Wales Bill

Guto Bebb Excerpts

Tuesday 6th May 2014 Commons Chamber

[Owen Smith]

It is a pleasure to serve under your chairmanship, Ms Primarolo. I rise to speak to amendment 40 to clause 6, which stands in my name and that of my hon. Friend the Member for Llanelli (Nia Griffith); amendments 7 and 8 to clauses 14 and 17 respectively, which deal with minor taxes; and amendment 43 to clause 28, which relates to reserved powers. It is also worth bearing in mind the amendment to clause 28 that we tabled last week, on what we described as the fair funding lock, which is relevant to that part of my remarks today.

All these amendments relate to the theme of stability and symmetry. Our contention is that although devolution has, for all sorts of reasons—historical, political appetite and timing—developed in an asymmetrical fashion across the UK, which has often been desirable and necessary, on both sides of the House we recognise that it is potentially undesirable for that degree of asymmetry to continue in future. It is undesirable because with it has come a certain instability in our devolution settlement. It is not a pressing problem of instability that has in any way threatened the existence of the UK, until recent months and years, but it is increasingly problematic. That instability and asymmetry has traditionally been exploited by nationalists in Wales and Scotland in good faith and with good intentions, from their perspective, but has led them to ratchet up demands for new and varied powers in Wales and Scotland, setting one part of Britain against another in seeking to extract benefit from their objectives of independence for Wales and Scotland through asymmetry of the settlement.

In recent months, another party has joined them in seeking to divide some parts of Britain from others and to separate people in one country of Britain from those in another for party political gain and ideology. That is the Conservative party, which has recently become a zealous if late convert to the cause of tax devolution and competition, and sees an ideological and legitimate benefit for a party that believes in low taxation, the Laffer curve and the logic behind the comments by the hon. Member for Forest of Dean (Mr Harper). It thinks that, from a relatively low political base in Wales, it has the potential to expand its presence by arguing that it is a low-taxation party in Wales.

I was intrigued to hear how sanguine the hon. Member for Forest of Dean is about the prospect of his constituents enjoying higher tax rates than those on the Welsh side of the border in the unlikely event of a Conservative Government in Wales. I am not sure that his constituents would be as sanguine as he is about the difference of a few yards making a 10% difference, potentially, in the tax rate enjoyed by them, compared with their neighbours.

[Guto Bebb (Aberconwy) (Con)]

I suspect that my hon. Friend the Member for Forest of Dean (Mr Harper) was relaxed because he had read the hon. Gentleman’s speech at the Llandudno conference in which he said that the 4,000 taxpayers in Wales who are currently paying the 45% rate should be paying a 50% rate.

[Owen Smith]

I will happily restate for the record our view that we ought to have a fair rate of taxation in Britain. That is why we have pledged that the next Labour Government will reintroduce a 50p rate in Wales and throughout the UK. Our proposal is directly relevant to the amendment, which is about symmetry between the powers enjoyed in Wales and in Scotland—

[Guto Bebb]

rose—

[Owen Smith]

I will give way in a moment, if the hon. Gentleman will calm down. I will finish my point and then the Floor will be his.

We want to future-proof the legislation so that, in the event of a Labour Government in Britain—we have already pledged in Scotland to take forward the Scottish devolution proposals and to extend the amount of income tax that can be devolved and the powers relating to that tax—the Chancellor would be forced to consider the benefits of symmetry and extending it throughout the UK.

[Guto Bebb]

Was the hon. Gentleman not rabble-rousing in his speech at Llandudno when he made it clear that a Labour Government in Wales would have the right to increase the tax rate to 50%? If he is concerned about tax competition, surely a 50% rate in Wales and a 45% rate in the rest of the UK would be problematic for the Welsh economy.

[Owen Smith]

I am not sure I was rabble-rousing. I would never describe the representatives of the Welsh Labour party as a rabble, although they may have been roused by my speech, and I trust they were. It is fair to say that they were reported as having been roused by my speech and I thank the hon. Gentleman for drawing that to the Committee’s attention. I am happy to repeat the view I expressed in that speech: that our worry is that the Conservative party has an established track record of cutting taxes for the wealthiest people, not just in Wales but throughout the UK, and is increasingly happy to support them and to act on their behalf. In the event of the Labour party winning the trust of people across Britain and winning the next election, we would like a Welsh Government to give the Welsh people, through their Assembly, the ability to deliver a progressive rate of taxation in Wales in keeping with the progressive values of the Welsh people. There is nothing wrong with that.

--- Later in debate ---

[Owen Smith]

That is precisely what I said in my opening remarks. We have a tradition of asymmetry that results from history and the relative degree of appetite for these powers in Wales, Scotland and Northern Ireland at the point at which we introduced them. Given that the Conservative and Unionist party is increasingly exploiting that asymmetry for narrow party political ends and risking tax competition within Britain, we worry that we need to move towards a more symmetrical system. In truth, that is what this Bill does. It puts Wales and Scotland on a more symmetrical footing in respect of taxation policy. It puts Wales on precisely the same footing that Scotland will be on after 2016. We support that. Our amendment says that if Scotland were to go further, as it would be likely to do under a Labour Government, we would afford people in Wales the ability to move to a similar position.

[Guto Bebb]

I think the hon. Gentleman is either confused or has been misreported. The speech he made in Llandudno specifically stated that Wales would have the power independently to reinstate the 50% tax rate. If he is concerned about tax competition, then surely he can see that a 50% tax rate in Wales—whereas it is 45% over the border, 45 minutes from my constituency—would create a disadvantage for Welsh taxpayers.

[Owen Smith]

I have not been misrepresented or misreported—that is precisely what I said and in no way, shape or form is it confused. It is a reflection of our abiding concern that the Tory party seeks to cut taxes for the wealthiest people in Wales. That is not a progressive tax system and it does not reflect the views and values of the people of Wales. Therefore, if we were in power in Westminster and Scotland took on greater tax powers, we would afford the Welsh people a similar opportunity.

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[Alun Cairns]

I am grateful to my hon. Friend for making that point. It is obvious where Plaid Cymru stands on the matter. The hon. Member for Arfon (Hywel Williams) made his case. I disagreed with it, but it is a respectable case which stands with the party’s politics in general. It seems inconsistent to make strong criticisms of an element of the Bill but not to table amendments seeking to improve the Bill or to make it more relevant, according to the Opposition’s argument.

The priority that has given rise to much of the debate about the need for greater capital spend in Wales is the need for improvement of the M4 around Newport. I pay tribute to the Chancellor and his efforts to encourage the Welsh Government to look positively at the need to improve that link. Many Members have spoken of the need for better infrastructure in and out of south Wales.

I remind the Committee that there was a commitment to such improvement pre-1997, by the then Secretary of State for Wales, my right hon. Friend the Member for Richmond (Yorks) (Mr Hague). That was to be funded entirely out of the Barnett block. The Barnett block at that time was £7 billion. It has now grown to about £15 billion. The shadow Welsh Secretary argues that Welsh projects cannot be funded without a significant increase in capital borrowing for such projects. Pre-devolution, without borrowing powers, those projects were to be funded out of the Barnett block as it was.

[Guto Bebb]

My hon. Friend makes an important point in relation to the proposed improvements to the M4. It should be noted that when the Bill was announced, the Secretary of State made it clear that this borrowing power should be for the M4 and also the A55. The Welsh Labour Government in Cardiff keep talking about the M4 and forgetting about the A55 and the needs of north Wales.

[Alun Cairns]

I am grateful to my hon. Friend for making that point. As a strong champion of north Wales he, along with the Secretary of State, will always ensure that improvements to the A55 are considered at the highest level.

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[Guto Bebb]

rose—

[Mr Llwyd]

I will give way a final time on this point, because I want to speak to my own new clauses.

[Guto Bebb]

I am grateful to the right hon. Gentleman for giving way. Is it not the case that a Member of Parliament has a responsibility to speak up on behalf of their constituents, including people who work in the health service who, time after time, come to me with complaints? They do so quietly and behind the scenes, because they know their positions will be endangered. We have a responsibility to speak up for patients and NHS staff in Wales, who are very aware of the fact that the standard of service is not appropriate.

[Mr Llwyd]

I take the hon. Gentleman’s point. He may know that I was very critical of the Welsh Government for going down the track of closing smaller hospitals, leaving nothing in their wake and pretending that care in the community was available when it was not. I am not uncritical. We should voice concerns when they need to be voiced.

New clause 1 stands in my name and those of my hon. Friends the Members for Arfon (Hywel Williams) and for Carmarthen East and Dinefwr (Jonathan Edwards). If accepted, it would require the Government to review the options for reforming the Barnett formula in order to ensure that Wales is funded on the basis of need rather than population share, as is currently the case. Of course, it is out of the scope of this Bill to seek to change the Barnett formula and make sure that Wales is funded on the basis of need, but the issue of fair funding has become an integral part of the public and political discourse on the powers it offers and we seek to highlight its importance.

Although the need for fair funding—as reform of the Barnett formula has become known in Wales—was not set as part of the remit of the Commission on Devolution in Wales, the cynical among us might view that as a ploy by the Government to continue to ignore the ongoing loss to Wales of between £300 million and £400 million per annum, which is an incredibly large sum of money for such a small country.

Earlier, we debated the need for borrowing and the £500 million limit. We are actually undersold £400 million per annum already, and we do not seem to be too concerned about that or, at least, nobody has been in any great rush to address it. I venture to suggest that if that were put right, the £400 million could be very useful to the Welsh Government immediately.

The so-called formula was devised in the 1970s by Joel Barnett MP, who is now Lord Barnett in the other place. He was a Treasury Minister at the time, and he saw that a simple stop-gap means of funding Wales would be to do so on the basis of its share of population—about 5% of the UK total. However, since the 1970s, Wales’s GVA has fallen as a percentage of the UK’s, and Wales now has a higher number of disabled and older people as a percentage of the population than our friends in England. The formula was intended to be only temporary, before a longer-term and more equitable solution could be found. Politicians of all parties recognise that it is unjust and needs reform, except those in government—whoever is in government at the time.

As part of our One Wales coalition Government agreement in the last National Assembly, Plaid Cymru demanded that an independent commission be put together to examine the shortfall in the funding which Wales evidently misses out on each year through how the block grant is currently calculated. The Independent Commission on Funding and Finance for Wales, expertly chaired by the widely respected Gerald Holtham, entirely vindicated what we have said for upwards of 30 years—that Wales has been losing out. Indeed, the £300 million to £400 million figure has been endorsed by another Committee, the Constitutional Committee in the other place, which separately came to a similar conclusion.

Plaid Cymru has been campaigning for reform of the Barnett formula and to secure fair funding for Wales on the basis of need for more than three decades. In all my time in the House, which spans more than two decades, we have returned to this continuing injustice time and again. If I may reminisce for a second or two, I remember asking successive Labour Secretaries of State for Wales why they would not reform the Barnett formula. I do not seek to embarrass my good friend the right hon. Member for Torfaen (Paul Murphy)—he had to stick to his brief at the time—but there is now an acknowledgment that we are underfunded, and that therefore needs to be put right. As in any other part of the UK, we need to ensure fair funding in Wales, which is something that no democrat would deny.

Imagine my surprise when it emerged that the Labour party had put a caveat on devolving income tax powers for Wales, by stating that it would not hold a referendum until fair funding had been secured. The fact that it wilfully ignored the problem and even denied that there was one during 13 years in power in Westminster must be the symptom of a grave case of collective amnesia. The cynical among us would call that expedient, to say the least, while others might be tempted to see it as a roadblock in the path of greater devolution for Wales, put in place by the anti-devolution tendency that appears to be in the ascendancy among Labour Members from Wales at Westminster.

--- Later in debate ---

[Mr Llwyd]

It was raised in line with inflation—[Interruption.] Let me finish. Other responsibilities came to Cardiff—virtually all the agriculture, the environment and various other things came in. [Interruption.] I would like to know the percentage, but I am not in a position to determine one way or another whether it amounted to a substantial increase. I do not think it was substantial: it was clearly above inflation, but other responsibilities had been devolved to Cardiff by that time.

Without trying your patience, Mr Crausby, I would like briefly to speak to Plaid Cymru’s new clause 10. The Silk commission’s recommendation 28—a brief one, you will be pleased to hear—states that the Welsh Government should set up a Welsh Treasury to manage the new powers contained within the report. The new clause extends that arrangement to the Bill. It is a simple but important new clause. In the spirit of our other amendments, it seeks to preserve the integrity of the cross-party Silk commission recommendations.

The commission recommended that if the Welsh Government are to be directly responsible for revenue raised in Wales, as will be the case with the advent of the Bill’s powers, they must develop their finance department into a Welsh Treasury. That is a common-sense approach. If the National Assembly for Wales decides to do this, in accordance with its will, so be it. It would avoid the need for inefficient and perhaps time-wasting tidying-up exercises, such as appear in the first part of the Bill. People in Wales have been referring to “the Welsh Government”—a change of name—so there should be no problem with calling the finance department “the Welsh Treasury”. It is common sense for that to happen. I hope that this simple new clause will be supported by both sides of the Committee.

[Guto Bebb]

I shall speak briefly to my amendments 12, 13 and 14, of which I am proud. I associate myself, too, not only with the amendment tabled by the Chairman of the Welsh Affairs Committee, my hon. Friend the Member for Monmouth (David T. C. Davies), but with his speech. There was nothing in it that was an attack on Wales. He was simply highlighting a real concern of our constituents that needs to be addressed. I believe that the amendments provide the opportunity to deal with the fact that we need an NHS that serves the people of Wales.

[Albert Owen]

I take the hon. Gentleman at his word that he is not attacking the NHS in Wales. He has to acknowledge, however, that both his and my constituents already get some of the best specialist treatment over the border in places such as Liverpool, Manchester and Gobowen. That just happens to be a fact of life.

[Guto Bebb]

That is true; the hon. Gentleman makes a statement of the obvious. Before I was elected, I was proud to support the campaign launched by my right hon. Friend the Secretary of State for Wales, who argued strongly that services in Walton rather than services in Swansea should be provided for people in north Wales. What the hon. Gentleman completely misunderstands is the fact that patient choice has been taken away in Wales. People in Wales can be referred to hospitals in England by a GP, but only if the GP makes that referral on the patient’s behalf. The opportunity to make a choice is not available to patients in Wales—very different from the situation that applies to patients in England.

The situation in respect of patient choice in Wales is simple. Some political parties in Wales argue strongly that patients in Wales should have entirely the same right to choose their preferred hospital as patients in England. For some reason, the so-called party of the national health service in Wales is of the view that that right to choose should be denied.

[Nia Griffith]

Will the hon. Gentleman give way?

[Guto Bebb]

I will give way so that I can understand why the Welsh Labour party takes the view that patients should not have a choice that is freely available to patients in England.

[Nia Griffith]

Does the hon. Gentleman not accept that patients in England need a referral from a GP? The way in which the funding is being reformed in England will make things difficult, because some GPs will have to make desperate choices about whose treatment they will fund.

[Guto Bebb]

The hon. Lady is mistaken. The NHS England website poses the question,

“Can I have a GP in Wales if I live in England?”

The answer is:

“Yes you can, but… Patient choice and the NHS Constitution do not apply to the NHS in Wales.”

In other words, patient choice does apply in England, but it does not apply in Wales.

It is important that this issue is debated, because the Government in Cardiff Bay state that the NHS in Wales is as good as the NHS in England. That is exactly the issue that our amendments highlight. They make it very clear that if patients from England elect to use services in Wales, there will be a corresponding change to the funding block, and if patients from Wales elect to use services in England, there will be a corresponding change to the block. If the confidence in the Welsh NHS that Opposition Members express in the media and on television is genuine, they would see no danger in the amendments. The amendments would simply allow patients from Wales who want to be treated in England and patients from England who want to be treated in Wales to have that choice. They are simply trying to ensure that we have an NHS that is national. Why is that so scary to the so-called party of the NHS? That question needs to be answered in this debate.

Secondly, I want to touch on the comments of the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd). I was genuinely disappointed to hear the comments of my hon. Friend the Member for Monmouth described as an attack on Wales. It is important in a mature democracy that we are able to highlight areas where service levels in Wales are not as good as they should be, because we should aspire to have the best. Whether we are talking about the NHS or education, we have a duty to highlight places where Wales is underperforming. To try to kill off that debate by arguing that all Members who highlight concerns on behalf of their constituents are in some way attacking NHS staff is unacceptable.

I might be suggesting that there is a motive where none exists, but perhaps the defensiveness that was articulated by the right hon. Gentleman reflects the fact that patient choice in Wales disappeared as a result of the “One Wales” Government. According to the House of Commons Library, the “One Wales” Government “eliminated patient choice”. Those are not my words, but the words of the House of Commons Library. It states clearly:

“Patients registered with a GP in Wales do not have a statutory right to choose at which hospital they receive treatment.”

The “One Wales” Government moved from patient choice to patient voice. That was a good soundbite that appealed to people who like poems that rhyme. However, in the Betsi Cadwaladr trust, patient voice meant that if somebody made a complaint, they might get a response in six months. Patient choice, which is what these amendments propose, means that patients in north Wales who feel that they would be better served by electing to be treated at a hospital in England would have that choice.

[Mr Llwyd]

Does the hon. Gentleman not accept that I do not have people crowding into my office to say that they were badly treated at the hospitals in Llandudno, Bodelwyddan or Wrexham or at Ysbyty Gwynedd, Bangor? People often come in to say, “If you’re in contact with those hospitals, will you please say that the care was excellent and that I have nothing but praise for them?” I do not recognise the problem that he perceives. I am not sure what I am saying about what he is saying, but I do not recognise the problems that he and the hon. Member for Monmouth have highlighted. I do not see those problems every day. If I did, perhaps I would join them.

