Savings Accounts and Health in Pregnancy Grant Bill

Harriett Baldwin Excerpts

Tuesday 26th October 2010 Commons Chamber

[Simon Danczuk (Rochdale) (Lab)]

I wish to turn my attention to the child trust fund, in particular, and to start by quoting the Chancellor. In a speech made just 12 months ago to the Conservative party conference, he said:

“We should continue paying them to the poorest families who often have no savings, and encourage them to use them more”.

As we have heard tonight from Conservative Members, many of them believe that the benefits we are discussing tonight should not be universal and that we should target them much more closely. That has been a common theme throughout this evening’s debate.

Only the Liberal Democrats have never really been in favour of the child trust fund. They have continually proposed to scrap it, although they have not had the decency to turn up to this debate in number. So we have to ask ourselves what the situation really is. Who is the driving force in the coalition Government in terms of punishing the poor? Is it the Conservatives, who want to target their benefits more closely, as we have heard today, or is it the Liberal Democrats, who are happy and enthusiastic about increasing VAT, raising tuition fees and cutting the child trust fund?

The reality of the Chancellor’s logic in scrapping the child trust fund is that the most vulnerable will be hit hardest. I can tell colleagues that the child trust fund is neglected in terms of the attention it gets, as has been shown by Conservative Members during today’s debate. The fund is a very important tool to encourage saving, particularly for the less well-off. I know that from speaking to parents across my constituency, particularly mothers. It has continually encouraged them to start saving on behalf of their children and it has started them thinking about the future for their children. We cannot underestimate the importance of the child trust fund in that regard. Although I readily accept that what children will receive is between £500 and £1,000, which is never going to pull people out of poverty in a short time, there is absolutely no doubt that it has been a catalyst to get people to start saving. As has been said, it has also encouraged families and friends to start contributing to the savings of young children.

I have described the trust fund as one of the best hand-ups, rather than handouts. As has been said, the Save Child Savings alliance has described the child trust fund as

“the most successful saving scheme ever.”

There is irony in the Government cutting the child trust fund at this time, because one of the key reasons for its introduction was to encourage people to engage with financial institutions. People are suspicious of such institutions and, if ever there were a time when we needed to encourage them, it is certainly now. Yet, the Government are scrapping this initiative and the other initiatives dealt with in this Bill, which actually encourage that engagement.

The Government’s decision to scrap the child trust fund will, in effect, create a situation where—we heard about this just before I spoke—the elite in society will be continually pumping and stashing thousands of pounds into the personal, private child trust funds that many of the wealthy already have. That dichotomy will continue. What we will have in poorer communities—in parts of Rochdale—is poor families who will be unable to get that start in life for their children, with no £250 or £500 to kick-start their saving. Although the wealthy will continue to have their opportunities in life, the poorer and more vulnerable will not have those opportunities. Come 18, when the children from the wealthier families have the chance to have a good time at university and have a better opportunity to go off on a gap year, to buy a car or take driving lessons, which is all well and good, the reality for the poorer people and the more vulnerable, whom we often see in Rochdale, is that because of these cuts, which could have been avoided, they will not have those opportunities. They are being taken away from them by the Conservatives, ably assisted—especially in this instance—by the Liberal Democrats.

The contrast could not be more obvious. In many respects, the axing of the child trust fund defines the differences between the Labour Government and the coalition Government. The Labour Government were intent on providing a hand-up and not a handout, whereas the coalition Government are not prepared to provide either a hand-up or a handout.

[Harriett Baldwin (West Worcestershire) (Con)]

I am trying to follow the intellectual train of the hon. Gentleman’s very powerfully expressed argument. I noted that it had something to do with targeting and Liberal Democrats, but perhaps I am picking up the wrong sequence of words. He started with an eloquent argument in favour of universal benefits. Does that mean that he is in favour of continuing to give these grants to my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg)?

[Simon Danczuk]

I will be quite clear about the position I take in that regard. Let me clarify my point: I was stating that many Conservatives have identified tonight that they do not believe in universal benefits and that they are prepared to have more targeted benefits. If that is the case, why did they not put that in the Bill? That is the reality. My point is that the only people in the coalition Government who want to scrap the benefits altogether are the Liberal Democrats, so is it the Liberal Democrats who are pushing the Conservatives more to the right, towards scrapping benefits completely?

