Regional Pay (Public Sector)
Helen Goodman Excerpts(12 years, 11 months ago)
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Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Diolch, Mr Chope. It is a pleasure to serve under your chairmanship this morning and to have the honour of beginning the first Westminster Hall debate of 2012. I thank right hon. and hon. Friends for making the effort to come here on the first morning of Parliament’s return.
The topic of regional pay will increasingly dominate relations between the UK Government and the public sector over the coming year, perhaps even more than the still unsolved dispute over public sector pensions. Back in November, I labelled the autumn statement a panicked response to worsening economic forecasts, rising unemployment and increasing deficit payments. The statement included many interventionist measures for which my party had been calling, particularly increased capital infrastructure investment. The signature policy of the statement was the capital investment programme, which seems remarkably similar to my party’s proposals at the last Welsh general election. I hope that the £25 billion of funds to be raised from pension funds over the coming years will be shared equitably across the nations and regions of the state.
The fine print of the autumn statement contained a deeply worrying request for pay review bodies to investigate how public sector pay can be made
“more responsive to local…markets”,
with the aim that they should report in July this year. After the flurry of announcements that we heard at the beginning of the autumn statement, it took a while for the significance of that announcement to sink in. What the Chancellor was announcing was a wholesale review of the introduction of regional pay in the public sector to be introduced as early as the 2013-14 pay round. I do not want to accuse the Chancellor of being deliberately antagonistic—
Jonathan Edwards
Well, it is the first day back. However, the fact that that announcement was made on the eve of the biggest industrial strike in the UK since 1926 smacks of deliberate bad timing. If the Government think that the proposals for public sector pensions have got state employees and their representatives worked up, they have not seen anything yet. As the debate rages over such proposals, I fear that we are likely to witness increased industrial strife.
After making the announcement in the autumn statement, the Chancellor explained that the review would be a significant step towards the creation of a more balanced economy in the nations and regions of the state that does not squeeze out the private sector. The claim—the theory, at least—is that depressing public sector wages where they are currently higher than those in the private sector will lead to the brightest and best choosing a private sector career over public service and that such an approach will boost the private sector.
What are the Treasury’s intentions? Is it considering a system that extends the London weighting, or is it considering something altogether more far-reaching? In June 2008, the Minister for the Cabinet Office was quoted in the Financial Times as saying that it is the intention of the new UK Government to lower rates of pay in the civil service outside London. That is on top of redundancies and a two-year pay freeze, with the autumn statement freezing public sector pay at 1% for a further two years. May I remind Ministers that a pay freeze at 1% is essentially a further real-terms pay cut for the next two years? My fear is that the Treasury’s proposals are all about saving costs. I therefore cannot see it topping up payments for public sector workers in more affluent areas of the state or reallocating resources. My concern is that the Government’s intention is to reduce pay in the poorest parts of the state across the public sector and to introduce market conditions into public sector workers’ pay and remuneration.
The Institute for Fiscal Studies reported that the public sector pay bill for 2009 was around £182 billion, which represents around 30% of UK Government expenditure and around 13.1% of UK national income. However, based on the 2010 comprehensive spending review, we know that the public wage bill will be significantly reduced by the projected reduction of 400,000 public sector jobs by 2017. In winding up today, it would be helpful if the Minister informed us what the savings will be of the Office for Budget Responsibility’s new projections of more than 710,000 public sector job losses by 2017.
At the risk of offending my friends in the Labour party, based on the policy direction of the previous Government, the Treasury should have the full support of Her Majesty’s official Opposition. What strikes me about politics in this place is that, despite the sporadic changing of the guard at No. 10 Downing street, more things stay the same. The previous Prime Minister had obviously spent too much time in his former post at the Treasury, as he was an avid exponent of regional pay. Indeed, the previous Labour Government introduced regional pay for court workers and the Prison Service.
In the teeth of the trade union movement’s opposition over the coming months to these proposals, the Treasury will justifiably be able to say that the previous Labour Government introduced the principle of differential pay, using the Courts Service as a pathfinder for its wider introduction across the whole public sector. Indeed, the Chancellor made that point repeatedly to the Treasury Committee during the evidence session on the autumn statement last month. To the Public and Commercial Services Union’s credit, it warned exactly of that during the debate surrounding the proposals for the Courts Service in 2007. It said at the time:
“There was a need for a pay and regrading review as workers from the magistrates’ courts have recently been brought into the civil service. But the Department of Constitutional Affairs has gone for the cheapest possible option. If the government brings regional pay in here, it will try to implement it in the rest of the civil service, and then across the public sector.”
I would be grateful to the Minister if she informed hon. Members about the Government’s assessment of the impact on recruitment and quality of service in south-east England of introducing regional pay in the Courts Service. More importantly from my constituents’ perspective, what has been the impact on recruitment, performance and, crucially, morale in those areas where lower rates of pay are offered?
Helen Goodman
The hon. Gentleman is in general making an excellent case this morning, and I congratulate him on securing the debate. Does he agree that there is a real problem surrounding the quality of public services as a result of the fact that, for example, doctors might come out of university with five, six or seven years of debt and be paid less in regions such as the north-east or Wales than in London?
Jonathan Edwards
The hon. Lady makes an excellent point, and I thank her for that intervention. I will come on to talk about the brain-drain element and the polarisation of wealth across the British state.
I say to the Minister that, with the policy in operation across some parts of the public sector already, the Treasury should have the information about its impact at its disposal. That leads us to ask why the autumn statement pledged to hold an investigation into the issue. There is already a wealth of evidence from trade unions about the problems of the policy in the courts and prison services.
Without having sight of the Minister’s speech, I presume that her counter-argument might include saying that it is the Government’s intention to equalise the standard of living for public sector workers. Such an argument might go along the lines that a teacher working in Carlisle or Carmarthenshire has more disposable income than a colleague working in Reading, because of the difference in the cost of living and that that is morally unjustifiable. Superficially, that seems a seductive and attractive argument, but it is essentially a policy aimed towards a race to the bottom.
I hope that the Government do not embark on a divide-and-rule strategy and play public sector workers off against each other, as they have during the public sector pensions debate. Under the proposals, both public and private sector workers in the regions and locations concerned would be losers. The impact of such a policy would not be a geographical or sectoral rebalancing of the economy; it would be a sobering experience, with public sector workers already in fear of their jobs having their pockets picked for pension payments and suffering a prolonged period of wage freezes and real-term cuts.
Glyn Davies (Montgomeryshire) (Con)
Thank you, Mr Chope, for calling me to speak on this complex, interesting issue. This is the first time that I have spoken under your chairmanship, and it is a great pleasure to do so. I congratulate my good friend, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). We have discussed this matter once, briefly, on Welsh radio, and I said then that I wanted to speak in this debate. The gist of what I said then, and shall say now, is that we are facing a complex issue. It is difficult to understand how the hon. Gentleman could be so definitive about a response.
There are serious issues here. On 29 November, the Chancellor announced a review of the case for regional pay. We are talking about an announcement that there will be an inquiry reviewing the case; that is not sufficiently definitive to be described as proposals. A number of hon. Members who intervened mentioned proposals, but we are considering something that could have a damaging effect and could distort local markets.
The issue is not new. I first became involved in it 30 years ago, and it was a chastening experience. I am talking about the general, in-principle case for looking at regional pay. I had just become chairman of Montgomeryshire district council, and had very little experience of public work; I had probably been put in that position a little earlier than I should have been. I was a local farmer—a small businessman—and it seemed to me that the local authority was distorting the local market. It was paying a significantly higher rate than the local market. People were being transferred, and local businesses were complaining about losing their best staff.
I went to a conference in Kensington town hall; I was very green and new. My chief executive, who came with me, put me down to speak. When I was on the platform, I made what I thought was an entirely rational point, but I was booed off the platform. I was an independent chairman; I was speaking with a local businessman’s logic about how we could run the business—the local authority—more efficiently and not distort local markets, but I was booed off. That was more than 30 years ago, so there is nothing new about this debate.
I have read some quotes made by the previous Prime Minister when he was Chancellor of the Exchequer, and they were incredibly positive about regional pay. I am sure that when we have this debate in July after the inquiry reports, which will be the obvious time to discuss what might then be considered proposals, his quotes will be mentioned; there are legions of them, strongly supporting regional pay and saying how vital it is for the future of our economy.
Helen Goodman
Labour Members are concerned that there is not an open inquiry, but a collecting of arguments for doing something that the Chancellor already wants to do. Will the hon. Gentleman say who is on the commission, who is undertaking the review, and whether the trade unions are involved with it?
Hywel Williams
The hon. Lady makes a fine point. As so often with the policies of this Government and at times, I fear, of her own Government previously, there is no apparent understanding that the system is such that if we cut off a large branch, the tree itself will be affected. I agree with her entirely.
Helen Goodman
The hon. Gentleman is absolutely right. In the north-east, the proposal has the potential to take between £500 million and £1 billion out of our regional economy every year, and yet the switch in capital to our regional economy under the Chancellor’s autumn statement was 0.1% or £4.1 million, which is completely unbalanced.
Hywel Williams
Indeed. The hon. Lady’s point is pertinent to the debate.
When cuts were made to wider public sector budgets, the effects were largely on the public sector, of course, but also on the para-private sector—companies that have contracts with the public sector—which is integral to local economies. Similarly, those whose livelihoods depend on services to those in employment will be at risk from the proposals. As well as the local economy, a whole host of small companies that service the public sector in our regions will be affected.
I have great sympathy with Labour Members—I am pleased to see some of them here today—but I appreciate that they will be fighting the proposals with one hand tied behind their backs. It does not please me to make the point about the introduction of regional pay by the previous Government, but the Labour Government promoted the idea. They floated it in 2003, and they introduced it in the Courts Service in England and Wales in 2008, when it was not entirely successful. The Public and Commercial Services Union has told me that regional and local pay in the Ministry of Justice has not been a success, and that with the introduction of local pay in the Courts Service in 2007, there were problems with regional pay zones in the Ministry of Justice. The policy created inequalities and tensions, and it was ultimately unsuccessful and had to be reformed. I hope that lessons have been learned, but I worry that the wrong ones might have been learned.
I conclude by saying that the effect of regional pay will be far-reaching and negative and that it will not improve the private sector. There is a strong likelihood that it will lead to institutionalisation of low pay in some places, and it will certainly make it much more difficult to attract new workers, as my hon. Friend the Member for Carmarthen East and Dinefwr has said. The Treasury must reconsider its stance, and I will certainly contribute to the debate as it develops, as will my hon. Friend and my right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd).
I apologise if my final point sounds light. I am pleased to see that Conservatives in Wales are represented here. The comments of the hon. Member for Montgomeryshire (Glyn Davies) were interesting. I appreciate that Scottish Tories may have problems in mustering manpower. It has been said that there are more pandas in Scotland than Tory MPs, and if the London Conservative and Liberal Democrat Government push the regional pay issue through, Tory MSPs in Edinburgh will be rarer than polar bears on the Clyde.
Miss Smith
It is perfectly possible to think that something is a good idea and then to ask experts how it could happen.
Helen Goodman
Does the Minister therefore accept that all that has happened is that the Chancellor has asked how the idea could be implemented and how it would work and that no consideration is being given to the proposal’s overall economic impact?
Miss Smith
The best possibility of dealing with the overall economic impact will be when facts and data have been received. That is the point of the process that the Chancellor has laid out.
To move on to the content that we need to get through, hon. Members should be in no doubt about how important the public sector is and about the fact that the Government share that view and the desire for all parts of the economy to do well in the coming years. However, fiscal consolidation is a vital precondition for growth and part of the sustainable foundation that will let all sectors and all parts of industry do well and do what they need to. It is also part of achieving even growth across the country. It is right that public sector pay restraint should play a part in that fiscal consolidation. Public servants do a crucial job in delivering the high-quality services that we all look for, and it is right that we continue to offer the kind of rewards that attract the most skilled people to the public sector. However, it is incontrovertible that public sector wages on average continue to compare extremely generously to those of private sector workers. The Institute of Fiscal Studies, which has already featured in the debate, suggested that there is on average a 7.5% premium to working in the public sector over comparable jobs in the private sector. That makes a strong case for public sector pay bill restraint.
I want to discuss the rationale for the policy suggestion that has been made and the Chancellor’s effort to seek views on how it can be carried out. We must ensure that public sector pay is set at the right level for each labour market in the long term. I want to make it clear again that the proposals are not about generating savings, but about supporting economic growth by ensuring that wages are set at the level in individual localities. Indeed, a significant reason for the disparity between public and private sector pay is due, as I have mentioned, to the difference between pay that is set locally and pay that is set nationally. Typically, private sector pay is more subject to the rates paid by local competitors, the local cost of living and perhaps, in some cases, local turnover rates. However, public sector pay is usually set on a one-size-fits-all basis nationally. Accordingly, public sector workers can often be paid more than private sector workers in similar jobs in the same area. That has potentially damaging consequences for the economy. For example, private sector businesses, perhaps such as the one that my hon. Friend the Member for Montgomeryshire once ran, which are looking for staff to help them to set up or grow, need to compete with much higher public sector wages in the same area. That is the ultimate crowding-out argument within the debate.
I want to refer briefly to the system of zonal pay in the Courts Service, which has been mentioned. It demonstrates that it is possible for pay to be responsive to local labour markets within a national bargaining framework. Of course, those zones did not simply conform to regional boundaries, but took into account the local economy by, for example, putting Norwich, Exeter and Newcastle in the same zone. The debate has a misnomer at its heart. In the autumn statement, the Chancellor announced local pay, not regional pay, so we are not talking about something that might take effect at the level of Wales. We are talking about something that may, depending on what the experts say, happen at a lower level.
The Economy
Helen Goodman Excerpts(13 years ago)
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Mr Osborne
Anyone listening to Opposition Members would believe that under the mythical Labour Government that apparently existed, all that information was disclosed. But was it disclosed? There was no disclosure whatsoever. I suggest to the shadow Chancellor—the former City Minister—and others that they back the unilateral measures that we are taking, which will make the financial centre here in London the most transparent in the world.
The advice of the Financial Policy Committee is clear. Banks should consider limiting bonuses this year and using profits to strengthen their balance sheets in the face of the eurozone debt storm. Let me make this plain: stronger banks, not larger bonuses, should be the priority this winter, and money that is earned should be used to build balance sheets and not to enhance payouts. That is the advice from the Bank of England, and that is the advice that the Government now expect to be followed.
Helen Goodman (Bishop Auckland) (Lab)
Will the Chancellor tell us what he, as a major shareholder in some of the largest banks in the country, will do about the bank bonuses on which he can have a direct impact?