[Guto Bebb]

The right hon. Gentleman makes an important point. When somebody tells me a good news story about the NHS in Wales at a public meeting or an event in my constituency, I am the first to applaud. It is important that we highlight success and great performance when it happens in the NHS in Wales. Unfortunately, I get complaints about the service that people have received in Wales far too regularly. Only three weeks ago, I heard from an individual who suffered from prostate cancer. He had an assessment in Wales that said that he did not have cancer. He was suspicious and booked a private appointment in London. Within 12 hours, he was operated on. He is of the view that the decision to go private saved his life. Is it not disgraceful that a patient in Wales has to have the means to go private to ensure that they get the correct diagnosis?

[David T. C. Davies]

I thank my hon. Friend for giving way and allowing me to put it on the record for the third time that I am criticising not the doctors and nurses in Wales, but the policies of the Labour-run Welsh Assembly Government that are making it difficult for people to see those doctors and nurses quickly enough. That is the problem.

[Guto Bebb]

I accept that point.

I will conclude my remarks because I wanted to be brief and my hon. Friend the Member for Monmouth has highlighted the main issues. The key issue is that our amendments in no way threaten the Welsh NHS if it is a beacon of success, as is claimed by the Opposition parties. If the good practice that I see on a regular basis in the health service in north Wales is replicated across Wales, the amendments should not strike fear into anybody.

I come back to the individual I saw on Saturday morning while I was out canvassing. As the right hon. Member for Dwyfor Meirionnydd will be aware, a significant portion of my constituents have retired to north Wales to live. They often have family members in the north-west of England. Is it not unfortunate that somebody who is facing a significant operation cannot choose to be treated at a hospital near their family? Medical records show clearly that being in close proximity to one’s family, having the support of one’s family and having a daily visit are often the difference between a quick recovery and a long, drawn-out recovery. However, that choice is not available to patients in Wales simply because they live in Wales.

The amendments are a vote of confidence in a national health service. All parties who claim to support the national health service should support them.

[Nia Griffith]

The amendments tabled by the hon. Members for Forest of Dean (Mr Harper), for Monmouth (David T. C. Davies) and for Aberconwy (Guto Bebb) claim that a disproportionate number of Welsh patients use NHS services in England. That is totally groundless. In fact, the number of English patients going to Welsh hospitals has increased by 10% since 2010, while the proportion of Welsh patients using English A and E services has fallen in recent years.

[Guto Bebb]

The point that the hon. Lady has just made is clearly wrong. I just made it very clear that patients in Wales are not able to choose to use hospitals in England, so it is no surprise that the numbers being treated in England have fallen.

[Nia Griffith]

I am coming on to that. I am talking about patients who live in England and come to have treatment in Wales. The implication is that everybody wants to flee from Wales and nobody wants to go there. That is not true.

The issue of choice is key. We all have constituents who go for specialist treatments in England. We all know of emergency cases that have been taken to special care baby units and to hospitals as far away as London. There are obviously issues of funding. Funding does change hands. Amendment 13 suggests that that should be done through the block fund, but it is done from health board to health board.

The hon. Member for Aberconwy ignores the reforms that are being suggested in England, which will mean that instead of a GP making a referral to the hospital that they consider will provide the best treatment for their patient, they will have to consider the GP surgery’s budget and might not be able to afford the treatment. There are hospital consultants in England who are terrified that their services will not be brought in by certain GP practices because of the immense pressure of trying to provide a huge range of services with a limited budget. That is terrifying. Soon someone will not be able to compare like with like, and there will not be a similar situation in England and Wales—it will be very different. I am afraid that the idea of patient choice will vanish in England. It is nice to think it is there and that it will exist in future, but it simply will not be there.

I have heard of many instances of patients who had a certain degree of choice and were able to go to a slightly different hospital than the one first suggested when they made the case and asked for that change. Frankly, I think this amendment has provided the opportunity for an attack on the Welsh health service.

--- Later in debate ---

[Guto Bebb]

Not again!

[Nia Griffith]

Absolutely—not necessarily from the hon. Gentleman, but from other hon. Members there has been a blatant and clear attack. I would be the first to make a fuss—indeed, I do—if somebody cannot get a specific treatment, and we all know that in every area, whether in England or Wales, certain specialties may be difficult to cover in certain periods. We all know that we need to fight for certain things for certain constituents. As was mentioned, however, there is no clear winner or loser; there is no clear leader or laggard in the four UK nations in terms of health provision, as shown in a longitudinal study by the Nuffield Trust over a long period.

North Wales Economy

Guto Bebb Excerpts

Tuesday 1st April 2014 Westminster Hall

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to serve under your chairmanship this morning, Mr Hollobone. I shall try to keep my remarks to seven minutes.

It is a pleasure to follow the right hon. Member for Delyn (Mr Hanson). I agreed with many of the points he made in his positive speech. As to transport, I fully accept that we need to push for upgrades to the north Wales main line. I would like electrification of the line; slight upgrading of train speed is certainly needed, because that will result in greater capacity. I use the A55 regularly, as do my constituents, to get to work. We should recognise that it is on a Euroroute, and apparently it is the only Euroroute that still has a roundabout on it. There are two, and they are both in my constituency, at Llanfairfechan and Penmaenmawr, so in due course I would welcome any upgrades to the A55, especially in my constituency.

The big picture is that north Wales can expect exciting times. There has been concern about economic figures, in relation to employment, but in Aberconwy unemployment figures have fallen by 13%. Most importantly, the youth unemployment figures have fallen. I am sure that every right hon. and hon. Member in the Chamber would welcome 18 to 24-year-olds finding jobs. It is positive for those individuals, and for the economy of north Wales.

The opportunities presented by Wylfa Newydd are also part of the big picture. We cannot overestimate the potential of a new nuclear power station to transform the economy of north-west Wales. I am delighted about the partnership between Gwynedd council, Isle of Anglesey county council and Conwy county borough council, to work to ensure that young people in north-west Wales will have the relevant skills for that exciting industry. Those who have the skills relevant to Wylfa Newydd will also have the skills relevant to the wind farm developments that are happening, and to other forms of energy generation.

[Albert Owen]

The hon. Gentleman is right; will he join me in congratulating the Welsh Government on investing £2.5 million only last week in skills training in the energy sector?

[Guto Bebb]

I will. I will not allow any party politics to stand in the way of the fact that that was a welcome decision. I also welcome the commitment by further education colleges, local authorities and the business sector to making that happen. It will provide young people with an opportunity to plan for a career in north Wales. I also welcome yesterday’s decision by the green investment bank to invest £220 million in the Gwynt y Mor facility. Every councillor in Conwy, including every Labour councillor, voted against that development, but the key thing is that the decision was made, and we need as much local value to be drawn from the development as possible.

[Chris Ruane]

Will the hon. Gentleman pay tribute to the more positive attitude of Denbighshire county councillors, including Conservatives, in Prestatyn and Rhyl, who voted for the wind farms of North Hoyle?

[Guto Bebb]

To be fair, it is important that we should reflect on the concerns of the tourism sector in Aberconwy, and Conwy in general, in relation to the wind farm development. The concern was reflected strongly by local representatives of all political parties in Conwy. Denbighshire councillors saw things differently, but the key thing now is to build on those successes.

The successes of north-east Wales are not for north-east Wales alone. Constituents of mine work in the Airbus factories, and people travel from my constituency to Deeside in 30 or 35 minutes on the A55, if there has not been a crash or an overturned caravan. The economies of north-east and north-west Wales are linked, and things work both ways because a significant number of people from north-east Wales are more than happy to spend their weekends in my constituency, and further west in that of the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd).

I think things are moving in a positive direction. My constituency has the highest dependency on small businesses of any constituency in north Wales. If it were not for the small business community, the economic situation there would be dire indeed. We are experiencing confidence, investment, and the willingness of people to invest in their businesses, whether those businesses are new or are being refurbished. There are recent successes that we should all welcome. The one I am most pleased about is a small coffee shop in Llandudno Junction. In terms of economic change, it is not a big issue—four new employees in a small coffee shop in Llandudno Junction—but that business was funded through crowdfunding. It is the first business that I have seen in my constituency that sought crowdfunding because of the reluctance of banks to lend, which continues to be a big problem. That resulted in a brand-new coffee shop employing people in the Junction. That is the type of innovation from young people that will be key to the success of the north Wales economy.

[Ian Lucas]

Will the hon. Gentleman give way?

[Guto Bebb]

I will take one final intervention, because I am aware of the time.

[Ian Lucas]

My interest, which I share with the hon. Gentleman, is in finance for business. Would he support a regional bank for north Wales that was much more attuned to the regional economy, able to understand our local business community and therefore able to make the right decisions on investment?

[Guto Bebb]

There is certainly an argument for that, but let us be fair: our big problem in Wales is the fact that Finance Wales has been such a disastrous failure. Had it stepped into the breach as a lender of last resort supporting businesses, perhaps we would not need a regional bank. Businesses in my constituency, such as those in the Church Walks enterprise hub, which has 40 employees in the high-technology industries, were being charged 7% above base by Finance Wales. That is the type of lending that HSBC and other high street banks have been guilty of charging. When we see a publicly supported bank doing that, I have real concerns.

We are certainly seeing real signs of investment in my constituency. A vital investment has been the refurbishment of the Eagles hotel in Llanrwst. No small town can do without a key hotel, and the closure of the Eagles hotel caused concern about the future of Llanrwst. I welcome its reopening with significant new investment. Furthermore, on Friday, I was in Betwys-y-Coed, reopening the Pont y Pair inn—seven new employees, a significant £150,000 investment and, from what I saw, a guaranteed success. Even better, that investment means that we are selling the local brew, the Conwy Brewery beer; that shows how tourism can interlink with the food and agricultural community. That is the other issue that I want to touch on.

We sometimes forget when talking about the economy of north Wales how important agriculture and the food sector are. In my constituency, we see the links, because there is significant investment in the Bodnant food centre, which is supported by European regional funding; indeed, it is one of the 0.5% of European-funded projects led by the private sector. It is a success; European regional funding might have even greater success if more such projects were led by the private sector, rather than by the dead hand of bureaucracy. The food sector in my constituency is going from strength to strength. The Bodnant food centre is a fantastic success story, but it is building on top of the success of companies such as Blas ar Fwyd and Siwgr a Sbeis. Those companies are delivering for and serving the tourism sector—cafés, restaurants and hotels—and it is as if all the sectors of the economy in my constituency are coming together to give tourists and visitors a distinctly Welsh feel when they come to north Wales.

There is real, large investment in Llandudno, the queen of Welsh resorts, which gave a warm welcome to the Welsh Labour party over the weekend—we were delighted to see them, obviously. For a long time, it has had two large derelict hotels, which have been a stain on the town: the Clarence on Gloddaeth street and the St Tudno hotel, which can link the high street to Parc Llandudno. The good news is that both are being refurbished in multi-million pound investments, and there will be hotels, shops, other retail outlets and cafés in both locations, one at the top end of the high street and the other at the bottom end. They are significant, multi-million pound votes of confidence in the economy of Llandudno. Clearly, we are turning the corner. There will be employment growth and, more importantly, the slight decay that we saw on both sides of the town will be dealt with positively. I pay tribute to Mostyn Estates, to the investors and to the local authority for ensuring that we are dealing with those problems quickly.

The Government are also doing things. They are giving a huge vote of confidence to small businesses. In my constituency, a small partnership business, such as a husband and wife running a guest house, will be able to post a £20,000 profit without paying tax. That money will go back into the business, because running a guest house is like running the Forth bridge—people must keep investing to keep up standards. That tax break of the personal allowance increase is a tax break for businesses, and it makes a big difference in my constituency. The £2,000 rebate on national insurance is another vote of confidence in small businesses that want to employ staff; they will have a tax rebate if they do. Finally, the Welsh Government have seen sense on the small business rate subsidy of £1,000; that was announced by the Chancellor in his autumn statement. It took the Welsh Government four months, but I will not carp about that; I would rather see a correct decision made late in the day than a wrong decision. I welcome the fact that the Welsh Government are following in the footsteps of the Chancellor by ensuring rates relief for small businesses in my constituency.

I will curtail my remarks, having given, I hope, a positive view of how things are developing in my constituency. Of course, Aberconwy is not isolated; it is part of the wider north Wales economy. There are clearly concerns if unemployment figures in some parts of north Wales are increasing. That is not the case in Aberconwy, but we need a successful economy throughout north Wales. We benefit from investment in north-east Wales, just as I am sure that it will benefit from investment in the north-west. The prognosis for the north Wales economy is positive, as long as we have a Government who understand that their responsibility is to support businesses where they can and, most of the time, simply get out of the way.

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

It is a great pleasure to take part in the debate. I congratulate the right hon. Member for Delyn (Mr Hanson). As I recall, he and I were elected back in 1992 on the very same day.

In November last year, I wrote an article in The Independent, sparked by the disturbing news about wage levels in Dwyfor Meirionnydd: 40% of people in full-time work were earning less than the living wage, which is considered unacceptable where there is no help from tax credits and so on. In the article, I noted that rural poverty is just as grinding as urban poverty. What is most disappointing is that the area that I have the honour to represent was once an industrial area central to the cementing of Wales’s position as the birthplace of the industrial revolution. The question is about not the quantity of jobs, but their quality, and our problem is the low-wage economy that we all struggle with in north Wales. That is not a political point; it is something that we all need to aspire to get rid of. There are disparities within the UK, which is probably the state with the greatest disparities in the European sector.

There is hope and no lack of ambition, however, as the right hon. Member for Delyn said. Last October, I hosted a parliamentary day for Meirionnydd, alongside the Farmers Union of Wales, showcasing the constituency’s small businesses, which are thriving in a time of austerity. Cutting business rates, lending to businesses, and apprenticeships for young people lie at the heart of my party’s plan for the north Wales economic recovery. Indeed, that will benefit the whole of the Welsh economy, as the hon. Member for Aberconwy (Guto Bebb) said. We have long called for a living wage to ease the squeeze on people’s pockets. It would make a substantial difference to living standards in constituencies such as mine, and across the whole of north Wales. Fair pay is essential. We need to put an end to exploitative, zero-hours contracts. I will not enter the political arena on this issue, because I am not sure where my friends in the Labour party stand on it—there is one view in Cardiff and one here—but in any event, such contracts should have no place in a modern economy.

Transport links, as the right hon. Member for Delyn said, are essential for any development of the north Wales economy. We still await notification from the UK Government of the electrification of the north Wales main line. The Secretary of State has indicated that he is in favour of it, but has had remarkably little success so far in persuading his Cabinet colleagues. Wales still does not have a single mile of electrified track; it is comparable with Albania, in European terms. The trans-European network, as the hon. Member for Ynys Môn (Albert Owen) said, is another area where the UK Government, as well as the Welsh Government, have to get moving. The rail line to Holyhead has been left off the European top-tier corridor projects, thanks, unfortunately, to the UK Government illogically guiding the route to Liverpool for the ferry to Dublin, rather than along to Holyhead, which is the most obvious route. That decision needs to be looked at again.

Away from transport links, we in Plaid Cymru have been focusing on the need to develop the small and medium-sized enterprises sector in Wales. SMEs are the backbone of the Welsh economy. It is often said, and I believe it is true, that about 90% of employment in Wales is in the SME sector. Gone are the days of inviting large international companies to bring in a massive factory and showering them with cash, only to see them leave a few years later. We must build from within. Plaid Cymru has put forward a range of proposals on business rates and financial support for SMEs. Discussions are ongoing in the National Assembly on that issue, and Plaid Cymru and others are playing our part.

The right hon. Member for Delyn rightly referred to tourism, which is a vital part of north Wales’s economy. We have many things to brag about, such as the iconic Snowdon and the Snowdon railway, our lakes and the unique charm of Portmeirion. Last week, Antur Stiniog in Blaenau Ffestiniog opened a mountain bike circuit, and the following day there was a UK championship with 2,000 competitors. Coed-y-Brenin is another of the premier mountain bike venues in Wales and beyond.

[Guto Bebb]

The right hon. Gentleman is making a significant point about the adventure tourism sector in north Wales. Will he join me in congratulating my constituent, Mr Sean Taylor, who has opened the largest zip wire in Europe in Bethesda?

[Mr Llwyd]

Yes. When I represented the valley, I used to help him as well. I got him started, so I can take part of the credit. I am pleased to join the hon. Gentleman in congratulating his constituent. It is a great pleasure to see a business such as his succeed. We have fishing, climbing, sailing, hiking—the whole lot. Of course we need to increase footfall, but the main thing we need to address is the need to increase the visitor spend. We need to up our game, but it is not beyond our knowledge and ken to do that.

Other measures that can improve the north Wales economy include a private sector-led industrial development authority to leverage investment into the Welsh economy. That is not dissimilar from the suggestion that the hon. Member for Wrexham (Ian Lucas) made. I still believe it was a mistake to do away with the Welsh Development Agency. Yes, it was a quango, but it did a good job and it was a brand that was known worldwide. But it went, and with it went the Development Board for Rural Wales, and nothing has been put in its place. The small business sector in rural Wales has lost that important arm of assistance, which was always there and was effective.

We believe that we need a public development bank to lend to SMEs and help develop local industries. Five years on from the crisis, SMEs are still being squeezed and the banks are still not giving them fair play. We should focus on the productive economy, rather than using funding for lending to asset-lend in the form of mortgages and pumping up another house price bubble.

Fairness and Inequality

Guto Bebb Excerpts

Tuesday 11th February 2014 Commons Chamber

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to follow the hon. Member for Na h-Eileanan an Iar (Mr MacNeil). In 1979 I spent a fantastic summer holiday on the Isle of Barra—something that I have promised my children I will repeat at some point.

[Mr MacNeil]

You’re very welcome to come back.

[Guto Bebb]

Thank you.

