Tax Credits

Huw Irranca-Davies Excerpts

Thursday 29th October 2015 Commons Chamber

[Frank Field]

There is indeed. That leads me neatly on to what the proposals for reform might be. I wish briefly to touch on four.

First, I make a plea to the Government to recognise just how quickly this whole debate is changing and to take advantage of that. Tax credit payments are here for the long run. When we began this debate back in 2010, there was enthusiastic talk about, in almost no time, a new benefit—universal credit—that would sweep away means tests and deliver a seamless service to our constituents. To be truthful but gentle about universal credit, its progress is very modest. I do not disagree with the Secretary of State in looking back at previous instances of trying to smash reform through whatever the costs, but at some stage somebody in Government has to look at how slow the progress of roll-out has been and question whether a full flowering will ever see the light of day. This raises questions about how tax credits might be reshaped, given that universal credit is not for the chop and is here for the longer term. It will not, in the lifetime of this Parliament or even the next, make tax credits redundant.

We have begun to have debates about this with the public. When I recorded a programme this morning, every time I said a word that people thought the public would not understand, we had to stop and start filming again. I could not say how long it took to film. We have our own language, which is a shorthand that is not understood by people outside.

[Huw Irranca-Davies (Ogmore) (Lab)]

My right hon. Friend speaks with great authority and experience on these matters. One of the very straightforward concepts that all my constituents understand is that there is a right-minded intention to get rid of taxpayer-subsidised poverty pay. In doing so, however, we cannot say to people on low pay, “We’re going to impoverish you on that journey.” The simple concept is yes, let us talk about the instruments for doing that, but remember that it is about getting rid of poverty pay and lifting people up, so that at some future date we do not have to rely on subsidy to make it worth while to go to work.

[Frank Field]

I could not agree more, in that we have not had a Chancellor who has decided that it is misplaced for taxpayers to play the role in the welfare system that wages should play in our economy. That leads welfare reform into new areas about how to raise productivity, particularly among those who are lowest paid. We should not simply accept and welcome the Chancellor’s proposals for a national living wage but think about how we take it on from there. My hon. Friend is absolutely right.

My first suggestion to those on the Treasury Bench stems from the fact of the Government’s introducing a national living wage. When the people who designed tax credits got to work, nobody thought that any Government would bring forward that proposal. They therefore incorporated two aspects into the tax credits system. The first was about how to subsidise, and make up to a more decent level, poverty wages. The second was that given the life cycle and where life’s journey takes us, there are periods when people have children and their budget is stretched, and the tax credits system should play a role in that. I ask those on the Treasury Bench, when they are thinking about what they do in only a few weeks’ time in the autumn statement, to consider whether we should now grow up and accept that we are going to have a national living wage, and that the tax credits system should not only subsidise low wages but take some of the responsibility for the costs of children. I think there would be a great deal more support in the country if tax credits were about supporting children rather than the need to subsidise poverty wages.

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[Huw Irranca-Davies (Ogmore) (Lab)]

It is very rewarding and refreshing to follow the right hon. Member for Haltemprice and Howden (Mr Davis), and other speakers as well.

If Ministers take anything from what has been said today, it should be a call for them to pause for a moment, to deliberate on the impact that the proposed changes will have on many working families in our communities, and then to work with Parliament and Select Committees on the ideas being presented. I do not have all the solutions today, but the appeal made by the right hon. Gentleman was, in effect, a political version of the Hippocratic oath: we should try to do good for our constituents, or at least do no harm, before proceeding with this policy. The evidence for that is very clear.

I thank my right hon. Friend the Member for Birkenhead (Frank Field) for initiating the debate, and for setting out so eloquently not just some of the basis of the problem that confronts the Government, but some of the possible solutions. They may not be binding solutions, but they are possible. It is as clear as day, and has been made clear by Members on both sides of the House, that the Minister needs to speak to Cabinet colleagues and other Ministers and rethink this policy. There has been talk today about lost sheep wanting to return to the flock. I suggest that those lost sheep are in some ways on the sunlit uplands. They are saying, “Come and join us up here.” They are not lost; they can see the way forward. We need to make sure we do no harm to our constituents.

I am sure the Minister is very aware of the impact of this, but let me explain the impact in my constituency. The number of working families currently claiming tax credits is in excess of 4,000. The number of working families with children claiming tax credits is nearly 3,500. The number of children in those families—low-paid families—is nearly 6,000. That is why my mailbag at the moment and my emails every night are full of letters from people who are terrified, for good reason, of what is coming down the track. It is not because of scaremongering; it is not because of unreal expectations of what might happen. They know; they are seeing daily the analysis of the situation for them and their families. They have read the analysis in Conservative-supporting papers, not in my newsletters or briefs submitted by the Joseph Rowntree Foundation, the Children’s Society or others.

Mention has been made of the impact on different communities, and it certainly does have a differential effect, but let me lay out the effect in Wales. The number of working families in Wales claiming tax credits who will be potentially affected by this directly in their pockets is over 167,000, and over 250,000 children will be affected. We cannot do this; a quarter of a million children in Wales will be affected by what we are doing to their families and what we are taking away from them directly. It is as clear as day that we have to change our way on this policy.

Let me look at one particular aspect where this hits really hard. We know that on average a fifth of women’s income is made up of welfare payments and tax credits, compared with around a tenth for men. Benefits make up twice as much of women’s income as they do of men’s. Women are disproportionately represented in many of those low-paid sectors we have talked about already, including hospitality and retail. When we go out and enjoy ourselves and have that coffee on our shopping excursion, we are typically served by women, not men. Other such sectors include care and domiciliary care and similar professions. Women are also more likely to be working part time. Nearly 80% of employees in those sectors where we so often say we respect the people who work in them, such as health and social care, are women.

You can see where this is going, Minister: we are hitting directly those who are most unable to go out and find another job, another few hours, or some other means of support for them, their family and their children. We are going right at the most vulnerable in our communities—and in huge numbers. Analysis by the Resolution Foundation suggests 1 million single parents in work will be left £1,000 a year worse off.

All of this has to shout out that Ministers going forward at such a rate of knots has created an almighty, cataclysmic mess. I ask the Government to slow down a little, listen to what has been said today, and work with parliamentarians and outside agencies who operate on the frontline with some of the people who will be affected. I ask them to work as well with the Select Committees. This issue is too difficult for the Government to address on their own.

The aim is to make work pay, and that is excellent, but it has to pay for everybody, not just some. At the moment, the crude impact of this on our communities will be devastating. It will wash right through not only individual families but the wider communities and will have a regressive, knock-on effect on spending power in those communities.

I ask the Minister to consider the options put forward today and to look at what other options there might be. There is no way on earth it is saleable politically to do this and, more importantly, there is the basic human issue of, “Do no harm to your constituents.” I cannot go and sell what is being proposed on the doorstep in my constituency. I will not do it. I want to tell these people, “It is worth going out to work, go and get a job if you can, go and upskill if you can, and we will make it worth your while.” That is our job here.

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[Mr Graham Allen (Nottingham North) (Lab)]

This has been a strange debate. It is as if we have managed to collect in the Chamber all the sensible people from all the parties, and to have a serious debate on some of these issues. It is unnerving to step out of the comfort zone of yelling at each other, and instead to hear sensible contributions from across the House, including the speech by the hon. Member for Waveney (Peter Aldous) that we have just heard.

Perhaps the lesson for us all is that this is how we should have done it in the first place, before the Chancellor made his announcement. He could have set out broad principles, as he is entitled to do, and said: “We need to reduce the welfare budget because we made a commitment in our manifesto. We would like to consider these issues. We need to find £12 billion, so how might we best do that?” By using the wit of Members from across the Chamber—including those who are appointed to Select Committees and work incredibly hard on our behalf—I am sure we could have come up with something less painful, crude and crass, while also saving the Chancellor some grief. However, we did not do things that way; we are doing it the other way round, so let us hope that we can reach a sensible result by listening to Parliament.