This type of Bill, like the CSR, will confirm to the people of Rochdale that the coalition Government are not on the side of fairness, but are on the side of the wealthy.

[Alex Cunningham (Stockton North) (Lab)]

Despite what we have heard from those on the Government Benches tonight, it is still very clear that with today’s Bill, the coalition will deliver yet another blow to hard-working families and the most vulnerable.

The Prime Minister said he wanted this Government to be

“the most family friendly Government we’ve ever had in this country”.

So, I want to know why the coalition is again hitting hardest families with children. That is not my analysis or the analysis of my colleagues on the shadow Front Bench, but the conclusion of the Institute for Fiscal Studies. The Deputy Prime Minister spent last week attacking that much respected think-tank for daring to tell the truth about the coalition’s damaging cuts, describing its methods of measuring the fairness of the controversial spending review as

“distorted and a complete nonsense”—

but that is what is nonsense. The Deputy Prime Minister argued that the rich will pay the most as a result of the spending review and that anyone who argues otherwise is “frightening people”.

Perhaps I could refer the Deputy Prime Minister and other Ministers not to the latest IFS report but to the Christian Bible and the story of the widow’s mite. It will be familiar to many, and tells the story of a widow quietly giving her last mite to the temple while a rich man makes a great show of handing over a considerable sum, but a sum that is insignificant as part of his overall wealth. It seems that the poor in our country need to give their all and stay quiet, too.

Although the rich of this country might pay more both in terms of actual cash and as a percentage of their overall income than those on the lowest incomes, their pain will be negligible in comparison with that of a family in my constituency who might lose £10 or £20 a week, which could be the difference between feeding themselves properly and missing meals. I doubt that they will be quiet, like that widow, when they have nothing left and still have mouths to fill.

Hard-working families in my constituency do not need Labour MPs or the Institute for Fiscal Studies to frighten them; they can see for themselves the damage that the coalition Government are doing. They remember how Teesside suffered under the last Tory Government and they are frightened that the Government are cutting harder and faster than we have ever seen.

Others have highlighted these points. We have heard about the cuts to child benefit, cuts to housing benefit, the scrapping of the education maintenance allowance, and the cut to the child care element of working tax credit that equates to a loss of up to £1,560 per year for families who are already struggling with the burden of extortionate child care costs.

[Harriett Baldwin]

Does the hon. Gentleman agree with the helpful suggestion made by my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) about the fact that these grants have been going to people like him? He argued for a change in favour of more fiscal rectitude, which would mean that children growing up in the constituency of the hon. Member for Stockton North (Alex Cunningham) would not have such a burden of borrowing in the future.

[Alex Cunningham]

I think that the point that the hon. Member for North East Somerset (Jacob Rees-Mogg) made was that perhaps families such as his do not need that sort of income. If he wants to forgo it, that is all well and good, but there are hard-working families in my community that need that money.

Let us add to all that the impact of the 27% cuts on local authorities and the effect that will have on services, including initiatives such as breakfast clubs, and again we see the family under attack. In the north-east, we already know that family dependency on benefits will grow, with some 43,000 public and private sector jobs lost over the next few years. People will see few jobs for them to chase as unemployment undoubtedly soars.

Today, the Government attack again. I object to the scrapping of both the child trust fund and the saving gateway and I believe the Government are making a big mistake by getting rid of them.

--- Later in debate ---

[Stella Creasy]

I am glad that the hon. Lady asks about an Opposition Member looking for evidence. If she listens to me, she will find that I can refer to many different research points that can bring out exactly that. It would be useful in these debates to move from the examples given to what the independent academic research tells us the child trust fund has done in increasing savings in this country. I direct her to the work being done by the university of Bristol on this matter in particular.