This has been an interesting and passionate debate thus far, but I would like to pick up on a few points made by the hon. Gentleman about the minimum wage. Members across the House will share the aspiration to increase the minimum wage, but to accuse the Prime Minister of inaction when he has simply stated a need to consider the facts is slightly unfair. On Friday, I met a number of constituents who run small hotels in my constituency. Not a single one of those six businesses had posted a profit in excess of £15,000 for the past three years, yet they all employed people and each paid slightly above the minimum wage. They want to do the right thing and retain their staff, but when talking about prosperity and creating jobs, we must ensure that anything we do with the minimum wage does not destroy the very thing that helps people out of poverty, which is having a job.

[Lorely Burt]

I understand the hon. Gentleman’s point about the minimum wage, but is he aware that were the Government to adopt the Liberal Democrat policy of increasing the threshold at which people start to pay tax to the minimum wage, that would achieve the living wage?

[Guto Bebb]

There is certainly an argument that to increase the minimum wage when, as things currently stand, the Government have already taken tax out of the minimum wage, would look as if they were kicking businesses for the sake of kicking them. I have supported the fact that the Government have increased the personal allowance dramatically, which has made work pay for people in many circumstances, but my point is that taking time over a decision is not something we should be ashamed of. Indeed, we should be proud of taking time to make the right decision on something that is so important for a constituency such as mine, where 27% of the working population are either self-employed or work for small businesses.

I must take issue with a few points raised by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) in his opening remarks. He began his speech by talking about Hywel Dda, who was indeed classified as one of the better Welsh kings. I was, however, surprised to hear the hymn of praise to a royalist from an avowed republican. Indeed, in terms of Hywel Dda, or Hywel the Good, being good, perhaps the true title should be Hywel the not-so-good. In addition to being the man who classified and created Welsh law, he also ordered the execution—the murder, I should say—of his brother-in-law in order to take over the kingdom of Dyfed, which is the current constituency of the Under-Secretary of State for Wales, my hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb). Furthermore, so as to extend his kingdom to the north and take over the whole of Wales, he also dispossessed the two sons of Idwal Foel from Gwynedd. When giving examples, I think we must put the man in the context of his time. It is interesting to highlight, however, that the Hywel Dda laws were in many ways ahead of their time in trying to achieve a level of equality between the sexes—not something that we saw in other parts of the United Kingdom for a very long time.

I also take issue with the comments by the hon. Member for Carmarthen East and Dinefwr about a proportional system of electing people leading to greater engagement with the political process. It is an attractive argument, but one that can be rejected simply by looking at the situation in Wales. We have 40 Members of Parliament who are elected on a first-past-the-post basis, and 60 Members elected to the Welsh Assembly, which uses a version of proportional representation. In a constituency such as mine, however, 70% of the electorate—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am a bit worried that we are getting in to a debate on proportional representation. I presume the point is linked to fairness and equality somewhere.

--- Later in debate ---

[Guto Bebb]

I am responding to the initial comments that proportional representation leads to a more involved electorate. I would challenge that because, as I was about to say, in my constituency 70% of constituents turned out in 2010 on a first-past-the-post race, but under a PR system in 2011, the turnout was only 40%. If we want democratic engagement, I argue that the evidence for the hon. Gentleman’s point is not clear.

Finally, I agree with the hon. Gentleman that when trying to ensure full employment in Wales and supporting businesses—all part and parcel of improving equality and job opportunities—we must support our small businesses and ensure that our banks are lending. My right hon. Friend the Chancellor of the Exchequer has made huge strides in trying to ensure that the banks support small businesses, but I accept the arguments about the need for further intervention to support small businesses in Wales.

I take from the comments of the hon. Member for Carmarthen East and Dinefwr an implied rejection of the work of Finance Wales, an organisation which has existed in Wales for a long time and has the purpose of supporting small businesses. In my view, it is a Government-supported way of supporting small businesses. On Friday, however, in my constituency I met a small hi-tech IT company employing 23 people, which had been asked to pay 9% above base to be lent money by Finance Wales. That is the type of behaviour that, if undertaken by the banks, we would be criticising openly. The initiative is supported by the Welsh Labour Government, and they should ask themselves serious questions when small businesses trying to create employment opportunities in my constituency are offered penal rates to borrow money.

I have some sympathy with the comments made by the hon. Member for Carmarthen East and Dinefwr. I share his surprise at the behaviour of the Labour party in the Welsh Grand Committee last week. Democratic engagement is part and parcel of the process through which we engage people and tackle inequality. However, the Labour party’s rejection of the entirety of the Silk commission report, with the exception of borrowing powers, should concern us greatly. If we are to create equality, in Wales and in the United Kingdom as a whole, we should avoid spending more money on debt repayment than we do on education. The only part of the Silk commission report that the Labour party seemed willing to support was more borrowing powers—no surprise, perhaps—but that is a betrayal of the aspirations that those of us on the Government Benches have for the people of Wales.

[Mr MacNeil]

I have been hearing quite a bit about the Welsh Labour Government’s rejection of more powers going to Wales, but I still cannot find the reason for that. Do they doubt their own abilities of stewardship and governance? Does the hon. Gentleman know why they do not want them?

[Guto Bebb]

It is not for me to correct the hon. Gentleman, but I am not sure whether the proposals were rejected by the Welsh Government. They were certainly rejected by the Labour Front-Bench team in Westminster—a significant difference. Perhaps Labour Members can enlighten us on whether there is a lack of trust between the Westminster team and the Assembly team.

The motion is wrong-headed in many ways, but its key failure is highlighted in the final sentence, which

“calls on the Government to halt its further spending and welfare cuts”.

That tells us that the motion is not serious. It talks about the importance of creating equality and opportunities and supporting people and communities, yet it does not recognise that to have a successful, sustainable economy we cannot carry on borrowing at rates that are unsustainable in the long term. There is nothing moral, fair or reasonable about asking our children and grandchildren to pay for our mistakes. We have a responsibility to future generations not to saddle them with unsustainable debts. We have an ageing population and a demographic problem, nowhere more so than in parts of north Wales that I represent. We face a real challenge to care for the elderly and to ensure that we have a fair pension system. Future generations will have to meet those obligations. In asking them also to meet our inability to take hard decisions, the motion is not a serious one, and it deserves to be rejected.

[Jonathan Edwards]

Will the hon. Gentleman inform the House what the debt to GDP ratio is now—it has risen under this Government, of course—and what it was in 1947, when the NHS was created?

[Guto Bebb]

The hon. Gentleman has made this point on numerous occasions. He is absolutely correct to say that the level of debt has increased under this Government, but for a party that says the level of debt should have increased at an even faster pace, it is hardly reasonable to argue that this Government have therefore failed. It should also be pointed out that we have an NHS that is, rightly, much more expensive and costly than it was in 1948, so that is a false analogy.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

Dare I say it, but the comment by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) shows that until we balance our books and are in surplus we will never start to pay down debt. His motion contradicts his desire to reduce the debt to GDP ratio.

[Guto Bebb]

I fully accept and endorse my hon. Friend’s comments. It is important, when we debate public spending and the level of so-called cuts, to bear in mind that we are running a state that is not meeting its obligations. Even in this financial year, we are borrowing £110 billion. We are not out of the woods by any stretch of the imagination. It would be an irresponsible Government who would damage the opportunity for people to have more equality through a willingness to borrow more without any plan to reduce the country’s level of debt.

[Mr MacNeil]

Is the problem for the Government not that the rush and the desire to attack the deficit has taken the focus away from what they should be doing: returning demand and growth to the economy? To make an equivalence between the national economy and a household budget is wrong-headed in the extreme and has led to the three-year delay in growth. It is leading to the wrong policies and—

--- Later in debate ---

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. In fairness, the hon. Gentleman has had a good day. He has made a lot of interventions and he spoke for almost an hour, so to try to make another speech is unacceptable. A lot of Members want to get in.

[Guto Bebb]

I reject the hon. Gentleman’s argument. To have more equality, we need more jobs and economic opportunities. The hon. Gentleman argues that that would happen with more Government spending as a proportion of the economy. If that was the case, then Wales would be, by a long stretch, the most successful part of the United Kingdom, because there is no part of the UK more dependent on the public purse. The dependency on public spending in Wales has led to failure not over the past three or four years, but over a 15 to 20-year period. It has not led to economic growth or prosperity, and it has not led to economic opportunities. Indeed, the very reverse is true: the size of the state in Wales is one of the reasons why the rebuilding job being undertaken by the Westminster Government is so important. In a Welsh context, we have created an economy that is unbalanced and has not created the variety of jobs needed to support our young people and ensure that we have an equal society. I argue very strongly that anybody who says that the answer to all economic issues in a Welsh context is more public spending is simply wrong.

[Jonathan Edwards]

Will the hon. Gentleman give way?

[Guto Bebb]

I will try to make a bit of progress.

The key point to remember is that those who now claim that the economic recovery has been too slow in coming are the exact same people who claimed that unemployment would increase dramatically because of the decisions taken in 2010. They are often the same voices who argued that there could be no growth without public spending, yet in Wales and in the whole of the UK we are seeing a vast increase in private sector employment. We have 1.5 million new private sector jobs, a ratio of almost 4:1 in comparison with the loss of jobs in the public sector. Wales is not an exception. Time and again when this is debated in the Welsh media, we hear people saying that the economic recovery is happening in London and the south-east. That is simply not reflected in the facts. In Wales, unemployment is falling and employment rates are increasing.

Anyone who is genuine about the opportunities necessary to reduce inequality would welcome the jobs that are being created. What we often hear from the parties on the Opposition Benches, however, is a complaint about the type of jobs being created: that they are not proper jobs and not the type of jobs we should be proud of. That is such a demeaning comment to make to people going out of their way to try to earn their living. I wonder how someone working in a Tesco or an Asda in my constituency feels when they hear a member of the Labour party demeaning a job as nothing more than shelf stacking. Such comments from a party that claims to represent labour are utterly disgraceful. I have made this point to the House previously and I will make it again.

One of the most moving things I have done as an MP was to visit a Tesco partnership store in Toxteth, in Liverpool. I can tell Members that a visit from a Conservative MP from north Wales is not something that happens very often at any store in Liverpool. The Tesco store in Toxteth was the largest inward investment into Toxteth since the riots in 1982. It was Tesco that undertook that investment. Half the staff employed at that store had been unemployed long term—for more than 18 months. The retention rate was more than 94% and the pride they showed in the fact that they were now working for a living was moving—there is no other way of describing it. I met one lady who ran the bakery section and asked whether she would ever want to move on. Her response was, “I’d have to be taken out of here in a box. It has given me my life back.”

[Mr Russell Brown]

I apologise to the hon. Gentleman—perhaps I am not in the Chamber as often as I should be—but I have yet to hear any of my colleagues condemn anyone in the retail sector. Those are valued jobs and, as the hon. Gentleman, I and many other colleagues know, working in retail is about much more than serving customers and stacking shelves.

[Guto Bebb]

I welcome that intervention from the hon. Gentleman, who clearly understands the importance of the retail sector. I was talking about comments made on radio and television by members of the Labour party. When I hear those comments I get annoyed as they refuse to acknowledge the fact that the sector provides the individuals in Tesco in Toxteth, or in various businesses in my constituency, with the opportunity to start a career, learn a skill and move on—and I would argue that people need a job to be able to move on to another job. It makes such a difference and those opportunities should not be dismissed by those who earn far too much to appreciate how important it is to earn a living, perhaps for the first time, and, in some cases, to be the first member of a family for a generation to take a job.

We need to be aware of the fact that the success we are seeing across the UK is being replicated in Wales. In a Welsh economy with relatively low levels of pay, it is even more important that we reduce the tax burden on those individuals. I have heard Opposition Members complain that although it is all very well to reduce people’s tax bills, by increasing the personal allowance tax credits have been reduced. That is not about what is right for the individuals; it represents the significant difference between the Government and Opposition. Government Members want to allow people to keep as much of their earnings as possible, because if a person goes out there and works we should tax them as little as possible. The Opposition were quite happy to tax people earning as little as £6,000 a year and recycle the money through an expensive, well-paid bureaucracy before paying it back to buy a client state. That was the dishonesty of the tax credit policy.

[Nia Griffith]

Will the hon. Gentleman explain why his party has introduced measures that have cut the taper on the tax credit system, making it much more severe and causing more difficulties for people? Does he not agree that the only way to reduce the tax credit bill, as tax credits top people up to a decent wage, is to ensure that wages go up through a strong minimum wage and incentivise employers to introduce a living wage?

[Guto Bebb]

As the hon. Lady knows, as I have already touched on the minimum wage, I believe that it is a complex issue that must be considered carefully. My view is that we should carefully consider moving towards a point where we do not need tax credits, as the imperative is to allow people to earn a living and pay as little tax as possible on their earnings. That should be the aspiration.

[Mr Marcus Jones (Nuneaton) (Con)]

My hon. Friend mentions the issues caused for his constituents by the way in which the Labour party dealt with income tax and the tax threshold, but were they not compounded by the removal of the 10p tax rate?

[Guto Bebb]

It undoubtedly did not help.

When we discuss inequality we should be aware of the key point that the Government have been very proactive in ensuring that the inequality faced by pensioners is dealt with. We can compare the impact of the triple lock on pensioner poverty with the previous Labour Government’s decision to increase pensions by a paltry 75p.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Taxation is not just about income tax, but about VAT. Is that not perhaps the most unfair tax on those at the bottom of the pile?

[Guto Bebb]

I would reject that argument. We talk about VAT, we often forget the exemptions. If somebody is buying a new Ferrari, I have no problem with their paying £50,000 in VAT. If somebody buys their food in a supermarket, they pay 0% in VAT. If VAT were 20% on every single item, it would be a regressive tax. For those who spend a significant proportion of their income on food, or on household fuel, which is taxed at 5% rather than 20%, the VAT issue is not as clear cut as Opposition Members try to make it.

[Debbie Abrahams]

Will the hon. Gentleman give way?

[Guto Bebb]

Not at the moment.

When we talk about inequality, it is important to recognise that the Government’s work on pensioner benefits has significantly reduced pensioner poverty. We should also recognise that in a country such as Wales, with such a high dependence on self-employment, the Government’s moves to introduce a single-tier state pension will make a huge difference for those who are self-employed and will result in less inequality when people reach retirement.

The hon. Member for Carmarthen East and Dinefwr, who has now, unfortunately, left his seat, said that there was a need for more investment in a Welsh context. Let me be very specific about the situation in Wales. Since 2000 and 2001, the Welsh Government, supported by European structural funding, has invested billions of pounds in so-called initiatives to deal with Wales’s lack of economic progress. When people talk about the need for public sector investment to create wealth and employment opportunities, it is important to consider the case study of how European funding, spent under the guidance of the Welsh Labour Government—and under the Welsh Labour and Plaid Government for four years—was used through so-called interventions that were meant to create employment opportunities and ensure that we had a more equal society. That has failed dramatically and for the entire period of intervention by the Welsh Government and the EU, west Wales and the valleys have gone backwards rather than prospering.

[Mr MacNeil]

rose—

[Guto Bebb]

Let me finish this point.

Back in 2000, when the decision was made to apply for objective 1 funding it was argued that this was a once-in-a-lifetime opportunity for Wales as the GDP of west Wales and the valleys as a percentage of the European average was roughly 74%. As hon. Members will be aware, once that percentage is above 75% the highest level of EU intervention is not available. It was also described as a once-in-a-lifetime opportunity because in 2004 all the accession countries from eastern Europe, which had been behind the iron curtain for decades, would become part of the European Union. Lo and behold, in two rounds since 2001 Wales not only has qualified for such funding but has qualified because we are going backwards rather than forwards. Those Members who argue that public spending, Government intervention and the “Government know best” mentality are the way forward for the Welsh economy should seriously consider the impact of public spending on west Wales and the valleys.

I shall now take a final intervention from the hon. Member for Na h-Eileanan an Iar.

[Mr MacNeil]

What the hon. Gentleman is describing in Wales is a symptom of picking winners; things cannot happen there organically. What is the difference between the EU accession states and Wales? What is the difference between Wales and the Republic Ireland, which used to be behind, but is now well ahead of Wales? The difference is that they have Governments who can make things happen organically within their nations, instead of having to join the “picking winners” line because of policies from another country’s capital that do not fit their needs.

[Guto Bebb]

Obviously, I do not accept most of the hon. Gentleman’s arguments; certainly, we should be careful about taking lessons from the Irish implosion. Ireland is probably one of the few countries to have a banking crisis even greater than ours. Many of the eastern European accession countries have managed to create vibrant economies by imposing low-tax regimes, and the whole of the UK should look carefully at those countries’ performance.

In the debate about whether we have a 50p, a 45p or a 40p tax rate, I remind Labour that it found the 40p tax rate completely acceptable for the vast majority of its 13 years in government. What is the purpose of income tax? That is a question that is often forgotten. Its purpose is not to bring down and punish the successful. If we believe in a more equal society, we want more money coming into the Exchequer, because that means we can do more to support the less well-off in society, but we have lost sight of that argument. If we reduce taxes and get more money coming into the Exchequer, that is something that should be welcomed. Time and again, it has been shown that when taxes are reduced, more often than not, the result is more economic activity and a greater success story.

[Richard Fuller]

Does it not strike at the economic illiteracy of the shadow Front-Bench team that they are far more interested in a headline tax rate than in raising revenue to pay for the public services people want?

--- Later in debate ---

[Guto Bebb]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Before the hon. Gentleman continues, I should point out that this debate has been going for more than two and a half hours, and he is only the fourth speaker. If every Member insists on taking this long, there will be a lot of disappointed people in the Chamber. I am sure he has lots to say, but so have other Members, and some consideration on both sides of the Chamber could help in making speeches just a little shorter than over half an hour.

[Guto Bebb]

Thank you, Madam Deputy Speaker. I took my cue from the initial speeches, which I think lasted an hour.