Mr Osborne
We restricted cash payouts in the Royal Bank of Scotland in the last bonus round to less than £2,000. That is what we did when we had the opportunity. The hon. Lady was a Minister in the last Government. Perhaps in 30 years’ time we will discover that she was sending letters to the Treasury asking “What are we doing about transparency in pay in the City? Why do we not introduce a permanent bank levy?”, and saying “I am really worried about the regulation of Britain’s financial services.” We will just have to wait for 30 years to find out whether, when she held Executive office, she once raised the concerns that she now raises in opposition.
Both the slow repair of our banking system and the crisis in the eurozone were identified by the Office for Budget Responsibility as causes of weaker economic activity. They are also a reminder of why it is so essential for Britain to maintain its fiscal credibility as we deal with a budget deficit that is higher than almost any other in the world. A month ago I was told by the OBR, as part of the formal preparation for the autumn forecast, that weaker economic activity would give Britain a less than 50% chance of meeting the fiscal mandate and the debt target that I had set out unless we took further action.
I believe that at that moment the OBR proved not just its independence, but its worth. It forced the Government to confront the issues at hand, and to use the weeks available to us before the statement to come up with a credible response. We know that under the previous forecast regime, those weeks would have been used to fiddle the forecasts, to tweak assumptions about the output gap, and to pencil in over-optimistic numbers on tax receipts: in other words, to do all the things that my predecessor, in his memoirs, says were done during his dealings with No. 10 Downing street. It would have been a case of choosing economic figures to fit the Government’s policies, rather than choosing Government policies to respond to the economic figures.
I believe that the existence of the Office for Budget Responsibility, which was consistently opposed by the shadow Chancellor in every position that he held in the last Government, has given the whole of Parliament confidence in the integrity of the forecast.
Mr Osborne
The OBR is very clear that the cause of its downgrade of the trend growth rate is the—[Interruption.] Is it any wonder that the economic credibility of the Labour party is falling week after week? The shadow Chancellor has backed it into the incredible position where only Communist parties in western Europe agree with it. The reason he has done that has nothing to do with the future political prospects of the Labour party. Rather, it has everything to do with his own personal record. He cannot be the Labour politician who admits that his party made mistakes in the run-up to the 2007 crisis, because he was the Labour Government’s chief economic adviser. That is the position the Opposition find themselves in, and Labour Members know it. They are all going around telling anyone who will listen that that is their problem. Until they face up to the reality of the economic situation confronting this country—a reality they helped to create—they will not be listened to by anyone in this country.
The choice we faced when we saw the OBR’s first-round forecast was not whether to fiddle the figures; instead, it was whether we should take action to respond to the changed economic circumstances. We could have done nothing, but given international events I thought that was not a risk worth taking. It may have seemed to be the easier option, but not when we considered the possible consequences for the credibility of our country in the credit markets and the risk of a rise in interest rates of the kind that so many of our neighbours have experienced. The other option was to take further action to ensure Britain was on course to meet the fiscal commitments we have made, and that was what we chose to do, with a package of measures designed to tighten policy in the medium term while using short-term savings in current spending to fund one-off capital investment in our country’s infrastructure.
As I explained last week, we have put the total managed expenditure totals for 2015-16 and 2016-17 on a declining path. We have made changes to the tax credit entitlements. We set pay increases in the public sector for the two years after the freeze at an average of 1%. We have recalibrated overseas aid spending so we hit 0.7% of national income in 2013. We have also increased the state pension age to 67, starting from 2026.
That money saved in the short term has been used to fund the youth contract, new nursery provision to two-year-olds, new free schools and school places, and a major programme of road and rail building, and to help with the costs of living by extending the small business rate relief, keeping rail fare increases low, and freezing petrol duty next month, but the permanent savings—
Helen Goodman (Bishop Auckland) (Lab)
I am pleased to follow the hon. Member for Montgomeryshire (Glyn Davies). I do not agree with what he said about wind farms, but he made a thoughtful and interesting speech, and I hope that when he listens to what I say about the north-east, he may feel that things in Wales are not quite so bad.
At the weekend I received an e-mail from a constituent which said:
“I wanted to apply for a crisis loan for my heating oil but when I rang up I was told this was not possible … and I would have to apply for a budgeting loan which has a three-week wait … My problem is I am unable to pay by direct debit … I have been unable to save the money from my employment and support allowance as I have been trying to pay my other important bills . . . My dilemma is that my oil will not last much longer and as I suffer from diabetes and had a heart procedure in September my health will suffer as a result of no heating.
What can I do to sort this out?”
The e-mail is interesting not because of what it says about the benefits system, but because of what it reveals about the level of poverty being faced at present in some households, as well as the consequences of the failure to tackle the energy giants adequately.
There are two major themes that I want to pull out of what the Chancellor of the Exchequer announced in his autumn statement—the unfairness and the unintelligence of the proposals that he put to the House. In many cases they are unintelligent because they are unfair. Let us look first at who is bearing the burden of the measures that he announced. We can see from the analysis published by the Institute for Fiscal Studies that it is the poorest who are paying the most. The IFS analysis makes it clear that the measures that the Chancellor of the Exchequer announced will make the bottom 30% worse off and the top 60% better off.
Mr McFadden
My hon. Friend is right in what she says about the Institute for Fiscal Studies estimates. She will also know that the IFS says that by household types, it is families with children who are worst hit. What does she think the Government and the Chancellor have got against families with children?
Helen Goodman
I cannot imagine what the Chancellor has against families with children, but it is obviously a matter of extreme concern not just that the number of children who live in poverty will go up, but that to tackle the problem, the Government are going to redefine poverty. They will find that that is a massive mistake. If they go to an absolute measure, they will not look good against the Labour Government, who reduced the number of children in absolute poverty by 2 million.
Those on £14,500 will lose eight times the share of their income that those on £32,000 will lose. The poorest 10% will lose four times the share of their income that the richest 10% lose. In other words, it is a cynical way of focusing money on so-called marginal voters. The proposals are unfair. They are unintelligent to the point of stupidity, because the propensity to consume is highest among the poorest. Maintaining the incomes of people on low incomes will have the fastest and greatest impact on demand, so even with the same level of borrowing as they propose and the same fiscal stance, the Government could have a bigger bang for their buck. They could have a greater impact on demand and on the growth of the economy, simply by redistributing.
The second dimension on which the autumn statement is both unfair and unintelligent is the regional distribution. The Government are switching £4 billion from current to capital, of which only £4 million—that is, 0.1%—is earmarked for the north-east. That is 25 times less than the £100 million that was lost from my constituency alone when the Building Schools for the Future programme was cut. For example, improvements to the A1, the A19, the A66 and the Tyne tunnel are not going ahead.
The North East chamber of commerce has described this as “hugely disappointing”. The extension of 100% capital allowances till 2017, the new enterprise zone in the port of Blyth and the increase in the regional growth fund are all minuscule in comparison with the impact of the abolition of the regional development agency.
Furthermore, the infrastructure plan is old-fashioned. Only £100 million of the new money is in the communications strategy and that is all concentrated in the cities, whereas the lack of access is in rural areas. Today the Federation of Small Businesses and the National Farmers Union came together to point out that hundreds of thousands of people will be left behind, so where it is most useful and most needed, it will be least available.
In announcing his weakening of the habitats directive, the Chancellor seemed to be scornful of green considerations. After the excuses of snow and royal weddings, it seems to be the butterflies that are the problem, or perhaps it was the seaweed that he was complaining about.
My hon. Friend the Member for Sedgefield (Phil Wilson) pointed out the detrimental impact of regional pay on our regional economy. Lower pay in the north-east is a symptom of our problems. Reducing the pay further will take yet more money out of the demand in the regional economy. To set this in context, my hon. Friend the Member for Easington (Grahame M. Morris) made an excellent speech in Westminster Hall, pointing out that the cuts in incapacity benefit are already taking £170 million out of the regional economy. What may look like a sneeze in the south can cause pneumonia in the north-east.
Damian Collins (Folkestone and Hythe) (Con)
Throughout the debate this afternoon we have been asked to consider that the debt situation that we are in is not as bad as it seems and that we can spend money that we do not have to try and get out of it. That argument lacks any credibility with the money markets.
Damian Collins
The hon. Member for Bishop Auckland (Helen Goodman) is speaking from a sedentary position. I shall come to her remarks, which are pertinent to my constituency, particularly her comments on the habitats regulations and how they impact on the local economy.
Opposition Members have put to one side the seriousness of the debt situation. The other issue that has not been spoken about at all—certainly not by the right hon. Member for Edinburgh South West (Mr Darling) or by the shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls)—is the underlying competitiveness of the economy. When we look at the debt situation and the world economic crisis, which are grave and severe, we should also consider that our economy may not be as fit and competitive and as able to grow the sort of jobs that we will need in the future as we thought it was.
Statistics showing how this country has fallen behind in the competitiveness league tables published by the World Economic Forum are often brushed aside. From being seventh in 1997 when the Conservative party left office, we fell to 13th last year and are 10th now. That means that in 1997 we had the most competitive economy in the European Union. We find ourselves today behind Sweden, Finland, Germany, the Netherlands and Denmark on competitiveness.
On the broader question of infrastructure, which is so important to the competitiveness of our economy, we find that Britain lies in 28th position, according to the latest figures, not rubbing shoulders with France, which is third, or Germany, which is 10th, but instead between Saudi Arabia and the Czech Republic.
Damian Collins
I am not sure what the hon. Gentleman’s critique is of the party that was in power for 13 years and delivered these statistics. The point I made at the beginning of my speech is that after 18 years of Conservative Government Britain’s competitiveness in Europe was much higher than it is now. I do not know what sort of indictment he finds after 13 years of Labour Government, but it sounds pretty damning to me. The hon. Member for Bishop Auckland talked about the habitats regulations, which I will move on to because it is an important point. She was slightly dismissive, but I do not think that she meant to be.
Damian Collins
She was very dismissive of the significance of the review the Chancellor announced last week on whether the habitats regulations are being used to hamper growth and business development and whether they are being unfairly and unreasonably applied. A particularly pertinent case in my constituency is whether Dungeness nuclear power station in Kent should be allowed on the list of new nuclear power sites, and I have written to the Chancellor to ask him to give it special consideration in the review. There is a huge amount of local support and there are two nuclear power stations there already.
Land was set aside for the creation of a third power station in the 1960s, most of which was disturbed during the building of the first two. The land is within a special protected area next to a Ramsar site that gives special protection not to butterflies, but to vegetation that grows on the shingle banks and to birds. The bird sanctuary was created largely after the building of the existing power stations. The area of development for the new nuclear power station is less than 1% of the protected area, so it would be difficult to claim that building it would damage the integrity of the whole site or destroy the habitats totally. They remain within a large, protected and conserved area and will be protected.
Nevertheless, based on Natural England’s interpretation of the habitats regulations, it was recommended to the Government that a third power station should not be built on the site, and that is the only reason why it cannot be built. It would create thousands of jobs during the construction phase and 500 permanent jobs for its operation. It would be an incredibly important investment, and that is an example of how the interpretation of some of these regulations is impeding growth and investment in our economy. The power station would be built not on a greenfield site in a protected area, but next door to two existing power stations and on land that was set aside for the purpose. I obviously feel strongly about this example because the new power station would help my constituency directly, but it would also be a new energy source in an area of high demand in the south-east of England, close to south-east London.
Another local example is Lydd airport. Extending or building new regional airports is a controversial issue. In my constituency the local council decided some time ago to approve a planning application to expand the airport. There had been a previous public inquiry on that in the 1990s, which had lapsed, so the process has to be gone through again. A private developer who is willing to invest money with the support of the local council, which approved the planning decision, is being put through a costly and lengthy process, wasting hundreds of thousands of pounds, with the prospect of possible judicial review at the end. That is also because of the way the habitats regulations have been interpreted, and during the course of the most recent planning inspector’s inquiry many of the objections were set aside. It is frustrating that these rules and regulations are hampering investment and growth.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to follow the hon. Member for East Antrim (Sammy Wilson). Having recently joined the Northern Ireland Committee, I am becoming more familiar with the issues that he raises and, in particular, with Northern Ireland’s attempts to show that one can compete on tax rates to grow one’s economy. It has the right idea in wanting to match Ireland’s lower corporation tax rate in order to grow the Northern Ireland economy, but I sense that it will not want to match Ireland’s new higher VAT rate in an attempt to grow the economy over there. That is aiming for the best of both worlds.
I welcome the chance to contribute to this important debate on what is the central issue for my constituents. I am sure that every Member who has spoken to constituents and businesses cannot have failed to notice how difficult economic conditions have become, and that is why I welcome in particular the fact that the Chancellor, in his autumn statement last week, did not try to hide the full extent of the difficulty, but set out exactly how difficult things are now and will be for the next few years.
The response was robust, and it should see us maintain the market’s confidence, which is the key to our recovery. I am not aware of any serious commentator who suggests that we should change our plan, and borrow more and spend more than we plan to, when we are running a deficit of more than £120 billion this year already. The shadow Chancellor chose earlier to quote Voltaire, and I have found a second quotation for him:
“Common sense is not so common.”
Some of his speech showed eminently that that is true.
I shall touch on the measures in the autumn statement that are relevant to my constituents and work through those issues that are raised most frequently. People—especially first-time buyers—complain that they cannot get mortgages or, if they can, that the deposit requirements are too high or the cost is too high, so last week we announced measures to make it easier for first-time buyers to get mortgages and thus get the building industry started again. I can think of some building sites where a couple of houses were started on the edge but the rest of the estate was mothballed for a few years, and getting those finished has to be a good thing.
Small businesses have for a long time complained that they cannot get funds out of the banks, and, although all our measures may have helped a little, they certainly have not solved the problem, so the loan guarantee scheme will I hope be a real step forward. Many businesses are struggling to decide whether investment is a great idea in the current climate, but as things start to improve the scheme will be in place and enable them to secure the finance that they need. In the meantime, every small business will welcome the extension of the business rate holiday for a few more months, but it keeps being extended, and at some stage it might be nice to extend it to a distant horizon so that we know where we are.
The worst impact of any economic downturn is on unemployment, and especially on youth unemployment, and the £1 billion of funding that we announced to tackle that will be hugely welcome. As I visit businesses throughout my constituency, I see that some are taking real steps, at their own cost, to employ local young people. I pay tribute especially to David Nieper in Alfreton, a fashion business that has started its own fashion academy, taking students from nearby universities and showing them the entire industry—from designing clothes all the way through to marketing them, selling them and producing brochures—in order to give them that whole-industry experience so that they really are job-ready.
Helen Goodman
I am pleased that the hon. Gentleman congratulates David Nieper, because my sister works in that factory.
Nigel Mills
Well, I am sure that she recognises how great an employer it is—and it is very kind of the hon. Lady to give me an extra minute!