I also hope that we will listen to people out there. This is a classic debate, and we must listen to those who will be impacted on and influenced by these changes. Often, those people are not necessarily very articulate or in touch with their Member of Parliament, but I want to speak up for them, particularly those in my constituency. Dinner ladies, check-out and administrative staff, nursing and teaching assistants and manual workers all need us—whatever our political persuasion—to stick up for them right now.

We should all be in it together, but it often feels that we are not. I looked for the number of people in my constituency who will benefit from changes to inheritance tax, and after a lot of searching I came up with a large zero. Unfortunately, it did not take long to find the number of people in my constituency who will not be benefiting from the changes to tax credit, because 12,300 children will be affected. That is important because I am the Member of Parliament for the second most deprived area in the United Kingdom in terms of child poverty in low-income families, which is a matter of great concern. We are not “all in it together”, because those kids are not in it with those whose families have higher incomes and should be shouldering a fair share— nothing more—of the tax burden in our country. Colleagues who know their food banks will unfortunately know that this measure is a food bank recruitment scheme on behalf of the Government, and we must be careful about how we tread forward with it.

No one was ready for this change. Some of us believed the Prime Minister when he was on television before the general election and said that there would be no changes to the tax credit system. It is the same Prime Minister who, sadly, was in this House a week ago and said he was “delighted” that the cuts had been voted through the previous evening. That indicates a contempt for institutions other than government—I know I labour this point, but listening to Parliament and to people outside does not mean that someone gets diverted from their principles; it means that they can better enable those principles by listening to those who might be able to help in a slightly better way.

These cuts will have a broader impact on families. Four out of five families in my constituency receive tax credits because of the low-income nature of my area—my constituency is among the 20 most deprived—and we can do a job for them. We will not necessarily overturn what the Chancellor thinks, but Members of the House can do what my right hon. Friend the Member for Birkenhead (Frank Field) has done and consider tapers, thresholds, transitions, and the time needed to allow people to adjust to a massive change in their life. We must look consistently at that family element, and review and analyse the impact of the changes in future years, so that we can mitigate the worst cases.

I am delighted that we have not heard the word “scroungers” in this debate, or heard people being described as having a free ride on the state or the system. As it happens, two-thirds of people in my constituency who are in receipt of tax credits are at work. They are being subsidised by the rest of us to be at work, and low-paying employers are being subsidised.

[Huw Irranca-Davies]

Perhaps one reason the debate has not been disfigured by such terms is that the people my hon. Friend is talking about are the friends, families and neighbours we stand alongside in supermarket queues and on the side of the rugby pitch on a Sunday morning. These are people we know. This is not a matter of “them and us”. They are us and that is why, as we stand alongside them at the rugby and in supermarkets, we must stand alongside them here, too. They need us.

[Mr Allen]

My hon. Friend is absolutely right.

We, and some of the media, think this is a big issue right now, but you would be amazed how many people do not know that this is going to hit them, and they will not know until that letter drops and it actually happens. A wise old bird—Joe Ashton, who used to be the MP for Bassetlaw—taught me this lesson: passing a Bill will not influence anybody’s real life until whenever—in this case, I believe, next April—it takes effect. Then there will be a shock. Then there will be a tidal wave of people saying, “My god, what are you doing to us? Why did you allow this to happen? We don’t care which way you voted, why are you allowing it to happen?” That is why between now and then we have to bend our backs to ensure that we mitigate the worst consequences.

The national living wage is a bit like English votes for English laws: it is such a smart slogan that one could perhaps run an election on it. Does the reality, however, have the substance and the detail that people need in their lives? Saying that we are going to have a national living wage sounds fantastic, but if it does not actually mean that incomes will be at least as good as they were before, it is a fraud.

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[The Exchequer Secretary to the Treasury (Damian Hinds)]

I am grateful for the opportunity to respond to this debate on behalf of the Government.

I must start by thanking most sincerely the Chair of the Select Committee, the right hon. Member for Birkenhead (Frank Field), for his continued work in this area. His expertise and commitment are well known and respected by all. I also welcome the hon. Member for Salford and Eccles (Rebecca Long Bailey) to her post. I, too, look forward to many opportunities to debate across the Dispatch Box.

I am grateful to all 32 right hon. and hon. Members, from both sides of the House, who participated in the debate. The Government are listening and this debate forms an important part of that process. I have heard the arguments put forward by hon. Members today. We are all united in wanting to implement policies to deliver the best possible settlement for our constituents now, in the near future and for the generations to come.

The Government’s belief, which underpins every aspect of our policies, is that without a solid basis of economic stability, the long-term security of the nation’s citizens cannot be protected. When economic stability is lost, the entire system falls apart. As a rule, those who end up losing most are those who started with the least.

I acknowledge, as does my right hon. Friend the Chancellor, the concerns expressed today and those expressed elsewhere and earlier by Members of this House. The Chancellor has said he has listened to concerns from colleagues and will make proposals in the autumn statement to achieve the goal of reforming tax credits, saving the money needed to secure our economy while at the same time helping in the transition to these changes. In that context, I fear that today I am not telling the House too much that is new, but I respect the reasons that hon. Members have wished to hold this debate. I and others have spoken at length about how spending on tax credits was allowed to get out of control; about how the costs trebled in real terms to 2010 and ended up costing £30 billion; and about how the level of in-work poverty rose over the same period.

Reforming welfare is part of the new settlement we are offering working Britain. Fundamentally, we have a choice about how people should be paid: through low wages topped up by high state benefits, or through higher wages, taking home a greater part of those wages, topped up by less in state benefits. We believe in rebalancing the economy so that employers provide decent wages for their employees. By 2020, when it will be worth more than £9 an hour, the national living wage will mean over £5,000 more gross full-time pay for someone on today’s minimum wage. With record employment, low inflation, rising wages and a rising standard of living, this is the time to be making structural reform.

Our record on helping working people stretches far beyond this. Since 2010, our mission in government has been to get wages up, tax down and welfare under control. The best route out of poverty is work, so we have created the conditions for 1,000 new jobs to be created every day—2 million since 2010—and have plans for 3 million more apprenticeships. We have increased the tax-free personal allowance radically. We are doubling our childcare offer to working families with three and four-year-olds. We have frozen fuel duty and council tax and protected spending on our schools and national health service.

As the Prime Minister said yesterday, we remain committed to the vision of a high pay, low tax, lower welfare society. We believe that the route to ensuring everyone is better off is to balance the finances, keep growing the economy, keep creating jobs, keep inflation low, keep cutting people’s taxes and introduce the national living wage. Hon. Members have asked about the distributional analysis and the effect of Government policies on different income groups. Considering all measures together, the burden of deficit reduction is spread evenly across income groups, albeit with a proportionate increase in the tax burden at the top of the distribution.

The right hon. Member for Birkenhead asked specifically about the data made available or what could be made available. The Government have provided an analysis by quintile of the overall distributional effect of Government measures since 2010, but—to answer his question—it does not include the effect of the national minimum wage because that is not a fiscal measure. He also asked about the interaction with the income tax personal allowance. As the Prime Minister said the other day, with the improving labour market, additional childcare support and the introduction of the national living wage, more people will come into income tax and so will benefit from those raised thresholds.

The right hon. Gentleman rightly asked, as did my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), about the key subject of marginal rates of withdrawal—or, as the hon. Member for Nottingham North (Mr Allen) might prefer, the rate at which money is taken away. I agree with them on the importance of these rates and their effect on work incentives, and I acknowledge that the proposals did imply a high peak marginal withdrawal rate for people earning above the personal allowance while also on the tax credits and housing benefits tapers. It is important to remember, however, that this compares with a top rate today that is only 2 percentage points different. I am afraid that high marginal withdrawal rates have long been a feature of the UK benefits system—and, indeed, of most welfare systems in developed nations.

As hon. Members will know, the key reform in this area is universal credit, which will simplify the system by merging six benefits into one, lower the marginal withdrawal rate and move the hours thresholds—the various spikes—to 16, 24 and 30 hours.