The issue of tax is crucial. I do not want to reduce tax for the sake of it; I want to reduce it because it will stimulate the economy and bring more money into the Exchequer. The hon. Member for Na h-Eileanan an Iar said he wanted to reduce corporation tax to stimulate the economy. I do not understand why reducing corporation tax stimulates the economy, but the same does not work for individuals.

I turn to inequality and the attack in the motion on the Government’s welfare reforms. Those reforms are crucial to the coalition Government’s legacy. In 2010, it was said the coalition came together to deal with the deficit, but just as important, I would argue, was the welfare reform agenda. It might not work, but if it does not, it will be the greatest shame. This brave effort to reform our welfare system is not about penalising people or depriving them of money; its whole purpose is to show faith in people—a faith never shown by the opposition parties.

The Labour Government had a make-believe target for taking people out of poverty. Poverty was defined as below 60% of the average wage, so if the average wage rose by 10% and the wage of somebody on 60% went up by 10%, they moved from not being in poverty to being in poverty. They were better off, but because the line had moved, they were defined as being in poverty. Even worse, if somebody was on 60% plus £1, they were defined as not being in poverty and therefore a success for the Government. That person did not necessarily feel suddenly out of poverty—they still struggled and found life difficult—but policy makers could forget them because they were above that line. That is why we ended up with 5 million unemployed people during 13 years of the previous Labour Government—5 million people, yes, who had money thrown at them so as not to embarrass Labour in relation to its poverty target, but 5 million people forgotten by Labour and denied the initiative to work because they were being paid to be on welfare. It was deeply shameful that they ignored people in that way, and I am proud to be part of a coalition Government who are at least making an effort to deal with it.

Between 2005 and 2010, 400,000 people born in the UK moved into unemployment, yet 700,000 jobs were taken by people not born in this country. There was something wrong with a system that said to people in my constituency, “You can be on welfare, while someone from eastern Europe works in the local hotel or the abattoir.” That is shameful, and we need to deal with it, because the opportunity to develop must start somewhere.

I feel passionately about this issue when I talk to the deputy manager of a hotel in my constituency. He came to this country from the Czech Republic, and within 18 months he was a deputy manager. I was very pleased for him, but I thought that the job could have been given to someone from the locality if that person had not been held back by the welfare trap that we had created. Our gradual move towards universal benefit is a brave move, but although it has been supported by Opposition Members in terms of their rhetoric, in terms of their actions they have rejected every effort that we have made to reform a system that is immoral, and is the basic reason for the fact that we have so much inequality in Wales.

The Labour party in Wales should feel particularly ashamed. The areas in Wales that are really struggling have given their loyalty to the Labour party not for one generation, not for two generations, but for three or four generations, and they have been failed time and again. It is clear from today’s debate that the Government are making really brave decisions to try to ensure that people are not seen merely as numbers so that they can be taken £1 over a moveable poverty line. Our coalition tries to see the value of each and every individual, and the contribution that the individual can make. Nothing will make a bigger impact on inequality than getting people back to work when they are capable of making a huge contribution that is currently being wasted.

When I see motions of this kind, what I see is the same old rhetoric of the middle-class, left-wing readers of The Guardian who have dominated this country for far too long. What we need are the reforms that are being implemented by the Secretary of State for Work and Pensions. What we need are the tax reductions that are being implemented by the Chancellor of the Exchequer. What we need is to show faith in the people of the country, whether that country is Wales, Scotland or the United Kingdom. Government Members see those people’s potential, but I fear that Opposition Members—especially those in the Labour ranks—saw them simply as numbers to be dealt with in the context of their poverty targets while doing nothing to help them, and they should be truly ashamed of that.

--- Later in debate ---

[Nia Griffith]

As the hon. Gentleman points out, there is still a long way to go. There are still many things that we all need to put right. Carmarthenshire county council has decided that over the next two years the 1% pay increase should be weighted towards those on the lowest pay to try to bring them up to the living wage, thus penalising the people at the top, because that is a way of bringing in a measure of equality.

Yes, of course there is still a lot to do. We began with the Gangmasters (Licensing) Act and the agency workers directive, but there is still a lot more to be done on the whole issue of zero-hours contracts, including using procurement, in the same way as the Welsh Government, to tackle blacklisting. When someone is blacklisted—they can no longer get employment in particular industries because their name has been passed round from employer to employer—it can be a terrible blight for a family. As in Wales, through the power of procurement we will say that we do not want public bodies to use contractors that are blacklisting people. That will be a powerful provision to raise the living standards of all those being paid from the public purse, whether by councils directly or by contractors.

People are able to make choices and there are mitigating factors and different ways of tackling poverty. In Wales, for example, by 2015 the Welsh Government will have doubled the number of children and families benefiting from Flying Start, whereas in England 500 Sure Start centres have closed. The Jobs Growth Wales programme is ahead of target in enabling 4,000 young people a year to take on a job, mostly in the private sector. It has a very high success rate, with some 80% being offered permanent jobs at the end of their stay. The Welsh Government have also increased the funding of the pupil deprivation grant, giving it a £35 million boost to help those from the least well-off homes to achieve their potential.

Equality is also about making those with the broadest shoulders take the biggest load. That is why we introduced the 50p tax rate, and we would reintroduce it for those earning more than £150,000 per annum. It has now emerged, from figures produced by Her Majesty’s Revenue and Customs, that almost £10 billion more was raised by the 50p tax rate during the three years it was in place than was originally estimated by the Government in 2012. The shadow Chancellor, my right hon. Friend the Member for Morley and Outwood (Ed Balls), has confirmed our support for a mansion tax. We have used the tool of a bankers’ bonus tax in the past and would do so again in order to provide thousands of job opportunities for young people. We would roll out a house-building programme of 200,000 houses a year to help bring down the price of housing. Labour’s Companies Act 2006 includes provisions the Government have refused to implement that would enable pensioners and investors to see how pension fund managers vote on remuneration packages, which would bring transparency to what is happening at the very top of the pay scales.

As prices continue to rise faster than wages, people are unable to cope with the expenses they face at the end of the month, which is making them ever more prey to exploitation by payday loan companies charging exorbitant interest rates and costs. That is why we have called for the Financial Conduct Authority to use its powers to implement, as soon as possible, a total cost cap on the amount that payday lenders can charge, in order to protect borrowers and ensure that Britain has a consumer credit market that works for everyone. Under pressure from Labour and other campaigners, such as Sharkstoppers and Debtbusters, the Government have now agreed to grant the newly created FCA the power to cap the total cost of credit through the Financial Services Act 2012 and to compel it to use that power through the Financial Services (Banking Reform) Act 2013.

As well as capping interest rates, we need to find alternative sources of loans to help people in difficult circumstances and to put further pressure on the payday loan companies and squeeze them out of the market. With some lenders making profits of as much as £1 million a week, my right hon. Friend the Leader of the Opposition has called for a levy on such profits in order to raise capital for alternative and affordable sources of credit such as the credit unions. That would give an additional £13 million to credit unions to offer more financial support to people who are in need of loans.

[Guto Bebb]

Like the hon. Lady, I am a great supporter of the credit union movement, so I was surprised to be informed by my local credit union last Friday that the funding from the Welsh Labour Government to the credit union movement in Wales will be reduced dramatically next year.

[Nia Griffith]

I am not aware of that, so I will not comment on it, but we certainly need to look at alternative forms of credit in order to stop people having to go to payday loan sharks. Given the explosion in the volume of payday loan company adverts in the past few years, we have also pledged to take action to exclude them from children’s programming in the same way as alcohol and gambling advertisements are excluded.

We very much support setting up a commission of inquiry to investigate the impact of the Government’s welfare reforms on the incidence of poverty. I, together with many Labour colleagues, spoke in favour of such a commission in the debate on 13 January, and I am wondering what the Government will do about that. I urge them to set up such an inquiry as soon as possible.

Tomlinson Report

Guto Bebb Excerpts

Tuesday 17th December 2013 Westminster Hall

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to serve under your chairmanship this morning, Sir Roger.

I am pleased to have secured this debate on the Tomlinson report prior to the Christmas recess, because it is important and touches on a lot of my work on interest rate swap mis-selling. The report’s scope is wider than just the interest rate swap mis-selling scandal, and it looks at how a certain part of the Royal Bank of Scotland, namely the global restructuring group, has been operating in relation to small businesses. It is important to place on the record that Lawrence Tomlinson’s findings reflect what I have seen both as a constituency MP and in my work on interest rate swap mis-selling.

Prior to the report’s publication, Lawrence Tomlinson spoke to the all-party parliamentary group on interest rate swap mis-selling, and it is fair to say that many Members in that meeting were shocked by what they heard about banks’ behaviour. What should concern us more than the fact that Members were shocked by Mr Tomlinson’s comments is that many of them were not surprised. When some of the report’s findings were highlighted, it was concerning to see that such activity was recognised by Members from their constituency casework. If MPs are not surprised by allegations of behaviour that verges on the criminal, there is cause for significant concern about banks’ behaviour.

Since the publication of the report and its findings, there has been a certain degree of blow-back. Elements of the press have suggested that Mr Tomlinson might have a personal agenda or vendetta against RBS. I therefore want to place on the record that I have never banked or had any banking facilities with RBS, and have no vendetta whatever against it. My concern lies with the numerous constituents who have been treated in a manner that I find unacceptable. It is important to highlight what the report found and how it resonates with those of us who have dealt with businesses that have been badly treated by their banks.

The report was met with a significant degree of sympathy when originally published, but concerns have been highlighted since then. I want to examine three key issues of concern today; other Members may have different issues to discuss. First, I want to concentrate on the report’s findings in relation to whether the bank deliberately attempted to engineer situations in which businesses defaulted or breached their banking covenants. One of the report’s key claims is that businesses often found themselves in difficulties due to the bank’s deliberate efforts to ensure that that happened, including through revaluations. Once banking covenants were breached, businesses were placed in the so-called supporting hands of the global restructuring group.

The second question that deserves consideration is about the nature of the support that businesses receive once subjected to the support structure of the GRG. Is it really trying to get businesses back on track, or—as in many cases that I have seen, and in many cases highlighted by Lawrence Tomlinson—are businesses subject to unfair and penal rates of interest and charges, and often asked to pay for reports and valuations that are almost never in the businesses’ interests?

The third question is about the impartiality of the whole insolvency process. The report asks significant questions about whether the process and all the professionals involved actually operate in an independent manner. I have seen a number of cases of valuations changing dramatically because valuers have been instructed to undertake a second valuation by the bank. That raises significant concerns about the independence of those valuations. Consultants, solicitors and accountants have been asked to undertake work, paid for by the business, on the instruction of the banks. Time and again, that work has been less than helpful to the survival of the business.

When I conclude my remarks, I will touch on the selection of Clifford Chance to conduct an internal review of RBS. I have no doubt that Clifford Chance is a reputable firm of solicitors, but I have concerns about whether it will pass the smell test of being impartial enough to undertake such a review, given its links to RBS.

Have RBS and the global restructuring group been guilty of engineering a default or a breach of covenant? There are examples. A constituent of mine had a quarry with landfill rights that was valued at £9.5 million. The bank decided to enforce a revaluation of the asset, which came back at £2.5 million. As one can imagine, the impact of a £7 million reduction in value was an immediate breach of the banking covenant. After long and hard-fought efforts by the company, there was a final agreed valuation of £4.5 million. The company agreed to that simply because it was desperate and wanted to try to keep trading. How can a £7 million reduction in value occur when the company undertaking the revaluation was the same one that made the original valuation only a few months previously? That question needs to be answered. Also, why did the company have to pay £14,000 for a valuation that it successfully disputed?

I was contacted by a business yesterday with a large portfolio of flats, one of which was valued by the GRG at £100,000. A sale price of £145,000 was achieved yesterday, but the bank is still unwilling to make any compromise on the valuation of the entire portfolio. When one flat is sold for £45,000 in excess of the bank’s valuation, one must question why the whole portfolio is not re-examined from a banking perspective. The business is paying penal rates of interests on the basis that it breached its loan-to-value covenant, yet the one sale that has been achieved shows that the asset’s value was much higher than the value that the bank placed on it.

Another example, of a hotel in north Yorkshire, landed on my desk because the business has also been affected by interest rate swaps. The hotel was independently valued by Matthews & Goodman at £3.4 million, but the bank was clearly unhappy with that valuation, which gave the business a healthy loan-to-value position, so it instructed the business to get a second valuation within two months. The business was charged £3,500 for the privilege, and the second valuation came back at £1.65 million. The result was that the business was in breach of its banking covenants. It is unsurprising that the business feels hard done by: an independent valuation suggested a value of £3.4 million, but less than three months later, another valuation, done on the instructions of the bank but paid for by the business, was less than half that.

[Glyn Davies (Montgomeryshire) (Con)]

I thank my hon. Friend for allowing me to intervene. There is a similar example from my constituency. Does he agree that it is often the time scale in which the bank demands a response that kills a business completely? A business in my constituency was given 24 hours to resolve a position that was not a difficulty. The business was bankrupted and its principal has gone to work in the far east, where they have created many jobs and much good business. That has been taken away from mid-Wales.

[Guto Bebb]

That is a fair point about timing. Another of my constituents was told that his bank charges would be increased to a weekly fee of £4,000. The letter informing him of that arrived on 21 December, just before his business closed for Christmas, which I am sure was enjoyable because of that letter. There was nothing to be done until the new year, because the business was closed. There is an issue there. To go back to the hotel I was talking about, as a result of the lower valuation, the business can show on paper that its bank charges over the following six months were £250,000 higher than they had been in the previous six months.

[Tessa Munt (Wells) (LD)]

I applaud the hon. Gentleman’s work in this area, and it is a joy to work with him. I want to mention a similar case involving a constituent who had a long-term arrangement with a bank. His business, which owns housing, has been told by the bank that it wants to finish his loan on 31 March, so he is required to sell the housing on 1 April. How can that be fair?

[Guto Bebb]

That is an issue on which the bank would have to respond, because my view is that clearly it is not fair.

I have a fourth and final example of businesses finding themselves in difficulty due to decisions taken by the bank. A company that contacted me recently had net profit of £272,000 on turnover of £3.5 million in 2008, net profit of £281,000 on turnover of £4.4 million in 2009, and net profit of £268,000 on turnover of £3.9 million in 2010. Those are all healthy figures. The company employed about 40 members of staff. In late 2010, however, an agreed overdraft facility with the bank was withdrawn, because a loan agreement under the EFG—enterprise finance guarantee—system was declined. The company was therefore put into GRG support, and the group proceeded to disallow a payment of £14,000 in corporation tax, on which basis the company found itself in difficulties and ended up going into administration. The final set of management accounts for the nine months before the company went into administration showed a net profit of £190,000. The company would argue that its difficulties were caused by the bank refusing the corporation tax payment, even though the final accounts showed a profit.

Such businesses feel extremely hard done by as a result of the way that the GRG and RBS have behaved towards them. My evidence could be described as anecdotal—I am more than happy to accept that—but it is important to emphasise that the cases highlighted in the Tomlinson report are the tip of the iceberg; they are not representative of an issue created by Lawrence Tomlinson himself. I have seen these issues in my constituency, and other Members have seen them in theirs.

Once businesses are in the GRG, the concern is that its attitude and behaviour is less than helpful. RBS argues that the whole purpose of the group is to put businesses back into health, but it is difficult to see how a business allegedly subject to cash-flow problems is helped by having an additional £250,000 in fees in a six-month period. Time and again, I have seen the fees charged by the bank go up when businesses go into the GRG, and they apparently bear no relation to the amount of work done in support of the business.

So-called independent reviews are forced on businesses by the bank, whether through a valuation, accountancy work or solicitors. Professional fees are charged to the business, but the instructions come from the bank and, often, the reports go to the bank first. We have to be concerned about that. Furthermore, the businesses often have no say whatever in who the reviewers will be. There is a question about the conflict of interest faced by those professionals: if they are being paid by a business, but instructed by the bank, surely they are conflicted in their work.

The other thing that I have seen time and again is payments by suppliers not being prioritised. There is almost never a case in which a payment to suppliers would be allowed if that took the business beyond the terms of its overdraft or facilities, and yet I have never seen a case in which charges due to the GRG have not been taken because they will take the business over its overdraft limit. That is a fair point to make, because if a business can go over its agreed limit in order to pay the bank charges, why on earth will the bank not allow a payment to a supplier if that supplier is crucial to the continuation of the business in question?

I have already mentioned a constituent of mine struck with a £4,000 weekly fee for the continuation of his banking facilities. To return to him, after three months of negotiation, the GRG agreed that it would accept £2,000 per week. There was no explanation as to why the fee was initially £4,000, or why £2,000 was now acceptable. I get the impression that the reason why it was £4,000 to start was that the bank thought that it could get away with it; the fee was subsequently £2,000, because the business put up a fight—its accountants and solicitors argued the case, as did the MP.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

Given all that, does the hon. Gentleman agree that removing the cash flow that assists in running the business when it is under pressure simply creates additional problems?

[Guto Bebb]

Absolutely. When a business is taken into the GRG in order to help with cash flow, it is difficult to envisage why there is therefore justification in imposing a £4,000 or even £2,000 per week charge for support. There is no indication of what that support entails, but it certainly does not support the cash flow—let us put it that way.

The company I mentioned was also expected to produce new accounts. It had monthly management accounts produced by its accountants, but that was not good enough for the bank, which had to have KPMG to do the work. Again, it was not good enough for the bank for the company to use its solicitors to value assets that were subsequently sold; it had to use solicitors chosen by the bank. That is oppressive behaviour by the GRG towards businesses that it is allegedly meant to be supporting.

It is important to bear in mind that when we highlight such cases, the concern is that we have examples from throughout the country, which makes the case that there is an issue here that needs to be looked at. I am pleased that the regulatory authorities are taking a look at the Tomlinson report, but I hope that they also take on board the comments made today by me and other Members on our experiences of businesses not included in the Tomlinson report. This is happening throughout the country and it needs to be highlighted.