Many other businesses in my constituency have expressed their concern about the impact of rising energy bills, especially given the Government’s climate change policies, which increase those costs. In my constituency, I have another great business, Denby Pottery. I do not know whether the hon. Lady has family working there, too, but it has expressed a real concern that even the welcome help that we announced for energy-intensive industries last week will not assist the ceramics sector, so I urge the Government to keep working on those measures to protect such valuable and historic industries.
Another particularly welcome announcement for me was the announcement of expenditure on infrastructure and road building. New road construction in Amber Valley has been a little neglected, so I urge the Government to look favourably on the bid that I and Amber Valley borough council have championed for the new Ripley-Codnor bypass, which would link the A38 and M1. We are not asking for the full funding, because the council is busy arranging it through developers that can pay for up to half the bypass, but if the whole road were completed it would present a real chance for regeneration and a real chance to attract new business to the area, which is exactly what the Government’s infrastructure funding is trying to do.
I am happy with what the Government have announced. In a difficult situation, they have announced some short-term measures to tackle the worst impacts of economic downturn. Now, we need to look at the long-term strategy and at the measures we need in place to make our economy as competitive as it can be in five or 10 years’ time.
In the final minute of my speech, I shall turn to the reform that we need in our tax system. As my hon. Friend the Member for Chichester (Mr Tyrie), the Chairman of the Treasury Committee suggested, many tax regimes that affect our businesses are unduly complex and out of date, discouraging investment while encouraging strange and perverse behaviour, which is why we have to introduce a huge number of more complex anti-avoidance rules, such as those announced today.
Wholesale simplification would ensure that we had a system which encourages what we do want and make it easier to stop the avoidance behaviour that we rightly wish to tackle—and I think the Government are coming round to that. Last week, they announced that 100% capital allowances will be made available to enterprise zones, and, to all those businesses in my constituency which would like to invest in new machinery and need to do so to remain competitive, we should send the message that we want to provide tax incentives for people to invest in capital equipment at this time. If we need 100% capital allowances for enterprise zones, can we not find a way of being more generous with capital investment throughout the whole country, not just in those zones?
Autumn Statement
Helen Goodman Excerpts(13 years ago)
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Mr Osborne
My hon. Friend is absolutely right. That is why we have made a particular commitment to two roads in East Anglia: the A11 and the A14. The A14 is a real challenge, as he knows, because it is a vital artery for the entire national economy. We are announcing particular commitments today to improve the A14. We want to work with local councils and local communities to make even greater lasting improvements to the A14 in the future.
Helen Goodman (Bishop Auckland) (Lab)
The Chancellor ended his statement by talking about quack doctors. Of course, in the book “George’s Marvellous Medicine”, George makes a potion to shrink his grandmother. Does the Chancellor of the Exchequer not understand that he will not grow the British economy by cutting tax credits, because that will make it uneconomic for many women to go out to work?
Mr Osborne
As I said, we are not cutting tax credits, but uprating the child tax credit. The hon. Lady should have listened to what I had to say.
Public Service Pensions
Helen Goodman Excerpts(13 years, 1 month ago)
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Danny Alexander
The hon. Gentleman is absolutely right: I can confirm that that would be the case. In some cases the figure would be more, depending on how the scheme-by-scheme talks that will go forward resolve the issue. In order to acquire a pension of the sort that we are rightly talking about for public sector workers, people in the private sector would need to acquire a pension pot of £500,000 or more, which would require a substantial salary contribution, of the order of a third.
Helen Goodman (Bishop Auckland) (Lab)
The Chief Secretary made much of preserving accrued rights. However, to return to the CPI and RPI, what will the average loss be to public sector workers of making the switch permanent?
Danny Alexander
I think the hon. Lady may have been trying to welcome the protection of accrued rights, in which case I am grateful for her comments. She is right that the switch from RPI is a change to public service pensions that will reduce the benefits over the long term, although that will depend on the scheme and the individual involved. However, it is the right thing to do, because we are talking about the measure of inflation used by the Bank of England to set rates. The answer to the hon. Lady’s question will depend on the individual scheme and the individual person.
Eurozone
Helen Goodman Excerpts(13 years, 2 months ago)
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Mr Osborne
My hon. Friend makes a good point. When we first said, “Look at Greece”, Opposition Members all said, “Well, that couldn’t happen here.” It then extended to Portugal, then Ireland, then Spain, then Italy, and now questions are being raised about the French banks, which France is seeking address, and a Belgian bank has fallen over this weekend. In the end, we can look at what the credit rating agency who gave us the triple A rating said last week. It said that the rating would come under downward pressure if
“the coalition Government’s commitment to fiscal consolidation falters”.
There would be an automatic downgrade if we were to follow the Opposition’s approach. That would lead to higher interest rates, hitting families and leading to more repossessions and more job losses. That is the path to ruin, and we know what it is like because we have been down it before under the shadow Chancellor.
Helen Goodman (Bishop Auckland) (Lab)
The Chancellor of the Exchequer has laid great emphasis this afternoon on credit easing, but he has said he cannot tell us how that will operate until the autumn statement, although it will be an alternative to bank finance. When will small and medium-sized enterprises actually get something from this process?
Mr Osborne
As I said, we have already extended the loan guarantees that we inherited. We have concluded a deal with all the high street banks—not just the two that were nationalised under our predecessors—to get an increase in SME lending. We want to go further, however, and we will set out the full details in the autumn statement, when the hon. Lady will, no doubt, be present to ask me a question.
Finance Bill
Helen Goodman Excerpts(13 years, 5 months ago)
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Helen Goodman (Bishop Auckland) (Lab)
I agree with the hon. Gentleman about the importance of marriage, but I am not convinced that it is appropriate to encourage and recognise it through the tax system. The hon. Gentleman mentioned unfairness, and I think the question of fairness is the nub of the issue, for if the money were spent on benefits or tax credits for children rather than on a married tax allowance, far more children could be lifted out of poverty.
Mr Leigh
As so often in Finance Bill debates, the devil is in the detail. The hon. Lady has made a perfectly reasonable point. However, I hope to establish in my speech that the present system is unfair and, specifically, militates against single-earner families. That applies especially to those who are struggling out of poverty, but it is not necessarily the very poorest about whom we should be concerned. We should also be concerned about families on fairly modest earnings who are desperately trying to look after their children, and who decide that someone, usually the mother, should stay at home and care for them. But, as I have said, the devil is in the detail, and I will try to deal with the hon. Lady’s point later. It is important, and we need to tease the answer out of Ministers. We want to know why action has not been taken.
Mr Leigh
I agree with the hon. Gentleman. I have made clear my belief that our policy of fiddling around with child benefit is entirely wrong. Child benefit works because there is no fraud and no error, and because it is a flat tax. I strongly oppose the Government’s policy, because it will attack families who are on the margin just as they get into work and emerge from poverty. I predict that we will see a U-turn on that policy, and if it is the 23rd U-turn, it will be one of the best of them.
Why does the lack of stability in marriage matter? We all recognise that most single parents do a fantastic job in very difficult circumstances—I noted earlier interventions on my speech to that effect—and they must enjoy our full support. Nothing that I am saying constitutes an attack on them. However, policy must be based on evidence, and the evidence is very clear. It shows that, on average, children who are brought up in single-parent families do less well than children brought up in two-parent families according to every significant measure: educational attainment, health, the likelihood of getting into trouble with the law, and alcohol and drug abuse. I do not think it wrong for the Government to try to recognise what works when it comes to bringing up children.
Some may be tempted to respond to what I am saying by suggesting that the principal cause of the different outcomes is not marriage but wealth, and that it just so happens that wealthier people are more likely to get married. However, the facts do not support that. No one is trying to argue that marriage is the only important consideration, or that wealth is not relevant—of course it is—but data show substantial differences in family stability between married and unmarried couples in the early years of parenthood, even after the discounting of socio-economic factors such as age, income, education and race.
Most notably, the difference in family breakdown risk between married and cohabiting couples is sufficient that even—this is an important point—the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. It is foolish to make ourselves the odd one out in comparison with other developed countries such as France, Germany and America. Why do we not recognise marriage in our tax system, and why has the Minister not fulfilled the pledge that we made in our manifesto?
As we all know, recognition of marriage in the tax system specifically through a transferable allowance brings heightened child development benefits. In a culture that encourages parents to go back to work as quickly as possible, even though research demonstrates that this is a key time for developing attachment which has huge implications for the later development of a child, the provision of a transferable allowance makes it easier for one parent to stay at home to be with their children. I am not saying that everyone will want to do it, I am just giving an opportunity. I am not requiring anybody to do anything.
Mr Leigh
I have given way to the hon. Lady once. I will make a bit of progress and if she is really desperate, of course I will let her in because I am very fond of her, as she knows, and we have served together in a Select Committee.
Polling demonstrates that staying at home is a choice that parents want to exercise. That is all that we are talking about here; we are talking about choice—no requirement. For instance, a 2008 YouGov poll for the Centre for Social Justice, run by the Secretary of State for Work and Pensions, found that 88% of parents thought that more should be done to help parents who wish to stay at home and bring up their children in the early years and 97% agreed that the Government should do more in that area. What other policy has 97% support?
A 2009 YouGov poll for the Centre for Policy Studies found that only 12% of mothers wanted to work full time, 31% did not want to work at all. Only 1% of mothers with children under five thought that the mother in a family where the father worked and there were two children under five should work full time, 49% thought that she should not work at all and fathers, when asked the same question, offered an almost identical response. So the facts are there in the opinion poll data. Only 2% thought that mum should work when her husband worked and the children were under five, and 48% thought that she should not work at all.
Many people are forced into work. Many mothers want desperately to be at home looking after their children when their children are very young, but they simply cannot afford to do so. No one suggests that a transferable allowance will solve the problem of family breakdown or make it incredibly easier for families to cope, but it will be a step in the right direction and a small gesture that we in Parliament could make to mothers who desperately want to stay at home and look after their young children.
Many women, rightly, want to work; they have good jobs. Why should we be forcing young women with very young children into low-paid jobs when they want to be at home looking after their children? Why should we create a tax system that militates against women making that choice?
Helen Goodman
I am grateful to the hon. Gentleman for indulging me. He makes a powerful point. Many mothers of small children want to work part time. I worked part time as I am sure did many other hon. Members. I want to bring the hon. Gentleman back to the facts. When the tax system changed from one that included a transferable allowance to one that did not, was there evidence of any impact on family breakdown?
Mr Leigh
I confess that I cannot go back to 1999 and I do not know what data were then available to the Chancellor, but the hon. Lady cannot deny that our tax system is unfair because it militates against the choice to stay at home. Surely I can take the hon. Lady just this far, if no further—that it should be a free choice for women with young children whether they work or not, and the tax system should be neutral. That is all that we are asking for. The hon. Lady can make a speech later if she disagrees with me. I do not doubt her sincerity. I am just saying that the system is simply unfair.
Britain’s failure to recognise marriage in the tax system meant, as of May 2010, that it was out of line with other developed countries, with the effect that, far from supporting the best child development environment and being family friendly, it was placing a significantly greater proportion of its total tax burden on this family type than was the case in comparable countries. In that context, it is not surprising that family breakdown, the key driver of the broken Britain phenomenon is particularly pronounced and the case for recognising marriage in the tax system is clear and compelling. So all the arguments for recognising marriage in the tax system stand in one key area. The tax burden on one-earner married couples with children in the UK has now risen such that it is over 40% greater than the OECD average.
Mr Jones
I actually do not understand why all this is unfair, because the new clause would give an advantage to people who are married but do not have children. I do not know how the new clause does what the hon. Gentleman is proposing in terms of keeping family units together and alleviating child poverty.
The important point relates to what was in the Conservative manifesto. What came out of that Conservative think-tank was the idea that marriage was an important point in keeping the family unit together and ensuring that children and wider society were not disadvantaged by a breakdown in the family unit. The manifesto made a commitment to “recognise marriage” in the tax system. It proposed that couples and civil partners who were basic rate taxpayers should be entitled to transfer just part of their allowance—this was worth, in effect, up to £150 a year. That is very different from what is contained in the new clause, because it makes no mention of civil partnerships. Given the names of the people who are supporting this proposals, I suspect that this has come from the wing that has not quite gone all the way in being the new cuddly Conservative party in terms of even envisaging the idea that civil partnerships, with or without children, could constitute a family unit.
As the hon. Gentleman mentioned briefly, the policy came unstuck in the coalition agreement because this proposal is clearly not supported by the Liberal Democrats. I believe that during a general election television interview, the Deputy Prime Minister called it “Edwardian”.
Mr Jones
That is a bit rich coming from the Liberal Democrats, because most of the things that they come out with are patronising drivel. However, they were clearly not happy about this policy, so in the scramble to get the red boxes and cars they had to reach some type of compromise. Thus, the coalition agreement simply states that there will be a provision whereby the Liberal Democrats can abstain at some point in the future when this policy is introduced.
Mr Jones
Possibly. The 22 June Budget made no announcement on where this policy stood and on what was happening to it. I can understand the annoyance felt by the hon. Member for Gainsborough and others, who clearly think that this is a vital piece of legislation that was promised to the electorate. It was obviously a key point: I am sure that a lot of people went to the ballot box thinking that if they would get an extra £150, they would vote Conservative. That pales into insignificance when set against what has been taken away from them since this Government came into power.
Mr Jones
The hon. Gentleman must be honest with my electorate in North Durham about the fact that although the Government have increased personal allowances they have taken away money in others ways, such as the increase in VAT and the £140 million of cuts that Durham county council will have to impose over the next three years. Those cuts will have a direct effect on many of those poor families. The Liberal Democrats can claim that they have had great success, but if that is their only claim they should be honest with people and tell them what they have lost, as well, through such vicious policies. The hon. Gentleman should remember that this Conservative Government would be doing nothing without the support of him and his Liberal Democrat colleagues.
Helen Goodman
Another problem with raising the tax thresholds—a provision constantly promoted by the Liberal Democrats—is that, as I am sure my hon. Friend has not forgotten, the biggest beneficiaries are those who are highest up the income scale. The biggest value of the change is not to the people at the margins—those who are just caught or just not caught by the tax boundaries—but to the people higher up the income scale.
Mr Jones
My hon. Friend makes a good point. A little later, I shall discuss what our Government did to recognise the fact that if we are to address the issues raised by the hon. Member for Gainsborough about child poverty, the tax system and marriage are not necessarily the way to do it. The way to do it is to ensure that the money goes to the families and children who are affected. That is why the child tax credits and other such provisions were vital in raising people out of poverty. Earlier, my hon. Friend the Member for Alyn and Deeside (Mark Tami) mentioned the minimum wage, which lifted a lot of very poor individuals out of poverty who were getting a pittance. I remember seeing as a trade union official an advertisement in the jobcentre in Newcastle that read, “Night guard, bring your own dog, £1.35 an hour.” That is a thing of the past. I hope that it will remain so, but I do not know, as we hear from Conservative Back Benchers that they might want to change the minimum wage in some way.
