Infrastructure
Helen Goodman Excerpts(11 years, 10 months ago)
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Greg Clark
The hon. Lady seems to be unaware of the fact that under the last Labour Government the national debt almost trebled. That is the legacy that they left and with which this Government are dealing. Over 13 years, they borrowed so much they left us with a deficit that was as big as that of Greece, and bigger than that of Spain, Portugal or Italy.
We would think that there would be something to show for all that money spent. We would think our roads, railways and power stations would be at least as good as those of Spain, Portugal and Italy. That, at least, would be a consolation prize: modern, up-to-date national infrastructure available to support British business and help us to generate the billions of pounds we need to pay off the deficit and reduce our debts.
Helen Goodman (Bishop Auckland) (Lab)
I have never heard such an absurd statement in this Chamber. Of course the increase in the debt in the last two years of the Labour Government did not produce new roads; that is because it went into supporting the banks, and if we had not done that, we would have had a banking collapse.
Greg Clark
The hon. Lady did not hear what I said. The structural deficit the Labour Government ran was in place before the financial crisis. That is the root of the problems we now face.
I do not for a moment want to suggest those 13 years did not result in a transformation of Britain’s position in respect of infrastructure. It was transformed, all right: the quality of our infrastructure declined in relation to that of our world competitors.
Greg Clark
The hon. Gentleman knows that it does count as Government borrowing in this country, which constrains this Government as it did the previous Government. Being a fair man he will be the first to acknowledge that the work I have been doing with our eight core cities has found innovative ways through tax increment financing and other schemes to invest in infrastructure in anticipation of some of the revenues associated with that. We are doing everything we can and have had some success in being creative in that regard.
As Europe and the developing world streaked ahead, the gulf in this country between London and the north widened under Labour. Only one of the eight largest cities outside London has an income per head that is above the country’s national average, which is in marked contrast to the norm on the continent of Europe. Seven out of the eight biggest German cities outside Berlin, and six out of the eight biggest cities in Italy, have an income per head that is above the national average. In France, that is true for half the largest cities, and for the others the figure is close to the national average. In other countries around Europe and the world, great cities outside the capital are motors of growth and drive the local economy. In this country, the legacy of 13 years of Labour is that the gulf with the north and in our cities across the country has widened and is a source of shame.
Helen Goodman
I am sorry to correct the Minister for the second time, but the rate of growth in the north-east went from being the lowest of the regions during the 1990s to the second highest during the last decade. Only two English regions grew faster than the national average under the Labour Government—London and the north-east.
Greg Clark
I do not quite understand the basis of the hon. Lady’s intervention, because the point I was making was precisely about the gulf between the capital and our provincial cities, and she has pointed out that London streaked ahead. By contrast, in other countries the performance of the regional economy kept pace with the capital, and that is something I want to champion; I want to encourage our provincial cities to be the equal of the capital on growth. I know she will recognise that in the past two years, at least, the performance of my native north-east, the place she represents, has indeed outstripped the rest of the country on creating jobs.
Gordon Birtwistle
No, I am not going to mention Eastleigh at all. Hon. Members are interested in the hon. Gentleman’s point on PFI—[Interruption.] No, he was talking about new colleges. Will he tell us when those massive infrastructure deals will be paid for? Will my grandchildren be paying for them?
Helen Goodman (Bishop Auckland) (Lab)
I found the Minister’s description of the recent history of this country totally astonishing. In my constituency, I can think immediately of a new bypass, a new further education college, a new hospital, several GP surgeries, several new schools and thousands of people who benefited from the decent homes programme under the last Labour Government. I am very concerned that this Government are not investing in the north-east as they should be. In the autumn statement of 2011, only 0.03% of the £40 billion that the Chancellor of the Exchequer switched into capital spending came to the north-east. In the autumn statement of 2012, there was an injection of £124 million, a road-widening scheme in Gateshead and some housing, which takes our share of the Government’s capital spend to an incredible 0.5%. That is an appalling waste of opportunity and potential in the north-east.
I am sorry that the Minister who opened the debate is not in his place, and I urge the Treasury to examine what the report from the Institute for Public Policy Research says about the way in which calculations for cost-benefit analysis on roads are made. The report makes it very clear that there is no level playing field between how cost-benefit analysis is carried out in sparse areas and how it is done in densely populated areas. I hope that the Treasury revisits that.
I also hope that the Treasury will examine the report from the North East chamber of commerce, which makes it clear that we have a large number of projects that would significantly improve the operation of the north-east economy. That is important, because we face the highest level of unemployment in the entire country at 9.1%. That is the short-term problem that the Government have pushed us into.
The long-term problem set out by Oxford Economics, which did some special simulations for us, is that in the 10 years from 2010, we will see a deficit of 20,000 jobs in our region. That is 20,000 lives wasted because this Government are not making intelligent decisions about investment. This Government’s infrastructure decisions are driven almost entirely by political considerations rather than economic considerations.
The Chancellor’s unstable approach to energy policy is such that we do not have a framework to enable investment in offshore wind and renewables. Those are of value in themselves and offer a significant opportunity for the north-east economy.
