Fuel Prices and the Cost of Living
Gregg McClymont Excerpts(13 years, 6 months ago)
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Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
Time is running away from me, so I will keep my contribution short. The Opposition have called the debate today because we have certain questions about the Government’s attitude to fuel, to living standards and to the economy more widely.
First, do the Government understand the squeeze on working families? Secondly, do the Government understand the need for a political economy that puts growth and jobs at the heart of everything government do? Thirdly, are they a Government who put the interests of the many above those of the few? [Hon. Members: “Yes.”] Well, I have to say—
Gregg McClymont
No, I will not give way, I am afraid. I have only three minutes. I am sure the hon. Lady will understand.
Government Members say “Yes”, but nothing I have heard so far in this debate leads me to believe that they have an affirmative answer to those questions. Reversing the VAT rise on fuel would be a statement—a declaration—of faith in working families in this country.
Gregg McClymont
I will not, I am sorry. I have only two and a half minutes now, and the hon. Gentleman will understand, I am sure, that there is no time to give way.
Reversing the VAT rise in fuel would be a small concession in the context of a cocktail of economic policies that amount to a sustained assault on the living standards of ordinary families in this country. The Chancellor, the Chief Secretary to the Treasury and other Front Benchers will claim that the squeeze in living standards is beyond their control, but the Deputy Prime Minister admitted at the weekend that this Government’s policies are their choices. They have chosen to make ordinary families pay the price for their chosen economic policy. Regressive indirect taxes are going up; taxes on bankers and financial services are falling. A return of the bonus tax on bankers would be strongly welcomed by Labour Members. Support for families and for children has been cut aggressively this year. The cut to the child care element in working tax credit will hit hard families up and down this country from April.
Ministers talk of rebalancing the economy, but over the next five years the Office for Budget Responsibility has predicted falling savings rates and a lower share of GDP going into the wages of ordinary families. We already know that lower wages, squeezed living standards and lower savings rates lead to higher personal debt, higher financial stress and more personal bankruptcy. Is this the rebalancing of the economy that we really want, where debt is shifted from Government to families? I, for one, do not think so.
Today we are calling for a reversal of the VAT rise on fuel. This would be a declaration of faith in ordinary families up and down the country, and I hope that the Government will look on it kindly.
HM Revenue and Customs
Gregg McClymont Excerpts(13 years, 7 months ago)
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Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
We are discussing the administration of Her Majesty’s Revenue and Customs, and I should declare a constituency interest because Cumbernauld HMRC is one of the largest tax offices in the country. It is a strategic site, and the largest employer in my constituency. As this debate shows, HMRC is equally important for the Government, who must collect tax more effectively if they are to be successful in their economic and financial objectives.
I should like to address a few issues regarding HMRC’s effectiveness, many of which were touched on in the thoughtful contributions of the hon. Member for Chichester (Mr Tyrie), my hon. Friend the hon. Member for Leeds East (Mr Mudie) and, most recently, the hon. Member for Redcar (Ian Swales). In my view, two things are necessary if HMRC is to be as effective as possible. First, it must be properly resourced, and I endorse the final words of the hon. Member for Redcar about the wisdom of getting HMRC sorted out before moving to a programme of further cost cutting.
Secondly—this relates to observations that have already been made—HMRC must have well-organised and highly motivated staff. I am concerned that that will not be the case in the future, not only because of the cuts that the Government are making in HMRC’s budget, but because of how they are being implemented. Together, the cuts and their implementation are having serious effects on the morale of HMRC staff in Cumbernauld and elsewhere. Simply put, HMRC staff know that cuts are being made, but do not know yet where they will fall.
HMRC received a tough settlement in the comprehensive spending review. The settlement mandates overall resource savings of 15% and efficiency savings of 25%. Those cuts were announced in October, as Members in all parts of the House are well aware, but we have yet to receive any confirmation from the Government of how HMRC is to be restructured.
Kelvin Hopkins (Luton North) (Lab)
Is it not the case that every additional tax officer collects many times their own salary, and that if we want to collect more revenue and make HMRC a more profitable organisation, we need more staff, not fewer?
Gregg McClymont
My hon. Friend makes a good point. There is a problem of short-term savings at the cost of long-term benefits—what we might call a false economy. I shall come to that.
We have not had any confirmation from the Government of how HMRC is to be restructured. We do not know which services to the public will go, or which services will be changed. We do not know yet which jobs will go. Before Christmas I asked the Treasury Whip about the future of HMRC jobs in Cumbernauld in a Back-Bench debate. The Treasury Whip suggested to me that the Cumbernauld jobs were safe. I understand that as it is a strategic site, its situation is different from that of some of the smaller call centres and the like. I urged the Treasury Whip to share the information that proved this to be the case: it has not yet been forthcoming, for good reason.
Subsequent questions for written answer revealed that the Government cannot give any such undertaking until HMRC publishes its business plan. It is better for HMRC to take its time and get its business plan right than to get it wrong in a rush, but that has consequences. It seems that the business plan will not appear before April. The delay and the mixed messages do not make tax officers’ jobs any easier. Clearly, the increased anxiety can damage morale.
We have heard about the situation from the hon. Member for Chichester and others. It is not surprising in those circumstances, and also given the nature of the job, that in a recent survey only 11% of HMRC employees felt that change in the organisation was well managed. HMRC employees in Cumbernauld are now just as uncertain about their future as they were when the programme of cuts was first announced in October. Such uncertainty has an impact on staff morale, and thus on productivity and performance. More fundamentally—this goes to the point raised in an intervention by my hon. Friend the Member for Luton North (Kelvin Hopkins)—I suspect that the cuts to HMRC’s budget may well prove to be a false economy. Short-term savings at HMRC could reduce the Government’s ability to maximize tax revenue in the long run.