Helen Goodman
It was interesting that the hon. Member for Peterborough (Mr Jackson) mentioned the UNICEF report, because Denmark came at the top and Britain came very low down. I want to remind hon. Members that Denmark has the highest rate of lone parenthood and the Danish can combine that with good child well-being because they have a strong welfare state. Does not my hon. Friend think that that is far more important in addressing child poverty and well-being?
Mr Jones
It is. To be fair to the hon. Member for Gainsborough, he did say that being a lone parent does not make someone a bad or unfit parent. My hon. Friend the Member for Denton and Reddish (Andrew Gwynne) had three children before he got married, but that does not make him a bad parent. [Interruption.] He says, “I don’t know,” but I do not think it makes him a bad parent: it is something that he and his partner chose to do. As he said earlier, the offer of a tax break of £150 a year would not make any difference to whether people decide to have children before or after they marry. Indeed, I have many friends who have children and who have never married and have no intention of doing so.
Helen Goodman
My hon. Friend’s description of what happened in the 1990s reminds me of an issue that I do not think the hon. Member for Gainsborough (Mr Leigh) addressed. One of the big debates on this subject was about the fact that transferable allowances reduce any scope for financial privacy within a marriage. A number of people felt very uncomfortable about that. Does my hon. Friend have any comments on that?
Mr Jones
My hon. Friend makes a key point and I understand why she makes it. This goes right back to when income tax was introduced in the 1790s, when a spouse’s income was the property of the husband. That was the basis on which income tax was brought in and it continued for centuries. There was no recognition that even within marriages people might have separate tax affairs or sources of income that needed to be recognised.
It is interesting to look back at the debate that took place about the MCA. Baroness Maddock, who was then a Member of this House, argued that the MCA was
“a relic of the days when a husband was taxed on his wife’s income as well as on his own. It contravenes the principle that marriage should be tax neutral.”—[Official Report, Standing Committee A, 22 February 1994; c. 344.]
Mr Jones
I think this is an important point, Mr Deputy Speaker. The main thrust of the argument that has been made is that marriage, and taxation in marriage, has been consistent throughout history, but it has not. Like a lot of things in this country, it has been looked at through a Victorian prism that seems to bend the reality of what took place way back then. However, I will move on to my next point.
Helen Goodman
I should like to back up what my hon. Friend says. In the major study of marriage in England from 1550 to 1750, Lawrence Stone demonstrated that in a commercial society with a commercial attitude—
Mr Deputy Speaker
Order. We seem to be going even further back. Keep to the 21st century, please.
Mr Jackson
I expected better of the hon. Lady, who is learned, intelligent and usually erudite, than rejigging the caricature, “Put a ring on your finger and get an extra 20 quid a week.” That has never been our argument. We seek to influence private behaviour with public policy, and I used the example of speeding fines and points on a licence as policies that are likely to influence future behaviour. As I said to the hon. Member for North Cornwall (Dan Rogerson), who is no longer in his place, the Liberal Democrats made a manifesto commitment, which we have accepted, to take more poorer working people out of tax. That commitment was made on the same basis. The point I keep coming back to, and which I repeat for the hon. Member for Stretford and Urmston, is that the international comparators support my case and not hers.
Mr Jackson
I will not give way for the time being.
We all wish to deal with the problem of family breakdown, and I genuinely believe that this would be an important pointer and signal that we are in line with other countries and cognisant of international comparators. The hon. Member for North Durham painted a picture of a wonderful land of milk and honey, a Valhalla, after 13 years of the Labour Government, but it is worth repeating that in 2007, under a Labour Administration, a UNICEF report on child well-being placed Britain bottom in a league table of 21 countries. Members should listen not only to me on that point but to Mr Justice Coleridge from the family division of the High Court, who in 2009 summarised the position thus:
“The breakdown of families in this country is on a scale, depth and breadth which few of us could have imagined even a decade ago… almost all of society’s ills can be traced directly to the collapse of family life… it is a never ending carnival of human misery.”
The Whips are imploring me to conclude my comments—I know it is not my aftershave—so I will do so, as I am always receptive to the admonitions of my hon. Friend the Member for Rochford and Southend East (James Duddridge). We have had an excellent debate and I believe that my hon. Friend the Exchequer Secretary has listened. This is an important point of principle for Members on this side of the House and for many others, including hon. Gentlemen and Ladies from Northern Ireland on the other side of the Chamber. It is a totemic issue, and this Conservative-led coalition Government must, and I believe will, deliver on this promise.
Mr Chope
No, I am not going to allow anybody to interfere with the words of the Prime Minister.
On 5 October 2010, the Prime Minister said:
“I have always supported the idea of supporting marriage through the tax system, specifically supporting the idea of a transferable tax allowance. The idea of a transferable tax allowance is in the coalition agreement.”
That is where my hon. Friend’s new clause comes in, because it calls for just that. One is entitled to ask why, having had two Budgets since the general election, we still do not have proposals to implement that very important pledge.
Labour Members are misrepresenting this proposal as an attempt to build new privileges for those who are in a marital relationship, but, as has been brought out time and again during the debate, the question is what we are going to do to prevent those who are married from suffering disadvantage under the tax system. That is what we are trying to put right with the new clause.
Helen Goodman
Labour Members would be far more sympathetic to the case that the hon. Gentleman and his colleagues are making in saying that they do not have negative attitudes towards single-parent families if they had not voted for the Welfare Reform Bill, which requires lone parents to pay to get the services of the Child Support Agency.
Mr Chope
Speaking for myself, I do not have negative attitudes towards single-parent families, but I do feel that single-parent families should not be advantaged in the tax system as compared with married families. That is the problem that we have at the moment, and that is what we are trying to put right in the new clause.
I am lucky in that my constituency is in an area described thus in a headline in last week’s local paper: “East Dorset is a place for love and marriage”. The article says:
“Married couples in East Dorset stick together. Latest…figures show that 65 per cent of marriages in the area last, well above the national average”,
with the seventh highest rate of marriage survival in the country. Even so, fewer than two out of three marriages survive, but that is a lot better than in many other parts of the country.
I am not suggesting that the tax system is causing marital breakdown, but I am saying that we should follow the very strong lead of our Prime Minister and put pressure on the coalition Government to implement their commitment to recognise marriage in the tax system.
Chris Leslie
Absolutely. Of course that is the case. It is so obvious that it is surprising that Conservative Members cannot see it. What is worse is that the new clause that they have moved—or rather, that one of them has moved—would cost more than £4 billion. It would cost £4.1 billion to create a personal allowance transferable between all couples, married and unmarried. That would be the price tag of new clause 5. That is the equivalent of a penny on income tax, a penny on employee national insurance rates, a 1% increase in VAT or putting VAT on fuel and power, as we know the Government sometimes like to do. If Conservative Members advocate spending that amount of money, surely it would be better to target it on the basis of need and where it would have the best and most direct benefit to society.
There is a long history of the transferability of personal allowances, and I will not go through it.
Chris Leslie
I know that many of my hon. Friends would like to me to elucidate some of that history, but we have already been through various centuries in this evening’s debate. Suffice it to say that it was a Conservative Government who eventually phased out the married couple’s allowance, and indeed the current Lord Chancellor who said:
“Now that husbands and wives are taxed independently—one of the best taxation reforms in recent years—the married couple’s allowance is a bit of an anomaly.”—[Official Report, 30 November 1993; Vol. 233, c. 935.]
My hon. Friend the Member for Stretford and Urmston was absolutely right when she highlighted Labour’s policy shift towards helping the children and families in greatest need, particularly through the tax credit system. That was one of the greatest changes made by the previous Labour Government, and one that we should be proudest of.
Oral Answers to Questions
Helen Goodman Excerpts(13 years, 7 months ago)
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Helen Goodman (Bishop Auckland) (Lab)
1. What recent assessment he has made of the effectiveness of the monetary policy framework.
The Chancellor of the Exchequer (Mr George Osborne)
I begin by expressing my own personal sadness and shock at the death of David Cairns, whom I knew pretty well. I went with him on a trip to the United States some years ago and spent some time with him, and I know that he was principled, gentle—in the best sense of the word—and genuinely liked and respected in all parts of the House. His sudden and premature death is a tragedy, and my sympathies—and, I suspect, those of everyone here—go to his partner Dermot and his family.
The Government have set up a new macro-economic framework to restore economic stability. The building blocks of that framework are an independent Monetary Policy Committee that will continue to target inflation, a new Financial Policy Committee to operate macro-prudential tools, so that we can assess overall levels of debt in the economy—something not done in recent years—and, crucially, a credible, coherent and independently monitored fiscal policy that allows interest rates to stay lower for longer while remaining consistent with the inflation target. It is now widely accepted that this framework is far more effective than the one that went before it.
Helen Goodman
May I associate myself with your tribute, Mr Speaker? David Cairns was a highly valued colleague, and I am sure that all our thoughts and prayers are with his partner Dermot and his family.
I am grateful to the Chancellor of the Exchequer for his answer, and I was wondering whether, in his more reflective moments, he would agree that Portugal, Greece and Ireland face a major problem, in that they cannot run an independent monetary policy attuned to their particular needs. That being the case, will he stop making rather childish comparisons between the UK and the eurozone countries?
Mr Osborne
The hon. Lady is right that those countries do not have a flexible exchange rate. That is because they are in the euro, which I campaigned to keep Britain out of. I do not know how she has campaigned in recent years, but the last time I checked I think it was still official Labour party policy to join the euro in principle. Perhaps the shadow Chancellor will clear that up when he gets to his feet. The comparison I make is a good one: a year ago almost to the day, people were looking at the British budget deficit, which was larger than those of Portugal and Ireland, and asking whether Britain could pay its way in the world. Our credit rating had been put on negative watch. Now, however, thanks to the policies of this coalition Government, Britain has economic stability again.
Finance (No. 3) Bill
Helen Goodman Excerpts(13 years, 7 months ago)
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Chris Leslie
Far be it from me to defend the poor banks in their compliance with the provisions, but obviously the more the compliance costs go up, the higher the likelihood that customers will end up footing the bill of taking on accountants to address the complexity of what should be a simple banking levy. Whether there are two rates or 10, however, all the rates in the bank levy are far too generous and far too low.
Helen Goodman (Bishop Auckland) (Lab)
I do not know whether Ministers have published the change to HMRC staffing needed to deal with these complex provisions. One would think that more staff will be needed, but my understanding is that staffing at the Revenue is being reduced.
Chris Leslie
Staffing at HM Revenue and Customs is under incredible pressures. Indeed, there have been a number of redundancies and posts lost. It has not been explained where the extra resources will come from to ensure that the bank levy, in all its complexity, can be enforced adequately. Again, the Minister needs to say what extra capacity HMRC will have to implement this increasingly complex bank levy.
Chris Leslie
Absolutely; but, quite apart from the obscenity of the scale of some of those bonuses, there is a hard-headed economic rationale for more transparency. If shareholders cannot see what senior executives in the banking sector are being paid, that indicates a dysfunction in the corporate governance of the banks, and if the bonus pots of certain executives are being swelled by their behaviour—by the choices that they make and the risks that they are taking—perhaps those were some of the antecedents of the credit crunch. We need transparency to prevent us from repeating the problems that occurred in 2008.
Helen Goodman
Surely, in the case of banks in which the Government were a major shareholder, they had an opportunity to deal with the situation as shareholders.
Chris Leslie
It is the inactivity of the Government, as the shareholder, that perplexes me. Ministers laugh with scorn at the idea that they, with the stewardship of the taxpayer’s share, should take any action in regard to the current activity of the banks. If the Minister wishes to intervene on the specific issue of his inactivity as a shareholder I shall be more than happy to give way to him, but he clearly does not wish to say anything at this stage.
Mr Redwood
I hold no brief for the credit rating agencies, but nor have I prepared a case against them. I am sure the hon. Gentleman can make his own case and come up with his own remedies. In my view, there have been many villains in this historic piece, including the regulators, the Bank of England for its misconduct in the money markets, and the commercial banks that took advantage of ridiculously lax conditions and got themselves into a great pickle, which we had to sort out.
Helen Goodman
I am interested in the right hon. Gentleman’s argument, but does he seriously think we could have made significant changes to the way we regulated banks in this country without international agreement on the way banks are regulated?
Mr Redwood
Yes, I think we could, which is why I made that recommendation well before the credit crunch occurred. In ’06 and ’07, it was obvious to me and to some other commentators that things were getting out of control—indeed, it was quite common for Opposition parties in this House to say they thought there was too much credit about. I went a bit further and said that could be remedied by changing the way we regulated the banks. It was quite wrong to allow a bank to extend more credit when it only had a 4% tier 1 capital ratio. I remember that when I was a financial regulator, we lived in an era when banks needed twice or three times that amount of capital to be acceptable to the regulator. There was a clear diminution in standards at a crucial time, which fuelled the credit binge.
Helen Goodman
The right hon. Gentleman is making a coherent case, but is he not worried that Government’s strategy is not as coherent as his argument? If we look at table C.3 in the Red Book, we see that no forecast is made of the value of the asset sales. Do we not need to see a forecast if we are to make precisely the judgment that he is asking us to make?
Helen Goodman
I agree with my hon. Friend. Does he agree that it is very odd that the rate of the bank levy is being cut in the second year and that the revenues from the levy, which start at £630 million, will fall to only £100 million by the end of the Parliament?
Ian Lavery
That is strange, but it is probably what we should expect. It does not surprise me one jot that the tax on banks will reduce in the years to come rather than increasing in line with profit or productivity.
Most Members will be lucky enough to have a credit card, and many of them will have maxed it out and might still have a maxed-out card. That is a new term I have learned since coming to Parliament—“maxed-out credit card”. Incidentally, returning to IPSA, my IPSA card has definitely been maxed out: it has been stopped, as there is only £1 left on it, but that is another issue. On a serious note, many hon. Members will have maxed out their credit card and will not be looking to pay it off in the next year or so. Instead, they will be planning how and when it best suits their pockets to pay it off, when they are able to do so. Paying it off immediately would mean having to go without even the most basic of necessities. That is life: it is about having effective financial means.