Another area where the Government are ignoring this country’s potential is connectedness. Since 2005, more than 7 million UK households have gone online. The explosion in internet use has had significant economic benefits: in 2010, the internet economy made up 8.3% of this country’s GDP—a higher proportion than in any country in the world. Underpinning that is the roll-out of Britain’s broadband infrastructure, but what this Government have done has almost halted the roll-out of broadband in England. The Labour Government had a plan to ensure that by 2012, 90% of the country would have access to at least a good speed of broadband, but this Government put the achievement of the target back to 2015, and last week we heard from British Telecom that it is unlikely to be achieved until 2017. That is five lost years from this Government.
We need solutions that allow the benefits of broadband to be spread as widely as possible, but what the Government are doing by failing to invest in broadband disadvantages rural communities in particular. That is extraordinary in view of the fact that both coalition parties claim to represent the countryside; neither is doing so effectively. By breaking up the large areas on which we were letting the contracts for broadband and instead adopting a policy of fragmentation by local authority area, this Government made it uneconomic for many providers to bid for the contracts; consequently, they have produced a market in which there is almost no competition. Clearly the slogan is, “Vote Tory, vote against competition.” That is not the way to develop our economy. It is really important that we move forward and have one digital nation.
Oral Answers to Questions
Helen Goodman Excerpts(11 years, 10 months ago)
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Greg Clark
I am very pleased to hear that from my hon. Friend, who has to count as one of the House’s most enterprising Members. He will know that Northampton came out very well of the recent cities survey with regard to its record of growth, and it is very important that we support that by getting more jobs and more people into work there.
Helen Goodman (Bishop Auckland) (Lab)
In answer to my hon. Friend the Member for Hartlepool (Mr Wright), the Minister made it absolutely clear that he is completely unaware of the fact that the cuts in the north-east total £4 billion, greater than those in Spain. Is it any wonder that youth unemployment is third only to Spain and Greece?
Greg Clark
The hon. Lady should reflect on the fact that the fall in unemployment in the north-east of nearly 25% is greater than that in any region in the country. She should be celebrating the turnaround in the north-eastern economy to which she and I have been aspiring for many years.
Oral Answers to Questions
Helen Goodman Excerpts(12 years ago)
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Mr Osborne
I sat on the PAC under my hon. Friend’s chairmanship and I remember our investigations into various hospital and prison schemes that had gone wrong. As we saw it, there were three problems. First, contracts were very inflexible, so it cost a huge amount to do things such as change light bulbs or clean hospitals and the like. Secondly, the private sector got all the upside of the projects and made more money than expected. Thirdly, there was no control on the overall off-balance sheet total. We are addressing all three: we are creating more flexible and transparent contracts; we will share in the upside by taking a public sector stake and having the public sector on the board; and at the Budget we will set out a control total for PFI 2 liabilities.
Helen Goodman (Bishop Auckland) (Lab)
The Chancellor says that things are getting better, but Essex county council has issued a social impact bond on which it proposes to pay 12%—six times the price of gilts—and the Government are putting £20 million into subsidising this financing. Why are the Government wasting money like that at a time of austerity?
Mr Osborne
I think that most people in the House—I thought this was the case in all parties—welcome the innovative work being done on social financing and social impact bonds. Sir Ronald Cohen is one of the leading advocates of this and has been advising the Government. It is all about trying to get new forms of financing into improving our society. I would have hoped she would have welcomed that, rather than criticising it.
Financial Services Bill
Helen Goodman Excerpts(12 years ago)
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Greg Clark
My hon. Friend is a real campaigner—anyone who suffers poor treatment in Chatham can count on her vigorous support in defending themselves against people who have more power. My understanding is that the research being conducted by the university of Bristol is pretty close to completion. I am not certain whether it will be published just before or just after Christmas, but I will ensure that my hon. Friend is alerted as soon as it is laid before the House.
Lords amendment 78 clarifies that the FCA will have the power to impose restrictions on the cost and duration of a regulated credit agreement. It ensures that potential loopholes that could be exploited by unscrupulous firms are addressed—for example, by ensuring that the FCA’s rules under the power cover linked charges and connected agreements. The amendment provides for the agreement to be unenforceable by the lender, for any money or property secured against the loan to be returned to the borrower, and for compensation arrangements to be put in place.
Helen Goodman (Bishop Auckland) (Lab)
Will the Minister clarify for the House whether the rules apply to organisations such as BrightHouse, which sells furniture and white goods at very high interest rates as well as via straightforward money transactions?
Greg Clark
The hon. Lady would not expect me to comment on a particular firm when I do not know the details, but she makes a perfectly reasonable general point. If a firm is a regulated provider of credit, the provisions apply to it in the same way.
Helen Goodman
But it sounds as if people selling goods at exceptionally high interest rates on hire purchase agreements are not regulated credit providers. Therefore, is there not a bit of a loophole in what the Minister offers?
Chris Leslie
That is correct. The Minister ought to be meeting the FCA regularly, and clearly those are the questions the House expects Treasury Ministers to put to the new regulators.