Jim Shannon (Strangford) (DUP)
The hon. Gentleman, like many others in the Chamber, was at the presentation to Members of Parliament by HMRC staff last year. At that presentation, HMRC staff indicated that they were aware of revenue that the tax bodies were not collecting. Their message was clear: more staff, more tax revenue; fewer staff, less tax revenue. Does the hon. Gentleman agree that the Government should consider the false “savings” that they will make in this year, against the tax income that they could generate instead?
Gregg McClymont
I thank the hon. Gentleman for that observation. Clearly, this is a complex issue and there will be reasonable arguments on both sides, but it seems to me that it is a job in which morale is particularly important. I intend to refer later to the psychology of being a tax officer, which pertains to his point about raising more revenue.
Mr Andrew Love (Edmonton) (Lab/Co-op)
I want to make an observation based on a recent conversation I had with a tax expert. When the Government looked at the overall staffing reductions in HMRC as a consequence of the spending review, it became absolutely clear to all that the gaps in their ability to raise taxes were such that they would need to put something back, and that is the explanation for the £900 million.
Gregg McClymont
I thank my hon. Friend for that information. As a member of the Treasury Committee, he is well known for his interest and expertise in this area. What he said sounds not only plausible, but likely.
I am suggesting that short-term savings in HMRC could reduce the Government’s ability to maximise tax revenue in the long run. They reduce the likelihood that HMRC will be able to attract and retain the talent necessary to administer complex systems and crack down on fraud, and the hon. Member for Chichester and my hon. Friend the Member for Leeds East alluded to that aspect of the argument. It seems to me that there is a danger not only that revenue will be lost to the Government, as has been made clear in previous contributions, but that reducing services to the public means that the costs will be passed on to the public and to businesses, particularly small businesses. If HMRC is harder to contact or slower to rectify errors, costs for the public and business will increase. The hon. Member for Chichester eloquently set out the dangers for small businesses of this process of HMRC reform or cutbacks, or whatever we call it. It is clear to me that those costs will disproportionately harm those with the least resources.
Mr Liddell-Grainger
Is the hon. Gentleman aware that the Revenue has just been fined £1.6 million for sloppy data handling and processing? When people asked why that had been a problem, they were told that it was too expensive to find out what the problem was. The hon. Gentleman is right. Is the problem due to a lack of skills, a lack of training or a lack of people? It must be one of the three, or perhaps all three.
Gregg McClymont
The hon. Gentleman makes a good point. My suspicion is that it will be a combination of all three. I will come to the skilling aspect, which it seems to me is important alongside the issue of number. If the costs are passed on to taxpayers, I suggest that they will fall disproportionately on those with the least resources—small businesses and poorer taxpayers.
To allude to a point made by my hon. Friend the Member for Leeds East, pensioners and other vulnerable groups will have to pay to phone 0845 numbers and will struggle to get through. Beyond the financial cost, there is the psychological anxiety caused by respectable working men and women having to worry that the taxman feels that they are not following the law. The psychological burden on vulnerable groups is worth considering alongside the burdens on businesses and other organisations.
I will focus for a moment on small businesses, although I will not take long as the hon. Member for Chichester somewhat shot my fox on this point. It is clearly okay for the big boys in business and the big organisations that can afford the finest tax accountants money can buy, but for small businesses every minute spent on administration, doing a tax return or conversing with HMRC is a minute less spent running their businesses. Usually, small businesses have much less slack to operate with. As the saying goes, “Time is money”, and any shifting of the burden back on to the taxpayer is likely to be deleterious in the extreme to small businesses and vulnerable groups.
Several Members have referred to efficiency and effectiveness, and that brings me back to staff morale, because staff motivation is particularly important in such a profession—the efficient and effective collection of taxes on behalf of the taxpayer. Inevitably, many of the savings that the Government wish to make will be made through redundancies and restructuring, but the Government approach that package of restructuring and redundancies in the context of an HMRC where staff motivation and industrial relations are already fairly poor.
The figures from the capability review that the Cabinet Office published in 2009 have been quoted, and, as we know, HMRC was the subject of heavy criticism. The review found that only one quarter of HMRC staff, compared with 61% of senior civil servants, were proud to work for the department. Perhaps senior civil servants are not the best comparator for HMRC staff, but 25% satisfaction is not very impressive. The survey also found that only 11% of staff—the hon. Member for Chichester said 12%; I am prepared to meet him halfway and say 11.5%—and 17% of senior civil servants felt that change was well managed in HMRC.
I worry that the combination of low staff morale, which the Government inherited but are contributing to, and further funding cuts might be a perfect storm that leads to more problems at HMRC. After all, if we think about it for a moment, we find that enforcing the payment of tax is not necessarily an easy job. No one likes paying tax, and HMRC staff—disproportionately, I suspect—deal with people who are particularly unhappy about the tax return with which they have been presented.
Staff in my constituency would have been greatly reassured and better able to serve the public if HMRC and the Government had worked together sooner to develop an implementation plan for cost savings, so anything that could be done to reduce the anxiety that they have felt for a reasonably lengthy period would be very welcome. It would reduce the worrying gap between the announcement of cuts and people’s knowledge of where they will fall. Anxiety among staff—particularly given the job that they do—is bound to undermine their effectiveness in serving the taxpayer and the public more widely. Given the importance to our country of effective tax collection, I urge the Government to do everything they can to reduce that anxiety.
My final observation touches on several contributions to the debate. As I have suggested, tax collection is not always an easy or, at times, pleasant job. People do not generally like paying tax, and in a profession such as tax collection, esprit de corps—a sense of public service and duty—is especially important. Previous Governments were not blameless in this respect, but this Government must be careful that, in the quest for short-term savings, they do not further damage the thread of professionalism, duty and pride in the job, without which an efficient tax collection system is unlikely to be possible.