The world economy revolves around borrowing and debt. People the length and breadth of the nation live off debt, and the issue is how that debt is managed and repaid. That kind of debt is like a mortgage: people have to pay it off, but it becomes like a family deficit that is paid off over 25 years. If people were told they had to pay their mortgage off in two years they could not do it, because they could not survive. That is exactly the approach that the Government are taking with the deficit. This is about having a fair process; it is about financial management. We are definitely not all in this together, but the Labour party’s bonus tax would have helped to implement a number of social programmes that would have benefited many of those who feel they are being disproportionately affected by the cuts.
Nic Dakin
I quote T. S. Eliot to remind us that bankers have played good parts in the world of culture, finance and many other things, and to remind us through his words of the pain of growth and rebirth. Economic growth is a difficult business. That is the business that we should be in, and we should make sure that bankers play their part in that.
Bankers were not always about bonuses, and conversations about banks were not always about bonuses. Sadly, since the credit crunch and the global financial crisis, more attention has been focused on how great the anomaly is. We have heard the telephone-number salaries quoted and compared with the situation of people in our constituencies who are doing their best to bring their families up to be aspirational and to move forward in their lives.
Helen Goodman
Does my hon. Friend agree that the criteria for awarding bonuses are strange? Is it not ironic that at a time when the clearing banks are closing branches in our constituencies, bankers are taking huge bonuses?
Nic Dakin
I thank my hon. Friend for that intervention. She draws attention to the fact that people see banks closing and services becoming less available and more remote at the same time as large bonuses are being given out, with no apparent transparency and no clear criteria.
The Bill delivers a tax benefit for banks—a bonus for banks, rather than for UK plc—in the form of the £2.5 billion bank levy, which should be compared with the £3.5 billion bank bonus last year, and with £100 million being given back through cuts in corporation tax. At a time when the banks should be putting more in to atone for the situation we are in and to help the engine of the economy, the Government are allowing them to take more out. That does not seem fair to me, and it does not seem fair to the people I represent.
Nic Dakin
I thank my hon. Friend for his intervention. Clearly, the amendment aims to provoke a review of how we best ensure that bankers’ bonuses are taxed efficiently and effectively, rather than ineffectively, as the Government are currently, which is always a danger unless we are vigilant, as my hon. Friend suggests.
Helen Goodman
I shall of course vote for the amendment this evening, but it does raise the question of whether it ought to be the Chancellor who reviews the bank levy or, because of the serious problems in the way in which the Government have handled it, the Public Accounts Committee.
Malcolm Bruce
That is precisely why my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) and I tabled the amendments. We want Ministers to begin in the process of building that trust.
The Government have made their case for this change and have defended it robustly on a number of occasions, but that is not the response that we need tonight. They have made their decision and I do not expect them to reverse it, because the Budget depends on it. What I expect them to do is engage with those in the industry, to explain the position to them, and to negotiate in detail on allowances and other flexible ways of ensuring that oil and gas that would otherwise be lost continue to be produced.
Helen Goodman (Bishop Auckland) (Lab)
I understand that the right hon. Gentleman seeks flexibility on the part of Ministers and is trying to persuade them of the value of his case. If the Government give him a negative response, will he still vote with them at the end of the debate?
Malcolm Bruce
I think the answer is that I want to hear what the Minister has to say.
Sir Robert Smith
Those hon. Members may have chosen to speak in other ways; they can raise matters with Ministers directly or in correspondence. There are all sorts of ways of trying to influence Ministers. I am using probing amendments and this debate to try to do so. If I may say so, it is rather sad that the Committee has chosen to focus on such a major industry for the UK economy at 1.30 am, but—[Interruption.] Well, the House collectively chose that time.
I want to make two final points on the instability and uncertainty caused by such upheavals. Statoil is reviewing its investment. That does not mean that it will not go ahead at all or that some of the investment might be done differently, but in the reviewing time, Statoil’s supply chain will no longer have the ability to deliver. The supply chain does not have the cash flow to sit around waiting for Statoil’s review without affecting its employment, recruitment and subcontracting. The skills base that has built up has huge export potential and earns a lot of money for the country through exports to other oil and gas provinces, but the Government need to understand that that base needs a stable home environment to ensure that we anchor as much of those profits in the UK as possible.
Finally, I want to reinforce how crucial the mature fields are in unlocking future investment. Many of the investments being attracted today are much smaller than before, and they would not stand up if they did not tie back to one of the big platforms that still operate in the North sea. That is why I was somewhat concerned by some of the Treasury’s evidence to the Energy and Climate Change Committee. The Treasury said that petroleum revenue tax fields were now just cash-making fields, so they did not need any more investment—but the very age of those fields means that they do need investment. The Health and Safety Executive is very keen to keep a close eye on those fields: because of their age, the safety of their infrastructure is crucial. Moreover, investment could be vital in ensuring that that hub remains to unlock any smaller fields around the North sea.
Another uncertainty is introduced by clause 7 because of its relationship with the clause on decommissioning. In the Public Bill Committee the Government must address that new uncertainty, which builds on the uncertainty caused by clause 7.
I urge the Government to respond constructively and positively to the industry’s desire for an investment climate in which it can take all the risks on geology, weather, technology and the future of the commodity market, in the knowledge that a Government who see its long-term importance to the economy, and who therefore recognise the need to restore confidence in a stable fiscal regime, are behind it.
Helen Goodman
It is a great pleasure to take part in this debate and to follow the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), who made such a reasonable, well informed speech.
One question that has remained unanswered tonight is why the Government chose such a complex route rather than a much simpler windfall tax. Everyone understands that when the Government are looking for sources of funds, they will look at particularly profitable industries. However, the structure they have chosen means that investment in, and the future of, the industry have been brought into question. A far simpler structure would have raised the money without risking future work in the North sea oil and gas sector.
The Red Book is peculiarly unclear. The supplementary charge was raised from 20% to 32%, but the Red Book states:
“As part of the fair fuel stabiliser, if in future years the oil price falls below a set trigger price on a sustained basis, the Government commits to reduce the Supplementary Charge back towards 20 per cent on a staged and affordable basis while prices remain low.”
However, the meaning of a “sustained basis” for a fall in prices and of a “staged and affordable basis” is not set out in the Bill.
Andrew Gwynne
It is excellent that my hon. Friend is bringing her Treasury expertise to this debate. She is adding greatly to the discussion. Does she agree that one of the motives for the Government’s tax raid on the oil and gas industry is that they view it as the goose that laid the golden egg?
Helen Goodman
I defer to my hon. Friend’s knowledge of poultry-keeping. However, I agree that that is the problem that we face with the Government at the moment. Their approach simply is not serious; it is trivial.
Mr Kevan Jones
Does my hon. Friend not think it incredible that the Treasury officials whom she worked alongside for many years did not work out that there was a difference between oil and gas prices? Does she also not think it remarkable that the Minister, who is a former employee of Centrica and British Gas, did not highlight that problem either?
Helen Goodman
That is absolutely right. It is extremely worrying for the gas industry that the tax is being linked to fluctuations in oil prices, yet gas prices might not only vary from oil prices, but possibly even be going in a different direction. This is an extraordinary approach to take to the taxation of one of our major industries. I hope to hear from Ministers about how they are forecasting oil prices over the period in the Red Book.
Returning to the issue of complexity and why the Government chose such a complex structure, we have to ask ourselves whether they completely misunderstood the debates in the previous Parliament on stabilisers. The Scottish National party and the Liberal Democrats proposed stabilisers on petrol taxation, but that seems to have been translated into the wholesale market. The situation now is not that stability is being provided for the consumer, which was the original objective of a stabiliser, but that the Government are able to hedge their tax revenues, which is a completely different proposition altogether. I hope that in responding to the debate the Minister will be able to explain what a sustainable oil price reduction means, because it is certainly not clear from what we have seen so far.
The other thing that was said at the time of the Budget was that the detail would be agreed with the industry and motoring organisations. I hope that we will get a report from the Minister on what discussions and agreements have been achieved. The initial press reports of her meetings with the industry were very alarming indeed. It sounded as though the industry was furious with what had happened and that Ministers did not have a proper answer to its serious concerns. It would be nice to know whether the negotiations have developed, although it seems from what we have read even today in the newspapers and on the web that they have so far not been fruitful. It would also seem that the Government, in their headlong rush, are not taking account of the fact that further evidence has yet to be given to the Select Committee on Energy and Climate Change. Indeed, that evidence is to be given only tomorrow, yet the Government are ploughing ahead, mindless of what the industry is telling them.
It is particularly worrying that, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) has pointed out, Centrica is saying that it might not open up the Morecambe Bay field after the annual shutdown to perform the usual maintenance functions this year. The Morecambe Bay field has been in operation for, I suppose, some 40 years—I think it was the first gas field from which we got natural gas in this country. The Minister is too young to remember the huge investments made in the 1960s to move from town gas to natural gas. Huge investments were made in this country to secure those gas supplies, and yet at the stroke of a pen, this Government are putting them at risk.
When the Government say that they want to rebalance the economy, we have to ask whether they even know that means. I understood rebalancing the economy to mean having fewer resources in financial services and more resources in other sectors.
Mr Kevan Jones
The argument made strongly by the Government is that the north-east economy should rebalance itself away from the public sector and towards the private sector. Does my hon. Friend share the alarm felt by the 380 firms that directly rely on the oil and gas industry in the region about the effect that the Government’s proposals will have on employment in those companies?
Helen Goodman
Of course. I am extremely concerned, as my hon. Friend and neighbour is, about the impact that the proposals will have on the economy of the north-east, and it will not be just a short-term impact, but a long-term impact. When we get investment in the oil and gas industry, we are getting investment in an industry at the cutting edge of technology. There have been many other positive spin-offs from the investments that the oil and gas sector has made.
Andrew Gwynne
That is precisely the point. The jobs in a lot of the support industries for the gas and oil industry are high-skill, high-tech and pretty well-paid jobs. Once we lose those skills in areas such as the north-west and north-east of England, they are gone for good. We need to support those industries, as well as the wider oil and gas industry.
Helen Goodman
That is absolutely right. The investment that the Labour Government tried to encourage in completely new energy industries such as the offshore wind industry used very similar skills. It is important to have a critical mass in these industries, and the achievement of that is now being put at risk.
It is not at all clear what the Government mean by rebalancing the economy. Our debate earlier this evening revealed a bizarre situation in which taxes on the financial sector are not tough enough, while taxes on the primary sector are over-strong. That is simply not going to take us down the route that we all want to go down.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
I do not know when the hon. Lady first came to the House, but she will recall that when the Labour Government first came to power, they imposed a windfall tax that punished the utility companies for their success. Now, this Government are trying to redress the balance, while recognising that oil prices are at an all-time high and that profits are being made simply through speculation. I am afraid that the hon. Lady is simply talking to the Westminster bubble. She should be thinking about how we can make a real difference to this country, rather than continuing to talk through the night.
Helen Goodman
I do not accept the hon. Lady’s analysis. Unnecessary complexity is one of the problems. A positive aspect of the amendments tabled by the right hon. Member for Gordon (Malcolm Bruce) is the improvement in transparency, stability and predictability that would ensue from them. Those things would simply not ensue from the Chancellor of the Exchequer’s proposals.
Mr Anderson
Does my hon. Friend agree that one of the differences between what is happening now and what happened in 1997 is that, in 1997, the Labour party went to the country to ask for a mandate to put in place a windfall tax on the energy companies, and that the people of this country voted for that?
Helen Goodman
That is a powerful point. What happened then contrasts with the total lack of consultation by this Government.
Mr Graham Stuart
The hon. Lady mentioned the Government’s policy on rebalancing the economy. One of the most important elements is to reverse the disastrous loss of employment in manufacturing under the Labour Government. More than 1.5 million jobs were lost and—
The Chairman of Ways and Means
Order. We are straying from the amendments if we start talking about job losses. Let us try to keep as close as we can to the amendments before us.
Helen Goodman
I entirely accept your guidance, Mr Hoyle.
There is obviously a supply chain for the oil and gas sector. Equally obviously, if we damage the financial viability of the oil and gas companies, there will be an impact further down the supply chain. It is worrying that the industry is predicting that 40,000 jobs will be lost. Those are 40,000 jobs that we can ill afford to lose at this time. This is absolutely typical of the measures being taken by the Government that, across the board, are not being thought through. The statement by Statoil that it is going to put on hold a $10 billion investment is very worrying.
We also need to pay attention to the fact that the North sea province is different. It is not only a mature province—we all understand what that means—but it is in a very competitive arena. The Government do not appear to understand what being in a competitive arena means, or that those companies have a choice about where they invest.
David Mowat (Warrington South) (Con)
At the current price of $120 a barrel, the average return on capital employed for a medium-sized field is roughly 40%. Do Labour Members think it right that oil companies should be making 40%?
Helen Goodman
I do not have the precise figure at the back of my mind and I am not going to pluck out of the air a particular number, which would be to behave as foolishly as Ministers. It is obviously necessary to look at the returns across similar fields in other countries and to consult the industry on the implications. I am sure that that will not have satisfied the hon. Gentleman, but I am afraid that it is my view.
David Mowat
The point about petrol prices has often been raised. The hon. Lady has mentioned both Centrica and Statoil. Does she believe that these are major petrol suppliers in the UK?
Helen Goodman
No, Centrica is a gas company. Oil companies, even if they do not have petrol companies within them in the UK, are selling their oil and gas to people who are delivering in the retail market. I would have thought that the hon. Gentleman understood that if something is being done with prices and taxes in one part of the market, it could have an impact on the prices charged in another part of the market. That was my point.
Let me deal now with the drafting of the Bill. Will the Minister explain why the $75 a barrel limit is not specifically mentioned in clause 7? As already mentioned, if we are to make any sense of what is going on here, we will need to look at clauses 61 through to 64 and at schedule 15 alongside clause 7. I would like to pay tribute to Rob Marris, the former Member for Wolverhampton, South West who always enjoined us to read the explanatory notes. The explanatory notes on clause 61, which deals with decommissioning, are particularly interesting. Has the Treasury or Revenue done any analysis of the impact on the environment of the changes to the rate of decommissioning relief?
The amendments in the group are also interesting. As I have said, the amendments tabled by Liberal Democrat Members are clearly aimed at improving stability, predictability and transparency. The amendments tabled by my hon. Friend the Member for Bristol East (Kerry McCarthy) are designed to review and understand the situation better. The most interesting amendment before us, however, is amendment 11, tabled by the Chancellor of the Exchequer. It is designed to insert the following provision into clause 7:
“But if the basis of apportionment in subsection (4)(b) would work unjustly or unreasonably in the company’s case, the company may elect for its profits to be apportioned on another basis that is just and reasonable and specified in the election.”
This is the most extraordinary amendment that I have seen in six years as a Member of Parliament. It seems that every company can say to Her Majesty’s Revenue and Customs, “The impact on another company might be ABC, but in our case it would be XYZ.” Every company will be allowed to negotiate not simply the interpretation of the tax code, but its own tax code.