[Huw Irranca-Davies]

I genuinely welcome the broad tone of the Minister’s contribution and the fact that he says the Government are in listening mode, but he makes it seem as if there will be no impact from these changes. According to House of Commons Library statistics—this goes to the heart of the debate—a family with two children on £20,420, after all the other changes he has talked about, will lose £1,233.60 from these changes. Does he not believe there will be impacts on those families?

[Damian Hinds]

None of the third-party analyses takes into account all the different changes and elements of support that are coming in. Of course, depending on exactly how many earners there are in the family, the age of the children and so forth, any proposals will impact differently. My point, as discussed in the debate, is that the Government are in listening mode and the Chancellor has said that he will come back and say more at the autumn statement.

The question of childcare came up more than once, including in the summing up of the hon. Member for Salford and Eccles. A review is taking place on the cost reimbursement for childcare providers, and it is important that the model is sustainable.

Questions about the devolved Administrations were raised by the hon. Member for East Antrim (Sammy Wilson) and, indirectly, by the hon. Member for Arfon (Hywel Williams). The 30-hour offer is an England offer, but there are Barnett consequentials—I hope I have the terminology right—that go with it, and it is up to the devolved Administrations to proceed in the way they think right. I am happy to be corrected by SNP Members, but I believe that the Scottish Government have committed to bringing forward 30 hours from 2020. I wonder whether they might think about doing that sooner.

Further questions were raised, although they were batted away quite effectively at the time, about the ability of the Scottish Government to pursue their own course on overall tax and benefits. Let me make it clear that from as early as 2017 the Scottish Government will be able to set rates and bands for income tax on earnings. That is clear in the Scotland Bill, which is also very clear that the Scottish Government can top up benefits and make discretionary payments to claimants. The Secretary of State for Work and Pensions cannot reasonably withhold consent for that.

Oral Answers to Questions

Huw Irranca-Davies Excerpts

Tuesday 9th December 2014 Commons Chamber

[Danny Alexander]

I agree with my hon. Friend. This Government have taken consistent action to tackle tax avoidance and to reduce tax evasion, raising billions of pounds to help avoid some of the pressures to which she refers. Dodging taxes is as morally reprehensible as claiming the wrong benefits or doing what she described. Those are all things that we, as a society, want to see stopped, and the Government are taking action to see that they are.

[Huw Irranca-Davies (Ogmore) (Lab)]

On infrastructure spending, the Government’s claims earlier this year that flood defence spending had increased were rubbished not by insignificant people but by Sir Andrew Dilnot, chair of the UK Statistics Authority, the Channel 4 “FactCheck” programme and many others. On that basis, what confidence can we have that spending on flood defence will increase, when it went down £200 million in the first four years of this Government?

[Danny Alexander]

This Government’s investment in flood-risk management has increased in real terms by 5% compared with spending in the previous five years. We will be spending more than £5.2 billion over the course of this Parliament on flood and erosion risk management compared with £2.7 billion in the previous five years. That is a record of which I am proud.

Oral Answers to Questions

Huw Irranca-Davies Excerpts

Thursday 3rd July 2014 Commons Chamber

[Mrs Grant]

The hon. Lady has made a very interesting point. I would say that there is a sport out there for absolutely everyone. We need to listen to what people want, and give it to them.

[Huw Irranca-Davies (Ogmore) (Lab)]

7. What steps she is taking to ensure that mothers' names are included on marriage certificates; and if she will make a statement.

[The Minister for Equalities (Sajid Javid)]

The content of marriage registers has not changed since civil marriage was introduced in 1837, so it is about time we took a further look. I have discussed this matter with my right hon. Friend the Home Secretary, and we are currently considering a range of options.

[Huw Irranca-Davies]

The Minister has referred to a range of options. Given that Labour changed the law in respect of same-sex couples and adoption back in 2002, what consideration has he given to ensuring that any changes that may be made to marriage certificates reflect the fact that many individuals now have legal parents of the same sex?

[Sajid Javid]

I agree with the hon. Gentleman, who has raised a very important point. When the rules were drawn up in 1837, equality was not a priority for our society. Today, thankfully, it is, so those are just the kind of changes that we are considering.

Wales Bill

Huw Irranca-Davies Excerpts

Tuesday 24th June 2014 Commons Chamber

[Owen Smith]

Absolutely. On previous occasions in the House I have outlined the difference between Wales and Scotland, in terms of the populous nature of our border, as well as the far greater problems that we will experience in Wales. I will touch on that later.

[Huw Irranca-Davies (Ogmore) (Lab)]

I agree with my hon. Friend on the Front Bench. There is an ideological difference between the idea that tax competition will inspire a race to prosperity and to the top, from which everyone benefits, and the opposite, in which nations and regions compete with each other in a race to the bottom. We do not want that for our constituents.

[Owen Smith]

I entirely agree. I have been at pains throughout our deliberations to make it clear that, in this Bill, we are being accommodating with regard to borrowing that we understand, but there are real concerns—they are not frivolous—about the benefit for our constituents of Wales having powers that could be misused, particularly by the Conservative party, to cut taxes in Wales in order to engender tax competition across the UK. We think that would bring little benefit but many risks.

Consumer Rights Bill

Huw Irranca-Davies Excerpts

Tuesday 13th May 2014 Commons Chamber

[Stella Creasy]

Like a pub quiz, we now come to the lucky dip round of the Bill, with a number of different issues being taken together. I am conscious that many Members wish to speak, so I will keep my remarks brief. [Hon. Members: “Hear, hear.”] I am always eager to please.

Let me start with new clause 8. A number of provisions have been proposed to deal with ticket touting—a subject about which I know many Members feel strongly. I shall also deal with new clause 22, which deals with fees. We have already tried today to abolish fees for debt management, and we would now like to abolish fees for tenants, which is what consumers need. I shall also talk about businesses and consumers, new clauses 13 to 15 and the Government amendments.

Ticket touting is an issue about which many of us are concerned. We see the damage it is doing to a range of industries by distorting prices and access to entertainment activities. Ticket bot machines—I am not sure whether all Members are aware of them—are pieces of software that impersonate individual visitors to ticket vendor websites and automatically make multiple ticket purchases. What does that mean in practice? It means that many of us as fans of music, sport or light entertainment do not get a look in. It means that millions of fans have never been able to get a ticket for a range of different events because all the tickets are sold out within minutes: they are sold to a machine, not to fellow fans. Those tickets are then resold at an exorbitant price.

According to Ticketmaster USA, one group of scalpers were requesting 200,000 tickets a day in this way. We certainly know that the secondary ticket market for the resale of tickets is worth up to £1 billion a year. Those MPs who are members of the Monty Python fan club—I see it in many of their speeches as they are certainly “the knights who say ‘Ni!’”—will be aware of the outcry after all the tickets for the Monty Python show disappeared in that way. Perhaps the Monty Python foot will fall on me for making that joke—the hon. Member for East Hampshire (Damian Hinds) seems to be making a face to suggest that it should. Those of us who are fans of the Stone Roses were horrified to see the band’s gigs automatically sell out in that way. Tickets for a Kate Bush gig were also taken out. They were originally sold for £49 but within minutes were on a resale site for £490. For the Stone Roses, tickets that should have been a mere £55 were being sold for £1,000 a time—well beyond the means of the average fan of such phenomenal music.

The Secretary of State has claimed that ticket resellers are classic entrepreneurs because they fill a gap that they have identified in the market. With the greatest respect, I fear that the new Secretary of State has misunderstood the market in ticket sales and quite what these businesses are doing by distorting people’s access. He presumes that consumers are able to compete fairly against these automatic machines, but that is simply not the case.

Let me be clear that our amendments are not designed to stop the resale of tickets. I told the Committee and I will tell the House that I was deeply disappointed to have to sit here late one evening and give up my tickets to see the great band, the Wonder Stuff. My hon. Friend the Member for Wolverhampton North East (Emma Reynolds) will know of the band’s work. I was looking to resell my ticket and, as a genuine fan, I wanted it to go to another fan so that they could hear the beauty and the wonder that is “Dizzy”.