Jesse Norman (Hereford and South Herefordshire) (Con)
The hon. Gentleman is absolutely right about the importance of morale at HMRC. As we discovered from testimony to the Treasury Committee, which Members discussed earlier, HMRC has gone from being a flagship Government department to almost dysfunctional on some metrics. One area in which it is dysfunctional is morale. Does he share my view that the nature of the cuts that have been made over the past decade and the very poorly handled merger with Customs and Excise have been most to blame for the crisis of morale at HMRC and the decline in its reputation?
Gregg McClymont
I thank the hon. Gentleman for his observations. I was very interested in what the hon. Member for Chichester said about the merger. I come to that subject with little background knowledge, and I intend to do some reading on it, because at face value it seems to be a plausible reason for some of the problems that HMRC now faces.
Mr Love
Taking on board the point just made by the hon. Member for Hertfordshire, should that not be a further argument that now is not the time to be asking for further reductions in manpower? Because of the difficulties of the merger and the problems that it created, we should be trying to retain the expertise that already exists in HMRC.
Gregg McClymont
My hon. Friend makes a powerful point. If we do indeed have an organisation that is dysfunctional, to use the hon. Gentleman’s term, there is clearly a question about whether the way to approach managing such an organisation is to engage in severe cutbacks.
Jesse Norman
I have a simple point of information for the House, which is that my constituency is Hereford and South Herefordshire, not Hertfordshire. Although Hertfordshire is undoubtedly a place of great glories—sadly, with due deference to my hon. Friend the Exchequer Secretary, only very slightly secondary to the qualities of my own constituency—the two should certainly not be confused.
Gregg McClymont
Now that the hon. Gentleman has provided that important point of information, I will conclude with a final observation that pertains to his previous intervention and that of my hon. Friend the Member for Edmonton (Mr Love).
Only with a cadre of well-paid, trained and skilled staff who enjoy a status commensurate with the important job they do will a more effective, efficient and productive HMRC become possible, and those staff have to be the foundation stone as we go forward through this decade. Does the Minister think we have that cadre as things stand?
Mr Ruffley
The return from the autumn survey of civil service staff at HMRC says that 14% think that the organisation inspires them to do their best in the job and 12% that it motivates them to help to achieve its objectives. Can the hon. Gentleman say, from his constituency experience in Cumbernauld, whether any work has been done with the senior management there? It seems on the basis of these figures that there is a problem with motivating and inspiring the work force.
Gregg McClymont
I thank the hon. Gentleman for that intervention. I am not able to give him a definitive answer, but I have met the senior management at Cumbernauld, who struck me as dedicated and professional, and its work force.
We need to take a—I hesitate to use the word “holistic”—panoramic view of the functions of HMRC. One can always make reforms and efficiencies, which, compartmentalised, seem to save money, but in fact, in the broadest possible context, will be a false economy and a short-term saving at the cost of a long-term sense of professionalism. I suspect that someone doing the job of tax collector needs a sense of pride in their job because at times there will be ups and downs during the course of the day.
Oral Answers to Questions
Gregg McClymont Excerpts(13 years, 9 months ago)
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Danny Alexander
I am glad to hear about the companies in my hon. Friend’s constituency, which share the confidence of many businesses that we have a Government who have got to grips with the public finances. That gives companies the confidence to invest, which is an important part of ensuring the private sector-led recovery that we need.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
17. What plans his Department has to ensure greater transparency in remuneration in the financial services sector.
The Financial Secretary to the Treasury (Mr Mark Hoban)
The Financial Services Authority has revised its remuneration code for disclosure rules to incorporate provisions in the EU capital requirements directive, CRD3, which comes into force on 1 January 2011. The directive requires firms to make narrative and quantitative disclosures on pay policy and practices. Those requirements are at the forefront of global practice and will help ensure greater transparency in remuneration in the financial services sector.
Gregg McClymont
In reply to my hon. Friend the Member for Sedgefield (Phil Wilson), the Financial Secretary suggested that the Government were united in their approach to banking reform. Am I to conclude from that that the Business Secretary speaks for the Government when he says that the Conservative party is a roadblock to banking reform?
Mr Hoban
I hardly think that a Government who have embarked on a programme of radical regulatory reform of the financial services sector, introduced the bank levy, and set up the independent banking commission to consider the structure of banking in the UK could be viewed by anybody other than the Labour party as a roadblock to reform.
Treasury
Gregg McClymont Excerpts(13 years, 9 months ago)
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Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
I wish to raise the issue of the funding settlement for Her Majesty’s Revenue and Customs, for two reasons. First, it is important to my constituents, many of whom work in the Cumbernauld branch of HMRC, one of the largest tax offices in the country. Secondly, it is important to the nation for our tax to be collected efficiently and effectively.
I have several questions for the Minister about the settlement that HMRC received in the comprehensive spending review. It mandates overall resource savings of 15% and efficiency savings of 25%. I should be grateful if the Minister clarified the precise meaning of those two figures. To what budget does the 25% refer? What proportion of the 15% overall resource saving will be met from efficiencies, and what proportion will be met through a reduction in the scope of HMRC’s activities? How does the Minister define an efficiency saving? And—this is the most important question for my constituents in Cumbernauld—what is the Minister’s most recent estimate of the number of redundancies that he expects at HMRC across the country during the spending review period, and what proportion of them will be compulsory?
Will the Minister confirm that neither the £900 million for combating tax avoidance nor the £100 million for reducing error, both of which were announced in the comprehensive spending review, will be additional money for HMRC? Will he also explain whether the figures refer to annual allocations, or to money redirected to these purposes over the entire spending review period? How does the Minister expect HMRC to achieve such a redirection of resources, in the context of significant cuts to its overall resource budget?
I would like to place HMRC’s funding settlement in a broader context and draw attention to some specific problems faced by my constituents working in the Cumbernauld office.