Mr Kevan Jones
Obviously many other taxpayers would like to be able to negotiate their tax codes with the Inland Revenue, but I am sure that the opportunity will not be open to them. Where will this leave the amount of revenue that the Government will supposedly raise to pay for the reduction in petrol duty?
Helen Goodman
My hon. Friend has hit the nail on the head. This opens a huge hole in front of the Minister’s revenue forecast. There is total uncertainty. Every company will be able to turn up and renegotiate its own tax regime, which is ludicrous. How far will this be taken? Will it be a general principle established in the tax code for the purposes of all corporation tax, or personal tax? I hope that the Minister has a very good explanation for what is going on.
Let me return to the underlying worry that has been exposed in tonight’s debate—that the Government simply have not taken account of the importance of energy security. Everyone knows that the energy market is under a number of different pressures. On the one hand, we must have a market that is environmentally sensitive and reduces our carbon footprint; on the other hand, we must have prices that are affordable for people in this country and that tackle fuel poverty. We must also have security of supply in a world that is particularly uncertain at this time. Wars are taking place in north Africa and there is conflict in the middle east, and it is at this moment that the Government have chosen to impose taxes that are so insensitive that they put the North sea oil and gas regime at risk.
Mr Anderson
I want to speak in support of amendment 10, but first I want to say something about the speech of the right hon. Member for Gordon (Malcolm Bruce). I am pleased that he has returned to the Chamber, because I was very interested in what he had to say. Most of those who have spoken in the debate on these amendments have done so on the basis of a degree of experience, which was not the case in earlier debates.
I wonder whether the case made by the right hon. Gentleman was made to the Government before the Budget. It appears from what was said by him and by the hon. Member for Dundee East (Stewart Hosie) that the industry has been saying to the Government for some time, “If you are going to do this, please talk to us and please make sure that we get it right.” The industry does not want to end up with the circumstances described by my hon. Friend the Member for Bishop Auckland (Helen Goodman), in which anyone could do whatever they want whenever they want.
If that information was shared with the Chancellor before he made his statement on 23 March, it would seem from what was said by the hon. Member for Dundee East (Stewart Hosie) about why he had ignored the voices of experienced people such as the right hon. Member for Gordon and those in the industry that the only thing that matches the Chancellor’s arrogance is his ignorance. Clearly he has decided to say, “I know better. I will impose this on the industry and on this country.”
This is not just about places such as Aberdeen and the north-west, because a huge amount of work is going on across the whole of Tyneside and the north-east of England. Some of the most advanced technical work anywhere in this country is being done there in very small factory units by very skilled men and women who are doing a great job. Shipyards have reinvented themselves after the closure programme of the 1980s and are building exploratory rigs and doing work that is vital to maintaining the skills base and developing the new work that we want to do. That will be development for not only the oil industry, but the offshore wind industry.
Mr Anderson
My hon. Friend is absolutely right. These people are rightly still among the most well-paid people in this country—why on earth should they not be, given the work they are involved in and the risks they take in their daily lives?
I worked underneath the North sea bed as a coal miner, so I have some experience of working in the energy industry. I am not the person to feel sorry for multinational oil companies, but if the Government take crass decisions that will have a massive impact on not only the industry, but the people who are dependent on it right across the board, we should surely question that. I have no problem with saying to the oil companies that we want them to play their part in trying to help us to get this country back on an even keel. Clearly, when companies such as Shell and BP are making huge profits, that discussion should take place, but it should happen before decisions as serious as this are imposed on people.
Some 450,000 people work in the industry. Our subsea industry is at the cutting edge and leading the world. People talk about what happened in the gulf of Mexico only a year ago, but the probability is that that will never happen in the North sea because of the experience we have gained over many decades of working up there. We lead the world and we should be proud of that, but this taxation surprise has made the industry question whether it should carry on being there, and clearly the oil industry can go to lots of other places in the world.
Helen Goodman
Does my hon. Friend agree that the expertise, research undertaken and skills gained on the UK continental shelf in the North sea enable British-based companies to explore successfully in the gulf of Mexico and the south China sea, and that from that exploration we also gain in income and investment from dividends overseas?
Mr Anderson
My hon. Friend is absolutely right about that. There is no doubt that as we move further forward and the exploration starts to take place west of the Shetland Islands, presenting new challenges, our people working in these industries will again lead the way. But that may not happen if companies are frightened away by a tax regime that is going to punish them. It will particularly punish them when it is a rabbit pulled out of a hat at the end of a Chancellor’s Budget, when it has not been discussed with the industry and when the industry has not been able to prepare, consider what it is doing and talk things through in a sensible and adult way in a genuine partnership to make these things work. As has been pointed out a number of times, Centrica has said this week that it is considering not reopening its gas fields off our north-west coast. That is a hugely important area of development and if Centrica decides not to reopen the fields they will just become sterile, like so many other of our energy reserves in this country over the past 30 years as a direct result of Government failures and inaction. It is clear that the Government have not thought this measure through, and the plea by the right hon. Member for Gordon is absolutely the right one, because they should think it through.
What will happen to the tax revenue in the meantime? That point was raised by my hon. Friend the Member for North Durham (Mr Jones). Clearly, the decision made on 23 March was that a certain amount of money would be raised by this attack on the North sea. If that money is not raised, either because of the discussions that go on or because the decision has changed, what will the Chancellor come back with? How will he fill the hole that will be left, at least temporarily, if we do not go ahead with the measure?
Mr Jones
I have known my hon. Friend for more than 25 years, and I think that this is the first time he has ever been overcome by something I have said—it might be the first time he has ever listened to anything I have said. The idea of leaving oil and gas in the ground and not extracting it is absolutely ludicrous. It makes no sense whatsoever with regard to the investment that has already been made, and it makes no economic sense with regard to security of supply in this country.
Helen Goodman
Does my hon. Friend agree that the problem is that the Government have no strategy? Just as they panicked when they realised that they had a fiscal hole to fill in the few days before the Budget, so they have now panicked with this ridiculous amendment 11.
Mr Jones
My hon. Friend has done the Committee a favour by drawing our attention to amendment 11, and that is something that we will all want to be argued for in the case of individual tax returns. The point of the matter is this: if the results are what has been suggested, how on earth will the Government be able to predict how much they will get from this tax?
Helen Goodman
Does my hon. Friend agree that it is also not clear, when a company negotiates its own tax regime, whether it will be a secret tax regime, or one that everyone will know? If it is secret, does that not open up the possibility of even more unfairness?
Mr Jones
It does, and that leads us to the point about how we would arbitrate in disputes between different companies. My hon. Friend the Member for Aberdeen South (Dame Anne Begg) mentioned the fact that decisions on investment in oil and gas are not taken in this country, but in Houston, Calgary and other parts of the globe, so the North sea and exploration in this country is competing for investment from around the world. If companies have to jump through hoops to negotiate their individual tax liabilities before trying to put an appraisal together, I am sure that decision makers will go for the easier options so that they know what the return on investment will be, rather than the uncertainty that this has left us with.
Mr Kevan Jones
It is, and the north-east has been able to take advantage of the change in, for example, the River Tyne, which was heavily dependent on shipbuilding. Now we have facilities such as the Walker technology park, and the city council was far-sighted when it developed an offshore park for the North sea oil industry.
Helen Goodman
Does my hon. Friend agree, as the hon. Member for Dundee East (Stewart Hosie) said, that there is also—
The Chairman of Ways and Means (Mr Lindsay Hoyle)
Order. Can you face the Chair, please? Thank you.
Helen Goodman
There is also a problem with partnerships between the private sector and the universities.
Mr Jones
There is indeed. There are also new technologies. For example, the development of mine ploughs for mining the North sea bed for the laying of oil pipes was generated from a company that spun out of Newcastle university. Places such as the Walker technology park sustain offshore supply jobs for the North sea, and two companies based there—Duco and Wellstream—produce 90% of the world’s capacity of sub-sea umbilical housing and cords. Those are well-paid jobs. Such companies chose to invest in the north-east of England not only because of the skills base but because of the access to the North sea, and they are now able to export from there across the world.
George Rafferty, the chief executive of NOF Energy, says:
“For the last six to nine months we have been talking about a renaissance in oil and gas especially from the North Sea and the benefit to our members in the North-East as a result of investment being put in. With this announcement by the Government, which was made without consultation with the industry, there is a serious risk those investment decisions will be reversed.”
The industry body Oil & Gas UK said that the tax would not be passed on to consumers after the Chancellor warned that the sector faced a “direct squeeze” from it. That is exactly the uncertainty that exists today. It does not affect only the jobs in the north-east region itself. We have a large travelling population of individuals who travel to work via the North sea; they go across to Morecambe bay to work in the gas fields, and to East Anglia and other parts of the UK. That shows that this is an industry that affects numerous parts of the UK economy as well as the north-east. We have to ensure that any decisions that are taken on taxation do not have a huge detrimental effect.
It is necessary to know what is going to be done when making decisions about where future oil and gas investment will go. Unfortunately, some companies have already invested in oil or gas fields on the basis of what the tax regime was going to be pre-Budget, and they now face a completely different set of circumstances. For example, Total E&P UK has established Laggan-Tormore—the west of Shetland gas development—and that investment of $4 billion is now at risk. Questions will be asked by the individuals who made the decision to invest there. What will be the future of that type of investment?
This is clearly short-termism for reasons of political expediency to do with the Chancellor. In the previous debate, we even got an admission from the Minister that the downturn in the petrol price was 0.8%—and we all know what we can do with 0.8 of a penny in our household budgets! Is it really worth making that type of fix, which will jeopardise not only the investment that has gone in to date but will go in in future? This is a world-class industry of which we should be proud in the UK. It sustains many jobs. Over the years, it has been a leader not only in technology but in safety, as my hon. Friend the Member for Blaydon mentioned.
I take no joy in what I am going to say now. I feel sorry for the right hon. Member for Gordon and the hon. Member for West Aberdeenshire and Kincardine, because I fear that they will feel the political consequences of this in the ballot box. I hope that with their expertise and continued lobbying, they can change the Government’s mind. A short-term decision based on the petrol price will have a huge economic impact on the UK, on the industry as a whole, and on the economy of the north-east. I urge the Government to think again. I do not know whether they will take silly decisions like this in the future, but please can they do a U-turn for the sake of the investment and jobs that they will put in jeopardy if they continue with this ludicrous policy?
Justine Greening
I only wish that the hon. Gentleman’s assertion was correct. The previous Parliament debated this very issue, and I think it was responsible of the new Government to get the independent Office for Budget Responsibility to examine it, given that there had been conflicting assessments from different industry watchers and think-tanks. The OBR was very clear that although we received some extra revenue from the North sea as a result of higher prices, the impact of higher oil prices is far more wide-ranging. We can see that from the debate that we have had over a number of weeks, which continues tonight, about the impact of oil prices as they feed through to high pump prices.
I remind the hon. Gentleman of his own words about how to pay for the stabiliser back in 2009. He said:
“That amount could come from the VAT windfall or the North sea windfall, because it would be directly related to the price of oil.”—[Official Report, 13 May 2009; Vol. 492, c. 908.]
I know that he was talking about the direct revenues that he has just mentioned, but I think he was also making the broader point that a more general windfall accrues to the North sea industry when oil prices are high. I will talk briefly about some of the steps that we want to take to ensure that we mitigate the risks involved in the more marginal investments, so that we manage the concerns that have been raised, particularly by Liberal Democrat Members.
Amendment 10, which was proposed by the Labour party and spoken to by the hon. Member for Bristol East (Kerry McCarthy), would require the Chancellor to
“produce, before 30 September 2011, an assessment of the impact of taxation of ring fence profits on business investment and growth including an assessment of the long-term sustainability of oil and gas exploration in the North sea”.
As I have said, I want to reassure hon. Members that we are engaged closely with the industry. In fact, we explicitly mention in the Budget document that we want to work with the industry on field allowances, particularly those on marginal gas fields. Since coming to power, we have engaged closely with the industry, as my hon. Friends are aware. We have introduced a change to the ultra-high-pressure, high-temperature field allowance to ensure that the fiscal regime was appropriate to those prevailing circumstances.
The Government are keen to continue working with the industry. I have personally met representatives of Statoil and Centrica and spoken directly with them about their individual concerns. As I am sure the right hon. Member for Gordon is aware, Wood Mackenzie explicitly pointed to the Mariner and Bressay oil fields as two of the few fields where there would be an uneconomical impact, but for a variety of reasons, a number of technical challenges associated with those fields already made them a challenging investment. Nevertheless, we are working directly with Statoil to look at whether field allowances can be developed to help to unlock that investment.
The Government published our assessment of the impact of the measure in a tax information and impact note at the time of the Budget. Although we do not expect the measure to have a significant impact on investment or production in the forecast period, as I have said, we are working closely with the industry. First, we want to look at field allowances to see how we can unlock those more marginal fields, and secondly, we want to look at the longer-term issues that the industry is keen to address, including, for example, achieving more certainty on decommissioning.
Of course, the Government expect that the average post-tax profits per barrel will be higher over the next five years than it was over the past five years because of the higher oil price. In its analysis of the Budget, industry analyst Wood Mackenzie stated:
“At current high oil prices, few new projects will become uneconomic as a result of the change”,
However, we want to do what we can to ensure that investment is unlocked for those projects that remain at risk, so that they go ahead.
Helen Goodman
I am just a little concerned about how the Minister expressed herself in her most recent remarks. My understanding is that Ministers are not supposed to be privy to the individual tax bills faced by individual taxpayers. From what she is saying, it sounds as if a line has been stepped over when it perhaps should not have been.
Justine Greening
I do not think that that is true. It is perfectly normal and reasonable for the Treasury to work with industry and individual companies to look at the particular problems that they face. That is exactly what the previous Government did, and they introduced field allowances. There is no substance at all to the hon. Lady’s claim. In fact, she would have more justification for complaint if we were not taking such action.
As I have said, the recent very high sterling oil price has resulted in unexpectedly high profits for oil and gas companies, although at the same time it has resulted in financial pain for motorists and the wider economy. The Government therefore decided that it was appropriate to increase the rate of supplementary charge, to redress that imbalance. The fact that we have acted in that way does not mean that we do not appreciate the impact of taxation. However, we believe that investment in an exploration of the UK continental shelf will continue, driven by the record high oil price.
The hon. Member for Bishop Auckland (Helen Goodman) asked about forecasting. Of course, there is a range of industry forecasts on future oil prices, but the Government use the OBR, which is entirely independent of us. The OBR forecasts an oil price for the forthcoming years of this Parliament in excess of $100 a barrel for every year of that period.