As an MP in Walthamstow, I cannot help but see the impact of the Government’s decision. The latest figures tell me that more than 10,000 families in Walthamstow have a child trust fund voucher—well above the national average for a constituency. Nationally, we know that 70,000 are issued each month, including the top-ups, at a cost of just £500 million to the taxpayer. It is a relatively small investment compared to some of the other mechanisms that we have, but we know that it is money well spent, because until they were stopped, child trust funds were the most successful Government savings scheme ever.

My hon. Friend the Member for Stretford and Urmston (Kate Green) admirably set out the evidence that we have. It is worth repeating because of the questions being asked by Members on the Government Benches. Two million people were contributing to 4.5 million open accounts, resulting in more than £2 billion in assets, with £22 million in regular contributions. Critically, those are from families on less than £50,000 a year. In London that is not a high target rate to meet.

To get the full sense of what abolishing the scheme will mean, it is worth looking at the sums involved. Thanks to the Revenue’s child trust fund calculator, I was able to do just that. It tells me that a child born on my birthday this year eligible for just that basic payment of £250 from the Government and whose family saves just £100 a year, which is not even a tenner a month, could get about £3,000 in 2028. If the family started saving £20 a month, the figure could rise to £8,000. At £4 a week, it would be nearly £10,000.

[Harriett Baldwin]

Will the hon. Lady give way?

[Stella Creasy]

With respect, I have given way once.

We do not need to wait until 2028 to see the impact that such funding will have on the choices that young people could make. We know that in 2020 the first generation of child trust funds will mature. That means there will be 18-year-olds with access to £3 billion of investment for our nation. That may not be the riches of Croesus that some on the Government Benches will be able to bequeath to their children, but for the families that I work with in Walthamstow those first funds maturing in 10 years will transform the choices that their children are able to make.

In the context of the other debates that we have had in the House recently—on tuition fees, home ownership and entrepreneurship—we all know the difference that that kind of money will make. Putting that £3,000, the lowest sum, into context, it is worth reflecting that evidence shows us that parents are spending on average £4,000 on financing their children through university. We know, too, that more than half of 25 to 34-year-olds still rely on their parents for financial help. With tuition fees set to rocket under the present Government, that debt, that dependency and that distress for the parents concerned are only set to rocket.

Countless research studies show us that low income families aspire to saving for the long term, and that they want a nest egg for their children. The child trust fund is helping to make that ambition a reality, with almost 30% of the children who get the child trust fund also getting the top-up endowment of £500, meaning that their nest egg will be even bigger.

[Stella Creasy]

I thank my hon. Friend for that question. He precisely answers the point that many on the Government Benches wish to raise about where else money could be raised. There are ample other ways that we could raise money to reduce the deficit, such as the bankers levy.

[Harriett Baldwin]

Will the hon. Lady give way?

[Stella Creasy]

I shall make progress, as Mr Speaker has pointed out how many Members want to contribute.

I want to put on record my concern that children who will have the child trust fund removed—those 30% who are getting the extra payment—are kids from the families most likely to be hit by the cuts in public spending, as the housing benefit, tax credits, jobs and services that their parents rely on are also slashed by the Government. These are the kids of families who already struggle to make ends meet and for whom the scheme represents a lifeline of opportunity for their children in later life.

Members need not take my word for it. Let them look at the reports from the Treasury and the Institute for Fiscal Studies. They make it clear that the poorest will bear the brunt of the cuts. The Bill ensures that the burden will carry on to their children as well. This is not fantasy or wishful thinking, as some on the Government Benches may wish to claim. Since the scheme has been running, there has been clear evidence that it works in encouraging saving and supporting aspiration.

It is not fantasy to think that that money would be spent on the future of those young people. The research commissioned by the Treasury shows that families of all incomes see the money as the key to their kids getting on in life, whether it is used for higher education, setting up home or even having driving lessons. The research reflects the ample evidence and common-sense proposition that possession of even a small pot of money in early adulthood improves one’s life chances later on. It shows the strength of the economic argument for retaining the child trust fund, and that a savings culture can be ingrained in people from the early years of their lives. It shows also how counter-productive it is to cut the fund now, because the funding that would have been available to our economy in later years will also be absent from the choices that children are able to make.