Mr Umunna
Does my hon. Friend share my concern about the hugely increased bureaucracy that HMRC will have to deal with because of the change to child benefit, which will require HMRC in some sense to monitor the incomes and outgoings of millions of families across the country?
Gregg McClymont
My hon. Friend raises an important point, which speaks to the overall context in which HMRC will be operating.
We know that there is no direct correlation between reduced funding and increased output. The productivity of individual public servants can increase, but overall output can still decline. There comes a point when any organisation can no longer do more with less. If resources are reduced too far and too hastily, it will end up doing less with less, even if productivity increases. Does the Minister accept that it will be extremely difficult to deliver the additional revenue and improved customer service that we need from HMRC in the context of large reductions in overall expenditure?
Many of the savings that the Government talk about will be made through redundancies and restructuring. Staff motivation and industrial relations at HMRC are already poor. These problems have been recognised by HMRC, which was the subject of heavy criticism in the capability review published by the Cabinet Office in 2009. The review found that only 25% of HMRC staff, compared with 61% of senior civil servants, were proud to work for the Department. In the 2009 staff survey, only 11% of all staff and 17% of senior civil servants felt that change is well managed in HMRC.
We know that working in HMRC is often a difficult job. Dealing with people who are recalcitrant in paying their tax is, I suggest—without direct experience of it—often not much fun, yet staff morale is extremely important. I worry that a combination of low staff morale and further funding cuts is likely to lead to further problems for HMRC. Staff in Cumbernauld, for example, are deeply concerned about the restructuring that is taking place among staff in the benefits and credits section, a reform that is taking place two years ahead of the planned move to universal credit.
These staff have been threatened with compulsory relocation to other tax offices in East Kilbride and Livingston, a source of particular concern for staff with child care and caring responsibilities. I hear that there are fewer jobs available in these new offices than there are posts in Cumbernauld. Staff who are not redeployed might be labelled as surplus, with an uncertain future. Staff in payroll and human resources for the whole of HMRC are also based in Cumbernauld. They are extremely concerned about potential redundancies following the introduction of next generation human resources.
Does the Minister expect that these changes will result in redundancies in Cumbernauld, or will the Cumbernauld office perhaps expand its functions and its staffing? More broadly, can he give us an assurance that HMRC will improve the manner in which it manages change in its organisation?
Finally, I would like to ask a broader question about HMRC’s strategic vision. Does the Minister accept that there is a tension between announcing Britain’s business- friendly credentials to the world and cracking down on tax evasion, particularly by companies and wealthy individuals? In particular, what view does he take of the remarks that David Hartnett, Permanent Secretary, made in the Financial Times last August, when he suggested that
“HMRC is packed full of very intelligent people but we are sometimes too black and white about the law”?
Does the Minister believe that it is possible for tax officials to be “too black and white” about the antisocial behaviour of tax evaders? I can assure him that my constituents, and no doubt those of every hon. Member, do not take that view.
A well resourced and properly motivated HMRC is crucial to the important work of Government. I ask the Minister to provide more detail on the implications of HMRC’s funding settlement, and to consider the assumptions underpinning it.
Mr Chuka Umunna (Streatham) (Lab)
I echo those wishes of good will and merriment to the House.
Before I start talking about choice and competition in the banking sector, I would like to put on record my thanks to the Building Societies Association and the pressure group Compass for giving me assistance in preparing for this debate, and to the fantastic staff of the Treasury Committee, who have provided excellent briefings to me and other Members throughout our ongoing inquiry into choice and competition in the sector.
The financial crisis had a major impact on the shape of the banking sector. There has been widespread consolidation, and concerns have been raised that competition in the sector is not working—with, for example, investigations by the Office of Fair Trading into overdraft charges—and that there is now an ever greater lack of choice and diversity in financial services. That is borne out by the latest OFT figures on market concentration. In the personal current account market, the five largest providers in the country have a 73% market share. In the mortgage market, they make up over 75% of gross lending. They have cornered over 90% of the credit card market as well. By way of comparison, in Spain, the US and Germany, the five largest providers have less than 50% of the personal current account market. In all but a couple of cases, the largest providers are banks. There has been just one new start-up retail bank, Metro Bank, since 2008. These figures demonstrate that there is a lack of choice and diversity in the sector, which, of course, also reduces competition.
I believe we can increase choice and competition by growing and expanding the mutual sector. I hope the Government agree with me on that, particularly as a commitment was given in the coalition agreement to
“bring forward detailed proposals to foster diversity in financial services…and create a more competitive banking industry”,
in part by promoting mutuals.
But why mutuals, and what can they offer that standard banks cannot? First, mutuals are democratic. Banks are accountable to shareholders who demand a rising share price and a big dividend, whereas mutuals, collectively owned by their customers, have a collective of people who vote on the direction they wish the institution to take.
Gregg McClymont
I have been listening closely to my hon. Friend’s comments. Given the Government’s commitment to what they call the big society, does my hon. Friend agree that mutuals seem to be a perfect example of collective self-organisation of the type the Government talk about?
Mr Umunna
I agree with my hon. Friend and I shall expand on that matter a little later. An example of the participation of members of mutuals is displayed when one attends a building society annual general meeting. The participation rates in such AGMs have increased sharply over the years, and some have member panels, which play an enhanced role in the management of the organisation. I am in favour of markets, but properly regulated ones. That means that we need to redemocratise the market so that it serves people, rather than having things the other way round, which is an avenue we have gone down too much over the past couple of decades. Giving life to mutuals is a good way of redemocratising the financial services sector.
Secondly, mutuals add biodiversity to the financial services sector; a thriving mutuals sector adds to the diversity of the financial system. The more diversified the financial system in terms of size, ownership and structure of businesses, the better able it is to withstand the strains produced by normal business cycles and we can also avoid the herd instinct commonly displayed in the market over recent times.