I also want to highlight an interview with Derek Sach, the founder of the GRG, by Debtwire in October 2012, which is rather chilling to someone who is of the view that the bank ought to be there to support small businesses. He describes the steady flow of “new distressed businesses” into the GRG as an opportunity. That is a key point. If the head of the GRG considers that distressed businesses coming into his organisation are “opportunities”, his view is that the group is there not to support businesses, but to gain commercial advantage on the back of those businesses. Furthermore, if any Members present represent a shipping business, they should be concerned, because Mr Sach also emphasised that he sees significant “opportunities” in that sector, because shipping is going through a difficult period—in other words, the GRG vultures are hovering, waiting for a further supply of distressed businesses of which to take advantage.

Throughout the process, I have also seen numerous examples of instructions by the GRG not to prioritise the Crown on VAT, corporation tax or pay-as-you-earn payments. That is concerning from any high street bank, but to see such an instruction to businesses coming from a bank that was supported and saved by the taxpayer should cause serious concern to Government. I hope that the Minister will respond to that specific point.

I have a final point to make before my brief comment on Clifford Chance. The whole insolvency process is a concern. When an insolvency practitioner or administrators go into a business, the poor old creditors will often receive little in return, because the fees will take the vast majority of what is available. Hon. Members need not take my word for that, because in a recent article, James Nicholls of Nicholls & Co, an insolvency lawyer based in Birmingham, highlighted the fact that the insolvency business is complicit in what is, in my view, an abuse of small businesses. He made the point that

“we in the insolvency industry have been complicit, collaborative and have completely failed in what our true roles should be. Almost everyone in our industry has effectively been ‘bought off’ by the Banks—accountants, IPs”—

that is, insolvency practitioners—“lawyers, surveyors—everyone.” That is not my comment but a comment from somebody involved in the insolvency industry. His argument is that the industry has turned a blind eye to the behaviour of the GRG and other turnaround companies: it has been bought off by the fees and affected by the culture that has existed in the past decade.

If we are serious about supporting small businesses and supporting the growth of our economy through their development, we have to ask ourselves whether that sort of attitude towards them—seeing them as opportunities to make money rather than as businesses to be supported—is the right way forward.

[Jason McCartney (Colne Valley) (Con)]

Everything my hon. Friend is saying is familiar to me. I have been supporting a decent-sized manufacturing business in my constituency. The bank concerned is not RBS but another major bank; I want the Minister to be aware of that fact, and I might speak with him afterwards. When a business needs support and is feeling a bit vulnerable, perhaps because it has just lost a contract or is restructuring, instead of getting support from its bank it gets a hike in interest rates and has extra costs imposed on it—for example, an extra £10,000 a month in accountancy costs—and there is no pathway for returning to regular lending.

The circumstances my hon. Friend has described are ones I am seeing with a business in my constituency; instead of getting the support it needs, the bank’s behaviour is creating worry and concern. I am supporting that business as best as I can. This debate is a timely one.

[Guto Bebb]

I appreciate my hon. Friend’s intervention, as it highlights the fact that this is not only an issue for those businesses highlighted in the Tomlinson report but something that we are seeing in our own constituencies.

James Nicholls concludes the article I mentioned by saying that the insolvency industry—by that he means accountants, solicitors, insolvency practitioners and so forth—needs

“to stop defending practices that on close and moral scrutiny just do not stand up to the ‘smell test’.”

I say, “Hear, hear,” to that.

I will conclude my comments by discussing Clifford Chance. I have no doubt, as I said in my opening remarks, that it is a reputable firm of solicitors, and make no comment about its behaviour, which I am sure is of the highest standard. However, by choosing Clifford Chance to undertake an internal review of the allegations made against the GRG, RBS is doing itself a disservice and is not creating any confidence in that review process.

Let us think of the relationship between Clifford Chance and RBS over the past couple of years. Clifford Chance worked on the sale of £80 billion of toxic UK commercial real estate by RBS, which was called Project Isobel internally; it acted on behalf of RBS on the sale of RBS Aviation Capital; it was instructed by RBS to deal with the recent IT outage suffered by RBS and NatWest; and it advised RBS on the LIBOR scandal.

I have no doubt that Clifford Chance feels that it could act impartially on the review, but businesses up and down the country genuinely feel that they have been treated badly by the GRG and RBS and they need to feel confident that the bank is taking their concerns seriously. I would argue that the impression given of a conflict of interests between Clifford Chance and RBS is enough of a reason for RBS to think again and appoint another firm to undertake the review. I welcome the fact that RBS is willing to undertake an internal review, and it has argued that it is creating an independent internal review; but that independence must be beyond reproach. Given the commercial relationship that I have highlighted between Clifford Chance and RBS, it is difficult to make the case that the review will be truly independent and will be able to gain the confidence of the business community. I ask the Minister to convey my concerns on that matter to RBS.

Thank you, Sir Roger, for allowing me to speak for so long on this issue, as I am aware that other Members wish to contribute. My concerns are simple. I believe that the issues highlighted in the Tomlinson report are worthy of consideration, and that it is good that the regulatory authorities are investigating on the basis of the report. But it is also important that Members of this House from all parts of the country highlight their experiences with the global restructuring group. RBS is not, in my view, the only bank to have behaved badly, but RBS and the GRG are the focus of the current report.

[Toby Perkins (Chesterfield) (Lab)]

I am grateful to the hon. Gentleman for giving way just as he is concluding his remarks, which have been very thoughtful. He is right to say that the GRG might not be the only perpetrator of this kind of behaviour, but it is the focus of the report. Does he think that the evidence that he has heard from colleagues and has read in the report is enough to say not just that there might have been bad practice but that, as Tomlinson appears to allege, systematic fraud is being perpetrated by RBS—is that the case that he is making?

[Guto Bebb]

I would be extremely wary of using the word fraud. In my view, there has undoubtedly been systematic bad behaviour and I could speak at some length about West Register, which is part of RBS, and the way in which assets have been taken from businesses by the GRG and West Register—there is a conflict there. However, even with the privilege afforded by being in the House, I would be careful about using the word fraud.

[Tessa Munt]

Does the hon. Gentleman agree that we could summarise the matter in this way? Customers have trusted their banks over so many years and that trust has been built up through generations. People still think that they should trust their banks, but there is now a complete imbalance in that relationship, as a practice has grown up in which highly commercially minded organisations are managing personal money and business money. People are now not qualified to understand what they are being offered by their so-called friends, the business or relationship manager and their bank.

[Guto Bebb]

Undoubtedly. That imbalance is something I have highlighted time and again in relation to the issue of interest rate swaps. I do not think it is reasonable to assume that we are talking about two equal parties when one is a banking organisation that has the ability to pull someone’s livelihood away from them at the stroke of a pen.

To conclude, the attention focused today on the GRG and RBS reflects the fact that RBS was bailed out by the taxpayer to such a great extent. With that taxpayer support comes added scrutiny. We should not take our eye off the behaviour of other banks and there are issues within those banks, but the key point is that the bank that we are talking about today is supported by the taxpayer and so has an obligation to justify its behaviour, over and above what is expected of other banks.

--- Later in debate ---

[Toby Perkins]

I think that many important points have been raised during the debate and that is certainly one of them.

We share the disappointment at the continued excesses in bank bonuses and the failure of the Government’s bank bonus levy to yield the returns that it promised. After all, we are having this debate just a day after publication of a survey showing that managing directors at banks in London are expecting a 44% rise in bonuses for 2013.

I turn now to some of the contributions made by hon. Members to the debate. Unsurprisingly, the hon. Member for Aberconwy made a series of significant contributions to the debate that he initiated. It was interesting that he reflected on the fact that Tomlinson had spoken to the all-party group on interest rate swaps. I was surprised to discover that during this process, Tomlinson never spoke to RBS and never gave it an opportunity to put the allegations that he was making in an alternative light.

The hon. Gentleman refused to take the bait that I generously offered him to say that the behaviour highlighted in the Tomlinson report would have verged on the illegal. I think that he understates the case. Tomlinson is fairly unequivocal. He is clearly alleging systematic fraud on the part of Britain’s largest bank—in effect, it is feathering its own nest by bringing down businesses that without the intervention of the bank would have survived and thrived.

[Guto Bebb]

It is fair to say that the allegations in the report are extremely serious. That is why, in my initial remarks, I welcomed the fact that the Government have referred the report to the relevant regulatory authorities—because I think that it is important that those allegations are looked at very carefully. However, the purpose of this debate was to highlight the significant effort in the media to portray Mr Tomlinson as a gentleman with a vendetta against RBS. The opportunity today was to highlight the fact that constituency MPs have seen behaviour by RBS and the GRG that is identical to that highlighted in the report.

[Toby Perkins]

There is no question about it: we have heard a lot of evidence of that sort. I agree, of course. I welcome the fact that the Government have referred the report on, but it is hard to see how they could have done anything else, on the basis of the strength of the report. The way in which the situation has been handled poses questions about judgment in terms of the seriousness of the allegations being made.

The matter will now be looked at by the Financial Conduct Authority. We are talking not about an external report to which the Government have to respond, but about a report written by someone at the heart of Government, which is apparently based on anecdotal evidence and which does not give RBS much of a right of reply. That is why I have questions.

The hon. Member for Aberconwy raised a legitimate question about the impact of the charges levied by banks on businesses that are already struggling with cash flow, and the powerlessness that businesses feel when they enter the restructuring process. In some cases, a business enters the process knowing that it is in trouble and feels as though the process is making the situation worse. I also recognise that Tomlinson highlights, as my hon. Friend the Member for Dumfries and Galloway (Mr Brown) has said, the fact that some businesses did not consider themselves to be in crisis until the moment they entered the process. The report raises many questions and we need to hear the Government’s response. It is important that we continue to put pressure on the banks, and indeed it is hard to see how that pressure will be alleviated.

My hon. Friend the Member for North East Derbyshire (Natascha Engel) highlighted suspect practices by RBS that were experienced by a business in her constituency. She repeated Tomlinson’s claim that systematic fraud was taking place. Interestingly, she asked the Minister to explain why he was certain that such practices were not occurring. Given that the report has come from the heart of Government, I imagine that he must be pretty clear that such fraud existed. I do not want to prejudge his comments, but I would be interested to hear what he has to say on that. My hon. Friend also made a significant point about the imbalance and unfairness of the relationship between banks and firms that are battling to stay afloat and do not have the resources to take on a major bank.

My hon. Friend the Member for Dumfries and Galloway raised an example from Barclays that it made it clear that such practices are not confined to RBS, although the Tomlinson report was entirely about RBS. My hon. Friend focused on businesses being driven into distress. He said that RBS was 80% state controlled. Although RBS is state owned, it has become clear under successive Governments that the bank is not state controlled; it is run in its own way. Perhaps we need to consider the fact that an organisation owned by Government is not always working in the best interest of British businesses and UK plc.

As I have said, we share many of Mr Tomlinson’s concerns and conclusions, and I now turn to the areas on which we agree. The Tomlinson report recognises the fundamental faults of the lack of competition in the British banking system, on which the Opposition wholeheartedly agree. Some 89% of small businesses are locked into the big five banks. The report also speaks of the need to change banking culture so that banks see small businesses as partners rather than merely cash cows, and so that the two can grow locally together. Such a model would not only be good for small businesses but lead to a stronger and more durable overall economy. That is why Labour proposes a new generation of local banks based on the Sparkassen model to add genuine competition on the high street. That would create a major new player that would not operate according to the same lending models as all the other banks, and would boost local decision making.

Although net lending has fallen every year during the crisis, our biggest European competitor, Germany, has seen an increase in lending over the same time. After the crash in 2008, a crisis occurred in bank lending, and far from being improved in the years since, it has continued to constrict. Tomlinson is right to say that we need greater competition. Alongside the new local entrants to the banking market, we are calling for greater bank account portability to ease the path into the market. Even a huge bank such as Santander found it exceptionally difficult and expensive to gain a foothold in the UK market.

We also agree that the culture of selling additional products and services alarmingly supersedes that of best serving customers’ needs, as was demonstrated by the interest rate swap scandal. Britain is currently facing a mutual crisis of confidence in small business lending, and in the relationship between banks and businesses more widely. A survey of members of the Federation of Small Businesses found that more than half of small businesses believe that banks do not care about small businesses, and, similarly, banks fear lending money to businesses. Such mutual distrust is one of the reasons why we have had the slowest recovery for 100 years. The Tomlinson report will, indisputably, further damage the confidence between banks and businesses. The Government have a grave responsibility to ensure that, when such damaging criticisms are made, every possible step has been taken to verify and scrutinise those criticisms before the Government endorse them.

In that context, we have significant reservations about a report that contains such serious allegations of systematic and widespread corporate fraud. There are concerns that, at best, the Tomlinson report will not be seen as being truly impartial. We have reservations about the Government’s endorsement of the report when its evidence base has not been subject to any public or, as far as we are aware, departmental scrutiny. The Secretary of State for Business, Innovation and Skills told the House during recent Business, Innovation and Skills questions that Tomlinson’s

“accusations are echoed in the report published by Sir Andrew Large, who was appointed by RBS.”—[Official Report, 5 December 2013; Vol. 571, c. 1080.]

However, the Tomlinson report states that businesses rarely survive the global restructuring group process, and that they never come out again. Tomlinson highlights the fact that

“a whistleblowing ex-RBS banker confirmed that they could not think of any occasion in which a business entered RBS’ Global Restructuring Group and came back into local management.”

The report by Sir Andrew Large showed that 50% of businesses traded out of the GRG, and that only about 10% became insolvent, so it is difficult to see how the Secretary of State could use the Large report as a justification for the publication of the Tomlinson report.

The Parliamentary Private Secretary to the Secretary of State for Business, Innovation and Skills appeared to be supportive of what the hon. Member for Aberconwy said, so I do not know whether his contribution has the Secretary of State’s implicit support. The hon. Members for Aberconwy and for Wells (Tessa Munt) certainly appeared to be working collaboratively. The allegations in the Tomlinson report are incredibly serious, and they clearly carry the stamp of Government.

If Labour had been in office when the issue came to prominence, we would not have been as quick as the Secretary of State has been to rush out this departmental report, about which there are many questions to answer. I am told that if Tomlinson had chosen to speak to RBS, he could have been referred to companies such as Samsonite, Fairline, Independent Slitters Ltd and many others, which would have told him that the GRG process was positive for them. He chose not to do so, and as a result the report represents serious concerns but does not reflect all points of view in a balanced way.

Had Labour been in office, we would have ensured that the FCA, which is the appropriate body to investigate such grave allegations, was immediately commissioned to conduct a full and proper inquiry before the trust between banks and businesses could be damaged by a sensational report such as the Tomlinson report. I do not suggest that bad practices do not exist or that we have not been pushing the banks to identify where they have failed their business customers, but we consider that the anecdotes in the report provide a pretty tenuous basis for such serious allegations to be made with the stamp of Government approval.

With that in mind, I ask the Minister to address the following questions. Was the Secretary of State aware of Mr Tomlinson’s ongoing dispute with RBS when he was commissioned to produce the report? If so, what assessment did the Secretary of State make of any potential conflict of interest before giving it the departmental stamp of approval? Why did the Secretary of State trumpet the report as independent when it was produced in his Department by someone with a close interest in both the party and the issues under discussion? Why were earlier references to malpractice at Lloyds removed from the final version of the report so that it focused purely on RBS, the bank with which Mr Tomlinson is in dispute, and why was RBS not shown the final report, nor given a chance to submit evidence to it?

The report is sadly lacking in detailed referencing and evidence. Given that the basis of the report seems to be that many of the businesses will have collapsed—presumably, that is on the public record—will the Department be publishing detailed citations for where the allegations have come from? Is the Minister personally satisfied that due diligence was carried out by his Department before it promoted the report? Does he agree that if the report’s claim that RBS was systematically involved in deliberately distressing businesses that would, without its intervention, have thrived, that would be a matter of corporate fraud on a huge scale, and such an allegation should be thoroughly investigated before being produced in a Government-backed report? Does he think that the appropriate level of scrutiny was given to the report prior to publication?

Finally, as we head towards a general election, I suspect we will hear from Ministers why they think the way in which the Secretary of State operated was not the way things would have been done under a Conservative Government. If we had a purely Conservative Government, would they have handled the report in the same way? If not, in what way would it have been different?

--- Later in debate ---

[Sajid Javid]

I say again for the record—I hope that I have made it clear to the hon. Gentleman—that this is a personal report by the entrepreneur in residence at BIS. That has always been the Government’s position, and neither BIS Ministers, Treasury Ministers or any other Ministers have ever said anything different. Nevertheless, it is an important report. He will know that the entrepreneurs in residence initiative was started by this coalition Government in order to allow further analysis of what can be done to help the SME sector.

In that vein, we welcome the Tomlinson report, which is why we take its allegations seriously and why we are pleased that the FCA has acted quickly so far to consider them. This debate has shown how much parliamentary interest there is in the issue on behalf of our constituents, due to the number of small businesses in our constituencies that have come to us with similar concerns.

[Guto Bebb]

The hon. Member for Chesterfield (Toby Perkins) highlighted concerns about the fact that there was no advance consultation with RBS, but in his comments, Sir Andrew Large said that managers at RBS had very little understanding or scrutiny of the global restructuring group. In view of the fact that the report highlights concerns about the GRG, is it really a huge loss that consultation did not take place with a group of managers who did not know what was going on within the GRG, according to Sir Andrew Large?

[Sajid Javid]

My hon. Friend raises an important point. I hope that all that will be considered in the independent inquiries taking place.

I congratulate my hon. Friend once again on securing this important debate on issues about which he and many other Members feel strongly. Those issues will be seriously considered by the FCA, and further as required. It is important at this stage, though, to allow the FCA, as the conduct authority, to investigate the claims made in the Tomlinson report.