What we are talking about is finding a way to make this work for the fans and the consumers, rather than the botnets. Our new clauses deal with the three clear issues. First, we want to apply to the secondary market the guidance about what information should be provided to a consumer when buying a product. There is clearly a gap in which these companies are profiting. There is confusion and a lack of information about what people are being sold. Some of us have had constituents tell us that they have been sold a ticket through a secondary reseller market only to find that it is a fake.

Secondly, we want to give greater protection for events of national significance. We know that there is widespread concern across the sporting industry about the real fans being locked out of games by these kinds of practices. I want to pay tribute to the work of my hon. Friend the Member for Eltham (Clive Efford) and the tireless campaigning he has done on the forthcoming rugby world cup. Millions of fans will not be able to attend events because of the actions of these companies and the touts.

Thirdly, we want to strengthen co-operation between the enforcement agencies and the secondary sites so that there is more protection for consumers and we can all be confident that when we buy a ticket for something, it is what we think it is and we can get a ticket in the first place.

[Huw Irranca-Davies (Ogmore) (Lab)]

Would my hon. Friend’s suggested reforms be able to deal with the appalling situation highlighted by my hon. Friend the Member for Blaenau Gwent (Nick Smith) whereby tickets for next year’s rugby world cup in the Cardiff Millennium centre—good stadium that it is—are now on sale for £1,560 for a £250 ticket? I would have thought that £250 is enough for the average rugby follower, but £1,560 is an absolute disgrace.

[Stella Creasy]

The new clauses and amendments would deal with that. I understand that the tickets for the rugby world cup are not yet formally on sale. The fact that they are already being marketed on secondary sites at such prices demonstrates the scale of the problem that we need to tackle.

I pay tribute to the tremendous and tireless work that has been done by my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson), who will speak about her new clauses later. I also pay tribute to what has been done by the hon. Member for Hove (Mike Weatherley). I know that the hon. Member for Shipley (Philip Davies), who has also tabled a new clause on this subject, shares the widespread concern that is felt.

Wales Bill

Huw Irranca-Davies Excerpts

Wednesday 30th April 2014 Commons Chamber

[Owen Smith]

It is a great pleasure to serve under your chairmanship, Dr McCrea. I had not spotted that you had arrived, for which I apologise.

The simple answer to the hon. Gentleman’s question is that this is, of course, the custom, practice and protocol in British elections for all institutions. I hear what he says about the interesting debate about whether, in an era of great cynicism towards and disinterest in and disengagement from politics, we ought to expand people’s opportunities to vote. Labour Members are looking seriously at that and have already suggested that it ought to be looked at, but for the purposes of this Bill and the principle under discussion, as opposed to the issue raised by the hon. Gentleman, it seemed simpler to stick to the customary practice of a Thursday. That is why we did not suggest a change.

[Huw Irranca-Davies (Ogmore) (Lab)]

Perhaps the hon. Member for Cardiff North (Jonathan Evans) will have an opportunity to table a probing amendment on that issue. Why does the Bill refer to five years? I understand that that is how this Parliament currently operates, but is there now an accepted body of wisdom that says that five years should be the default position of any democratic Assembly or Parliament?

[Owen Smith]

The reality is that the accepted, orthodox wisdom of electoral experts around the world, certainly in Britain, is that five years is probably too long and that four years would be more appropriate. Certainly in the history of this place, four years has been not the norm, but the exception. Ordinarily, over the long term, elections to this place have taken place rather more frequently than that. Our primary concern—this reflects the view of all parties in the National Assembly for Wales, particularly the Welsh Labour Government—was to ensure that the elections for this House and those for the National Assembly did not coincide on the same day, which would have been the case without the changes introduced by this Bill. Nevertheless, it struck us as important to probe the Government’s view of the degree of consent they ought to seek from the National Assembly and the respect they ought to show to devolution when making changes to an election that is not ours. I think that the view of most people—it is certainly the view of most experts—is that five years is too long.

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[Mr Harper]

That is a good point. As I said, I am very familiar with it, because colleagues in the European Parliament tell me—this relates to a point my hon. Friend the Member for Cardiff North made—that it can take an extremely long time for someone to get from one end of the south-west of England to the other by road, or even by rail. That is why my amendment suggests that we need to look at the advantages and the disadvantages, so that a proper decision can be taken. We need to think about the regions. As Members will recall—I know this was not popular among those on the Labour Benches—I think we have too many elected Members at the moment. The provisions that I have suggested were to reduce the size of this place, and to ensure that electors in all parts of the United Kingdom were equally represented rather than over-represented as they are at the moment, with the average size of a seat in Wales—in terms of the number of electors—being smaller than the rest of the country.

[Huw Irranca-Davies]

I appreciate the way in which the hon. Gentleman is using his amendment to test and explore the efficacy of a review of the different scenarios that could arise. I am interested to hear his thoughts on another scenario, a wholly different trajectory towards, for example, increasing to 80 the number of Assembly Members who are bound to a constituency. We could have dual Member constituencies so that there was a direct link, but that is not in the review. I put it to him that better than the amendment would be to wait for part II of Silk and for the wider issues around that and to explore all the different options relating to both numbers and structures rather than accepting a slightly partial amendment looking at only a couple of scenarios.

[Mr Harper]

I think I indicated at the beginning of my remarks that this was a probing amendment. I said that I had listened to the Minister’s response to the debate on clause 1, and that that may well be an acceptable solution. The independent review looks at the impact of the removal of the restriction on standing for both constituency and electoral region, which is obviously the specific purpose of clause 2. In particular, it says that we should examine the implications for the desirable total number of Assembly Members and proportions elected by each route. I guess it implies that we will have at least some Members elected by region. I accept the hon. Gentleman’s point that we could move to a wholly constituency-based system. I shall listen to the Minister’s response first, but I am prepared to accept that waiting for part II of Silk and the response to that may well be a perfectly sensible way in which to proceed. I thought that we should have some discussion today rather than focusing narrowly on whether a person can stand for both constituency and electoral region. We discussed that at some length on Second Reading, but I felt that a slightly wider debate would be more helpful.

--- Later in debate ---

[Mr David Jones]

The hon. Gentleman has twice used the word “abused” in the context of Clwyd West. Will he please explain what he means by abuse in that context?

[Huw Irranca-Davies]

It is fairly straightforward.

[Owen Smith]

It is pretty straightforward. As I have said, there was an instance in Clwyd West of the abuse of natural justice and of what most people understand as democracy by a system that allowed people to enter the Assembly via the back door. That is supported by the evidence, and I want to enumerate some of the pieces of evidence, because they are extremely important.

--- Later in debate ---

[Susan Elan Jones]

That is right. It is important that on such constitutional issues we have this sort of open debate and are open to ideas, as my party certainly has been. It is possible to be progressive and pluralistic but to recognise that it would be nonsense to go back to the whole issue of dual candidacy in the Assembly. I am firmly of the view that someone should either stand for a constituency seat or be on the Assembly list. There is a very strong case—my hon. Friend the Member for Ynys Môn (Albert Owen) made it—for open lists. These are the sorts of things we should be looking at.

Yesterday evening, I came across a leaflet. It was nothing to do with politics; it was to do with recycling. I spotted on it a comment that I thought was so good that I wrote it down. It is not exactly clause 2 of this Bill, but it could be. It said:

“Within as little as 6 weeks, the empty can you put into your recycling bin could be back on the shelf as a new can of cola or a new tin of beans.”

That is why we think that the Government have got it wrong on this one.

[Huw Irranca-Davies]

It is very good to serve under your stewardship, Mr Chope.

This has been an interesting debate. After listening intently to lots of good argument by Members on both sides of the Committee, I have still failed to hear a convincing argument for once again reversing a fundamental part of the current devolution settlement, but there have been many convincing and compelling arguments for why we should stay exactly as we are. That is why, having heard the debate, I intend to support my Front-Bench colleagues.

There has not been a convincing argument to reverse the ban. As has been pointed out by my hon. Friend the Member for Ynys Môn (Albert Owen) and others, there was only one manifesto commitment in the last set of manifestos, and that was the Labour party’s. It was based on the experience we had of the first outcomes of Assembly elections, where 17 out of those 20 candidates were defeated and then popped up again. Lord Richards, the Richards commission and others reported that among the electorate, not among politicians, there was a gut feeling that that was not right.