Thirdly, mutuals have a lesser appetite for indulging in risky financial activities and so, on the whole, they weathered the storm well during the global financial crisis. For example, building society mortgage arrears are less than two thirds of those of the market as a whole. Building societies are also, thankfully, legally barred from taking positions in derivatives, foreign currency and commodity markets, which is where other financial organisations have found themselves in deep trouble. Where mutuals have run into difficulty, as the Dunfermline building society did in March 2009, it has been because they have moved away from the traditional mutual business model. So a growth in mutuals will not only reduce exposure to risky financial activities, but bring systemic advantages. It will foster a culture that moves away from the risky, reckless behaviours that we have seen precipitate the crisis, and so we can reduce the chances of that reoccurring.
Mr Goodwill
I think I will just continue. I have a very detailed brief that I am sure my right hon. Friends the Chief Secretary or the Chancellor will put into a detailed response. Given the time, I cannot go into the issues in detail, but there are a number of tables that I am sure will reassure the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East. Suffice it to say, the work force and change plans are still being developed. Until those plans are completed, HMRC cannot say what the position will be on redundancies or exits.
Gregg McClymont
I thank the Minister for his response. From what he said, can I take it that the Department will write to me with the detailed figures? Is that the position?
Mr Goodwill
Yes, I am sure that that is the case. The first choice is to redeploy, but where that is not possible because of location or skills, exits will be used as a last resort. HMRC will recruit people if it cannot otherwise fill roles with people who have the right skills.
On the point about child benefit changes within a reducing settlement, the changes will be managed from within the settlement. Withdrawing child benefit from households with a higher rate taxpayer can be done within existing PAYE and self-assessment systems. HMRC will therefore not need to contact all 7.8 million households in receipt of child benefit. From a customer’s perspective, that delivery option does not place a burden on all child benefit claimants; it limits the impact to those households containing higher-rate taxpayers.
On the issue of whether the law is too black and white, I stress that tax evasion cannot be tolerated wherever it occurs. I was pleased that the Finance (No.3) Act 2010 closed a number of the loopholes that meant that people were not paying the tax that they should. To be fair, those loopholes were identified by the previous Government.
Much of the debate was focused on the banking system and I am sure that we all have had horror stories brought to our attention by our constituents. One of my constituents was in the Proudfoot supermarket making a purchase of about £5 and the checkout girl accidentally clocked up £50. That was corrected less than five minutes later, but it incurred an unauthorised overdraft fee and the bank refused to back down when contacted by me as the Member of Parliament. Fortunately, when I got the Yorkshire Post on to the issue it finally relented; such is the power of the press.
In response to the hon. Member for Streatham (Mr Umunna), the Government are clear that there should be more competition in the banking sector. The Independent Commission on Banking has been asked to consider reforms to the UK banking sector, including how to encourage greater competition. Following the commission’s report next year, the Government will bring forward specific proposals to foster diversity and increase competition, and I am sure that that will include a role for the mutual sector. I have nothing to add to the answer given by the Financial Secretary earlier, but I am sure that he will write to the hon. Gentleman following this debate.
On cheques, my hon. Friend the Member for Rugby (Mark Pawsey) raised the potential—
Autumn Forecast
Gregg McClymont Excerpts(13 years, 10 months ago)
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Mr Osborne
I thank my hon. Friend for his initial comments. I say this about any future action that we may or may not have to take. On the bilateral loan, I said last week that there were some very specific— I stress the words “very specific”—circumstances that would lead us to support Ireland because of the interconnectedness of our economies. I also said that the European financial stability mechanism, the EU fund, was something that the previous Government had signed up to, and that the UK could not block its use because it operated under qualified majority voting. I had to deal with that situation, but by finding now what I think is a way forward that means that the mechanism disappears in 2013, we have taken a bad situation and made it a lot better.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
Has Ireland’s fiscal consolidation been successful?
Mr Osborne
The point that I would make—[Interruption.] Ireland has had to take some incredibly difficult decisions to deal with its fiscal deficit. Its Government have announced, with the support of all the major parties in Ireland, with the exception of Sinn Fein, that they are going to have to take further austerity measures next year and over the next three or four years. If they did not take those measures, the country’s situation would be even more difficult.
Frankly, we should have some respect for the incredibly difficult situation in which Ireland finds itself. We should take some comfort that, because of the measures that we have taken on our public finances, we in this House are able to help the country and that we are not in the firing line in the way that we would have been if the Labour party had won the election.
Financial Assistance (Ireland)
Gregg McClymont Excerpts(13 years, 10 months ago)
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Mr Osborne
I agree with my hon. Friend. I make the point again that if we followed the prescription advanced by the Opposition—they suggest that tomorrow I should get up and announce a brand-new Budget, and engage in fiscal loosening at a time when we have the largest budget deficit in the G20 and at a time of heightened concern about sovereign debt—that would be a completely irresponsible path to take.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
For the last six months the Government have wasted no opportunity to tell us that Britain’s situation is very similar to Ireland’s. Now they cannot tell us fast enough that we are in a very different situation from Ireland, because we have our own currency and control of our monetary policy. Has the Chancellor not spent the last six months talking down the British economy for naked political advantage?
Mr Osborne
The reason we are in a different situation is not just because we have a different currency; it is because we have a Government who have put our public finances in order.
Finance Ministers’ Meeting (Ireland)
Gregg McClymont Excerpts(13 years, 10 months ago)
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Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
The Government spent six months telling us that Britain was very much like Ireland and had a similar sovereign debt crisis. Now we hear that we are in a very different position because we are not in the euro and we have other economic tools. Which is right?