Cost of Living

Guto Bebb Excerpts

Wednesday 27th November 2013 Commons Chamber

[Guto Bebb (Aberconwy) (Con)]

My hon. Friend talks about the future. How does he respond to the approval, given by the Labour party yesterday, of a 5% increase in council tax in my constituency—a decision made with no consideration of the cost of living for my constituents?

[Sajid Javid]

My hon. Friend makes an excellent point. What goes on in Wales is an excellent example of what a Labour Government would do, if they had the chance, in the United Kingdom. As well as increases in council tax, there has been a 10% cut in the NHS budget in Wales. That tells us exactly what Labour’s priorities are.

Transport Infrastructure (North Wales)

Guto Bebb Excerpts

Tuesday 26th November 2013 Westminster Hall

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to serve under your chairmanship, Mr Caton, and to follow the right hon. Member for Delyn (Mr Hanson). I am pleased to be involved in this debate, and I congratulate the hon. Member for Alyn and Deeside (Mark Tami) on not only securing it, but articulating a positive view of the future of the Welsh economy.

It is important that we should sometimes speak as Members for north Wales, rather than trying to make party political points, and the spirit of the debate has been positive. We are all extremely proud of the success of the north-east Wales economy, which, it is fair to say, is interlinked with that of the north-west of England. As a Member for a constituency further west, I want to see some of north-east Wales’s success move along the A55 and the railway line to ensure that more of north Wales benefits from the economic performance of north-east Wales.

The success of north-east Wales—I am thinking of Airbus in particular—is putting Wales on the map. A week and a half ago, when the announcement was made about Airbus’s success in securing further significant orders, I happened to be in Washington, and it is my pleasure to say that both Senators and Congressmen were aware of Wales, mainly because of the success of Airbus. For Wales to be known for the high-skill, high-technology industry in the area is an important development.

On the performance of our predecessors, I should say that before making my maiden speech, I read Lord Roberts of Conwy’s, but I felt depressed afterwards. He said that he wanted to do two things during his time in Parliament—first, to ensure that there was a dual carriageway from Chester to Holyhead, which was delivered—

[Chris Ruane]

It is 25 miles short!

[Guto Bebb]

Almost to Holyhead. Lord Roberts also wanted to ensure that Bangor had a new general hospital, which was delivered. When preparing a maiden speech, looking at a predecessor’s performance can be a sobering experience.

The road infrastructure in north Wales is actually fairly good, but we need to consider whether we can deal with some of the pinch points, not least those on the A55, which can create difficulties—in particular on summer Friday nights when people are heading into Wales for the weekend from the north-west and Yorkshire and any accident or problem can cause severe delays.

The A55 is a designated Euroroute and yet that dual carriageway has two roundabouts in my constituency—the only two roundabouts on Euroroutes in the whole of Europe. I can assure everyone that the caravans and tourists trying to get down to Anglesey or the Llyn peninsula make returning from my constituency office on a Friday night a difficult journey. The A55 does need some improvements, but we should be fairly pleased with the current road infrastructure.

We need to look carefully at the required investment in rail. Anybody who travels from London to north Wales is well aware that there is a two-hour service to Chester, where one must often change trains and enter what feels like a less effective system. The mere fact that it takes two hours to get from London to Chester, but then another hour and 45 minutes to reach Holyhead is indicative of the problems.

I warmly welcome the announcement of the £200 million- plus investment in signalling on the north Wales main line, but we need to keep up the pressure for electrification. It is to be welcomed that the Government are delivering electrification in south Wales—in particular on the valley lines—but we need to argue the case for north Wales. Signalling will make a huge difference to speed and capacity, but I acknowledge that we need to look at electrification as the long-term goal. The north Wales railway line can take high-speed rail, by which I mean a speed much faster than the current performance. Much of that can be achieved through signalling, but we must keep up the pressure for electrification.

Given the growth and renaissance of Liverpool, the fact that there is no direct link from there to north Wales is problematic. People in my constituency travel to Airbus, to Deeside and over the border for work, and I am sure that they would travel even further afield if the transport links existed. I would support a direct link into Liverpool.

We should, however, be confident of the fact that positive things are happening on the railway, and not only in signalling. Virgin Trains has plans to develop services in north Wales. My constituency is dependent on tourism, so a service from Llandudno Junction to London in three and a quarter hours, which is what Virgin envisages as possible, would make a huge difference. To be able to say that a constituency such as mine was within three hours and 15 minutes of London would be a huge boost to tourism in my area.

The Conwy valley railway has also seen significant investment into communication for the cabs travelling up and down the line. It is an important link, but we sometimes think of it as a line that happened to escape the Beeching cuts. I recently gave a hitchhiker a lift from Tal-y-Cafn back to Dolwyddelan when on my way to a surgery. The gentleman in question worked at the new Bodnant Welsh food centre. He catches the train down from Blaenau Ffestiniog to Tal-y-Cafn in the morning and then hitchhikes back in the evening, because he cannot afford the rail fare. He wanted to work, so he preferred to do that than be unemployed in Blaenau Ffestiniog. He cannot hitchhike in the morning, because he needs to be in work for 8 am, so the only way he can make it is via the Conwy valley railway.

Another important point about the line is that my constituency and that of the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) have both seen huge development in outdoor sports, such as mountain biking. Market research in the area shows that many of those who visit for such sports would really like to travel by public transport, so the Conwy valley railway is important. My aspiration is that such people should go biking on the new tracks at Blaenau Ffestiniog while staying at Betws-y-Coed or other places in my constituency. The railways are getting some investment, but we need more.

Before I finish, I have a few points to make about infrastructure. When discussing infrastructure, we need to talk about broadband. The fact that 10% of the broadband fund has been spent in Wales is a real success for the Government and a great success for the partnership between Westminster and the Assembly. The important investment from the Department for Culture, Media and Sport, which has been matched and supported by the Welsh Government, is most welcome.

If we aspire towards a modern economy, broadband infrastructure is just as important as any transport link. Frankly, in an area aspiring to have new businesses, saying that we have no broadband capability is not very persuasive. That is also true from a tourism perspective; time and again I am told by businesses in my constituency that the lack of broadband capability and of wi-fi affects them.

All that must be underpinned by the skills sector. We can talk about the need to invest in infrastructure—whether road, rail or broadband—to our hearts’ content, but we must also underpin all that by training our young people so that they can take the job opportunities. In that respect, the investments in Deeside college, Glyndwr university and, in my constituency, Llandrillo—including the support of Coleg Menai, which is part of Grwp Llandrillo Menai, for the energy sector—provide examples of the further education sector supporting the jobs that, without doubt, we hope to see in north Wales.

Infrastructure is important, yes, but unless we have the skills base in place, we will not be able to exploit the economic potential of the area.

Interest Rate Swap Derivatives

Guto Bebb Excerpts

Thursday 24th October 2013 Commons Chamber

[Guto Bebb (Aberconwy) (Con)]

I beg to move,

That this House considers the lack of progress made by banks and the Financial Conduct Authority on the redress scheme adopted as a result of the mis-selling of complex interest rate derivatives to small and medium businesses to be unacceptable; and notes that this lack of progress is costly and has caused further undue distress to the businesses involved.

I am surprised to be back here 15 months after the first debate on this important issue. I appreciate the Backbench Business Committee—the Chair is in her place—once again offering time to debate it. The first debate made a significant difference. Prior to that debate, the Financial Conduct Authority and the banking sector were refusing to acknowledge that there was an issue that needed to be dealt with. A few days after the first debate, that changed and a pilot scheme was announced.

Members who have followed this issue carefully are aware that the pilot scheme found that approximately 91% of cases investigated between July 2012 and January 2013 had a technical mis-selling, so the process has highlighted the mis-selling of these products. The House should take some comfort in knowing that securing the second debate has also resulted in a significant concession from the banking sector. Members of the all-party group on interest rate mis-selling have argued long and hard that the redress scheme had a central flaw, which is that the technical redress for the mis-selling of interest rate swap derivatives and the consequential losses were linked within the redress scheme. That gave the banks in question a significant advantage, because small businesses facing heavy cash-flow problems were inclined perhaps, under the scheme as it stood, to accept an offer of technical redress without fighting hard over consequential losses, simply because they were desperate for the cash.

As a result of the announcement of this debate last week, HSBC said on Tuesday that it was separating the technical redress from the consequential losses, and other banks have followed. My first call today, therefore, is for the rest of the banks involved in the redress scheme to follow HSBC’s and RBS’s lead. It is several months too late, perhaps, but it is the right decision, and we want to see the other banks following.

[Mark Tami (Alyn and Deeside) (Lab)]

Does the hon. Gentleman agree that the FCA is still dragging its feet and that this has gone on for far too long? I am helping Ged Fitzpatrick, who has a care home in north Wales and who recently suffered a heart attack. I am sure that that had something to do with the stress of this process, which has gone on for far too long.

[Guto Bebb]

Bully-Banks surveyed its members and found that the health impact on them had been significant. I accept that the FCA still has ground to make up, but despite its stating in September that linking both payments was the right thing to do, I am pleased that yesterday it welcomed the decision to separate them. I would rather see a sinner repent, even late in the day, than no changes whatsoever.

--- Later in debate ---

[Mr Speaker]

We all look forward to the publication of the right hon. Gentleman’s thesis on this subject, but in fact I think we have just heard it.

[Guto Bebb]

I accept the right hon. Gentleman’s point. This is clearly an important step forward, however, and we should take comfort from the fact that this place can influence the behaviour of the banking sector. I will be discussing consequential losses later in my speech.

It is fair to say that the 91% finding in the pilot scheme has been replicated in the work done within the redress scheme. The figures released by the FCA in August and September on the individual performance of banks—something for which the all-party group called—have clearly shown that 93% of cases in the redress scheme involved actual mis-selling. So again we have proved that there is an issue that needs to be dealt with.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

I echo the praise from the right hon. Member for Blackburn (Mr Straw) for my hon. Friend. Does he have sympathy, as I do, for companies with more than 50 employees that are not financially sophisticated and which were mis-sold these products, often as a condition of loans to do business, but which now find themselves described as the sort of people who should have been able to see through the sophistry and misrepresentation of the salesmen of these products?

[Guto Bebb]

My hon. Friend mentions the sophistication test, and I will be coming to that; it is indeed something that concerns me and the all-party group.

We have found consistently that banks are admitting a mis-sale in about 93% of cases. Had we found, in the consumer mortgage market, that 93% of mortgages had been mis-sold, would we have allowed nine months to pass between those findings and the situation we now face? We have to ask the question: is it right that these businesses should be treated differently because they are small businesses, when we have found that there has clearly been mis-selling?

[Steve Brine (Winchester) (Con)]

I have many constituents, some of whom are outside this place today, whose businesses are in limbo while they wait for this interminable delay to be sorted. They are unable to press on and employ the people they want to, to grow their businesses, pay their taxes and help to grow the economy, which is what we all need to happen. That is the bigger point in this debate: the impact on the wider economy.

--- Later in debate ---

[Guto Bebb]

My hon. Friend makes an important point, which those on the Front Bench need to take seriously. These businesses have been unable to invest because they simply do not know whether they are financially feasible. Time and again, I have heard stories of people with investment plans who, rather than implementing them and growing their businesses, have been closing elements of their businesses, making staff redundant and just trying to survive.

[Mr Jim Cunningham (Coventry South) (Lab)]

The hon. Gentleman mentioned the situation facing small businesses. Does he agree that some small companies are afraid to challenge their banks because their loans could be cancelled?

[Guto Bebb]

That concern has certainly been raised, but I keep receiving assurances from the banks that that is not the case. I want to take those assurances at face value and would still recommend that anybody who has been sold one of these products should undoubtedly go and talk to their banks. If the banks are unsympathetic, they should come and talk to their MPs, because we can and should intervene.

[Stephen Mosley (City of Chester) (Con)]

Will my hon. Friend give way?

[Guto Bebb]

I will take one quick intervention, but then I will have to make some progress.

[Stephen Mosley]

Is it not the case that some customers do not know that they have been sold swap agreements? Some people have been sold hidden swaps and do not know about it. Does my hon. Friend not think that the banks have a duty to inform customers themselves if they sign people up to such agreements?

[Guto Bebb]

I am grateful for that intervention. I will come to hidden swaps later—“embedded swaps” is the technical term; “hidden swaps” is a fairer way of describing them—because they are a big issue and we need to address them.

The setting up of the redress scheme was the reason why we called this debate. It has taken months to reach an agreement to ensure consistency across the 11 banks involved. Originally we were told that Christmas was the deadline for completion. However, at this point in time there are 30,000 businesses in the cohort—I think that that figure is an underestimate, because of embedded swaps, for example, and the way the sophistication test works—so frankly the Christmas target will not be met.

[Kelvin Hopkins (Luton North) (Lab)]

rose—

[Guto Bebb]

Before I take any further interventions, it is worth making this point. I was recently involved in a mediation meeting with one of the banks and one customer, whom I cannot name, even with parliamentary privilege, apparently. The bank in question made it clear that it could not promise a date for paying redress before 2015. As such, although the intention of achieving consistency is correct, we have to put pressure on the FCA to ensure that we move at a faster pace.

One of the big frustrations felt by the businesses affected and the APPG is that since the pilot scheme was completed, the banks involved have spent upwards of £300 million on the administration of the scheme and recruited up to 3,000 people to deal with it, yet by the end of September only 32 businesses had been offered redress, to the total value of £2 million. I understand the complexity of getting this right, but it is simply not good enough for the banks to be spending that much money and for the businesses that need redress not to be getting it.

[Mr Mark Prisk (Hertford and Stortford) (Con)]

I am grateful to my hon. Friend for giving way; he is doing a fantastic job. It is becoming clear to businesses in my constituency that, in the absence of any penalty after the current agreement—which, of course, is voluntary—the banks are just playing for time.

[Guto Bebb]

That is an important point—that the banks are possibly playing for time—which I think will be touched on in other speeches in this debate. As for the ability of businesses to try to get compensation through litigation, it is important that they take action to protect their positions. The redress scheme is a step forward. It is not working perfectly, but I would still advise businesses to protect their position from a legal point of view.

[Mr David Heath (Somerton and Frome) (LD)]

Will the hon. Gentleman give way?

[Guto Bebb]

I will take a final intervention for the time being.

[Mr Heath]

I thank the hon. Gentleman for giving way and for his work. He said earlier that he could not name his constituents or the bank involved, but I will certainly name Chris and Angela Hays, whom I am trying to help, and the Royal Bank of Scotland. Is it not the case that we have seen a double whammy? We have seen a big bank using a scam on its customers and then using every device to prevaricate and procrastinate to avoid paying the money that those businesses need to survive.

[Hon. Members]

Hear, hear.

[Guto Bebb]

Hon. Members have made their feelings about that intervention very clear; we all share that frustration.

The FCA and the banks have made it clear that the suspension of swap payments is a concession that has been offered, but as yet only 1,000 businesses have been offered the opportunity to suspend payments. A key message that this debate needs to send out is that if a business wants to request a suspension, it has to be in financial distress. Some banks are stating that a business requesting a suspension is admitting to being distressed and therefore needs to go into special measures. Any small business would be loth to find itself dependent on a team of specialists from its bank’s restructuring department. We need to ensure that a suspension of payment can be offered without the need for a business to go into special measures with its bank.

The delays are the reason that we called this debate, but I also want to highlight other concerns that have been expressed about the redress scheme. I have touched on some of them in response to interventions. A key issue is the sophistication test. I acknowledge the need for such a test. Huge businesses can derive benefits from these products, and they will have the sophistication and expertise to understand what they are being sold. However, there is concern about the decision to introduce a sophistication test as part of the redress scheme.

Anyone who takes out a swap in excess of £10 million will be excluded from the scheme because they will be deemed to be sophisticated. The FCA has found that a key aspect of mis-selling involves banks over-hedging loans taken out by businesses. In other words, a business might have a loan facility of £5 million but a hedge in excess of £10 million. In such a situation, the fact that the bank was guilty of mis-selling would provide it with protection within the redress scheme. That is unacceptable. We need a greater degree of flexibility on the issue of sophistication.

[Mr John Baron (Basildon and Billericay) (Con)]

Would my hon. Friend also accept that the banks have made these processes unduly complex, which has resulted in delays in addressing the issues? In the case of one company in my constituency, it has taken the bank 16 months just to recognise the fact that the company was unsophisticated, to use my hon. Friend’s language. That is clearly unacceptable.

[Guto Bebb]

I agree that 16 months is a very long time. Even when cases are accepted into the redress scheme, they seem to be taking a long time. The banks would argue that businesses need to engage with them, but I believe we still need to look carefully at this matter. The sophistication test should be more flexible, and the discrepancies that I have described need to be acknowledged.

Another discrepancy involves the asset value. A business could be excluded from the scheme because of the asset value that it holds. In effect, it could be argued that a business that had been lucky enough to invest in property at the right time should be excluded from the redress scheme because of that piece of luck. If the asset value had increased to a certain level, that could result in the company being excluded from the scheme.

There is also a lack of consistency. In some cases, the banks are ignoring the sophistication test because they believe that a customer would fail it and therefore be eligible for the redress scheme. Instead, they are moving the customer straight into the assessment of redress. If they can ignore the sophistication test in some cases, where is the consistency? A member of the all-party parliamentary group argued strongly on behalf of a constituent who had a £12 million swap and, lo and behold, the constituent was subsequently allowed to become part of the redress scheme. That was an excellent result for that business, but again, where is the consistency? The FCA needs to look carefully at the sophistication test.

My final point on the sophistication test is that, if a business spends six months waiting to be assessed, those six months will be lost in regard to the statute of limitations for taking legal action. The FCA needs to recognise that, because it is potentially dangerous for the businesses concerned.