Lords amendment 78 was another concession that had to be dragged from the Government at great effort. I do not expect too much sympathy from you, Madam Deputy Speaker, but it is quite difficult for the Opposition to win votes in this House. Occasionally we have the odd success, such as on the EU budget—I do not want to talk about these things too much, as I know the Minister is a bit raw on that point—but by and large we try our best, we make our suggestions and we do not get very far. However, on this issue the Government were faced not just with the weight of argument by many hon. Members—including, of course, my hon. Friend the Member for Walthamstow (Stella Creasy)—but with the spiritual hand of assistance from the new Archbishop of Canterbury-designate in the other place, the Cross-Bench Bishop of Durham, as is. The Government had no choice but to make that historic concession when faced with the overwhelming moral and political case and the breadth of cross-party agreement.
The Commercial Secretary to the Treasury admitted that amendment 78 would not be a silver bullet for the problem of high-cost credit—payday lending or however we characterise these things. Although we are slightly disappointed that the new expanded Lords amendment 78 does not refer to “consumer detriment”, we hope that some of the provisions will open the door to enabling the Financial Conduct Authority to take urgent action to clamp down on some of the high costs involved, as well as the duration and rolling over of some payday loans or high-cost credit arrangements again and again, getting people into a spiral of dependency with massive credit costs, which are severely damaging to very many people.
My questions for the Minister are these. If the legislation no longer contains the “consumer detriment” litmus test, what will trigger intervention by the regulator? What will be the test? We are keen on many of the ideas in the amendment. The power to recover funds for consumers, the power to strike down enforcement action by an unreasonable lender and the power to insist on compensation for customers are all good, but we need the Minister to explain in slightly more detail how the Financial Conduct Authority will trigger those powers. Will individual complainants ring up the FCA hotline? Will litigation or a set of class-action cases be needed to get the FCA to take note, or might it send mystery shoppers around the country to undertake proactive investigations and say, “This is not good enough; we will see action”?
We are glad that Lords amendment 78 also makes changes on unlawful communications. That is welcome. Hon. Members will be looking at the clock and thinking, “Well, usually about now”—some time between 7.30 pm and 8 o’clock—“we get text messages from companies trying to convince us that all our debts can be written off in a voluntary arrangement under new Government legislation.” We might get spam or a cold caller saying, “Did you realise you’ve got £2,500 overdue, if only you put in your PPI claim before Christmas?” It is around this time in the evening that people will be getting these sorts of automated calls. There are all sorts of advertising, text and cold-call arrangements proliferating across the country.
Many of our constituents are totally baffled about what is being done and what can be done by the relevant authorities to stop such exploitative behaviour. Apparently, some of the companies trying to exploit vulnerable individuals use mechanised arrangement to poll thousands and thousands of people, and even if only 1% pick up the phone and say, “Oh well, I’d like more information”, the volume of calls means that they can make significant profits. A lot of these automated telephone arrangements are routed through foreign jurisdictions—often not even in the European Union—as a way of skating around advertising regulations.
We want amendment 78 to get a grip on some of those questions. I know that financial services companies are not always the ones directly involved—it could be what are known as claims management companies. There are also organisations peddling debt management plans that have high fees associated with them. People are sold a product by a company that says, “Let’s consolidate all your expensive loans and we’ll take a single payment instead.” People think, “That sounds rather good,” and they start making payments. Perhaps months go by, during which they pay, thinking that they are defraying their debts, but when the company goes bust, they find that they have paid down absolutely none of their debts. All they have been doing is paying for the profits taken by a fee-charging DMP provider. Those are the sorts of services we want the Financial Conduct Authority to tackle.
We have had a lot of shilly-shallying on these issues. Quite frankly, it should not have taken nine months of hard effort to extract this concession from the Government since we first tabled an equivalent amendment in Committee back in March. We are glad for small mercies—this is a step in the right direction—but it is now for the Minister to explain how Lords amendments 25 and 78 will bite and how they will help people in their daily lives. I look forward to hearing his response.
Helen Goodman
I want to speak to Lords amendment 25. The Minister was not terribly clear in his opening remarks about whether it concerned consumers as individuals or whether it would be interpreted more widely, to address the branch networks that the main clearing banks operate. When he winds up, I urge him to say something about the significance of having a nationwide branch network to ensure that all communities can be financially included.
This issue came to my attention in July, when I received a letter from HSBC, which wanted to close its branch in Shildon in my constituency. Shildon is a town of slightly more than 10,000 people, many of whom have been banking with HSBC for a long time. Many local businesses—600 of them—bank at the Shildon branch. It is much cheaper for everybody to have a local branch than to get on the bus, go down to Bishop Auckland, put money into the bank or take it out, and then come back again. The round trip on the bus costs £4. It is absolutely ridiculous that people should face such barriers. We mounted a great campaign and a huge petition, but of course HSBC has paid no attention whatever to the needs of the people of Shildon. I happened to come across a man at the Labour party conference who revelled in the title of “Director for wealth management”, and who was apparently the person responsible for the branch network. It is true that there is not a lot of wealth to manage in Shildon; none the less, people in Shildon need a proper banking service, just like those in other parts of the country.
As well as thinking about that need, we need to think about the impact on the rest of us. Let us suppose that somebody who lives in a perfectly well-banked part of Durham wishes to make payments in Shildon, belong to an organisation there or make transactions with people there. It is far easier and better for everybody if they know that there is a proper national network of bank branches. I urge the Minister to comment on the branch network in his closing speech.