The strength of the scheme, and what I want to concentrate my final remarks on, is the evidence that a small amount of capital at the beginning of life had a significant advantage for children 10 years on in life, even when accounting for employment, higher earnings and better health. At the heart of the scheme, and the reason why the previous Government introduced it, is a concern for social mobility, something that Government Members say that they too care about. If they do care about it, however, they will understand that assets are the key to social mobility.

Labour Members understand that if a child is born with a silver spoon in their mouth, it means not just nice baby clothes or a wonderful pram but the money, resources, confidence and networks that help to turn potential into reality. If a child does not have those assets, at every stage in their life their choices will be limited, and the decisions they make will be that much harder, whether they are about where to live or the lifestyle their family can afford, or whether they can even take the chance to go on to further and higher education. That is why Labour Members fought for the scheme and had planned to extend it if Labour won the election. It encourages not just savings, but aspiration.

We might look at our debates, and those that the UK Youth Parliament will have on Friday, about the right to vote and citizenship, but surely a truly progressive society is one in which we ensure that people have access to the capital endowment that gives them the same social power and responsibility of all their peers. I know that some Government Members agree. Only one day has been allotted to this debate, and attendance is low, but I hope that the country takes note of the fact that this Bill reflects the real impact of the Liberal Democrats on the coalition.

I urge those Government Members who consider themselves to be compassionate Conservatives to hold true to their own manifesto and to protect against this onslaught of Liberal callousness. The Conservatives’ manifesto at least pledged to protect the child trust fund for some children, so I urge them not to listen to the siren voices of the Liberal Democrats who, by abolishing the child trust fund, want to see the poorest families decimated.

The Liberals cannot even decide why they do not want the fund. Their claims run from “We can’t afford it,” to “It’s not the best way to secure asset-based mobility.” But as the former Chief Secretary to the Treasury said—

Independent Financial Advisers

Harriett Baldwin Excerpts

Wednesday 20th October 2010 Westminster Hall

[Harriett Baldwin (West Worcestershire) (Con)]

It is a great pleasure to serve under your chairmanship, Mr Caton. I hope the Minister will forgive me for holding this debate on a day when he probably has quite a few other things on. As he knows, however, such debates are a bit of a lottery, and I was not expecting mine to come up today.

According to the Library, this is the first time that the regulation of independent financial advisers has been debated in a Chamber of the House, and we have to ask why. Colleagues on the Treasury Committee discussed the topic yesterday, and I have put my toe in the water by asking for a 30-minute debate today. Given the interest that I have encountered in the issue—I have had a binder full of correspondence since the debate was announced last Wednesday—I anticipate that this is not the last that we will hear of it.

[Mark Garnier (Wyre Forest) (Con)]

The interest that I have encountered is certainly unprecedented, and I too have a very large binder. Will my hon. Friend work with me to secure a Back-Bench business debate in which we might have an opportunity to debate the issue for up to three hours on the Floor of the House?

[Harriett Baldwin]

Yes. I thank my hon. Friend for that suggestion and I would be delighted to support it.

IFAs are regulated by the soon-to-be-abolished Financial Services Authority, the independent statutory regulator set up by the previous Government. Banking supervision is to return to the Bank of England, while many other regulatory functions will go to a new consumer protection body. Thus, this seems an opportune time for the House to debate some of the implications of those policies and some of the functions involved.

Fewer people are benefiting from defined-benefit pension schemes. More individuals are being asked to contact an IFA to obtain advice. Many will receive lump sums from an inheritance or perhaps a redundancy payout, and they will need professional advice to make the most of them. With auto-enrolment beginning in a few years’ time, people will also have to decide whether they need to opt out. Many younger people will leave university with student loans. Many older people will need to buy annuities or to make arrangements to pay for long-term care. All those transactions require some financial advice.

[Ian Lucas (Wrexham) (Lab)]

I previously worked as a solicitor and employed an independent financial adviser. Does the hon. Lady agree that it is better to receive advice from an independent financial adviser than a tied agent?

[Harriett Baldwin]

There are indeed advantages, and I thank the hon. Gentleman for his helpful intervention. He obviously has a lot of experience of dealing with the sector.