--- Later in debate ---

[Jonathan Edwards]

As one of the more reasonable Members on the Labour Benches—

[Huw Irranca-Davies]

Stop!

[Jonathan Edwards]

—is it the hon. Gentleman’s view that if there were a decision in future to change the electoral system in its entirety rather than the minor change proposed in the Bill, it should be for the Assembly to make that decision, rather than the House of Commons?

[Huw Irranca-Davies]

That is a good discussion to have and it will flow from part II of the Silk commission, which we will debate in the Chamber. It is a worthwhile debate to have in the present situation, where Parliament still has sovereign powers and still in essence passes to the Assembly the ability to do certain things, bearing in mind the commitment from our Front Bench in principle that we look favourably upon the idea of reversing the current position, where it is only the delegated powers that the Assembly can legislate on. That debate is not for today, but the time will come.

The explanatory notes, which Ministers seek to use to justify the reversal, say in paragraph 12 that the concern expressed by many people

“has been refuted in studies by the Electoral Commission and others which have demonstrated that the prohibition”

that is currently in place—the ban—

“has a disproportionate impact on smaller parties who have a smaller pool of potential candidates to draw upon.”

I am genuinely bemused by that. In my own constituency, which is a strong Labour constituency, not only are there Tory voters, but there are Tory elected representatives, a Plaid Cymru representative, and others. I cannot believe that they do not have a sufficient number of alternative candidates to put on a regional list.

All we are talking about is a handful—four candidates—appearing on a regional rather than first-past-the-post list. If they do not have the numbers, that is a real signal of a lack of confidence in the capacity of what have today been termed “minority parties” in the regions. I simply do not believe it—there are people who will and should come forward. Equally, we would have to do the same in the regions. There is an onus on the party to bring people forward in the valleys, the vale, west Wales and elsewhere. The argument that each region would not have four candidates who can be put on the list just does not hold water.

[Chris Bryant]

Does not this give the lie to the accusation that the Labour party gains a partisan advantage from the present law? Given that everybody else has mentioned the Rhondda, I will too. Leanne Wood originally said that she would stand for the constituency seat, but if the law is changed she will probably stand on both lists, and I think that undermines Plaid Cymru. If the law is changed, it will hurt Plaid Cymru in the end. It will mean that she will get fewer votes in the Rhondda than she would have got in the first place. More importantly, it undermines, and makes people more cynical about, the whole concept of the Assembly itself.

[Huw Irranca-Davies]

I entirely agree. We all make personal calculations in our political lives: we decide where we should stand, where we have connections and where we should cast our lot and go for it. However, the proposed system—this is the exact situation in the Rhondda—amounts to, “Well, I’m really going to go for this, but if all else fails there’s something I can fall back on.” My gut instinct is that that is not right and it does not feel right to many voters either.

The Bevan Foundation has been criticised, but it is a left-of-centre think tank—that is what it does. It is scandalous to say that it is simply an arm of the Labour party. If Members look at the work it has done on welfare issues, unemployment and economic incapacity in the valleys, they will see that some of it has been critical of the Labour party as well. When my hon. Friend the Member for Caerphilly (Wayne David) was looking for someone to do a report, my guess is that the Institute of Economic Affairs and others were not available or did not have the knowledge of Wales to do it.

The majority of people canvassed were very concerned. I will not repeat the quotes, but people from across all parts of south and west Wales said that they could not understand how people who had clearly been defeated could then pop up. Of course, that was reiterated by the Government’s own impact assessment, to which I am sure the Secretary of Sate will refer when he explains why he is jettisoning its findings.

After the first set of Assembly elections, it is not just the Labour party that underwent a damascene conversion, as it has been called, but the Tories and Lib Dems. Lord Crickhowell, who has already been mentioned, is categorically opposed to dual candidacy and said back in 2005:

“The present arrangements are really pretty indefensible”.—[Official Report, House of Lords, 15 June 2005; Vol. 672, c. 1216.]

The current Chief Secretary to the Treasury made exactly the same point. It was not just us or members of the public who were saying it at the time; other politicians also said, “We made a genuine mistake.”

As I said at the beginning, we can have discussions about closed and open lists in terms of proportionality and whether there is a different way of doing it, but I say adamantly to the Secretary of State that to reverse the system again, for whatever reason, is not the way to go. It does not work and it has been proven that it does not hold the confidence of people on the ground in Wales. Let us have the wider debate on the way forward, but simply to chop and change, particularly against the recommendations of the Electoral Commission, is no way to make Acts of Parliament.

[Mr David Jones]

I, of course, share the general delight at serving under your chairmanship, Mr Chope.

This has been an interesting and very forthright debate. Clause 2—it seems unnecessary to say—will overturn the ban on dual candidacy introduced by the Government of Wales Act 2006. Under its provisions, candidates at an Assembly election cannot stand both in a constituency and on a regional list. Before 2006, candidates could of course stand in both.

Amendment 15, which was moved by my hon. Friend the Member for Forest of Dean (Mr Harper), would require the Secretary of State to commission an independent review of the possible effects of dual candidacy on the effectiveness of the National Assembly for Wales and to lay the findings before both Houses within nine months of Royal Assent. I fully understand his intention in tabling the amendment and to a certain extent I empathise with him. I welcome the opportunity to debate further the merits of removing the current unfair ban. My hon. Friend has highlighted the need for independent evidence on the effects of dual candidacy, which is of course important, but the fact is that ample evidence from independent bodies shows that dual candidacy is part and parcel of similar systems across the world.

The previous Labour Government justified imposing the ban on dual candidacy on the grounds that they said there was “considerable dissatisfaction” with the system, although they provided little evidence to support that position. Frankly, having listened to the debate, I have to say that I have heard little more evidence this afternoon. We have of course had the Bevan Foundation—

--- Later in debate ---

[Mr Jones]

I do not think that we have had that difficulty in the past.

The Opposition have pointed to the fact that a majority of respondents to the Government’s Green Paper consultation were in favour of retaining the ban as further evidence in support of it. However, if one takes away the many Labour Assembly Members, who responded in a strikingly similar way, that would no longer be the case. The simple fact is that the ban was introduced to benefit one party, the Labour party, in one part of the United Kingdom, Wales, and in not Scotland or London.

In his evidence to the Welsh Affairs Committee during its pre-legislative scrutiny of the draft Bill, Professor Scully said that the claims that are made about dual candidacy, which have been repeated again and again by Labour Members,

“remain wholly unsupported by solid evidence”.

I repeat that the simple fact is that the ban was introduced as a partisan act that affects smaller parties disproportionately and ensures that good quality candidates are lost to the Assembly.

[Huw Irranca-Davies]

Lord Bourne, who was my friend and fellow academic at Swansea Institute of Higher Education—that great factory of political candidates—is often cited as someone who lost out, did not have the list to fall back on and hence went into other occupations. However, does the Secretary of State accept that if a candidate who, for very good reasons, was wholly objectionable to the electorate—not a Lord Bourne, but somebody wholly objectionable—was No. 1 on a closed list because of the party selection, Conservative, Liberal or Plaid Cymru voters would have no choice but to vote for them? That is one of the big problems with the reversal that he is proposing.

[Mr Jones]

Absolutely not. Electors may cast their votes in any way they wish for whichever candidates they wish. That argument is wholly facile.

The right hon. Member for Torfaen (Paul Murphy) seemed to criticise the whole concept of a top-up list. As somebody who is far more supportive of the first-past-the-post system, I have considerable sympathy for that point of view on the basis that one lives by the sword or dies by the sword. However, every party in this House supports some form of proportional election to the Assembly, as he accepted. It seemed to me that his criticisms, and those of the right hon. Member for Neath (Mr Hain), were aimed more at the consequences of the proportional representation system than at dual candidacy. Therefore, we are now legislating to remove that unfair prohibition and to reintroduce the system that was in place and worked well between 1998 and 2006.