I remind the Minister that over the last four years taxpayers have given the major banks a considerable amount of support through subsidies and guarantees, yet although they are too big to fail, they are not too big to fail their customers, which is exactly what they are doing. HSBC claims in its slogan to be “the world’s local bank”, but it is not very local in my constituency.
Mr Gareth Thomas
I am grateful for this opportunity to take part in the debate tonight. I echo some of the concerns that have been expressed by my hon. Friends the Members for Bishop Auckland (Helen Goodman) and for Nottingham East (Chris Leslie). I hope that the Minister will see his response to the debate as an opportunity to convince the House that Lords amendments 25 and 78 are not part of an attempt to put off action on payday lenders or on lending deserts.
I want to offer the House the example of the community of Thamesmead and Abbey Wood. It is a community of about 55,000 people in south-east London. The houses there were built in the 1960s in response to what was then seen as London’s housing crisis. There is no bank branch in the whole of that community. Not one of the big five banks has a branch there. The nearest branch is 30 to 45 minutes away by public transport. This is not for want of trying by a whole series of people to convince the big five banks to establish themselves in the area. An excellent organisation, the Thamesmead Trust, has tried to persuade the banks to set up there. The former Member of Parliament for Erith and Thamesmead, John Austin, has also tried many times, and the present Member, my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce), has made a number of efforts as well, but there is still no bank in the area.
The community of Thamesmead and Abbey Wood is clearly not the only area without a bank, as my hon. Friend the Member for Bishop Auckland illustrated, but I worry that many of the lending deserts in this country are not yet out of the closet, if I can use that term. We do not have the necessary information to chronicle by postcode the lending that is taking place to businesses and to individual consumers. As my hon. Friend the Member for Nottingham East said, many of the banks in question are established in the United States, where they have to provide those data. As I said in an earlier intervention, President Obama supported calls for business lending to be publicised, on a postcode basis, so that people could see where lending was taking place and where it was not. That provision has now been written into American law.
We have called not only for the publication of lending data by postcode but for an obligation to be placed on banks to lend into every community. If they are not prepared to do that themselves, there should be an expectation that they will do so through community development finance institutions, through charity banks or through credit unions, but the obligation should be on the banks to demonstrate that they were providing lending into communities through those alternative sources if they were not prepared to do so directly themselves.
Helen Goodman
My hon. Friend reminds me that I asked HSBC, when it was closing its branch in my constituency, if it would instead put £10,000 into the local credit union. I received a letter from the bank today saying that it would not.
Mr Thomas
My hon. Friend gives a good example of the lack of joined-up thinking in our financial services markets. It would be good to see the big beasts of the financial services jungle supporting the newer players that want to address the problem of lending deserts.
Numerous websites offer comparisons between banking products, but the Centre for Responsible Credit has highlighted how, in practice, the banks release very little information about their lending at community level, either for businesses or for personal customers. Data on lending to and deposits from small businesses and third sector organisations, by postcode or at neighbourhood level, are not routinely available in the UK, even though much of that information is held by the banks and could be released.
The last time I spoke to representatives of the British Bankers Association, they told me that they were looking at this issue. It would be good to hear what the Financial Secretary thinks about it. My hon. Friend the Member for Nottingham East clearly thinks that the Minister will be a new broom sweeping through the fusty ways of the Treasury, and I hope that he will use his considerable influence to maintain the pressure on the British Bankers Association to step up the release of those data. I also hope that he will use his meetings with the chief executive and board members of the Financial Conduct Authority to require them to initiate similar pressure, in private before the FCA is properly established, and in public thereafter.
Autumn Statement
Helen Goodman Excerpts(12 years ago)
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Mr Osborne
I entirely agree with my hon. Friend. We have made difficult decisions on welfare uprating—we have asked the rich to pay more—but, as I have said, we have done that not only to help to deal with the deficit, but to help people who work hard and want to get on. That is precisely what we have done today
Helen Goodman (Bishop Auckland) (Lab)
Further to the answer that the Chancellor gave my right hon. Friend the Member for Morley and Outwood (Ed Balls), will he admit that in 2010 he cut public spending in the north-east by £2.8 billion, that last year he gave us 0.03% of the capital spend, and that this year he gave us 3%? Far from being fair, does that not mark a transfer of resources from the north to the south?
Mr Osborne
Under this Government, the level of capital spending is higher than the level in the plans that we inherited from the last Labour Government—which the hon. Lady supported at the time of the last Labour Budget—and, indeed, we have added to it today. Under this Government, the level of public investment as a proportion of GDP is higher than the average level under the Labour Government. As for investment in the north, there is the investment in the A1, the investment in High Speed 2, and the investment in the northern rail hub. There is a whole load of investment in the transport infrastructure of the north and the north-east because we are helping this country, which suffered so much under the Labour Government, when the gap between the north and the south grew.
Bank of England
Helen Goodman Excerpts(12 years ago)
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Mr Osborne
I thank my right hon. Friend for his support for the appointment. We have now united all points on the spectrum.
The Governor of the Bank will chair the Financial Policy Committee, the body that will be responsible for macro-prudential regulation. In other words, he will set overall guidance on issues such as capital and liquidity, about which I know my right hon. Friend has spoken powerfully. Any decision on the framework of the inflation-targeting regime and the like will be made by the elected Government and not by the Governor of the Bank.