It is estimated that there are about 45,000 IFAs in the country, many of whom are sole traders.

[Charlie Elphicke (Dover) (Con)]

Should those tens of thousands of small traders not be encouraged to use their entrepreneurialism to help people save, rather than being squashed by the dead hand of unthinking regulation?

--- Later in debate ---

[Harriett Baldwin]

I thank my hon. Friend for that interesting intervention. I shall come to precisely that point in a moment.

The market for financial advice suffers from comparatively low consumer trust. Consumers find it difficult to engage with the financial services industry—banks are not exactly the most popular institutions in the country at the moment. Economists would describe buying financial products as a transaction in which consumers have asymmetric information; in plain English, the buyer knows a lot less about the product than the seller. There is therefore a need for proper independent advice.

Along with banks, IFAs have been guilty of selling certain products because they give a better commission. Like banks, IFAs have been found to have mis-sold private pensions to public sector workers. Like banks, they have mis-sold high-income precipice bonds. Often, they have sold products that simply performed badly or carried high charges. There is no doubt that the industry’s reputation could be improved.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

My hon. Friend mentioned the Treasury Committee, and it may be of interest to note that I was in the Committee yesterday when it talked about this issue. Interestingly, the response from the Association of Independent Financial Advisers and the Association of Private Client Investment Managers and Stockbrokers was that the retail distribution review, having started with high ambitions and high principles, not only ran four times over cost, but conducted a somewhat ineffective consultation. I put the question whether, in that aspect at least, it had become a bit of a fiasco, and the witnesses concurred, very much to my surprise. My hon. Friend might want to bear that in mind in future discussions.

[Harriett Baldwin]

I thank my hon. Friend and neighbour. He is a distinguished practitioner and member of the Treasury Committee. I am very interested to hear about the evidence yesterday.

We should not underestimate the costs of mis-sales to consumers. The FSA’s cost-benefit analysis assesses the cost to consumers of the pensions mis-selling scandal at £45 million per annum. In reaction to such circumstances, the FSA has spent the past several years consulting on how to address the issues involved. I share its goal of improving consumers’ perception of the industry and access to high-quality investment advice.

[Mark Pawsey (Rugby) (Con)]

Does my hon. Friend agree that the new regulations will raise the bar in terms of the standard of advisers, which means that there will be fewer financial advisers in future and that individuals’ ability to seek advice will be restricted, not enhanced?

[Harriett Baldwin]

My hon. Friend raises an important point, and I will come to that.

The FSA has come up with proposals to address the issue. They are close to final, and the board is likely to take a decision in December. Under the current plans, the proposals will be implemented by the end of 2012. As they stand, the proposals are known as the retail distribution review. As colleagues have suggested, they raise real questions about the role of regulation and the laws of unintended, and indeed intended, consequences in terms of regulation.

[Andrea Leadsom (South Northamptonshire) (Con)]

Is it not also true that not only will there be a reduction in the number of IFAs, but many of those who have been in the industry for a long time, who are very experienced and who understand the market and customers very well, will unfortunately inadvertently fall foul of the regulations?

[Harriett Baldwin]

My hon. Friend, who is also a member of the Treasury Committee, makes an extremely important point, which I will mention in a moment.

The impact of the proposals has been brought to my attention by a range of independent financial advisers, who are also constituents. Acting independently of one another, they all came to see me in my advice surgeries. Under the RDR proposals, each IFA should pass a set of exams and then spend at least 35 hours per annum on continuous professional development. Hon. Members should note that the requirement is 35 hours and that 34 hours would not be acceptable. IFAs also need to obtain a statement of professional standing from an accredited body. Someone who, today, is a qualified and approved IFA but who does not meet those requirements by 31 December 2012, will no longer be able to practise his or her profession, despite many years’ experience.

[Mr David Nuttall (Bury North) (Con)]

Is not the problem with the RDR that many of our constituents will be left without appropriate financial advice because of the introduction of the new rules? Often it is the most experienced IFAs, with the most years of experience, who will be forced out of the profession.