Amendment of the Law
Helen Goodman Excerpts(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Pickles
This is a very clear example of the difference between how we do business and how the Opposition did business. We are not going to tell the people of Bristol where the enterprise zones will go—they are going to tell us.
Helen Goodman (Bishop Auckland) (Lab)
There is confusion in the north-east because what the Chancellor said in his speech about enterprise zones—that there will be one in Tyneside—was not the same as what the Budget documents said: namely, there will be one in the north-east. There is an enterprise zone on Teesside, but the geography of the other one in the north-east is not clear. Does the Secretary of State have any insight on that?
Mr Pickles
There is one in Teesside and an additional one within the northern area. In truth, it is up to the local enterprise partnerships to put the thing together. [Interruption.] The hon. Lady wants to control everything from here, but I have to say that she was not very successful in doing so. What is wrong with an approach in which rather than us down here in Whitehall telling the people of the north-east what to do, the people of the north-east tell us how they will do things?
We are taking measures to help get the house building industry firing on all cylinders. Every new home supports four jobs in house building and two more in related industries. The availability of new homes helps people move around the country for work. Getting the housing industry moving again is key to restoring growth. Under the new Government, house building starts are up 23% and construction orders for new private housing are up 50% compared with Labour’s last year. But we need to go much further. There are about 200,000 granted planning permissions out there in the country, but the homes are not being built.
The answer is not targets; it is addressing the root causes. First, there is a tight mortgage market, so we will introduce a new form of support that will help first-time buyers get a foot on the ladder: a 20% equity loan, co-funded by Government and developers. That will put ownership within the grasp of 10,000 first-time buyers. We will reform the stamp duty land tax rules on bulk purchases of new homes to boost equity investment. We will help to reduce the sector’s reliance on mortgage funding.
Secondly, there is the problem that elements of the planning system are holding up the building of new homes. Let us go back to the 200,000 granted planning permissions. It is fair for councils to agree a contribution to the area where developers are planning to build to ensure that the development is sustainable, perhaps by providing a new park or playground, or by paying for road widening. However, what looked like a reasonable request three or four years ago may no longer look quite so reasonable if it stops necessary development happening altogether. If those commitments make it simply too expensive to build, we need to be realistic. Councils should not compromise on the essentials to make a development acceptable to the local area, but unrealistic agreements negotiated in the boom times should be reviewed to help new developments move forward quickly.
Nicholas Soames (Mid Sussex) (Con)
I draw the House’s attention to my entry in the register.
I warmly welcome the Budget and my right hon. Friend the Chancellor’s broad judgment of the economy. I particularly commend him for sticking to the plans he had outlined earlier, so that—painful though it may be, and mindful, as we must be, of the difficulties—we can deal properly and speedily with the appalling state of the economy bequeathed to the Government by their thoroughly irresponsible predecessors. Measures are now firmly in place to repair the economy, to ameliorate the gross waste of public money, to pay down the deficit and to put in place the architecture for a growing and expanding enterprise economy, with all the opportunities for jobs, increased competitiveness, substantial improvement in the effectiveness of essential and greatly valued public services and support for wealth creation.
Clearly major challenges and difficulties lie ahead, but the Chancellor has set out a clear vision for growth, with the aim of creating in the United Kingdom the world-class businesses of the future, of all sizes and in all activities, and consolidating a way ahead for all our industries and commerce. I was taken today with a letter in the press from some of Britain’s most successful business men that said that the steps taken
“will be a massive boost for start-ups, and will help entrepreneurs to secure finance to get their ideas off the ground.”
That is just so. It is exactly what is required.
Of course, I welcome the announcement on apprenticeships, but as I have made consistently clear to Ministers on many occasions, all the good will in the world cannot replace the over-bureaucratic burden currently in place that often makes it difficult to take on apprentices. If these targets are to be achieved, the process must be made a great deal easier. These are matters with which the Department concerned must deal with great vigour. The opportunities to expand the skills of our young work force are real and vital, and I hear from businesses on all sides their desire to get on with this matter in a speedier manner. To this end, I strongly urge my right hon. Friend to pay careful attention to the views of Professor Alison Wolf, who has developed some very good ideas on these matters, and the excellent work done by my right hon. Friend Lord Baker of Dorking.
I welcome the steps taken on deregulation, and I was pleased to see that the Government’s earlier work has been built on in the Budget in a number of areas. However, those steps are nowhere near good enough yet, and progress across Whitehall is extremely patchy. For my part, I believe that greater authority and impetus should be given to the war on unnecessary, debilitating and grinding red tape, which holds back so many of our businesses and infuriates so many of our best people, who have great ambitions that they cannot fulfil because of the burden that the state places on enterprise.
Nicholas Soames
No, I am very sorry; I am afraid that I cannot.
I call on the Chancellor and the Prime Minister to bring back Lord Young, who understands such matters well, knows the grislier ways of Whitehall and is ideally qualified to lead a tough, cross-departmental effort to enforce the measures needed to reduce onerous administrative burdens, particularly on our small and medium-sized businesses. I know that many Ministers are aware of the importance of doing that, but from the Back Benches making progress often feels like wading through very deep mud. The sometimes apparent weakness of the civil service, judicial activism, thickets of regulation, and an infantilised and often financially illiterate press can all make it impossible to progress. The Government need to make a big effort to move on the issue.
On taxation I need say only this. A more competitive, simpler and more stable tax system will be better for everyone, rich and poor alike. Such a system would also go a long way towards restoring our badly lost international competitiveness, to which the last Government did such terrible damage.
Finally, let me briefly say a word about banks and the language of relentless negativity that is doing great harm to the City of London, which is one of the greatest assets that this country has. That language—particularly of the Opposition, but also of much of the press—is self-defeating, illiterate and often infantile. It needs to stop, and the debate needs to grow up. Many new jobs in banks headquartered in London are now being located overseas. That is very bad news. The Chancellor has averted a fiscal calamity. I am optimistic about the future of this country, but we face a long, hard slog.
Helen Goodman (Bishop Auckland) (Lab)
I am pleased to have the opportunity to contribute to this year’s Budget debates. Last Wednesday, the Chancellor of the Exchequer had a choice to make. He could have corrected the judgment he made last summer in the light of December’s stall in growth and the huge instability in the oil market, but he made a different choice: he chose to continue with his £81 billion of public spending cuts. Notwithstanding the remarks made by the hon. Member for South Northamptonshire (Andrea Leadsom), I fear that the Government’s supply side measures will not produce a revolution in entrepreneurialism. The evidence for that is the Chancellor’s own growth forecasts. The forecasts for the early years have been reduced by far more than those for the later years have been increased, and that is because everything is dwarfed by the massive fiscal retrenchment. The cuts are deeply unfair and they are a strategic blunder.
I wish to focus for a moment on the cuts to the poorest families: the cuts to the social fund. At the beginning of March, the Department for Work and Pensions announced an immediate end to crisis loans for cookers and beds. Why? Before the election, the hon. Member for Thornbury and Yate (Steve Webb), who is now a Minister of State at the Department for Work and Pensions, said:
“People who apply for crisis loans are desperate and have nowhere else to turn…The Government has got to practice what it preaches to the banks and make more cash available through these loans to help families through hard times.”
Now he prioritises sticking to the Budget and says:
“We need to ensure that crisis loan support is correctly targeted at those who need it most”.
Does he honestly believe that bedding is not essential? Does he think that mothers of disabled and incontinent children do not need beds and bedding? Can Government Members imagine how a mattress smells after six months’ use by an incontinent child?
Helen Goodman
The hon. Lady says yes, so she obviously thinks it is satisfactory for poor children to live in that way—a way that I am sure she would never allow her own children to live.
Do Government Members think that children in poor families should have only cold food—even in winter? Would they like to say to their small child on a cold afternoon in November, “Oh you can’t have baked beans on toast. You’ve got to have a cheese sandwich”? No wonder DWP Ministers are not having an outing on the Treasury Bench during these Budget debates. Clearly they do not want to face the criticism they know they would get from Labour Members.
In answer to questions, the DWP has told me that last year crisis loans for cookers and bedding totalled some £27 million. Where are people supposed to turn instead? Are they supposed to turn to the voluntary sector? I recently met families in my constituency, all with disabled children, who had benefited from that excellent voluntary sector organisation the Family Fund. Last year, the Family Fund helped 55,000 families with items such as cookers and bedding and its total budget was £35 million. Are the Government going to increase the grant to the Family Fund by £27 million to make up for the cuts to the crisis loans? Last year, the Family Fund included a picture of the right hon. Member for Witney (Mr Cameron) in its annual report—I wonder whether it will do that next year too. I am sorry that the hon. Member for Colchester (Bob Russell) is the only Liberal Democrat Member here to be reminded that the Minister responsible for this is the hon. Member for Thornbury and Yate.
The problem that this country faces is not that it is bankrupt; the problem this country faces is that it has a Government who are morally bankrupt. This is hurting, but is it working? Taking the four years from 2010 to 2014 together, the independent Office for Budget Responsibility forecasts that growth will be down, unemployment will be up, the social security budget will be up and net public sector borrowing will be up by a massive £40 billion. Already this looks like a catastrophic error of judgment and a strategic blunder. There is an alternative: a sensible path to fiscal consolidation as set out by my right hon. Friend the Member for Edinburgh South West (Mr Darling), which was about bringing down the debt, promoting growth and keeping people in work. There is an alternative, and on Saturday 300,000 people came to London to demonstrate in favour of it.
Amendment of the Law
Helen Goodman Excerpts(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Sammy Wilson
My fear is that, not just in Northern Ireland but throughout the United Kingdom, the measure will be more like a branding exercise and good for a soundbite, rather than something that will have any real impact. I hope that the measure has an impact, but, if I look at the amount of resources that will go into the zones, and at what really is required to lift such areas, I fear that it will not.
Other changes have been mentioned, such as those to the tax structure, and I noted what the Chancellor said, but some of them might not include extensive consultation—the issue is complex—and might be years away. So, again, they look good in the Budget, but what is the immediate impact going to be?
Helen Goodman (Bishop Auckland) (Lab)
On that point, it is interesting to look at the changes to national insurance contributions, which are forecast to have an impact right out to 2016, because they show that the proposed bringing together of the two taxes—national insurance and income tax—will not happen for at least five years.
Sammy Wilson
I hope I am not quoting the Chancellor wrongly, but I think he talked about nine years in the future before those changes have an impact, so again we have to ask, “What is the impact going to be?”
Mr Syms
It was nothing to do with light-touch regulation; in fact, we needed more competent regulation. The Financial Services Authority was not up to the job, and the Bank of England would have done a better one.
The key thing is that we now have a great imbalance in our economy. Over the long term, Britain has always tended to have public spending of about 40% of GDP, taxation of about 40% of GDP, and a national debt of about 40% of GDP. We have always managed to grow and export, and to be a fairly successful economy. We now have to yank public spending and the deficit back to those sorts of levels. As was pointed out earlier in the debate, even after five or six years, we will only be back down to where we were towards the end of the Labour Government when we had to go into deficit to deal with the difficult economic situation.
I think that the Government’s response is sensible. It is planned over five or six years, and is gradual. For all the talk of expenditure cuts, the expenditure cuts will be gradual over that period. The plan, as the Chancellor set out today, is for the economy to grow. That should generate more tax revenue. The difficulty, of course, is that we will have to raise taxation, as can be seen in the plans, to help balance the budget. I hope that that is more of a short term, rather than a medium to long term thing, because we need to build incentives back into the British economy.
Helen Goodman
On that point, has the hon. Gentleman not noticed that table 2.1 on page 42 of the Red Book shows that, over that period, personal tax allowances will increase substantially, because the switch to CPI and the changes to national insurance outweigh significantly—by several hundred million pounds—the increase in personal allowances that the Chancellor made? This is a tax-raising Budget, not a neutral Budget as he said.
Mr Syms
The key fact is that the Government whom the hon. Lady supported left us with massive debts. There is no honest or honourable way in which we can deal with that problem, other than taking tough decisions, which will involve many of our constituents paying considerably more money. Over the next five years, unfortunately, more money will come in through taxation. There is no way around that. That is the legacy that Labour has left us. If we want to be responsible, to get the economy back into balance and to have long-term economic growth, we have no choice but to take tough measures.
Dame Anne Begg (Aberdeen South) (Lab)
At the end of every Budget speech, the Chancellor has to pull a rabbit out of the hat. I will begin my remarks on the rabbit that I was not expecting today. It is something that will affect my constituency. Because I have been sitting in the Chamber since the Chancellor made his speech, I have not been able to quantify exactly how it will affect my constituency, but I have great fears that it might have a devastating effect.
I should explain that as a Member for Aberdeen, the economy of my constituency is based on the offshore oil and gas industry. I should also explain that I am the chair of the all-party group on the offshore oil and gas industry. Aberdeen has survived the downturn probably better than anywhere else, because the oil industry has been fairly buoyant. Unemployment in my constituency has risen from only 1.9% to 2.5%. I appreciate that that will sound very good to many Members. I fear that because of the rabbit that the Chancellor pulled out of his hat, that may not continue.
I speak, of course, about the fair fuel stabiliser. I think that that has the potential to destabilise the offshore oil and gas industry quite dramatically. I appreciate that the Chancellor was looking for something so that he could bring down fuel prices. However, it appears from the Red Book that huge amounts of money will come from the North sea. Apart from in the financial year 2011-12, in which the amount that will be given back to the taxpayer is £1.9 billion and only £1.78 billion will come in from the North sea from the increase in the supplementary charge, in every other year more will be raised by the Exchequer from the North sea oil and gas industry than the Chancellor will give away by bringing down petrol prices.
Helen Goodman
I also noticed that very interesting line in table 2.1—line 28. It shows that the proposed revenue stream is the same in every year. However, as the Chancellor said, that will depend on the oil price. Unless he is absolutely confident that the oil price will remain at the same level throughout the period, these are completely unfounded forecasts and estimates.
Dame Anne Begg
Indeed, if the oil price goes up, the amount that the Chancellor gets will go up. These must at best be guesstimates. Therein lies the problem for the offshore industry. The North sea is a mature province, but there is still a lot of oil left. In fact, there are probably as many known oil reserves in the North sea today as there were in the 1970s, but they are much harder to reach and more challenging to get out of the ground. The one thing that the offshore oil and gas industry needs is stability—stability in what the Chancellor is going to do. The last time the tax revenues for the offshore industry were changed, by the last Labour Government, there was a slowdown in the industry for a good two years before it recovered. The industry complained about the unexpected nature of that change and the fact that it was not able to plan for it. This change comes into effect from 12 o’clock tonight, so it will come as a huge shock to the offshore sector that it will be affected.