Helen Goodman (Bishop Auckland) (Lab)
I am sure that this is a question that the Chancellor has considered. Will he explain how Mr Carney will handle any conflicts of interest that arise during the period between now and his taking up his post in London?
Mr Osborne
There should not be any conflicts of interest, because he is very clearly the Governor of the central Bank of Canada, will remain so until the end of May, and will fight Canada’s corner as we would expect him to do. However, he is also the chair of the Financial Stability Board, of which we are a member. He is already heavily involved in international financial regulation and in decisions that have a real impact on our financial services. Moreover, Canada is a G7 country, and is probably one of our closest allies: it is difficult to think of a closer ally than Canada. We already work incredibly closely with the Canadians. Incidentally, the fact that we co-ordinated the press conference in Ottawa and the statement in the House of Commons today and the news did not leak in advance shows that the two Governments work together and trust each other.
LIBOR (FSA Investigation)
Helen Goodman Excerpts(12 years, 5 months ago)
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Mr Osborne
I am tempted to say that we should find an Aristotelian mean, where we do not completely destroy the industry with one inquiry after another, but instead have a sensible inquiry that gets to the right answer, amends the law appropriately and enables us to have a sensible financial services industry that avoids the scandals that we are dealing with today.
Helen Goodman (Bishop Auckland) (Lab)
One of the most controversial episodes in the recent history of the City was big bang in 1986. Notwithstanding the many good qualities and good intentions of the hon. Member for Chichester (Mr Tyrie), the fact is that in 1986 he was a special adviser to the then Chancellor of the Exchequer, who was overseeing big bang. Does the Chancellor agree that the hon. Gentleman will find it difficult to demonstrate the necessary independence?
Mr Osborne
My hon. Friend the Member for Chichester (Mr Tyrie) is more than capable of demonstrating his independence, and I remind the House that thanks to the reforms of this Government he was elected to his post by the entire House of Commons.
Finance Bill
Helen Goodman Excerpts(12 years, 5 months ago)
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Helen Goodman (Bishop Auckland) (Lab)
Is my hon. Friend saying that if a person’s income fluctuates during the year, but they do not know that it is fluctuating, and do not know the full amount of their income until the end of the year, the child benefit will be treated by one set of rules, whereas if they know how their income is fluctuating and whether they are moving in and out of the zone in which the charge applies, they will be treated in another way?
Cathy Jamieson
Yes, my hon. Friend has got the situation exactly right; that is the problem as it has been described. As for people who may elect not to receive the benefit, the Government’s proposals make it difficult for people who do not know what their earnings will be over a particular time to make that judgment.
A number of issues have been raised to do with how one would determine the higher-income person in a relationship. The measure raises a number of complex issues to do with independent taxation and taxpayer confidentiality. I know the subject has been raised with the Minister. My understanding is that HMRC will tell the couple which person had the higher income and is therefore subject to the new charge. As I outlined previously, I can see some difficulties associated with this. Not only does an individual need to know about their partner’s income, but they would need to know whether their partner has claimed child benefit and whether the partner has elected not to receive the benefit.
This will be particularly important where a couple are not on speaking terms. That does happen. It may not seem like it when everything is cosy in the coalition, but there are relationships in which people are not on speaking terms or where they have separated. In those circumstances, we need to be clear about what HMRC intends to do to inform a partner whether the other has made an election not to receive child benefit. Will they be advised, should the partner subsequently revoke that election?
There are potentially Catch-22 situations, particularly in relation to self-assessment and submitting the returns. Far from simplifying the system, which was straightforward and understood by everyone and which made it easy for people to claim, we seem to be making it far more complicated.
I want to raise, briefly, the issue of extended families. There are concerns that there may be contentious cases where different people claim entitlement to child benefit—for example, where parents are unable to look after the children and perhaps grandparents take over that role. We know the valuable role that grandparents can play in those circumstances, often at considerable cost to themselves. There could be situations where a parent continues to receive child benefit, although the child lives with the grandparents. If one or both grandparents have adjusted net income over £50,000, under the relevant provisions of the Bill, the higher-earning one would be liable for the higher child benefit payment, even though the grandparents are not necessarily at that point receiving the child benefit and could even be in dispute with the recipients.
These are some of the practical problems that come into play when we look at how people live their lives. I have mentioned the issue of timing. Perhaps the Minister can answer that. The issue of national insurance credits was raised in the Committee of the whole House. Although the Minister went some way towards explaining the situation and giving reassurance, it would be helpful to hear that stated here this evening.
I shall spend a moment on the problem of electing not to receive child benefit and revoking the election. Where one party to a relationship has an income in excess of £60,000, it seems that HMRC would like to encourage the child benefit claimant to claim the child benefit but to elect not to receive it, because that somehow makes everything neater. HMRC would stop paying out the child benefit, which would reduce the need for the higher earner to join self-assessment and to pay their tax. Those who expect their income to be more than £60,000, apply for child benefit and elect not to receive it, yet subsequently realise that their income for the year is likely to be between £50,000 and £60,000, could lose out unless there are some changes to the legislation.