The amendment tabled by my hon. Friend the Member for Forest of Dean also proposes that his review would consider the implications of removing the prohibition on dual candidacy for the desirable total number of Assembly Members; the ratio of Assembly Members elected by constituency and from the regional list; and the merits of an all-Wales list, rather than lists in five separate regions.

On the implications for the desirable number of Assembly Members, we set out in the Green Paper on future electoral arrangements that we believe 60 Assembly Members is the right number, and we continue to hold that view. I note that the First Minister said in his oral evidence to the Welsh Affairs Committee during pre-legislative scrutiny of the Bill that the Assembly could “undoubtedly” cope with its new powers without changing the number of Assembly Members.

The Government also believe that under existing arrangements, the current ratio of constituency and regional Assembly Members is right. The Green Paper set out our belief that an all-Wales national list was not desirable as it would place more distance between regional Members and their constituents than the existing five regions—a view that I think is shared across the Committee —and again, our view has not changed.

New clause 4, tabled by right hon. and hon. Members from Plaid Cymru, seeks to establish a mechanism through an Order in Council by which competence could be devolved to the Assembly to determine its size. In a similar vein, new clause 6 would enable devolution to the Welsh Government—I think it actually means the Welsh Assembly—of the power to determine the system by which Members are elected.

Although the Silk commission made no recommendations about the electoral system, it did recommend that the size of the Assembly should be increased so that it might better fulfil its scrutiny role, and new clause 4 would pre-empt that. The commission also acknowledged the practical implications of its recommendation on the electoral system and the need for further consideration. The Government have made it clear in responding to publication of the commission’s report that any recommendation such as that requiring primary legislation should be for the next Parliament, and therefore for political parties to consider when preparing their manifestos for the 2015 general election. Of course, the commission also recommended that consideration be given to increasing capacity in the Assembly in the short term.

Earlier this year an Electoral Reform Society report found that 79% of Assembly Members surveyed believed that plenary time could be used more efficiently and effectively, and in the same survey, 90% of Assembly Members supported a comprehensive review of Assembly procedures. The Assembly and the Welsh Government have the power to change those things through Standing Orders, and I call on them to consider carefully how the Assembly could make better use of its time and the resources already available to it.

I thank my hon. Friend the Member for Forest of Dean for his amendment, which has enabled a full and extensive debate this afternoon on the merits of removing the ban on dual candidacy. I hope I have been able to reassure him, at least, and I ask him to withdraw his amendment accordingly. I also urge right hon. and hon. Members from Plaid Cymru not to press new clauses 4 and 6 to a vote.

Finance (No.2) Bill

Huw Irranca-Davies Excerpts

Tuesday 8th April 2014 Commons Chamber

[Jonathan Edwards]

I am sure that my hon. Friend’s surgeries, like mine, are filled weekly with individuals who face problems with reductions in the support that they receive. With all that in mind, it is difficult to look them in the eye and support a tax cut for those on the highest incomes. It undermines the case for the moral crusade I alluded to earlier and public support for the fiscal policy of the current UK Government.

[Huw Irranca-Davies (Ogmore) (Lab)]

The hon. Gentleman is making some good points. Does he agree that, while there are technical issues in determining the exact point at which the Government will gain more or less from a tax, there is a significant signal from the 50p tax rate, which is that we are, at least to some extent, all in it together? His constituents are not far from mine, and the average median wage in the Ogmore valley is less than £21,000.

[Jonathan Edwards]

The hon. Gentleman always makes very intelligent points. I believe that he is talking about the Laffer curve. I will discuss the optimal rate of taxation later, but I agree wholeheartedly with his comments.

A report for the Office for National Statistics entitled “The Effects of Taxes and Benefits on Household Income, 2011/12”, which was released in July 2013, showed clearly that, while income tax is progressive, as it should be, the effect of indirect taxes such as VAT means that the bottom fifth of the income groups pay the most out as a percentage of their gross income at 36.6% in taxes, while the top fifth pay 35.5%. The overall tax system is therefore still heavily weighted in favour of the highest earners. Plaid Cymru believes in progressive taxation irrespective of the timing and state of the wider economy. We believe that those with the broadest shoulders should bear the burden of taxation. A Scandinavian model of progressive taxation is part of our DNA.

The House has voted on this measure only once, during the resolution votes following the 2012 Budget debate. I am delighted that it was Plaid Cymru and Scottish National party Members who called that vote. The shadow Chancellor must have been having an off-day, because the entire parliamentary Labour party abstained, apart from two honourable exceptions, the hon. Members for Bolsover (Mr Skinner) and for Newport West (Paul Flynn), if my memory serves me correctly. Although Labour Members voted against the Government’s 2012 Budget, which reduced the 50% rate to 45%, they missed the only vote that we have been able to have directly on the reduction of the top rate.

--- Later in debate ---

[Jonathan Edwards]

That is an important point about forestalling, which I will talk about in more detail later.

I note that the Office for Budget Responsibility’s March 2012 “Economic and fiscal outlook” states on page 110 that

“the revenue-maximising additional tax rate is around 48%.”

Again, that blows a hole in the Government’s argument that their reduction of the additional rate was based on sound economic and revenue-raising evidence. That is why they should now commit to carrying out a full report, as the new clause would compel them to do. I would argue that 48 is slightly closer to 50 than to 45.

The Chancellor told the House in 2012:

“The increase from 40p to 50p raised just a third of the £3 billion that we were told it would raise.”—[Official Report, 21 March 2012; Vol. 542, c. 805.]

I know my A-level maths is a little shaky, but that still makes £1 billion, a significant sum to the good people of Carmarthenshire and the good people of Wales and the rest of the UK. The Chancellor’s justification for the tax cut for the super-wealthy was that they would avoid the tax, they might leave the UK, it raised only £1 billion, and the reduction would lose the Government only £100 million. Having brought forward their income to avoid the 50p rate in the first year, the rich delayed it in the final year to benefit from the reduction to 45p. That forestalling and deferment will have cost the Treasury billions that could have been used to avoid some of the worst cuts to those on low incomes, such as those resulting from the bedroom tax.

Recent claims by some on the Government Benches that the tax cut for the richest has yielded more revenue conveniently gloss over the increased likelihood of those with an accountant being able to move their income into the following year, given the Government’s indication a year ahead of time that they were enacting the tax cut. My advice to the Government would be to enact the proper closing of loopholes to ensure that the super-wealthy pay their fair share, instead of the fig leaves of action that the Government have offered previously. They have still not introduced proper measures to make up the HMRC estimate of £35 billion lost each year through avoidance and evasion. Other estimates put the figure much higher. Claims that the rich were fleeing because of the 50% rate are also not very well grounded. Research by the TUC, using HMRC figures, indicated that 59% of those paying the 50% additional rate were employees, most working in banking and therefore unable to leave.

[Huw Irranca-Davies]

Does the hon. Gentleman understand the disconnect between those who are super-wealthy and the argument that he is making, when I, my constituents and my family, who rely on public services, the national health service and so on, see the sense in paying progressively higher rates of tax, myself included, to make sure that those services are available? Why is it that the super-wealthy do not see the sense in providing for public services? Is it, perhaps, because they do not rely on them?

[Jonathan Edwards]

That is certainly one argument, and I shall talk about how, with such an attitude, the super-wealthy are cutting off their own noses, and how a progressive taxation system would benefit them as well as people like the hon. Gentleman and me, who earn far less than those who get hit by the top rate.

As the 2012 HMRC paper that examined the effect of the 50% additional rate of income tax noted,

“there was a considerable behavioural response to the rate change, including a substantial amount of forestalling: around £16 billion to £18 billion of income is estimated to have been brought forward to 2009-10 to avoid the introduction of the additional rate of tax.”

This is a massive sum which would arguably have been included in taxation had the measure been announced with immediate effect.

The most recent figures from HMRC revised liabilities up by £2.8 billion in 2010-11, £3.3 billion in 2011-12 and £3.5 billion in 2012-13. This means that HMRC says it earned a total of £9.6 billion more than previously thought from the 50p tax rate. These are of course projections of taxable income, but that makes the case for the new clause which I am pushing.

