8% to 7.7%, so it came down.

Oral Answers to Questions

Gregg McClymont Excerpts

Tuesday 12th March 2013 Commons Chamber

[Greg Clark]

Yes. By next month it will be worth £600 a year for every basic rate taxpayer, which is an enormous increase. For someone on median earnings, it is equivalent to a pay rise of 4.5%. I would have thought that the shadow Chancellor, who professes to be interested in helping the low-paid, would endorse the policy.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

12. What estimate he has made of what the annual value of his planned reduction in the additional rate of income tax to 45% would be to a person earning £1 million a year.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

Owing to the significant behavioural responses to changes in marginal tax rates at high levels of income, the annual value of changing the additional rate of tax would not reflect the actual Exchequer impacts of the change. HMRC’s report “The Exchequer effects of the 50 per cent additional rate of income tax”, which was published alongside the 2012 Budget, set out that behavioural response in detail.

[Gregg McClymont]

Well, that was very clear, Mr Speaker. The answer, of course, is £40,000 a year. Why is a £40,000 a year tax cut for millionaires this Government’s priority?

[Mr Gauke]

The purpose of income tax is to raise money to fund public services. The 50p rate of income tax did not raise money to fund public services, so we have got rid of it.

--- Later in debate ---

[Mr George Osborne]

We are raising more in bank taxes every year of this Parliament than the previous Government raised in any one year during their time in office. My hon. Friend is right; those revenues help to support public services and deal with the deficit. We also have a better-regulated banking system, and with the arrival in April of the Bank of England’s new role as prudential regulator, and the Financial Services (Banking Reform) Bill currently before Parliament, we are putting right all that went wrong in the banking system.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

T3. Did the Business Secretary let the cat out of the bag yesterday? When asked on the “Today” programme whether his call for investment in infrastructure to kick-start the recovery would mean more borrowing, he replied:“Well we are already borrowing more”.

[Mr Osborne]

We are increasing capital spending more than in the plans we inherited from the Labour Government. This Government are spending more on roads than the previous Government did and, of course, the deficit has come down by 25%.

Banking Reform

Gregg McClymont Excerpts

Monday 4th February 2013 Commons Chamber

[Greg Clark]

One of the principal innovations was to get rid of the shadow Chancellor who was then in a position to interfere. The reason we are setting up the system and giving powers to the Bank of England and the regulator is to make it very clear that any bank that breaches the rules can forget about lobbying Ministers. The banks will be responsible to the Bank of England, which will enforce the law that I hope this House will see fit to pass.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Let me take the Minister back to the question posed by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), who is a member of the banking commission. In simple language, what possible reason do the Government have for not accepting the commission’s recommendation to take that reserve power? After all, only banks that do not conform with the Government’s wishes would have anything to fear from the reserve power. Why not go on and take that power?

[Greg Clark]

I have explained on a number of occasions why we have not done so. One reason is that the regulator does not want that power, and a second reason is that it seems to us more appropriate that individual banks feel the consequences of their breach. The system itself does not have a mind to breach the rules; it is individual banks that do so. It is thus appropriate for the sanctions to apply to individual banks.

Oral Answers to Questions

Gregg McClymont Excerpts

Tuesday 29th January 2013 Commons Chamber

[Mr Gauke]

It would be right to say that the Government have taken 2.2 million people out of income tax—that is certainly a simplification for them. We have reduced the small profits rate of corporation tax and reduced the main rate of corporation tax. We have taken steps, wherever possible, to reduce taxes.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Can the Minister reassure the House that these attempts at tax simplification will be more successful than last year’s attempts, which saw U-turns on caravans, pasties, charities and the oil and gas sectors? Can he reassure the House that these attempts will work a lot better this year?

[Mr Gauke]

I can remember one particular tax simplification from the last Government, which was the abolition of the 10p rate. I think we have a better record than that.