Mr Hoban
We have taken action in the UK to tackle our fiscal position to avoid a sovereign debt crisis. [Interruption.] Opposition Members need to recognise that the problems facing Ireland stem from a banking crisis—the banking sector was poorly regulated. We are learning lessons from that in the UK, but it is very clear that because we are outside the euro we have the flexibility to engage in economic policy by setting interest rates that meet our economic needs, and we have the flexibility that our exchange rate brings in stimulating exports. We are in a much better position as a consequence of being outside the euro.
Savings Accounts and Health in Pregnancy Grant Bill
Gregg McClymont Excerpts(13 years, 11 months ago)
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Paul Maynard
Forgive me, I shall not give way because I have not yet finished the quotation.
Paul Maynard
If the hon. Gentleman will calm down and let me finish the quotation, I shall happily give way. Learn some manners, sir, please.
The CPAG continued:
“The very children who would benefit most from having savings and assets are likely to derive least financial advantage from the scheme.”
I shall now give way to the hon. Lady.
Jacob Rees-Mogg
I am grateful to the hon. Gentleman for his kind and helpful intervention, because I happen to have with me some economic data from the 1930s. I believe they will prove helpful because they are from the United Kingdom. It is a common error—if I may say so, it is a schoolboy error—to confuse the situation in the United Kingdom with that in the United States in that decade. In 1931, public spending in the United Kingdom was £1.174 billion, a figure that had been cut to £1.061 billion by 1934. Unemployment peaked in 1932 and gross domestic product grew from £4.399 billion in 1931 to £4.813 billion in 1934. So there was a percentage cut of nine-odd per cent. in public spending accompanied by a 9% rise in GDP, and unemployment peaked long before the cut in public spending was at its maximum point.
So in fact this Government are rightly following what the British Government did in the 1930s, and the key thing, which I will give credit to the Labour Government for, was coming off the gold standard. In 1931, having an active monetary policy meant that the economy could grow even while public spending was being cut. Her Majesty’s previous Government, the one that she dispensed with on 6 May or thereabouts, allowed the pound to fall so much and allowed the Bank of England to ease quantitatively—or print money, to put it in less jargonistic terms—that the increased money supply created the conditions where this Government can and must cut fiscally, and can have economic growth and falling unemployment. We are already seeing some of the fruits of that coming through in the figures announced today.
Gregg McClymont
I was listening closely to the hon. Gentleman’s comments. Given what he was saying, will he support a further round of quantitative easing if that is necessary to stimulate the economy, given the possibility of a prolonged—
Mr Deputy Speaker (Mr Nigel Evans)
Order. This is going rather wide of the mark and now may be an appropriate time to remind colleagues that we have the wind-ups at 9.40 pm. I would be grateful if Mr Rees-Mogg could show some restraint, as well as everybody else that follows.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
We have heard tonight two main arguments from Government Members. The first, which may be familiar to Members on both sides of the House, is that there is no alternative, but the absurdity of that position should be clear to everyone. Budgets are inherently political acts, and the notion that the Government have no choice is ridiculous. It is nonsense. The House of Commons came into being over the issue of supply. The modern House of Commons emerged because there were debates about how money should be appropriated. So let us nail that myth.
Listening to Government Members, we realise that this argument is only a front for their real argument. We have heard an attack on universal benefits that has been repeated throughout this debate, to which I have listened closely. These attacks have continued despite the fact what we have heard continually from my hon. Friend the Member for Stretford and Urmston (Kate Green), who has forgotten more about these issues than anyone on the Government Benches even knows.
I turn quickly to something that the hon. Member for North East Somerset (Jacob Rees-Mogg) mentioned. I am sorry to see that he is not in his place. He might be an historian—I personally will reserve judgment on that—but he certainly is not an expert on asset-based policies, because he suggested that the child trust fund and the saving gateway in particular are examples of nanny-state socialism. I have a message for those on the Government Benches: they are not examples of nanny-state socialism; they are examples of liberalism.
The child trust fund is a policy whose objective is to promote social mobility. It is a starting point—a symbol and a recognition of the fact that massive inequalities of wealth exist in our society, and that these inequalities exist in addition to the massive inequalities of income. The child trust fund is also a policy with a long history. Thomas Paine first proposed the idea of state-backed assets for all individuals reaching adulthood at the turn of the 19th century. No nanny-state socialist he. Thomas Paine suggested such payments because he understood that inherited wealth unfairly tipped the scales of life in favour of those who were born lucky, rather than those who worked hard—something that I am sure Members on both sides of the House agree with.
The child trust fund operates on that principle, by hopefully making it possible for young people from ordinary backgrounds to go out into the world in future with savings to their name. I say “in the future”, because nobody is suggesting that the child trust fund was a perfect policy or that it had achieved everything that we hoped it would achieve, but it has hardly bedded down and now it is being abolished. The child trust fund allows ordinary kids going out into the world to ask themselves a basic question that we have all asked ourselves, as we went forward in our lives: what do I want to do with my life?
As such, I am afraid to say that abolishing the child trust fund represents another nail in the coffin of a once great tradition of social liberalism. Social liberals used to recognise—indeed, social liberals still do—that in the absence of a fair distribution of income and wealth, real freedom is impossible for most individuals. “Assets for all” is an inspiring cry that we used to hear from those on the Liberal Benches. No longer do we hear it.
Gregg McClymont
That may well be the case; I could not possibly comment.
I know that a number of people are waiting to speak, so I shall be brief. However, I want to reiterate the point that the child trust fund is about freedom and opportunity. It is not about nanny-state socialism; it is about trying to enable young men and women who are not from privileged backgrounds to go out into the world when they turn 18 and have a chance to make something of themselves. I would have thought that that was something that everyone, in all parts of this House, would support. And please, let us not hear again from those on the Government Benches that there is no alternative. The Government are spending, on behalf of us all, £697 billion this year. Abolishing the programmes that we are debating this evening will save around £4 billion. Are the Government really telling us that there is no alternative? I for one do not believe a word of it.