It is important to place on the record that it is not only the Labour Opposition who oppose what the Government are doing. People who understand the tax system and want to see it improved, such as the Chartered Institute of Taxation, say that ideally the clause and the schedule should be withdrawn and a fresh consultation launched, with a view to coming up with a more workable alternative to the current proposals. We have tabled a couple of amendments to test the Minister’s view on whether that is needed. It has been suggested that these are needed to assist in the situation where people elect whether or not to receive child benefit.
The amendments would put all claimants not subject to 100% high income child benefit charge on the same footing as other claimants able to make a revocation, so this might be easier, it is argued, for HMRC staff to understand and implement. There is a clear distinction between people who elect not to have payments and then find that their income is under £50,000, and those who elect not to have payments and find that their income was between £50,000 and £60,000. The Bill copes with the former, but not with the latter.
I can see people’s eyes beginning to glaze over at these technicalities. Hon. Members in all parts of the House no doubt want me to bring my remarks to a close. [Interruption.] It is good that we all agree on something. These points are very important.
To return to what I said at the outset, if we make the situation more complicated, cause more confusion and make it less likely that people will know whether they qualify for the benefit, that will not be helpful for families, it will certainly not be helpful for children and, I would argue, it will not be helpful for Ministers, because it is they who will have to come back to fix the problem later.
Helen Goodman
One reason for not taking up the proposal is that one group in society which is most likely to be in child poverty is children in families with lots of children.
Mark Field
I accept that, but we are looking for a simple system—[Interruption.] No, the issue at stake is trying to find a straightforward and simple system that bears down on the idea of universality, which we should try to do if our welfare system is to retain any credit.
I hope that even at this late stage the Minister will give some thought to the matter. I work on the basis that I want the measure to work, but nothing would undermine our tax system more than the benefit before us being undermined, as many of us fear, through the practical difficulties that are almost inevitable. Let us for once, as I say, be wise before the event.
Helen Goodman
Normally, one begins a speech by saying what a pleasure it is to speak, but it is not a pleasure to speak in this debate; it is a great disappointment. This is the third time that I have spoken about the problem with the child benefit proposals in the Budget that the Chancellor of the Exchequer announced.
The first time I spoke I thought that there were four arguments against the Government’s proposals; I now discover that there are 14. First, there is the impact on distribution and horizontal equity, the point well expressed by my right hon. Friend the Member for Birkenhead (Mr Field). The Institute for Fiscal Studies’ independent analysis of the impact of changes made by the Budget looked at households with and without children, and households with children are losing most. From all the changes in the current year, households with children will lose 1.3% of their annual net income compared with 0.5% for those without children.
On the changes implemented so far, the loss is 3.5% for households with children and 2.1% only for working-age households without children. By 2014 there will still be inequity between households with children and households without. By then, even assuming that universal credit is as good as the Government say it will be, which I doubt, households with children will have lost 3.7% of their income—£1,411 on average—whereas those without children will have lost 2%, or £646 a year. How it can be fair to take more money from families with children than from those without, I do not know.
There is clearly also unfairness among those people who are just above and just below the thresholds, and among families in which one person earns £50,000 and those in which two people earn £40,000. We have discussed all that before.
New problems have emerged since we debated the issue. There is the possibility of people planning their tax to avoid the charge; administrative problems have been referred to; and we have repeatedly asked the Minister how he will preserve independent taxation, given the implications for it. That point has been raised to a significant extent by the professions; the Chartered Institute of Taxation and the Office of Tax Simplification are very concerned about the issue.
One thing that is not at all clear is how Ministers intend to implement the measure, given that, as far as I can see—the Minister can correct me if he wants—in schedule 1 there is no obligation on people to share information about their incomes, so it will be extremely difficult for people to know what is going on. The Minister is calm about that, but given that families’ incomes and circumstances change over time, the measure is highly likely to lead to a large number of practical difficulties.
Another thing that is odd from a Government who claim to be in favour of the family is that they are introducing a charge that is, in effect, a couple penalty. At one stroke of a pen, they have achieved both a penalty for couples and the destruction of the independent taxation of women. It is a masterstroke of its kind.
Nadine Dorries
Does the hon. Lady agree that many couples with no children object hugely to their taxation going towards families who decide to have large numbers of children? The proposal made by my hon. Friend the Member for Cities of London and Westminster (Mark Field)—that the cap should be at two or three children—strikes a fair and moral balance.
Helen Goodman
As I explained to her hon. Friend, I do not think it strikes a good balance because the children who live in families with lots of siblings are the children who live in poverty. I know that Conservative Members are not as committed to addressing child poverty as were the last Labour Government, and we will see the results of that as we go through this Parliament. I regret that. I am surprised that the hon. Lady, who is in general a practical, well-rooted person, does not see the power of that point.
Another issue is the fiddly definitions of partnerships and the difficulty that Ministers will have in establishing what those are for the purposes of the measure. The measure is both administratively fiddly and extraordinarily mean. It will affect more than 1 million families; about 1 million people are going to lose £1,300 a year. That is a significant sum and I wish that the Government would take more seriously both the practical and the fairness arguments that we are making.
The Minister has still not addressed one final issue: people who at the moment get national insurance credits by claiming child benefit. They will lose their national insurance credits, which will impact on their pension entitlements for many years to come.