A further concern relates to the alternative products on offer. It has been said time and again that if these complex products are unsuitable, it cannot be right to introduce a redress scheme in which a swap can be substituted by a slightly less complicated swap. It is also important to note that a business will be offered an alternative product only if it has failed the sophistication test—that is, if it has been deemed to be unsophisticated. I find it difficult to understand how any alternative product other than a cap could possibly be suitable.

Another reason why the cap is the obvious alternative product is that if businesses had been told clearly of the cost of the products they were taking on board back in 2006-07, they would have seen that a cap would have offered them significantly better value for money. Why was the cap not offered? Probably because of the financial imperative of the banks to sell something more complex and more rewarding. It is thus important to highlight the fact that having a complex derivative rather than a cap as alternative product is a real concern. If businesses have been classified as unsophisticated, that issue should be recognised and we should try to ensure that we provide a cap as the only acceptable alternative product.

[Richard Fuller (Bedford) (Con)]

My hon. Friend mentions the omission of information from the sales process; does he also accept that the information needed was introduced late and that only opinions were offered? What was really going on was a sophisticated sales process to dupe people who may have been financially unsophisticated for the financial benefit of the banks. Does he believe that that should mean that the people in charge of that process should face criminal sanction, not just financial redress for their customers?

[Guto Bebb]

That is certainly a call that some of the organisations campaigning on this issue have made, and I am sure that other hon. Members and members of the all-party group will expand on that theme in their speeches.

We thus need to look carefully at the alternative product issues. It is fair to argue that businesses might have been looking for interest rate protection, but it is difficult to argue that they would have been tempted by an expensive product in 2006-07, when a cap offered such good value for money at that time. I am unpersuaded of the arguments for a complex derivative.

[Richard Benyon (Newbury) (Con)]

rose—

[Guto Bebb]

I will take my hon. Friend’s intervention, but this will be the last because I am conscious of the time.

[Richard Benyon]

I am grateful to my hon. Friend. Many of these products were sold on the basis of a projection for interest rates to go up. There is a slam dunk case against some of these companies for showing a graph of projected interest rate rises when, of course, the opposite happened. Surely that should be a factor when it comes to whether or not firms’ were sophisticated about the product that was eventually sold.

[Guto Bebb]

I could not agree more with my hon. Friend. The expectations back in 2007 were that interest rates would go down, yet there were numerous examples of bank sales teams informing businesses that they needed to protect themselves against a rising interest rate scenario—contrary to the information that the banks themselves had.

Another key call is why there is no appeal process within the redress scheme. There would be much more confidence in that scheme if there were an appeals process. I understand that the Financial Ombudsman Service offered to provide an appeals service, but the offer was rejected by the FCA. It would give some comfort without complicating issues too much if, for example, assessors working for one bank in the redress scheme were able to provide an appeals process for another bank in it. That may not be perfect, but it would help to avoid over-complicating what is already a complicated redress process and it would give businesses the confidence that there is an appeal process and that they can turn to somebody else to argue their case. We should be very concerned about having a redress scheme without any appeal process, as it goes against the principle of natural justice, while opening up the door to litigation, when the whole point of the redress scheme was supposed to be to avoid litigation.

Embedded or hidden swaps, which are currently excluded from the redress scheme, are another key issue to highlight and a matter of huge concern. If we think about it, a hidden swap is quite possibly worse because businesses were not even aware that they were also taking out with their fixed-rate loan an interest rate derivative product. The American author, James Riley once said:

“If it walks like a duck, and swims like a duck and quacks like a duck, then it must be a duck.”

The same point needs to be made about these hedging products. If the impact of an embedded swap is the same as the impact of a separate hedging product taken out with it, it is difficult to argue that the small businesses that were sold those products should be excluded because of a technicality relating to whether they are subject to the FCA regulations. I ask the Minister to respond on that specific issue.

A publican from Aberystwyth, Mansel Beechey, was sold one of these embedded products. I know Mansel very well because when I was a student in Aberystwyth, I was financially illiterate and used to cash cheques in the pub. I used to do that on a Wednesday evening and pay 50p for the privilege. On a Saturday evening, I would want to cash a cheque again, and Mansel would say, “Well, make it one for £30, and I will give you back what you gave me on Wednesday, only charging you the 50p once.” Mansel Beechey thus showed me more respect and consideration, in behaving properly towards me, than the bank that sold him the hidden swap showed to him. That business had been built up over a long period. If Mansel Beechey could show to me a degree of responsibility that had not been shown to him, there is clearly something wrong with our banking sector.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

Will the hon. Gentleman give way?

[Guto Bebb]

I am afraid that I cannot take another intervention.

The issue of hidden swaps is important and needs to be addressed. We need to know why businesses to which they were mis-sold have been excluded from the redress scheme. Thousands of businesses have been mis-sold these products, banks have admitted that the products were mis-sold, and yet the redress scheme is not, as yet, performing as it should. I am not looking for a new scheme, but I am looking for changes, and much greater speed, in the scheme that we currently have; and I think that we need to address some of the exclusions, which are clearly unfair.

I became involved in this issue when a constituent of mine, Mr Colin Jones, came to see me. He claimed that he had been sold a complex product and that, as a result, his business had gone under. The last news I heard of Mr Jones was that he was homeless and living with his mother. He has lost absolutely everything, and because his business was a limited company, it is highly unlikely that even if the redress scheme highlights the fact that he was mis-sold the product and is in need of compensation, he will not benefit from that compensation personally. I think it wholly wrong for someone to lose his business not because he was a poor business man, not because he made a mistake, but because he was taken advantage of by his bank. Having listened to the trade calls, I am quite happy to say that publicly.

I am delighted to note the interest in the issue that is being expressed in the Chamber today, because I believe that businesses all over the country are looking to us to give a lead. I hope that the FCA and the banks will listen to what is being said, and I sincerely hope that the redress scheme will start to perform in the way in which it was expected to perform in January, rather than in the slow and bureaucratic way in which it has performed so far.

[Several hon. Members]

rose—

--- Later in debate ---

[Guto Bebb]

With the leave of the House, I should like to make a few concluding remarks. This has been a positive and necessary debate, and we have seen significant progress as a result of it. Members from across the House have made it clear that they want a step change in the progress made by the FCA review process. That is necessary; we need a significant increase in the number of businesses offered redress. There are real concerns about an expansion of the scheme. Speeches have highlighted the issue of embedded swaps and the concerns about the sophistication test, which I would like to discuss in further detail with the Minister in due course if I can.

The other pretty obvious thing from this debate is that we need the banks to provide support for the businesses while they wait to be reviewed. We want the banks to show forbearance and to understand that the difficulties faced by many businesses were created by the banks’ own mis-selling. No further businesses should be lost to the UK economy as a result of the mis-selling of these products, which were inappropriate in the vast majority of cases. This has been a positive debate, but we still need to see the proof of the pudding in the way in which the scheme delivers from now on.

[Sajid Javid]

May I tell my hon. Friend that I would be more than happy to meet him and other stakeholders to discuss this further?

[Madam Deputy Speaker (Mrs Laing)]

If the Minister has finished his intervention, the hon. Gentleman may conclude his speech.

[Guto Bebb]

I appreciate that offer very much, Madam Deputy Speaker.

Question put and agreed to.

Resolved,

That this House considers the lack of progress made by banks and the Financial Conduct Authority on the redress scheme adopted as a result of the mis-selling of complex interest rate derivatives to small and medium businesses to be unacceptable; and notes that this lack of progress is costly and has caused further undue distress to the businesses involved.

Budget Resolutions and Economic Situation

Guto Bebb Excerpts

Thursday 21st March 2013 Commons Chamber

[Susan Elan Jones (Clwyd South) (Lab)]

I am grateful to you, Mr Deputy Speaker, for allowing me to speak in this important Budget debate. I shall make a relatively short speech, because I know that many other Members wish to speak. I make no apology for focusing on my constituency, and on the people who elected me to be their representative in Parliament.

I do not think there is a single issue in my area that people care about more than jobs, and I entirely agree with them. My constituents know that without work, there can be no community and no prosperity. Much concern has rightly been expressed about the fact that growth in our economy now stands at less than a seventh of the amount that the Chancellor anticipated in his 2010 spending review: 0.7%, rather than the 5.3% that was forecast at that time. However, I believe that we are right to be even more concerned about the fact that yesterday the Chancellor, rather alarmingly, had to admit that the growth forecast for this year had been cut in half, to just 0.6%. The forecast by the Office for Budget Responsibility that borrowing will hit £114 billion this year, instead of the already immense £108 billion that was previously forecast, should fill us all with concern, as should the fact that yesterday’s UK unemployment figures were up by 7,000 to 2.52 million.

It troubles me, in human terms, that according to the very latest unemployment figures, one person in every 20 in the economically active population aged between 16 and 64—1,770 people—in my constituency is unemployed. I believe that that figure would be even higher were it not for the serious efforts of the Welsh Government’s Jobs Growth Wales fund, which has provided 4,000 jobs for young people throughout Wales.

On the day on which a new Archbishop of Canterbury is to be enthroned, I think that we can do worse than reflect on the words of one of his great predecessors. Archbishop William Temple wrote:

“The worst evil of unemployment is in its creating in the unemployed a sense that they have fallen out of the common life. However much their physical needs may be supplied the gravest part of the trouble remains; They are not wanted!”

Those are the words of someone who lived through the great depression of the 1930s, and who realised that without the politics of one nation, our country could never have stood against fascism. They are, I believe wise and prophetic words for us today. That is why I believe that discussions about unemployment affect us all, and why unemployment can never be seen as a price worth paying. It is why I am deeply disappointed that the Chancellor did not take the step yesterday that my party would have taken by guaranteeing a job for every young person out of work for a year or more and for every adult unemployed for more than two years—funded by a fair tax on bank bonuses and changes to pensions tax relief for the very richest. That would be a far better investment than the subsidy for second homes. For Labour Members, it is the flesh and blood of one nation politics and would have been the best and fairest option.

Real action on national insurance to help small businesses take on more staff would have been the fairest option too. Any Government Members awake at this point may say, “Did you not hear what the Chancellor said yesterday?” Of course I did, and I like the idea of the national insurance cuts for employers so much that I am delighted to be a member of the party that proposed them. It is just that, in the interests of fairness, growth and getting our economy going again, I have to ask: if it matters so much to him, why will he not do it now? Why does he think that excellent local small businesses such as the Community café in Rhosymedre should not be supported this year, yet millionaires will get their tax cut from next month? Why will he not commit to a British investment bank? The hon. Member for Burton (Andrew Griffiths) spoke eloquently about the Campaign for Real Ale and real ale pubs. Unlike him, I have last year’s CAMRA pub of the year in my constituency. One of its biggest problems in setting up was that bank managers persistently refused it loans. It is exactly the sort of programme that our British investment bank would support. The Government’s thinking on this one just does not make sense.

[Guto Bebb (Aberconwy) (Con)]

In view of the need to support small businesses with finance, how can the hon. Lady justify in the current economic scenario Finance Wales, which is funded by the Welsh Government, giving out loans at 8% or 9% above base?

[Susan Elan Jones]

I am sure that we could carry on this conversation ad infinitum. I am sure that the hon. Gentleman could tell me how he can justify all the cuts in revenue spending that are coming to the Welsh Government, but we will carry that one on some other day. I am sure that he could also tell me about the excellent impact there will be on his local economy when the holiday homes subsidy is in place, but, again, we will carry that on later.

I believe that investment, growth and employment are not just terms in economic textbooks; they are at the heart of what makes communities and countries work. I am talking about communities in my constituency and, more widely, across the nations and regions of the United Kingdom. If our Government and our Chancellor cannot understand that, it is high time for them to be replaced by a genuinely one nation Government who do understand.

--- Later in debate ---

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to follow the hon. Member for Worsley and Eccles South (Barbara Keeley), but I think that her speech was representative of those we have heard from Labour Members today: there was no effort to explain the context; not a single acknowledgement of the problems the Labour party left this Government; no mention of the fact that there is a crisis in the eurozone; no mention of the fact that the IMF has indicated that UK levels of growth will be higher than those of Germany and France; and no mention of the fact that we are facing an international energy crisis—there was no mention of reality. That is the truth about what we have heard from the Labour party. Labour Members seem to be living in their own fantasy world in which money grows on trees or can be created from nowhere. The truth, as my constituents, the people of Wales and the people of Britain know, is that money does not grow on trees; we have to pay our way in the world.

The worst thing I heard today from Labour Members is their complaint that there is no demand in the economy, apparently because of the welfare cuts being implemented by the Government. Those cuts are being implemented to deal with the mess the previous Administration left behind. There is no acknowledgement that the so-called growth period under the previous Government was basically built on unsustainable Government and personal debt. There is a lack of demand in the British economy because the British public have realised that they have to live within their means, and this Government realise that they must deal with the mess left behind by the previous Administration and that we must live within our means—[Interruption.] The hon. Member for Hartlepool (Mr Wright) might laugh, but the people of this country are not laughing at the mess the previous Administration left behind. That is the context of this Budget and, in that context, I think that the Government have made a substantial and significant move in the right direction.

We need confidence that businesses will create jobs. Labour Members continually talk about Governments creating jobs. Governments do not create long-term sustainable employment. The private sector does that; businesses do that, working with Government. This Government are making sure that people can invest in the United Kingdom with confidence and know that if they make a profit in this country they will do so with the right to a more competitive tax advantage than in any other part of the world. The competitive levels of the UK economy in comparison with the situation under the previous Government show that we are definitely moving in the right direction in creating the circumstances for business investment.

[Michael Ellis (Northampton North) (Con)]

Does my hon. Friend acknowledge, as the Opposition clearly do not, that the OBR is forecasting 600,000 more jobs in the coming year than had previously been anticipated?

[Guto Bebb]

Indeed, and I welcome every single one of those jobs.

The worst thing about the argument that we are having is that every time Labour Members appear in the media in Wales, they complain, “Yes, jobs have been created, but they’re not our type of jobs—they’re not proper jobs.” They insult people who are going out to work and trying to earn a living in supermarkets and hotels by claiming that they are not taking the right type of jobs. People in my constituency know that a job is an opportunity to help themselves. This Government are making sure that people in low-paid jobs are keeping the money they earn because their tax rates are going down. Labour Members bribed people with their own money; this Government are allowing people to keep their money in order to look after themselves, encouraging self-sufficiency and responsibility rather than the expectation that the state will look after them. We are moving in a direction that I am proud of, because we will have a country in which people are confident that if they invest, they will be able to keep more of their money without being taxed and in which people will be able to earn money without being penalised for doing so.

In my constituency and in many other parts of Wales, we are very dependent on the small business community, which was never understood by Labour Members; indeed, they do not understand it now. I will give an example of how bad Labour is at understanding business. Labour’s Minister for Finance in Wales says that she does not believe in capitalism and prefers Marxism. If she were a trade unionist or a Labour activist, I would understand that, but she is the Minister responsible for economic development in Wales and does not believe in capitalism. She should give up her job and get somebody better to do it who will ensure that Wales can benefit from the policies of this Government.

Every single one of the small businesses in my constituency will benefit from a reduction in employer’s national insurance contributions. Labour increased national insurance contributions for people employing staff; we are reducing them significantly. Some 35,000 businesses in Wales will benefit, 20,000 of which will pay no employer’s national insurance contributions. My hon. Friend the Member for Burton (Andrew Griffiths) talked about small breweries and the fact that the beer duty escalator has been stopped, which is a good thing for the industry. In my constituency I have four small breweries that will benefit not only from the changes to the beer duty escalator, which was brought in by Labour, but from the reduction in employer’s national insurance contributions, allowing them to invest and to develop more opportunities for work in the area.

There is a 13% differential between the rate at which Labour would be taxing petrol and what this Government are doing. In a rural constituency such as mine, that is crucial—13p per litre makes a huge difference. Labour Members might not understand this because they do not understand rural areas, but in my part of the world there is an understanding that the changes to fuel duty and excise duties are crucial for a rural area that depends on self-employment and the small businesses that do understand the needs of the community and the need to invest in order to improve.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

What does the hon. Gentleman think would be the effect on rural and, indeed, urban communities in his constituency of a housing measure that will apparently subsidise people to buy second homes up to a value of £600,000?

[Guto Bebb]

We await clarity on that issue. However, I am absolutely terrified about the fact that the administration of that measure will be partly devolved to Wales, where the situation is astonishing. The NewBuy scheme was introduced by this Government in April 2012, but it has yet to be introduced in Wales. The Welsh Labour Government will introduce it in June 2013. In other words, 15 months after the money was made available, the Labour Government in Cardiff are still not helping people in my constituency who want support to buy new houses.

I am concerned that the Labour Government in Cardiff are not delivering. Their decisions on every single policy are made for political reasons to undermine the work of this coalition Government, and nowhere is that more the case than with how the Welsh Government refuse to co-operate with the Work programme. Many programmes in Wales are funded by money from the European social fund and they provide support to those who need it to get back into employment, but the Welsh Labour Government refuse to allow those individuals to access the Work programme and the ESF business support programmes at the same time. The Labour party’s commitment to employment growth in Wales is zero, while its commitment to wrecking the work of this coalition Government is 100% and total. The people of Wales realise the betrayal of their communities by the Labour party.

The fact of the matter is that, on every single issue, this Budget is making an effort, in very difficult circumstances, to help those people who want to help themselves. As a Member who represents an area that is very dependent on self-employment, I welcome the key decision to introduce the flat pension rate. For far too long, the option of self-employment was penalised by the pensions system. The move to a flat system whereby people will benefit by about £144 a week from a guaranteed state pension is crucial. The decision to become self-employed is a difficult one to make, especially so in Wales, where it is also difficult to then provide for a pension, because the position of the public sector is so different. I warmly welcome the fact that this Government are tackling the need for a fairer pension system. Every single person in my constituency—employed or self-employed—will realise that if they put money aside for their own pension, they will be supported by a Government who are committed to supporting people to do the right thing.