PAYE Contributions
Gregg McClymont Excerpts(14 years ago)
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Mr Gauke
The period of three years is one in which we have confidence that HMRC will be able to address the matter administratively. Beyond that, certain technical matters would need to be thought through. However, we are confident that HMRC is capable of addressing the matter over three years.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
Does the Minister agree that the position of front-line staff in HMRC centres up and down the country is important? They do a stressful job at the best of times and regularly deal with frustrated taxpayers on the phone, but with the new problem, I am sure the Minister agrees that the staff’s position needs to be looked at. A statement of support for them from the Minister would be welcome.
Mr Gauke
I am grateful for the hon. Gentleman’s question. Some comments have suggested that the situation is the fault of HMRC staff who cannot add up, but those comments are ill-informed. The truth is that HMRC staff are committed to doing a good job. They are battling with a difficult system, and I give them my support. As a Minister, I have visited many HMRC offices, and I appreciate the hard work, enthusiasm and dedication of HMRC staff.
Finance Bill
Gregg McClymont Excerpts(14 years, 2 months ago)
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Jacob Rees-Mogg
The hon. Gentleman asks the wrong question, for a very straightforward reason. I would happily ask a question back. Can he point to a deeper recession in the history of the United Kingdom? The fact is that recovery rates from very deep recessions are much faster than those from shallower recessions. That is the point that my right hon. Friend the Member for Wokingham (Mr Redwood) made earlier. We get very strong recoveries after a very serious downturn, and the seriousness of the recent downturn goes back to the 1930s, as the right hon. Member for Edinburgh South West (Mr Darling) so rightly pointed out.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
The hon. Gentleman asked whether it was possible to name any recession in which there has been such a recovery. What about the 1930s? I understand that it was only through rearmament that Britain recovered from the deepest recession of all.
Jacob Rees-Mogg
I do not believe that the hon. Gentleman is accurate about the recovery in the 1930s. There is a common misconception that the recession of the 1930s was the same in the United Kingdom as in the United States, but that is not correct. What really happened in the 1930s is that when we came off the gold standard, there was a gigantic monetary stimulus, and that led to the recovery. The one thing that is of crucial importance, but outside the strict remit of this debate, is that we must maintain a loose monetary policy, which will be supportive of the recovery, as it was in the 1930s.
Gregg McClymont
I thank the hon. Gentleman for that answer. However, my understanding is that we had mass unemployment until the war took its course and we had to rearm. Am I not right in saying that the unemployment problem that emerged after 1929, and particularly after 1931, was not solved until rearmament and the war occurred?
Jacob Rees-Mogg
The hon. Gentleman is absolutely right about the problem of unemployment in the 1930s, although the situation began to recover in the United Kingdom considerably earlier than in the United States. I accept that in the United States, rearmament led to recovery, but I suggest that in the United Kingdom the recovery resulted from coming off the gold standard and the boost to trade that that provided.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
“Fair” and “unavoidable” are the two adjectives that have been attached to the Budget by the Government parties. It seems to me that the claim to fairness has been exploded, not just by Opposition Members and sometimes by Liberal Democrat Members but by the independent analysts who have established the regressive nature of many of the measures in the Budget. I want to concentrate on the claims that there is no alternative, that the markets are demanding deficit elimination on the scale and at the speed proposed in the Budget and that the Government are simply responding to economic facts.
Government Members talk about political economy as if it is a perfect science. The hon. Member for Bermondsey and Old Southwark (Simon Hughes), who is not in his place, suggested that the Office for Budget Responsibility was objective, the corollary being that it was reliable. The Government present the pronouncements of the OBR as gospel, at least when they are convenient for Ministers. They offer technocratic diktats. The Government claim the support of infallible markets and independent institutions. What they deny is that any Budget is inherently a political act as well as an economic one. Listening to the Chancellor deliver his Budget, I got a pretty good idea of what his new politics involved. He thinks that these vital political economy decisions are not a matter for him: he can absolve himself of responsibility. The OBR will provide the figures; the OECD is the supposed authority, the markets the excuses.
The issue of supply—the very reason this House came into existence—will be determined by what Ministers declare to be unavoidable. But political economy is not an exact science. It is a matter of priorities and judgment. It is almost always informed by ideology, self-interest and party interest. How could it be other otherwise when economists rarely agree on anything? Put two economists in a room and you will get three opinions. No, the Budget is deeply political. It embodies the long-held superstitions of the Conservative party, superstitions that come to the fore in times of economic stress—the 1920s, 1930s, 1970s, 1980s, and now again in 2010. However, these superstitions are not fully articulated by Conservative Members. They emerge almost accidentally through their rhetoric, but they are worth examining because they are the real motivation for the coalition Budget.
The first superstition is that debt, no matter what the circumstances, is unnatural and wrong for economic man or woman other than in the short term. This is a superstition since it denies the reality that many households and individuals balance their books only in the long term. They and we often have levels of debt that surpass our annual incomes for many years. Otherwise, no one would be able to afford a mortgage. The fact is that debt is a sensible mechanism for acquiring funds for responsible investments as long as repayments are manageable.
That first superstition encourages a second: states, like households, must not carry debt over the long term.
Sammy Wilson (East Antrim) (DUP)
The hon. Gentleman makes an important point. Does he accept that debt and the ability to borrow are not simply a function of one’s ability to pay, but of the perception of the exposure to debt and whether, in the long run, that debt will be manageable for borrowers? Our difficulty at present, looking at the evidence elsewhere, is that the markets are nervous about the ability of countries—even ones as stable as ours—to manage in the long run continuing increases in debt and to pay it back.
Gregg McClymont
Keynes famously said that, in the long run, we are all dead. To be fair to the hon. Gentleman, there is a serious point there, to which I was just coming.