Dame Anne Begg
With all due respect, that is not how the Chancellor has sold it. Even if there has been a windfall, perhaps it would have been better had he given some warning of the change so that people in the oil industry in particular could have taken account of it in their planning.
When we look at the Red Book, we see that the change is not tax-neutral. It states that by 2012-13, the tax raised will be £2.2 billion, and that it will be £2.1 billion the following year. The Chancellor is expecting to raise more than £2 billion a year—a much larger amount than is being given back to the consumer who buys petrol at the pump. Line 6 on page 42 of the Red Book shows that the Chancellor is taking more from the offshore oil and gas industry than from the banks, by a factor of 10.
Helen Goodman
I am grateful to my hon. Friend for being so generous in giving way. The other interesting thing in those numbers is that whereas the Chancellor claimed that the banks would not benefit from the corporation tax change, we can see from the Red Book that corporation tax reliefs will rise over the period in question but the bank levy will absolutely collapse.
Dame Anne Begg
Indeed, the bank levy will come down to just £100 million by 2015-16.
The change to the oil and gas charge has come as a bit of a shock, and it worries me. From looking at the Red Book, I am getting more and more worried about what the Chancellor has announced today. The Red Book states:
“The Supplementary Charge on oil and gas production will therefore increase to 32 per cent from midnight tonight.”
There was no warning, and it will have come as a big shock to the industry. The effect could be dramatic in my constituency. I only hope that the Chancellor has thought the matter through and had some discussions with the industry. I suspect he has not, and I am worried about what will happen.
I wonder what other nasties are lurking in the Red Book. Last time it was the 10% sanction on housing benefit when someone had been out of work for a year, which we did not discover until days afterwards. I am glad that the Government have backed down on that and that today’s Red Book shows that money again.
From a cursory glance at the Red Book, I discover something that comes as a bit of a surprise to those of us who were here for Prime Minister’s questions today. The Leader of the Opposition asked the Prime Minister why the Government were taking the higher-rate mobility component of disability allowance from people living in residential care. Those who were here will remember that the Prime Minister replied, “We are not”—a simple, straightforward answer. However, line d on page 44 of the Red Book is about the plan to
“remove mobility components for claimants in residential care from April 2013”,
with a figure of £155 million to be saved. That is different from the last Red Book, which stated that the change would come in in 2011-12 and save £135 million. All that the Government have done is delay it by two years. As the Leader of the Opposition pointed out, the change is still in the Welfare Reform Bill, and here it is in the Red Book. Perhaps the Prime Minister might want to come to the Chamber and apologise for not having been as accurate as he might have been.
Stephen Williams
I am sure that the hon. Gentleman has been making that case in private to his well-connected friends. I and my colleagues have also been making the case for a green investment bank, not a green investment fund. It has been confirmed as a green investment bank today and it will have £3 billion of seedcorn capital to get it off to a flying start. It is going to start a year earlier than originally suggested. By the end of this Parliament, it will be able to issue bonds so that if we wish, we could all deposit our funds with that bank to invest in our green future.
I also welcome the investment made in innovation and skills, particularly in technology innovation centres. I talked a lot in the last Parliament about the skilling of our young people and how we needed to get more people to take up apprenticeship places, so the confirmation of 50,000 more places today means that there will be 250,000 more in this Parliament than we were left by the last Government.
Speaking as someone who before entering this House spent 17 years in a career in the private sector, advising small businesses on how to set up and take off, I welcome the confirmation or enhancement in the Budget of many reliefs designed to help new and innovative businesses to take off and the fact that by 2014 we will have the lowest rate of corporate tax in the G7. We now look forward to a further period of reform.
The hon. Member for Aberdeen South (Dame Anne Begg) rightly mentioned the integration of the income tax and national insurance schemes, on which there is to be consultation after the Budget. It is, of course, 100 years since Lloyd George, my political hero, introduced the national insurance scheme. During the slump of the 1920s, however—this deals with the point made by the hon. Lady—the actuarial soundness of that scheme was essentially undermined, and ever since then the fiction has been maintained by Governments of all hues that it is a separate fund. In fact, it is a second income tax in all but name, and the time has come to reform it. I am very glad that the Government are going to do that; and because they are going to consult on how it should be done, all the issues raised by the hon. Lady about contributions-based benefits are likely to be dealt with.
The other reform to which I look forward is the move to a system based more on sustainability, involving a tax on carbon. I am delighted that the Chancellor has confirmed the introduction of a new carbon floor price. On behalf of the Liberal Democrats, I will shortly produce a paper fleshing out how that can work during the rest of the current Parliament.
It is disappointing that we have not been able to agree internationally on further taxes on aviation—both coalition parties wanted an aeroplane tax rather than air passenger duty—and I hope that international agreement will be secured so that that can be achieved. However, I welcome the confirmation that we are to end the absurd anomaly whereby the jets that most of us use when travelling abroad are subject to air passenger duty while private jets are not. Under the existing law, a plane full of football fans going off to watch their heroes must pay tax, while the team itself takes off in a private plane and pays none.
The measures that have already been outlined, and the reforms to which we look forward, reward hard work, incentivise enterprise, and make progress towards a low-carbon economy.
Let me deal finally with the issue of the banks. I welcome the fact that the Government have introduced a levy that will be permanent, throughout the life of this Parliament. It has been confirmed today that the banks will not benefit from the reduction in corporation tax, and that the levy will be increased in future. We shall have to wait for the results of the Vickers review to find out whether there are proposals to break up the banks.
Helen Goodman
How can the hon. Gentleman say what he has just said about the banks, given that the bank levy is falling from £600 million to £100 million within three years? That is patently ridiculous.
Stephen Williams (Bristol West) (LD)
I understand that the bank levy is about £2.5 billion a year. The Chancellor announced recently that the levy, which was £1.8 billion in its first year, would be increased to £2.5 billion, and today it has been confirmed that the banks will not benefit from the reduction in corporation tax and that the levy will be increased.
Another issue connected with the banks is what we should do with our ownership, as taxpayers, of Lloyds Banking Group and the Royal Bank of Scotland. That is an issue with which the Government will have to deal at some point in the next few years. A couple of weeks ago I published a pamphlet, with CentreForum, which suggested that the shares should be given to the people so that the state could recover the £67 billion that was invested in the banks bail-out in 2008. The citizen should enjoy the upside: the citizen should enjoy the growth in those shares in the future. I hope that my Treasury colleagues will look favourably on that proposal as they decide what to do with the legacy from the last Government.
The Liberal Democrat-Conservative coalition Government have dealt with Labour’s toxic legacy, but Labour Members seem to be still in denial about the problem. They have not acknowledged its existence, let alone shown any sign of contrition for their role in the deficit. The Leader of the Opposition produced some very good jokes today—I will give him that—but he could at least have made an apology. We have started to clear up the mess. Today’s Budget sets in train a plan for a Britain that is fairer, with a stable economy and a low-carbon future. It recognises the need to help households with their budgets now, and to give them confidence that the economy and their country are back on track.
Several hon. Members rose—
Richard Harrington
With the possible exception of the la-la land factor, my hon. Friend is absolutely right.
I want to talk about some specific factors that are important to business people, and therefore important to growth. There is a lot of talk about banks and the availability of capital, and about what the Government should do and what they have not done. Again, I want to comment based on my experiences in the constituency. The bank lending situation is getting better; there is no doubt about that, as the loans are beginning to come through. In Watford alone, under the enterprise finance guarantee loan scheme, 23 companies have already borrowed money amounting to £4 million. That is a comparatively small sample and it reassures me for the future that this scheme, which is to be expanded, does work, and that it does so in a comparatively short period of time.
It is very fortunate for us that interest rates are low, but the decisions made by businesses do not change when fluctuations are minor, such as 1% up or 2% down. Their decisions do change when the situation reaches a ludicrous point; I was once left with a loan on which I was paying 2% over base when the base rate was 15%. Variations such as 1%, 3% or 5% make little difference. Again, what matters is confidence in the economy and confidence that the Chancellor has done the right thing today. So I must encourage what the Government are doing on the fundamentals, because people and businesses will want to borrow money only when there is confidence in the future and confidence that we are doing the right thing.
My next point relates to the availability of skilled staff. Despite the fact that 3.7% of people in Watford—more than 2,000 people—are on jobseeker’s allowance and 700 or 800 young people there are not in education, employment or training, I visit factories and businesses that cannot recruit staff of the right calibre every week. A few weeks ago, I visited Davin Optronics, a manufacturing company that uses skilled labour to make lenses—it deals with complicated stuff. Its fear was that its work force were getting older and younger people did not want to join manufacturing businesses. That is a fundamental issue and we have to change attitudes.
Helen Goodman
How does the hon. Gentleman reconcile that situation with his Government’s policy on tuition fees and the fact that this week children in this country are being told that they cannot take three sciences at GCSE because of the cuts to school budgets?
Richard Harrington
The hon. Lady and I were at university at broadly the same time, so we were very privileged. We could debate tuition fees for hours, but no matter what one’s arguments on that, the new regime has not changed the current situation and we are, thus, dealing with Labour’s policy on tuition fees at the moment. I would be happy to debate tuition fees with her on another occasion, but the real issue is that we have young people and older people who are unemployed, and we have vacancies in jobs that people will not go into. The Government’s efforts on work experience for young people—today’s announcement on that was tremendous—and on expanding the apprenticeships scheme are very important, as are the technical universities. I commend those efforts because we must have a work force who have the right skills. That is not solely about graduates; it is also about people who are leaving school and are doing apprenticeships and further education courses. What the Government are doing to help will change the availability of staff.
Mr Jackson
I know that the hon. Lady has some expertise on these issues. She can rest assured that my criticism will be confined mainly to the Leader of the Opposition, who delivered a master class in opportunism and vacuity. His loquacity was in inverse proportion to his intellectual insight. In his 15 minutes of speaking, no policy whatever was articulated.
The Budget is supported by the OECD, the International Monetary Fund and business leaders such as the deputy director of the CBI, John Cridland, and David Frost of the British Chambers of Commerce. It is about the Government putting in place the conditions for sustainable, balanced economic growth. Let us remember that the Institute for Fiscal Studies still says that public finances remain in a critical condition, but we have had no alternative whatever from Her Majesty’s Opposition. Indeed, we might have to call in Professor Brian Cox, the noted cosmologist, to search for the black hole where the Labour economic policy should be.
Mr Jackson
I will make some progress; I am sure that I can let the hon. Lady in a bit later. The priorities of the Budget are primarily to reduce the deficit; rebalance the economy, which was left out of kilter by the Labour Government, with an over-concentration on financial services, the housing market and public expenditure; reform public services; and grow, via initiatives such as the green investment bank, green expertise, knowledge, skills and jobs. If I may give a plug, yesterday a collaboration was announced between Peterborough city council and Cranfield university on a centre for renewable energy and biofuels, to be based in Peterborough.
We need to move towards a high-wage, low-taxation economy with less pressure on household incomes, and the Budget provides a road map for that. No one denies that we have had to make some very tough decisions in the comprehensive spending review and in last year’s emergency Budget. There were real-terms cuts in departmental expenditure; the cut to departmental expenditure will be, on average, 11%. However, we should remember that between 1998 and 2010, there was a real-terms increase in budgets in each Department of anything between 2% and 8%. The fiscal tightening between now and 2015-16 will mean that we have to reduce public expenditure and put taxes up, with capital gains tax, tobacco, fuel, the bank levy, consumer prices indexation and child benefit affected. Contrary to received wisdom among Opposition Members, the richest 2% will be hit hardest by the tax benefit and other changes.
What choice do we have? Labour’s poisonous legacy and debt millstone left us with simply no alternative. In 2010-11, we had to borrow about £140 billion—perhaps around £10 billion less than expected. Only Ireland has a bigger cyclically adjusted deficit. Labour ran a structural deficit some seven years before the banking crisis in 2007-08, and we entered the financial crisis with the largest structural deficit in the G7. The national debt doubled between 1997 and 2010. In May last year, we were at significant risk of a downgrading in our international credit rating, with a catastrophic impact on public services, business and consumer confidence, a long period of stagflation, and a contraction in the economy.
Mr Jackson
The hon. Lady will know that the markets have recognised that the fiscal consolidation that the Government had to put in place as part of a policy of growth in the private sector and consolidation in the public sector has resulted in a lessening of the pressures in the gilt markets, with gilt yields down to 3.53% since May last year, and every 1% is £1 billion of interest payment. Of course, that is change in the pocket to Labour Members; we are spending £120 million on debt every day.
Mr Jackson
No, not at this moment.
To put that in context, £95 million could have been spent on schools each day, but we are servicing Labour’s debt, and we could be spending £35 million on police, £25 million on social care, and £90 million on defence. The entire budget deficit that the Labour party ran up in government is £42.7 billion. That is 40 Type 45 destroyers, 33 Astute class submarines, 42,700 MRI scans, or 1.3 million nurses. That is the reality of the appalling profligacy and mismanagement of the Labour Government. We do not hear alternatives. We hear a policy that is dishonest, incoherent and irresponsible. The right hon. Member for Morley and Outwood (Ed Balls) shares very few values, I imagine, with the former US President Ronald Reagan, who once said, “I am not worried about the deficit. It is big enough to take care of itself.” That sums up the Labour party’s attitude in government, and the deficit denial on the Opposition Benches now.
Even some sensible and pragmatic Labour supporters are troubled by the incoherence and the substitution of political opportunism for a realistic alternative policy. The erstwhile Cabinet member, the right hon. Member for Salford and Eccles (Hazel Blears), said at the weekend:
“The public expects us to at least give a broad direction—but I think they are worried that we haven’t been as clear as we ought to be.”
She is absolutely right.
The former general secretary of the Labour party, Peter Watt, went further. In a rebuke to the institutionalised deficit denial of the shadow Chancellor, Mr Watt said on the labour-uncut website that Labour
“is . . . a highly toxic brand. . . we are still opposing every cut . . .It might make us feel better and win some short term popularity. But it isn’t an answer to the charge that we had become economically illiterate and had allowed massive overspending.”
If there is one lesson that I can offer the Labour party from our long period in opposition, it is this: rarely is it enough to be populist to win the respect of the electorate. That rarely forms the basis of a credible election strategy.
Helen Goodman
Is the hon. Gentleman satisfied with a Budget to which the oil and gas industry responded this afternoon by expressing its shock and stating that the investment climate has been seriously damaged and the Budget will drive jobs away from this country?
Mr Jackson
That is one viewpoint from one group of people. Others, such as Baker Tilly, the tax accountants, say that it is an excellent Budget. So do the CBI, the OECD, other industry groups, house builders and others. [Interruption.] I am glad the hon. Lady thinks it is humorous that people are supporting my right hon. Friend’s Budget.