[Harriett Baldwin]

My hon. Friend makes a good point, which I am about to make myself, so I thank him for his helpful intervention.

Advisers will have to charge explicitly for their services and will not be able to accept commissions. Oxera, the market research firm employed by the FSA to assess the costs and benefits of the changes, expects the net present value of the compliance costs to the industry to reach between £1.4 billion and £1.7 billion. Worryingly, the estimate in 2008 was £600 million. That cost will be passed directly to consumers. The latest estimate represents an astonishing 180% increase.

Oxera expects the increase in compliance costs to be passed on to consumers, so they will pay for the changes. Charges will be higher, so sales of financial products will decline. The majority of adviser firms expect a reduction in turnover. Consumers with smaller amounts to invest are much less likely to seek advice if they have to pay for it explicitly. Smaller firms of IFAs are the most likely to exit the market.

[Ben Gummer (Ipswich) (Con)]

We all want greater transparency in IFAs’ charges, but I am concerned about the direction in which the RDR is going, because of precisely that point. If we go down that route we shall restrict financial advice to the very wealthy, and do nothing to reverse the appalling savings ratio that we have inherited.

--- Later in debate ---

[Harriett Baldwin]

I agree, because according to Oxera’s survey for the FSA, 25% of firms are very or quite likely to leave the market. That will reduce access to advice for those living in rural constituencies such as mine. It will reduce access to advice for those with smaller amounts of money; the charges for explicit advice will be for those with higher sums of money.

[Glyn Davies (Montgomeryshire) (Con)]

Does my hon. Friend agree that there will be a particular effect on rural areas? I live in a rural area, where nearly all the financial advisers are small, one-person businesses. The imposition in relation to costs and time is particularly onerous for them. Many will simply close and the service in rural areas will disappear.

[Harriett Baldwin]

Yes, I agree. In London it does not really matter if one person goes out of business—there will be lots more financial advice available; but in rural constituencies such as mine and that of my hon. Friend there will be a significant impact on access.

The IFAs in West Worcestershire who have come to my constituency advice surgeries have also raised concerns about the exam. Most of the advisers I have seen have been—I know we should not mention age—in their late 50s or 60s. Speaking for myself—and obviously I am still very young—I am not as good at taking exams now as I was when I left university. That does not mean that I have not accumulated something else over the years. I hope that I have a little more wisdom and experience than I had then.

[Mr Robert Buckland (South Swindon) (Con)]

I have spoken to many local IFAs in my constituency and elsewhere, who provide localised, personal services to individuals who may not be of great net wealth, as my hon. Friend the Member for Ipswich (Ben Gummer) said. Does my hon. Friend agree that asking them questions about international arbitrage and the derivatives market is hardly relevant to the practice they have carried on for many years?

[Harriett Baldwin]

Indeed, that is a helpful intervention. I received a letter from someone in the north of England who was concerned about having to learn a lot about non-domiciled investors, which they did not think was very relevant in Sheffield.

In financial markets wisdom and experience are valued. Someone who has lived through a boom and bust cycle in the past is much less likely to believe that the latest investment fad will defy the laws of investment gravity. Someone who has seen a few economic cycles is much more likely to understand the ravages of inflation on savings. Someone who has been to a range of conferences over the years is more likely to know when something is really too good to be true. No exam can test that. Yet it is those experienced IFAs, who are often sole practitioners, who will find it hardest to take the time required to pass the specified exams.

[George Hollingbery (Meon Valley) (Con)]

Is not the situation also exacerbated by accounting rules? Being compelled to write off goodwill in one year, it is very difficult for groups of IFAs to acquire the business of smaller IFAs, which compounds the problem.

--- Later in debate ---

[Harriett Baldwin]

My hon. Friend raises an interesting point that I had not even thought of.

The experienced IFAs, who are often sole practitioners, will find it hardest to pass the exams. However, someone who has just graduated from university with a bachelor’s degree in financial markets—and I am not knocking that—will be immediately accredited by certain institutions. In the full file that I have received in the past few days are stories from experienced IFAs with unblemished regulatory track records, years of experience, happy clients and no complaints. Yet as a result of the rules, if they do not pass the exams they will not be able to ply their trade on 1 January 2013.