As I said, the first superstition encourages a second: that states, like households, must not carry debt over the long term. But if that is untrue for households, it is even less relevant for states, because states are different from households. First, nations do not have to balance their payments over a life cycle as an individual does; unlike individuals, states are here for the long term. That is an important point. Secondly, states’ ability to borrow is much greater than that of any private citizen. States may borrow much more cheaply than any individual, simply because the amount of economic activity within any state’s borders is much greater than the economic activity to which any individual has access. I therefore disagree with the hon. Gentleman on that point.
More important, states have obligations to the societies they serve in a way that households do not. States can use their ability to borrow to support demand at a time of low private sector activity. Pull away that support for the economy and private sector firms are discouraged from investing, the tax take is reduced and spending and unemployment are pushed up; ultimately, the deficit is made worse. That is the paradox of Government thrift. We learned it in the 1930s. The Liberal Democrats warned us of its dangers up until 7 May. Now, that lesson seems to be totally lost on both elements in the Government.
Government Members claim that the fiscal deficit is crowding out private investment by pushing up interest rates and making investment more expensive. Crowding out is not an insignificant issue and it does have some relevance in conditions of full employment when an economy is at full capacity, but we are nowhere near that point. As the right hon. Member for Wokingham (Mr Redwood) pointed out, the private sector has taken a real battering in the past two or three years. Excess capacity is manifest. In my view, there is a much simpler explanation for low private sector investment: the private sector is not investing and banks are not lending because they fear that households will not have the confidence or the ability to buy goods.
What do we use to restore confidence? So far, we have used monetary policy, but it is not clear to me how much further we can take that. Interest rates are already at rock bottom. We cannot reduce them much further if this Budget tips the economy back into recession or, as my hon. Friend the Member for Telford (David Wright) suggested earlier, it has us bumping along the bottom. At that stage, if the recovery does not take place along the lines the Government that claim it will, the only instruments of monetary policy at our disposal would be further quantitative easing or a further devaluation of the pound to encourage exports. That could be dangerous, encouraging exactly the increased inflation and higher interest rates that Government Members fear. In my opinion, fiscal policy continues to have a role to play.
I mentioned two superstitions that I think underpin the Government’s attitude, but there is a third: the idea, repeated over and over, that our national debt is unprecedented historically and exceptional internationally. That is the basis on which the Government claim over and over again that public spending is out of control. They assert again and again that we have left the nation’s finances in a mess, and that is the context for the spectre of a sovereign debt crisis.
Gregg McClymont
Indeed, they assent. My own view is that the political rhetoric is at odds with the economic reality, and I shall tell them why. Several colleagues have noted that the average maturity of British sovereign debt is 14 years—
Mr Speaker
Order. I am listening to the speech by the hon. Gentleman with the closest interest, and it certainly has the manner of an economic treatise, which is of some interest, but I am just trying to fathom to which part of the Bill his comments relate. I have not yet found it, but I have a feeling that he is about to demonstrate it to me.
Gregg McClymont
Thank you for that guidance, Mr Speaker. As I suggested at the outset, everything in the Finance Bill depends on a view about confidence in the economy, and I was suggesting that the Government’s confidence in their own prescription is misplaced. However, I shall try to follow your advice and move on.
Government debt is still at historically low levels. It is edging towards 70% of GDP, but for 60 of the past 100 years, Government debt was at that level or higher, and that undermines the claims for an historic level of debt. It is true that those debts were incurred fighting two world wars, but the recent and more modest expansion of the national debt also happened in exceptional circumstances. I hope that Government Members will not forget the scale of the crisis that the world economy recently suffered. In 2009, global GDP shrank by 2.4%, the first decline since world war two, and the Budget must be considered in that context of global depression.
The political obsession with debt is dangerous and has distorted the Government’s economic priorities as set out in the Bill. Our public deficit is just one of many causes for concern about our future economic performance, and that is why Labour had a plan to restrain public spending when the recovery was secured. Labour led Britain out of recession last year through stronger growth and lower unemployment, supported by an active industrial policy and global co-operation. This Government, by contrast, offer us nothing but scaremongering about the national debt and competitive deflation with our economic partners.
What of job creation? In oral questions last week, the Secretary of State for Energy and Climate Change compared the previous Government’s target of 1.2 million new green jobs to the sector targets that Gosplan set in the Soviet Union. The Opposition might have had plans and targets for job creation, but the Government have targets for the destruction of jobs. That is what we learned from the Treasury leak last week, and that is where an obsession with public debt leaves us.
I should like to address one final superstition—that austerity inspires confidence among the bond markets that finance our debts and the consumers who drive demand and growth. That belief suits the Chancellor’s purposes admirably, as he and his colleagues have done much to undermine confidence in our economy and public finances. They style themselves as the remedy for a moral panic of their own making but, as I have suggested, there is little hard evidence to support what they say. The hard-headed realists on the Government Benches want to sacrifice real services and real jobs here and now, on the basis of what they think the markets might desire of them later. We may yet find that those gods are as inscrutable as they are insatiable. There is a fine line between confidence based on reduced deficits and confidence based on growth. It suggests that markets that smile on austerity now may punish us for low growth later.
In my opinion, the coalition Government and their policies have had little discernible impact on international confidence in the British economy. More important has been the lack of confidence in the eurozone; relatively speaking, confidence in our economy has grown. But the scaremongering about the public finances has already had a clear negative impact on the confidence of ordinary men, women and businesses, on whom the country’s recovery rests.
To conclude, the Budget has little to do with progressive or necessary austerity; it is acutely political in intention. The long-term objective is to reduce the financial burden on those who tend to vote Conservative by reducing the size of the public sector. That is the context in which the Conservative claim that the public deficit is the biggest threat to recovery must be understood. The Budget is profoundly political and not unavoidable. It reflects the superstition, self-interest and party interest of the modern Conservative party. I, for one, will not be supporting it.