Finally, one of my concerns about the current economic situation relates to financing for small businesses. This is not a criticism of the Government. Time and again I meet representatives from banks who claim that they have money available but that there is a lack of demand for funding. We have heard the same complaints from the Labour party. The key thing is that MPs can do a lot of work on this matter. During the Easter recess I will hold two surgeries to tell businesses how to get themselves fit for the lending available. Circumstances have changed. The time when money was thrown at businesses has gone, but businesses that go to the banks with appropriate business plans and ideas for development and growth should and could access money at much cheaper rates than the Welsh Assembly-funded Finance Wales scheme. MPs can stand up in this Chamber and complain as much as they want, but the key thing is that we—I know that my Government colleagues do this—work with businesses to help them access that funding, rather than complain all the time in the way that the Labour party does.

--- Later in debate ---

[Justin Tomlinson]

Absolutely. I also commend the constructive and proactive way they lobbied politicians on both sides of the House, so that they realised what a benefit such a move would be to the local economy, as well as for those who enjoy the odd pint in their local pub. It is cause for rejoicing.

I have two further requests. A considerable number of pubs are starting to provide food as a mainstream part of their offer. More needs to be done to encourage hospitality and catering students to consider becoming landlords, as a lot of breweries are struggling to find younger landlords. Secondly, I urge the Minister to consider the excellent work of my hon. Friend the Member for Burton and to commission him to look more widely than the beer duty: to consider why we are losing pubs and what more we can do in that regard, just as we commissioned Mary Portas to carry out the high street review.

[Guto Bebb]

Is my hon. Friend aware that the increase in the personal allowance can be crucial for businesses such as public houses, which are often run by a husband and wife working in partnership? Our changes mean that such partnerships can make a profit of £20,000 without paying a penny in tax.

[Justin Tomlinson]

Absolutely. The industry can react quickly and provide flexible employment opportunities, and it is a major contributor to local economies across the country.

The Help to Buy scheme will provide £3.5 billion to help those wanting to get on to or move up the property ladder. I know that more details need to be considered, but we should think not only of the people who will benefit directly but of the huge numbers of people in the house building industry. Over the past 20 years, Swindon has been pretty much the fastest growing town, and a huge number of local residents are connected to that industry. They will welcome any measure to help restore confidence in the housing market.

We come up with these fantastic schemes, and I was challenged on local radio last night about whether this scheme would catch on. As entertaining as we all think we are, our wonderful debates in the Chamber often pass the public by. As the scheme comes into force in 2014, it would be nice to promote it in the annual council tax bill. The councils have already paid for the postage, so let us put a little information flyer in with the bill so that people can see what opportunities there are and whether they apply to them.

Finally, I want to talk about business rates, on which I would have liked a little more to have been done. Our high streets are struggling and business rates are becoming a bigger burden, with landlords lowering rents and so on. I was fortunate enough to become a member of the Public Accounts Committee, but one of my biggest disappointments is that that happened 24 hours after Starbucks and Amazon had their hearing. Amazon kindly came to meet me yesterday and it is fair to say that we rowed. Its actions over tax and transferring money to Luxembourg are disgraceful. The company is not operating on an even playing field. We have to investigate some form of internet consumer tax for such organisations, but with every single penny ring-fenced to subsidise the business rates of the traditional high street. If the high street struggles any more, Amazon will also struggle because the high street is the shop window. I have spoken to a number of independent retailers who provide the customer service—and consumers then simply pick up the phone and order from Amazon. Let us create a fair playing field for all retailers.

Food Banks (Wales)

Guto Bebb Excerpts

Tuesday 12th February 2013 Westminster Hall

[Kevin Brennan]

Yes, I suspect my hon. Friend is right. I am sure the Minister has visited a food bank and will say what impression it made on him. What were his feelings on visiting the food bank?

Government policies such as the Welfare Benefits Up-rating Bill, the VAT hike and the bedroom tax are making the crisis worse. I hope the Minister will distance himself from the comments we have heard from Downing street and acknowledge that Government policies are making things worse, not better, for hundreds of thousands of families across Wales.

[Guto Bebb (Aberconwy) (Con)]

There is no VAT on food, so the VAT change did not affect the price of food, which is important to remember.

[Kevin Brennan]

The hon. Gentleman is absolutely right, and I am aware of that fact, but he will find that families spend their money on things that do attract VAT, which has a direct impact on their disposable income and, therefore, on their ability to buy food.

--- Later in debate ---

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship again, Mrs Riordan. I congratulate my hon. Friend the Member for Cardiff West (Kevin Brennan) on securing an important debate.

Sometimes in debates about food banks, or poverty—urban or rural—I get the feeling that Government Members think we make things up or exaggerate them.

[Guto Bebb]

The accusation is not that the Opposition party is making things up, but that it is forgetting history, rewriting it and ignoring its own part in a situation that is desperate for many people in Wales.

[Chris Evans]

The hon. Gentleman has summed up my absolute frustration with the House since I came into this place. All those on the Government Benches seem to want to do is look into the past and blame the Labour Government for everything. I simply ask him to put himself in this position: if tonight someone cannot afford to feed his family, because he finds that he has no food and that his children are screaming for food, will they care whose fault it is? What they care about is where their next meal is coming from. Often in this House, we look more interested in trying to win cheap political points than in bringing about real political change for people who are suffering.

--- Later in debate ---

[Guto Bebb (Aberconwy) (Con)]

I thank the hon. Member for Islwyn (Chris Evans) for being so gracious as to allow me five minutes to contribute to the debate.

First, importantly, the work done by food banks is appreciated by all Members of the House. The political reasons behind the creation of food banks might be debated passionately, but their work is most welcome. I do not have a food bank in my constituency, but my children have contributed to and collected for the one in the constituency of the hon. Member for Arfon (Hywel Williams). We applaud food banks, because they show a community coming together to support the most vulnerable.

What is missing from the debate, however, is any attempt by the Labour party in Wales to provide a context. It has been a self-indulgent debate in many ways, in which attacks on Government welfare policies have been made completely out of context. We heard no comments whatever on the fact that in April 2007 there was one food bank in Wales, but by May 2010 there were 10; now there are 24 to 26, depending on which statistics are accepted, but the reasons are much more complicated than changes to benefits. If we look at benefits payments in Wales, my understanding is that when the Labour party came to government in 1997, the average employment and support allowance payment for a benefits recipient was 20% of the Welsh average income. By 2010, when the Labour party left power, that proportion was down to 17.2%, and it has since increased to 17.6%. Last year, benefits went up by 5.5%, the highest for some time.

We have to provide the context for why household budgets are being challenged. They are being challenged by forces beyond the control of any Government. Food prices have gone up 27% between 2007 and 2012; that is beyond the control of the Government. When I was in Washington last year, a crisis was hitting corn prices because of drought in the mid-west, but that type of thing is not in the control of our Government. Look at electricity and fuel prices. Prices are subject to VAT at 5%, just as they were throughout the entire period of the Labour Administration, yet electricity prices have doubled and gas prices have tripled since 2000. No Government can deal with that type of effect on people’s household incomes. No Government can respond in a sufficient manner to that type of price increase, which is beyond the control of any Government.

All we have heard from the Labour party have been accusations that all the difficulties were caused by Government changes. Time and again it is Government changes, even when those changes have not yet been implemented. We heard a lot about the so-called bedroom tax that will affect people’s incomes; it has not yet been implemented. The hon. Member for Swansea West (Geraint Davies) talked about the effect of universal credit; it has not yet been implemented. Blatantly political views have been expressed about people in desperate situations in Wales in order to score party political points. I find that most disappointing.

Even worse, the hon. Member for Wrexham (Ian Lucas), who is no longer in his place, stated that the coalition was responsible for cutting taxes to the wealthiest in society while punishing the poorest. That came from a Member who, I gather, voted to get rid of the 10% tax rate for the lowest paid in society and who was quite happy for capital gains tax to be paid at 18% by the wealthiest City financiers while their cleaners paid 22% tax. Those are the realities of what happened under Labour, but not a single comment has been made in the debate about that atrocious track record.

The worst thing that came out of the debate was the comment by an Opposition Member that we were creating a dependency culture. Labour Members are from a party that has been in government in Wales more or less since the end of the first world war, whether locally or nationally, and from a party that has failed Wales time and again, creating ghettoes of inequality within Wales. I cannot comprehend how they can with a straight face make the accusation that the coalition Government have, in two years, created a dependency culture. I find that staggering and unacceptable.

My final point is that this Government have presided over the creation of more than 1 million jobs in the private sector. Last week, a constituent on £71 jobseeker’s allowance visited me. That is no way to live—I am the first to acknowledge it, and I think every single Member in the Chamber would acknowledge that they could not and would not want to live on £71 a week. That is why it is so important for the Work programme and the support offered by the Government to get people back into employment. That is the real way to deal with the issue—not by point scoring about changes to this benefit or that benefit, but by acknowledging that a life on benefits is not something we should aspire to as a country. It is not something I aspire to for the people of Wales.

Time and again, we have heard from the Opposition party that everything would be okay if there were a Labour level of spending on benefits and welfare. The Government have much more ambition for the people of Wales. We want them to have the opportunity to work and take themselves out of poverty, not through dependence on the state but through their own efforts, and that is what we are creating.

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[Stephen Crabb]

Thank you, Mrs Riordan. In preparation for this afternoon’s debate, I did a bit of research.

[Guto Bebb]

Will the Minister give way?

[Stephen Crabb]

I will, quickly.

[Guto Bebb]

Does the Minister agree that the whole point of the debate is to cast aspersions on our motives as Conservative Members?

[Stephen Crabb]

That is exactly what it is about. I did some research before the debate this afternoon and looked at the parliamentary record, because I wanted to know what kinds of questions and issues were being raised on food banks by Members of different parties—not only from Wales, but from right across the UK. It might not surprise my hon. Friends to know that I could not find a single reference by a Labour Member of Parliament, before 2010, to food banks.

Taxation (Living Wage)

Guto Bebb Excerpts

Tuesday 22nd January 2013 Westminster Hall

[Guto Bebb (Aberconwy) (Con)]

I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing this important debate. It is a great pleasure to follow the hon. Member for Strangford (Jim Shannon) who always speaks so passionately on behalf of his constituents in Northern Ireland. I noticed time and again from the statistics he offered that Northern Ireland and Wales are often classified as the poorest parts of the United Kingdom. That makes the 10p tax rate an incredibly important issue for my constituents in north Wales.

We must congratulate the coalition Government on the significant increase in the personal allowance. It has meant a huge cost to the Government, but it is the correct decision and it highlights the coalition’s strong belief that the best way to help people is to allow them to keep more of the money they earn. That is the big difference between the coalition and the Labour Opposition, who believe that the best way to help the poorest in society is to take money from them and give some of it back, depending on their circumstances. I strongly believe that we should try to ensure that people keep as much of the money they earn as possible. However, my hon. Friend the Member for Harlow made another important point: I support the aspiration of a £10,000 personal allowance, but we must ensure at some point that people understand that they must contribute to society.

I welcome the movement in the personal allowance, which means, for example, that the husband and wife who run a small business as owners of a small guest house in my constituency can earn £20,000 from it without paying tax. That is an incentive for them to work and make a success of the business; but it is important that people understand that there is a point where they must contribute towards what the state provides. It is all very well to ask and demand more from the Government, but there is an understanding, which includes everyone, of a need to contribute. That is why it is important to focus our attention, once the £10,000 personal allowance is secured, on continuing to support the lowest paid, but in a possibly more cost-effective manner. Let us be honest: a 10p tax rate would cost half the amount of an increase in the personal allowance. There would be an impact on more people. We should support the aim of securing a new 10p tax rate, because it would help the poorest paid but also emphasise the need for everyone who works to contribute to society at some stage. I strongly support that aspiration.

I have nothing but sympathy with the Minister on the issues that the Treasury faces. The previous Government left them with a terrible situation—and I am not talking just about the financial deficit. The complication beyond recognition of the tax system is frankly shameful. In a recent article Philip Booth included a table that highlighted the fact that the marginal tax and benefit withdrawal rates are now out of tune. That results in a situation where someone earning between £8,000 and £38,000 is paying, between benefit withdrawal, tax payments and national insurance payments—if that person has a family of three children—a 73% marginal tax rate. That then falls to 42%; then it goes up again if people earn more than £100,000, because of the personal allowance withdrawal. Then it goes down again. The progressive tax system, which everyone in this country believed in, has been completely distorted by a process in which benefits, personal allowances and so forth have been withdrawn in response to a financial crisis. That has left a distorted tax system that goes against something the coalition is strongly in favour of—the aspiration to support people who want to support themselves. It is difficult to see how a tax system that now has so many distortions is doing the job it is meant to do, of supporting such people.

The Treasury faces a huge job in dealing with the deficit, but in due course it will need to think carefully about how to make the tax system fairer, with a progressive element rather than the present slightly distorting effect. There are opportunities to change it. Universal credit will deal with many anomalies at the lower end of the income spectrum, but we must recognise our responsibility to see the tax system for what it is—a failing system whose distortions run counter to the work ethic. The counter-productive element of the tax system is reflected in the fall in the 40% tax rate threshold. The fact that it will hit people on an income of £34,000 from April is counterbalanced by an increase in the personal allowance, but we must be aware that people in fairly modest positions in society are now being expected to pay a higher rate of tax, something that previous generations would not have anticipated. We have a responsibility to deal with that issue. The important thing for the Government is to try to provide circumstances that will support people in work.

The Northern Ireland situation has been discussed, and it is similar to that in Wales. We need to congratulate the Government on the fact that the tax payments of a person on the minimum wage, for example, have been halved as a result of changes to the personal allowance. There is a question whether it is justifiable to call something a minimum wage while still expecting someone to pay tax on it. However, I want to sound a note of caution about the living wage. I support the aspiration, but I question the affordability of it. I specifically question the fact that local authorities in Wales are saying they will pay all their staff a living wage. Is that a reasonable way to deal with the issue? In effect, it is using money raised in taxes from people who are often not particularly well paid to provide a benefit for people in the public sector, who may have better benefits than other workers. I question that: by bringing in a living wage for some workers, the public sector in some local authorities reinforces the view that people who work for the public sector somehow deserve better pay than those who work in the private sector. I am hugely concerned about it.

There is a saying in Welsh, which I hope that you will allow me use, Mr Robertson: “Hael yw Hywel ar bwrs y wlad,” which means it is very easy to be generous with other people’s money. When I hear of local authorities in Wales that are thinking about taking that course, I ask them to reflect on where the money comes from in the first instance; because 75% to 80% of local government expenditure in Wales is from general taxation, so lower paid workers in other parts of the economy will be contributing to enabling councillors to feel good about themselves. The aspiration should be for people on comparatively low pay not to have to pay significant amounts of tax. Therefore the increase in the personal allowance, coupled with the 10p tax rate, would make a huge difference.

I support the aspirations behind the debate today, but we must consider the issues in the context of the complexity of the tax system, and the challenges to the Government in dealing with the deficit. However, a challenge that is equally crucial is to set out plans to introduce a 10p tax rate and deal with a tax system that is no longer progressive in the way it collects taxes from families. That may be something for a second term, but I am confident that there will be one. I am sure that after 2015 a Conservative Government will be able to deal with the anomalies and ensure that the tax system is fair to all—whether those at the lower end of the tax spectrum or a family earning perhaps £40,000 or £50,000 per annum.

[John Robertson (in the Chair)]

I hope that the hon. Gentleman is ready to help the Hansard people with his speech.

--- Later in debate ---

[Catherine McKinnell]

I appreciate the hon. Gentleman’s concern, but I am trying to discuss the premise proposed for debate today by the hon. Member for Harlow, which is people on low pay and the living wage campaign, so I will return to my point on the national minimum wage, which transformed the lives of millions. The policy is now taken for granted, but it was implemented in the face of often strident opposition, in particular by members of the Conservative party. Despite significant opposition at the time, however, it now seems to be universally accepted as an important aspect of our economy in ensuring fairness across the board.

The squeeze on people’s incomes and the ever-increasing cost of living, of which we are all aware and which we have all seen among our constituents, mean that for many the national minimum wage is simply not enough to make ends meet. Thus, a higher rate of £7.45 per hour outside London and £8.55 per hour inside the capital has been calculated by the Centre for Research in Social Policy as the level required to enable people to provide for themselves and their families.

[Guto Bebb]

On the minimum wage, although I was not in this place for the debates, my recollection is that the issue was about the scale and level of the minimum wage. My real concern was that the state was imposing a minimum wage on small businesses but also helping itself to tax from that minimum wage. Surely it is a good thing that the coalition is ensuring that people on the minimum wage are now paying significantly less tax.

[Catherine McKinnell]

Could the hon. Gentleman repeat his premise about how the Government are helping people on the minimum wage to pay less tax?

[Guto Bebb]

The point is simple. The Labour Government brought in a minimum wage, and yet the Government of the day helped themselves to significant amounts of tax from that minimum wage. In other words, small businesses in constituencies such as mine felt that they were being forced to pay higher levels of wages in order for the Government to be able to help themselves to tax. Surely this Government, by increasing the personal allowance so significantly, have reduced the tax take from those on the minimum wage.

[Catherine McKinnell]

I accept that the Government have increased the personal allowance, but their other policy changes have impacted on those very people whom they purport to be helping, with a real-terms effect on families up and down the country. In fact, the hon. Member for Cleethorpes admitted that his constituents are certainly not happy about some of the changes and their impact. I know for certain that my constituents would agree, but the shocking fact is that almost 5 million people across the UK are currently paid less than the living wage, and 3 million of them are women. The Government may believe that the way to motivate people on low incomes is to pay them less, and the way to motivate those on the highest incomes is to pay them more, but the Labour party believes that this is an issue of dignity at work and social justice.