[Esther McVey (Wirral West) (Con)]

I thank my hon. Friend for securing the debate. I have had many letters from concerned constituents about it. Independent financial advisers feel that they will be put at a substantial commercial disadvantage by the new rules.

[Harriett Baldwin]

There is an important point to be made about how some of the larger organisations, and indeed some banks and bancassurers, will most readily be able to have their staff trained for the exams. However, that raises the question whether the exams will really test the skills needed by a good financial adviser. In the investment world, experience is valued and the FSA is imposing on the market a one-size-fits-all, prescriptive approach to education, at great cost to consumers, in return for a modest benefit.

I have written to the chief executive of the FSA and to date have received a letter, beginning, “Dear Mr Baldwin”, simply reiterating the FSA’s consultation paper conclusions. I would like to ask the Minister to answer a few questions. The FSA is the independent statutory regulator. However, it is answerable ultimately to the Treasury. Does the Minister believe that it is proportionate in the present case to impose a regulatory burden of £1.7 billion on consumers? Is the Minister concerned that up to 25% of smaller advisers are likely to leave the industry, handing a competitive advantage to banks and bancassurers? Is he convinced that the banks will not be able to find a way to reward employees for pushing certain products? Does he share my concern that the FSA’s own impact assessment suggests that those who get reduced access to advice are likely to be the smaller, poorer consumers in more remote areas?

Does the Minister think that there might be a more proportionate way for the FSA to achieve its objectives? For example, IFAs who have passed exams could add the letters of qualification to their business cards. Consumers could then be educated and could choose an unqualified adviser if they preferred, but would come to know over time that there was a brand to the qualification.

[Jesse Norman]

There is also a simple solution for firms of more than one person, which is that the senior member can sign off on the work or qualification of the person who has not received formal accreditation. That allows for the sharing of liability, the preservation of standards within the firm and the guarantee of good quality to the customer.

[Harriett Baldwin]

I thank my hon. Friend for that helpful suggestion.

I would also like to ask the Minister how changing from commissions, which are currently exempt from VAT, to advice, which will attract VAT, will not add a further cost for consumers.

[Andrew Bingham (High Peak) (Con)]

On the subject of commissions, the IFAs in High Peak who have spoken to me are concerned that removing the option of commission and replacing it with up-front charges will prevent people from getting the independent financial advice they need. Conversely it will prevent IFAs from taking the exams, because of the downturn in work. That means many people will not get the independent financial advice they will need.

[Harriett Baldwin]

Yes, that is a question to be considered as well.

Does the Minister really believe that consumers should not be allowed to choose whether they pay explicitly for advice or whether they pay through commission? Does he believe that it is consistent with UK legislation retrospectively to change the qualification regime for a whole class of practitioners? Finally, does he agree with one commentator, who described the RDR as

“a sledgehammer to miss a nut”?

Oral Answers to Questions

Harriett Baldwin Excerpts

Tuesday 12th October 2010 Commons Chamber

[Danny Alexander]

The hon. Gentleman will have to wait until the statement on 20 October to hear the details of our spending decisions, but as I have made clear in answer to earlier questions, of course we consider it important to understand and manage the regional impact of spending cuts. We have established a regional growth fund, the details of which will be in the spending review statement, which will enable areas such as his to win support for projects that help economic growth in difficult times.

[Harriett Baldwin (West Worcestershire) (Con)]

17. What assessment he has made of the effect on GDP of proposals to increase the level of economic growth in the June 2010 Budget.

[The Economic Secretary to the Treasury (Justine Greening)]

As we discussed earlier, the emergency Budget supported businesses in a variety of ways. We know that we have to rebalance our economy by getting an unwieldy public sector back into a sustainable, private sector-led economy that generates the tax revenues needed to fund our public services sustainably. We will never go back to the profligacy of the Labour party.

[Harriett Baldwin]

Businesses in West Worcestershire welcome the cuts in corporation tax that were announced in the June 2010 Budget. Does the Minister agree that the most basic economics primer would say that, if they are possible, lower tax rates for business can lead to higher tax revenues from business?