--- Later in debate ---

The additional thing contained in the figures is the behavioural aspect. Whether we are talking about the way in which people will try to avoid tax or the number of people who will not flee the country, as opposed to the number who did flee the country in the past, we are introducing a huge element of uncertainty, because we cannot accurately predict the way in which people will respond in certain circumstances. There are so many factors that will influence their behaviour.

[Huw Irranca-Davies]

I apologise for having left the Chamber. I had to address some young constituents.

The hon. Gentleman has made a number of good points. May I now ask him a question that I asked earlier? Why is there such a disconnect in the moral compass of the super-wealthy that they feel they would rather flee the country than pay a couple of extra pennies in income tax? Why do they imagine that they live in a different world, and that they do not need to sustain the public services on which everyone else relies?

[Sammy Wilson]

That is a very good question, but the fact is that we do not even know whether that is the way in which people behave. As has already been pointed out, many of those who pay the top rates of tax are employees, and many have their roots here. Their children are at schools here, they are involved in their communities here, and they have their families—their grannies, their mummies, their uncles and so forth. The assumption that people will suddenly cut all those ties when the marginal rate of tax is raised is extremely tenuous. I have not so far seen any figures that suggest that that happens. I can understand that if the marginal rate were raised from 45% to 90%, there might well be some incentive for people to leave, but when it is raised by only a few percentage points, is there really an incentive for people to avoid taxation by becoming exiles, given all the disruption that that may cause?

Ministers frequently refer to tax take predictions based on economic models, but it should be borne in mind that such predictions cannot specify the exact impact of tax changes with rapier-like incision. Their other argument is that, if the theory and the models cannot provide an exact picture, we should look at what has happened to tax revenue in practice over the past few years, because the proof of the pudding is in the eating. No doubt the Minister will give figures showing an increase in tax revenue from this particular income group, in which case we must ask whether it is possible to separate the various elements that have led to that increase.

I believe that the Government made a rather cynical attempt to ensure that they would achieve the result that they wanted by announcing the tax reduction a year in advance, knowing that that would give people an opportunity to defer the tax that they pay, thus enabling the Government to point to an increase in tax revenue in the first year of the new rate. Of course, if people are given advance notification and a chance to delay their payments, we will see the predicted outcome. I suppose it would be best to see whether the trend continues over a longer period, because we do not have any figures yet.

We know that while the incomes of certain groups have been frozen, incomes have been much more fluid at the top end of the income scale than at the bottom end, where there has been a blanket 1% increase. Indeed, there have been wage decreases in some parts of the private sector, especially at the lower end of the scale. How much of the increase is attributable to the fact not that there is more tax take from the same level of income, but that there is more tax take from increased incomes because there has been greater fluidity at that end of the income scale? Even after consideration, it cannot be said with absolute certainty that the reduction in the level of income tax has led to the increase in revenue.

--- Later in debate ---

[Sammy Wilson]

The point I was trying to make, perhaps at too great a length, was that the important thing was the headline rate when people were looking at places to locate their businesses. It is the same with income tax. While there may have been other tax changes that have affected the rich, when people make a judgment on the Government’s sincerity about austerity, they will look at the headline rate, and what they see when they look at the headline rate for those on middle incomes, for those on lower incomes—not in terms of the headline rate of income tax, but in terms of what has happened to their income—and for the most well-off in society is that there is a disparity, and that breeds cynicism. I believe an amendment such as this one will at least help to restore some confidence that when this House looks at what lies ahead, it is genuinely trying to make sure the burden is shared equally.

[Huw Irranca-Davies]

I apologise to the Committee for being absent earlier; I was with a group of young people from my constituency who are interested in politics and in what is being debated in the Chamber today. I am glad to have a few minutes now to say a few words.

The new clause and the amendment are innocuous and harmless proposals. They simply ask the Government to be transparent and to produce a review within a few months to show the effect of a 50p tax rate on those whose taxable income is between £150,000 and £1 million a year. I have struggled to find many such people in my constituency. I have tweeted about this on social media, asking people whether they think our amendment would be a bad idea, but, unsurprisingly, no one has come forward to say that they earn that much.

It is in the Government’s interest, as well as ours, to have this transparency. It is also in all our interests to tell people that we get the message about proportionality and contributing to public services. There is an emerging trend among the Conservatives to describe themselves as being the party of the working class and of working families. If that is the case they should support our proposals, because they would create full transparency and allow a debate to take place on whether we should set a tax rate of 50%, 49% or whatever. The proposals would also allow them to explain to working people—not the ones who earn between £150,000 and £1 million a year, but those who earn about £20,998, the median wage in Ogmore Vale—and to Conservative supporters why they think it is not a good idea to say to people, “Pay your share. We are genuinely all in this together.”

The hon. Members for Carmarthen East and Dinefwr (Jonathan Edwards) and for East Antrim (Sammy Wilson) have made good contributions to the debate, and I made a couple of mischievous interventions on them earlier. I have faith in the wealthy and the super-wealthy in this country. We will not have many Gérard Depardieus fleeing the country and heading off to Russia, or wherever the British, Welsh or Scottish equivalent might be. They will say, “We have respect for the communities that we work and employ people in, and it will not bankrupt us to stay here. We are not going to flee overnight to another country like some carpetbagger. We are not going to up sticks and relocate our premises.” That is not going to happen; it did not happen before, even when taxes were at much higher levels. It is a discredit to those people to suggest that it would happen.

In preparation for the debate, I looked into a few examples of people who had said that a return to the 50p tax rate would be a disaster. I was about to say that it would be wrong to name them, but one of them, the chief executive of Kingfisher, has been very outspoken in saying what a terrible detrimental effect such a measure would have. He has said that it would be a disaster for the country, and that entrepreneurs and businesses would flee. Well, okay, it might be just a coincidence that Ian Cheshire is an adviser to the Prime Minister as well as being the chief executive of Kingfisher. It might also be just a coincidence that he was knighted in the new year’s honours list. I am sure that that is pure coincidence. However, he clearly has a direct influence on the Government. When he says, “This is not good”, things happen. It is not only him, however.

It was fascinating to note the reaction of one other person, when this debate was raging about 18 months ago. I will not name this individual, but people can look him up in the Daily Mail. It is pretty obvious who I am talking about. He had said that he objected to a 50p tax rate on the basis that people like him would no longer be inspired to go out and earn money. He was reported in the Daily Mail as being about to sell his £3 million mock-Tudor home. He was explaining that he was now in a great place but when he had previously had trouble expanding the property, he had solved the problem by snapping up the property of his next-door neighbour. This was in an area inhabited by rock stars, football players and other highly paid celebrities. He had snapped up the house next door so that he could put in a swimming pool, a games room and a garage block for his Bentleys. We do not have many garage blocks in Ogmore. The properties were in a patrolled, gated community with private security.

My constituents who are on less than £21,000 a year think that that is another world. They think, “Why doesn’t that guy think he should be paying a couple of pennies more to keep the national health service going, because I can’t afford to have private health care or to send my children off to private school? I need what the state provides.” I know that this is like an old comedy sketch—“I look up to him because he is better than me.” But, that is not the case. The person I am talking about was one of those hardworking Tory supporters who some Government Members would like to appeal to now as the working Tory voter. Let us have a reality check. To those who say, “We feel really unhappy about this change, and it will drive us off”, I say, “Go.” They should subscribe to the values and ethos of this country—from each according to his ability to each according to his need. If they do not, they are not living in the country in which I was brought up. They should think twice about saying that they will go. Most people will sensibly recognise the skills and the quality of the work force, the good environment here for building up companies and our position in the European Union, and they will stay in the country and continue to work. All this amendment asks is that at a certain point in time, not too long in the future, we should be told what the impact is on those who are earning £150,000 or £1 million. Be transparent and tell us.

[Ian Swales]

I represent a constituency with similar income levels to that of the hon. Gentleman. However, does he regret the fact that a senior member of the Government he was in described himself as being “intensely relaxed” about the situation that he has just described?