I hope that the Minister, even at this last stage, will have a last-minute conversion.
Mr Stewart Jackson (Peterborough) (Con)
I say gently to the hon. Member for Bishop Auckland (Helen Goodman) that it is incumbent on her party to offer suggestions for alternative sources of funding, rather than the endless criticism. I speak as someone who is generally extremely sceptical of the policy, but alternatives came there none from the Opposition. Even the alternative offered by my hon. Friend the Member for Cities of London and Westminster (Mark Field) was cursorily rejected by the hon. Lady.
I have been consistent on the issue since it first arose at the end of 2010, following the Chancellor of the Exchequer’s announcement. It would be churlish and unfair of me not to concede that he took on board the issue of the cliff-edge effect. He sought to ameliorate that perverse issue with the taper system, which was broadly supported on the Government Benches.
Apart from administrative issues, there are a number of other criticisms that were comprehensively covered by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). For example, the Government are not abiding by their own tax consultation policy. My hon. Friend the Exchequer Secretary, who is proud to have been the tax personality of 2010, launched a document called “Tax policy making: a new approach” in June 2010. He also responded to the public consultation of December 2010, which called for thorough consultation and cost-benefit analysis and impact assessments for key stakeholders. That has not happened in the case of this change, which will affect 790,000 couples and 30,000 lone parents who will lose the entirety of their child benefit allocation, and 330,000 couples and 20,000 lone parents who will lose some of it. That is a major problem. Apart from the lack of consultation, we still have the unfair situation that a single-earner couple earning just above the threshold rate, which was then £42,475, will lose child benefit, but a two-earner couple earning just under that amount will receive it in full. That has not been properly addressed.
As my hon. Friend said, we have a moral responsibility to focus on clearing up the deficit left to us by the previous Administration, but this proposal, in particular, fails on the grounds of fairness. How can it be right? It will send the message that ambition is wrong, that the basic tenets of fairness will be disregarded, and that there will be a perverse anti-marriage and anti-home maker bias and an attack on hard work, ambition and family responsibilities.
The policy means that a two-earner couple with two children on a combined income of £100,000 will keep their child benefit while a one-earner family with two children on just over £50,000 begin to lose it and, if their income rises to £60,000, lose it completely. The former household is already far higher up the income distribution yet keeps its child benefit, while the latter household, which is lower down the income distribution, loses it. Let us remember that this proposal was predicated on clobbering the top 15% of the income distribution, but it does nothing of the sort. Only if the family has one child will they be in the eighth decile of the income distribution; if they have two, three, four or more children, they will, largely speaking, be skewed towards the middle. We are not clobbering the richest in society; we are clobbering people who want to do well and are ambitious and aspirational. Unfortunately, that will have perverse consequences that will backfire on this Government politically and in terms of what is needed to make sure that the administration of the system works properly.
This issue is inextricably linked to the popular commitment that we made in the 2010 general election to give a tax break for marriage and families, which we have not yet carried through. We need to keep faith with that, particularly as the coalition agreement guaranteed the Liberal Democrats, who had some ideological problems with it, the chance to abstain. If the Government want to keep the faith with the people who elected us as Conservative Members of Parliament, they should make sure that that is in the pipeline now, because after April 2013 administrative difficulties with IT systems might preclude its coming to fruition.
In terms of cash in the pocket and real tax bills, a one-earner, two-child family earning £60,000 currently pays £13,950 in tax per annum while a two-earner, two-child household with each person earning £30,000 pays just £8,768. That difference will increase substantially as a result of these tax changes. The first family will see their bill rise to £15,667, meaning that there will be a substantial difference of 59% between the tax paid by the two families.
LIBOR (FSA Investigation)
Helen Goodman Excerpts(12 years, 5 months ago)
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Mr Osborne
I am grateful to my hon. Friend for sharing his CV with the House. [Interruption.] At least he did not work for the shadow Chancellor. The answer to his question is that we are publishing the consultation next week.
Helen Goodman (Bishop Auckland) (Lab)
The Chancellor has very sensibly said that he will look at how fines are used, but his answer to my hon. Friend the Member for Ilford South (Mike Gapes) about calculating how much people have lost is somewhat disappointing. Can he not look into whether the fine money can be used to compensate people? Surely he is not expecting every individual to make their own case against a large institution such as Barclays bank?
Mr Osborne
I am happy to take away, because it has been raised by several Members, the issue of the total impact on the economy and on individuals. I would point out to the hon. Lady that that might be extremely difficult to work out, because the LIBOR rate was manipulated up as well as down. Sometimes the rate was too low for the true market price, and sometimes it was too high. It was manipulated by its derivative trading floor to suit the particular position that the bank had taken on that day, and that is why it is a difficult calculation to make. The FSA has made it clear, however, that that contributed to a risk to the country’s financial stability, and the cost of that is enormous.
Interest Rate Swap Products
Helen Goodman Excerpts(12 years, 6 months ago)
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Helen Goodman (Bishop Auckland) (Lab)
I do not know who my hon. Friend met, but I wonder whether the stories he heard were like that of my constituent Mr Les Wood. He borrowed £9,000 from HSBC and has since repaid £133,000 to HSBC—a totally disproportionate sum.