[Justine Greening]

My hon. Friend is right, and I know that she had wide experience in business before entering the House. Opposition Front Benchers really ought to listen to the CBI, the Institute of Directors, the Federation of Small Businesses, the British Chambers of Commerce and a range of other representatives from across industry who welcome the measures that the Government have brought forward to support business. As long as the Opposition put their head in the sand they will remain what they are right now, which is incredible.

PAYE Contributions

Harriett Baldwin Excerpts

Wednesday 8th September 2010 Commons Chamber

[Mr Gauke]

I am grateful for that question. It is absolutely right, particularly where those larger sums are involved, that HMRC deals with people sympathetically, and in order for it to do so there needs to be proper communication. That is a challenge for HMRC, but it is absolutely right that it focuses its resources on this matter.

[Harriett Baldwin (West Worcestershire) (Con)]

A couple of years ago, HMRC lost my personal information and that of 25 million other people on the child benefit disc, and in my constituency surgeries each week, HMRC problems consistently generate the most casework. In opening the boot—or the bonnet—of the car that is the computer system at HMRC, what other problems is the new mechanic going to find?

[Mr Gauke]

HMRC has faced many problems and challenges over recent years: a merger, coping with a complicated tax credits system, and a number of other issues. We need to be realistic about what can be done with our tax system—tax simplification is indeed important—and allow HMRC to focus on its key concerns and do the very important job that it has to do.

Office of Tax Simplification

Harriett Baldwin Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

The appointees will not be paid. If they incur proper expenses, they will be reimbursed, as is only reasonable—[Interruption.] I would have thought all Members of the House would appreciate that. Ultimately, the appointments will be in accordance with the relevant provisions, but we believed it important to set the OTS up quickly. We have done that, and with two excellent individuals.

[Harriett Baldwin (West Worcestershire) (Con)]

If those two excellent individuals are to work for an initial period of 12 months, will that be enough time for them to read the 11,000 pages of tax code applied by the previous Government?

Banking Reform

Harriett Baldwin Excerpts

Thursday 17th June 2010 Commons Chamber

[Harriett Baldwin (West Worcestershire) (Con)]

I very much welcome that direction of travel, just as I welcomed the decision of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), in 1997, to set the Bank of England free to make decisions on interest rates. Will the Minister clarify whether the Financial Policy Committee will publish its minutes openly and on a regular basis, and how it will deal with a situation in which it is concerned about a specific institution?

[Mr Hoban]

It is important that the Financial Policy Committee is transparent in its dealings. It is a great strength of the Monetary Policy Committee that it is transparent and that it can be held to account by the public for its decisions. We need to ensure that similar arrangements are put in place for the FPC—while respecting, as my hon. Friend has pointed out, the confidentiality of individual firms.

Financial Services Regulation

Harriett Baldwin Excerpts

Wednesday 16th June 2010 Commons Chamber

[Mr Osborne]

I remember that at the time I, too, was surprised by the FSA’s decision. If the hon. Gentleman will allow me to say this, those questions are best asked once we have made clear what the new institutional arrangements are. Then we can get on to the pay and rations.

[Harriett Baldwin (West Worcestershire) (Con)]

Does the Chancellor agree that it is surprising to hear Opposition Members talk about Northern Rock as a shining example of micro-regulation, when the FSA’s own report into Northern Rock said that the ARROW process gave it far too low a ranking and that that such decisions would have been better taken in the home of the lender of last resort?

[Mr Osborne]

My hon. Friend makes a very good observation. Let me make a broader observation, if I may. She has enormous experience of the financial services. There are Members on the Opposition Benches with real experience as well, including the hon. Member for Leeds West (Rachel Reeves), who used to work in the Bank of England. I would like that experience to be brought to bear in the process over the next year. We have decided not to resolve the issues in the Treasury, in the Department for Business, Innovation and Skills and in No. 10 Downing street, as we could have done. We have decided to have an open commission to which all Members can contribute and with which they can all engage. I think that is a better way to make policy.