Chris Leslie
That story has been repeated time and again. For those of us who might have come across the problems in anecdotes related to us in our surgeries, today’s debate has revealed that they were not one-off cases; there was a pattern.
Let us remind ourselves of what the banks have been doing. They saw an opportunity in new firms ambitious to succeed and to grow, and in firms in need of loans to invest in new plant and processes. The banks sought to attach complex hedging products to the loans, allegedly giving the impression that that was a requirement of the loan—we have heard how many times businesses were told it was part of the package deal—and that credit could not be obtained otherwise. Small firms were told that the products were just insurance policies: the upside protections were emphasised, but the downside risks were hardly mentioned. Then, when the course of the economy took a turn—we will not go into that today—leading to interest rates plummeting over the past couple of years, the firms were forced to pick up the punitive costs of the downside risks of the hedges. The banks have profited significantly at the expense of small firms.
Today we have heard revelation after revelation of breathtaking abuse of the small firms that have been caught out—firms up and down the country, from chip shops to child care centres, builders to bed and breakfasts. I pay tribute to The Daily Telegraph business section, which has pursued this issue tenaciously. It highlighted the case of Adcock and Sons, a Norfolk electrical retailer that took out an interest rate swap on a £970,000 loan. The product, known as an asymmetric leverage collar, cost the business £2 for every £1 of benefit it offered. As The Daily Telegraph reported, what really rubbed salt into the wound was that the arrangement resulted in Barclays Capital profiting by £100,000.
This is not just a story of product asymmetry; it has many other facets. For example, as we have heard today, agreements are too often not made in parallel with the line of credit, but extend way beyond the end of the loan. Guardian Care Homes has been mentioned: it had two swaps whose term exceeded the loan by 10 and 15 years respectively—totally ridiculous. We have also heard about the punitive costs of servicing the swaps, and the back-breaking breakage fees—sometimes 50% of the total loan cost, averaging, we are told, about £1 million just to reverse out of the agreements.
Questions have been asked today about the competence of those selling these specialist products and the commissions that skewed their judgment. Banks were, at best, taking advantage of what we in the trade know as “information asymmetry”—in other words, unsuspecting customers and cunning banks—but at worst their behaviour was extortionate. Court action to try to obtain a remedy has not been easy: we have heard about gagging clauses in out-of-court settlements, where they have been made. Those problems are compounded by the fact that the clock is ticking on people’s right to complain and pursue redress.
In recent months, Opposition Members have done their best to raise these issues. In the Financial Services Public Bill Committee, we tabled amendments that would have given small firms better access via the FSA to the super-complaints power and stronger collective proceedings powers. The Financial Secretary, who is not here today—I think he is at a conference in Turkey—rejected the amendments, saying that he did not want to comment directly on interest rate hedges issues as they were a “matter for the FSA”. That response was not substantive, and I hope that the Economic Secretary can rise to the occasion today and respond seriously to the heartfelt concerns that have been raised in the debate.
The Government rejected other amendments we tabled to the Financial Services Bill on the need for a fiduciary duty of care for customers, both individuals and SMEs, when they are taking out these products. The Chancellor has rejected Vickers’ advice—it appears that the banking reform Bill will have nothing to improve customer protection. Vickers, of course, highlighted that in the ring-fenced retail arrangements we should be very careful about interest rate swaps, hedging and derivative products moving into what might be called the normal vanilla nature of banking. That is something all hon. Members might want to spend a little time considering when scrutinising the proposals set out in the White Paper that the Treasury has just produced.
I met FSA representatives yesterday and we talked about its supervisory investigation. I am told that it has been looking at a random sample of 50 or so cases in each of the banks. They have been listening to the tapes of some of the sales calls that took place and looking back at them. I am told that its target is to announce some action by the end of this month, which I sincerely hope it will do. Having listened to the debate and heard the strength of feeling on these questions, it occurs to me that any small businesses that have not yet complained or raised these issues with the FSA must do so as soon as possible. The FSA’s hotline number is 0845 606 1234. I hope that those firms will ring and let the FSA know, because it is our best hope at this juncture.
I am looking for four particular assurances from the Minister today at the very least. First, she and the regulators need to extract from the banks an assurance that no customer who complains will be treated adversely because of the complaint. There is potential for a sense of victimisation, and we need absolutely to get out of that space. Secondly, we should have a moratorium on foreclosures while the complaints of the customer concerned are being considered and their case is under review, because firms are going under and going into liquidation and bankruptcy every single day. We have to ensure that some backstop is put on the process.
Thirdly, we need agreement by the banks that customers who were sold hedges for longer than the term of the loan should have the right to cancel and move out of the breakage fee arrangement. Those are the minimum criteria we need. Also, banks should extend the statute of limitations, the sense that complaints have to be investigated within a particular time scale. The banks should show more grace in these circumstances.
Small businesses are the lifeblood of the British economy. They account for 48% of private sector turnover, employ 14 million people, have a turnover of £1.5 trillion, and of course they make up 99% of UK enterprises. They deserve to be treated better by our banks and to be supported more effectively by the Government. They certainly deserve the full backing of both sides of the House for an urgent solution to this serious problem.