[Huw Irranca-Davies]

I would never use that same phrase. I do not find myself intensely relaxed about this. Sorry, what I mean is that someone playing for the Ospreys rugby team might not earn as much as a premiership footballer, but good luck to them. Let them make a lot of money. Let them do well for their families. Let someone travel to France and play for Perpignan and earn four times the money. Good luck to them, but I want them paying their taxes. When they are back here, I want them to contribute the right amount. I want to encourage the people in my constituency, and say, “If you have the abilities and the skills, and if you are willing to put in the effort, don’t accept that job that you are doing now. Work your way up and do what you can do. The sky is your limit.” But I want them also to contribute. I do not want this ludicrous situation in which people can say, “I tell you what, at a certain point I will leave the country.” I do not believe that they will leave the country. It will not happen. I have much more faith in them than that.

One of the major hedge fund operators, again a Conservative donor, told the Financial Times:

“There probably aren’t many votes in cutting the 50p top rate of tax, but among those that give significant amounts to the party, it’s a big issue, and that’s probably why it’s a big issue for the party too.”

Four months after he said that to the Financial Times, the Budget happened and we had the cut in the tax rate. It is probably just a coincidence again.

Let us look at the impact of this policy and the Government’s current policies on the wider population—beyond the wealthy and the super-wealthy. The Institute for Fiscal Studies’ figures on net income changes by 2014-15 show that overall, households are £974 worse off; a working lone parent is £1,335 worse off; a working couple with no children is £438 worse off; a working couple with children is £2,073 worse off. What about the millionaires? They get this enormous tax cut so that they can go out and buy a couple more Porsches. The Minister might say, “No, it is so that they can reinvest it in this, that and the other.” What about reinvesting in public services? Why does the Minister think that they want to escape from that obligation that we all have to each other to contribute? It may be 47p, 48p or 49p, but there is a message—there is clarity—about us all being in it together that comes with saying that it is 50p. If that 2p seriously makes a wealthy individual say, “We are leaving this country because it is a disgrace that any Government should come after me”, I would say that it is a disgrace that they are even thinking in that way. I have more faith in those people who have made wealth in this country. I believe that they will want to stay here and genuinely help us climb out of this economic morass. They will want to build jobs, grow the economy, skill the economy and lift up the wages of some of my constituents.

--- Later in debate ---

[Mr Gauke]

That is not correct, because of the way we have done this. I will not spend a lot of time on the matter, but I can tell the hon. Gentleman that in preparation for this speech I have seen various responses from those raising concerns about higher-rate taxpayers not benefiting from the increases in the personal allowance in the way that basic-rate taxpayers have. Indeed, those earning more than £100,000 a year do not benefit from increases in the personal allowance because it starts to be taken away.

The reality is that basic-rate taxpayers have benefited most from the measures that we have taken in increasing the personal allowance. More than 26 million taxpayers will be up to £570 better off in real terms in 2015-16 as a result of this Government’s changes. In 2014-15, basic-rate taxpayers already pay up to £700 less income tax than they would have done four years ago. By 2015-16, the Government will have cut their income tax bills by over £800 per year. Together, all the personal allowance increases since 2010 mean that this Government have cut the number of income tax payers more in five years than any Government in a similar period since records began.

[Huw Irranca-Davies]

Will the Minister correct what may be a misunderstanding? Is it correct that 13,000 people who earned more than £1 million a year would have benefited to the tune of £100,000, on average, from the reduction in the top rate of tax?

[Mr Gauke]

Amendment 4 and new clause 4, tabled by Opposition parties, deal with familiar matters that we debate every year. They propose, once again, that within three months of passing the Finance Act, the Chancellor should publish a report reviewing the impact of setting the additional rate at 50%. In addition, amendment 4 asks for an assessment of the impact of setting the additional rate for 2014-15 at 45% and at 50% on the amount of income tax currently paid by those with taxable incomes of over £150,000 and over £1 million per year. Needless to say, such an analysis, in order to be credible, would need to take behavioural impacts into account, as did the HMRC report on the additional rate published at Budget 2012. When increasing taxes, it is not enough merely to look at theoretical income tax liabilities. Let me assure hon. Members, once more, that this Government already consider the impact of any policy decisions taken. The HMRC report on the additional rate concluded that the underlying yield from the introduction of the 50p rate was much lower than originally forecast due to large behavioural effects. It even said that it is possible that the 50p rate could have reduced income tax revenue instead of increasing it. It would be illogical and unfair to reintroduce a tax rate that is ineffective at raising revenue from high earners and that would end up making ordinary taxpayers pay more and risk damaging growth.

[Huw Irranca-Davies]

I genuinely thank the Minister for trying to explain that to me, but he has just described the top-end tax cut as a theoretical tax cut when my understanding is that it is a very real tax cut whereby 13,000 people who are millionaires or richer have each saved more than £100,000 per year. At this very moment, my constituency is digging deep as a result of cuts to school transport. Will the Minister confirm that the tax cut is not theoretical, but real, and that 13,000 people who are millionaires or richer have each saved to the tune of £100,000 as a result of it, when the median wage in my constituency is sub-£21,000?

[Mr Gauke]

Let me see if I can find a point of consensus with the hon. Gentleman. We want—and I suspect he wants—to ensure that the wealthiest make a fair contribution towards reducing the deficit, and the challenge for any Government is to work out the best way of doing that. Let us look at this Government’s record on raising money from the wealthiest. Budget 2010 increased the higher rate of capital gains tax and Budget 2011 tackled avoidance through disguised remuneration—a policy that was opposed by the Labour party, even though it addressed avoidance by high earners. Budget 2012 raised stamp duty on high-value homes and autumn statement 2012 took action to reduce the cost of pensions tax relief, while Budget 2013 and autumn statement 2013 announced further measures to tackle offshore evasion by high earners. In 2013-14, the richest 1% of taxpayers contributed a larger share of income tax receipts than in any other year, including every year under the Labour Government.

The point is how we raise money from the wealthiest. The 50p rate is not the most effective way of doing that, because the behavioural effects are so strong that it fails to raise money. Now that growth is finally picking up, the Government will not consider any actions that might put the UK’s recovery at risk. Despite reducing the additional rate, the richest now pay more income tax than they did in any year under Labour.

--- Later in debate ---

[Mr Gauke]

To be fair, Lord Jones was a Minister in a Labour Government. The Mail on Sunday has reported a key supporter of Tony Blair as saying of Labour Front Benchers:

“The trouble is they are economically illiterate and have no understanding of business or profits.”

[Huw Irranca-Davies]

The hon. Gentleman gives us examples of people arguing that the policy is economically illiterate, but we are politicians, not economists. I will try to reach consensus with him by saying, although perhaps I should not, that the policy is in his party’s interests. The biggest segment of those who donate to the Conservative party—providing more than half its donations—are from financial services. To say to them, “We are all in it together. You will have to accept a little bit more pain”, would be a good political signal, let alone an economic one.

[Mr Gauke]

I am always grateful to the hon. Gentleman for his political advice. I cannot but notice that he talked about wanting to uphold the values of the British people and then quoted Karl Marx—but there we go. My point is that the wealthiest are making a bigger contribution in income tax, capital gains tax and stamp duty, and that this Government are taking further action to deal with avoidance and evasion more effectively than any previous Government have done.

Rothschild Bank and Mortgage Equity Release (Spain)

Huw Irranca-Davies Excerpts

Wednesday 22nd January 2014 Westminster Hall

[Huw Irranca-Davies (Ogmore) (Lab)]

It is a delight, Mr Turner, to serve under your capable stewardship again this afternoon. I am delighted to have secured this debate about an issue of direct concern to not only my affected constituents but, as I have become aware, several hundred other UK citizens. I am seeking justice for them. I urge financial institutions such as Rothschild to come clean on their involvement and to discharge their moral responsibility towards people, many of whom are elderly and retired, who risk being left destitute. That has happened primarily because they had good reason to believe that Rothschild was the reputable and trusted brand behind a financial product that now looks more and more like a property scam and mis-selling. Will the Government and the Minister investigate the matter fully to assess whether victims have been scammed and there is a case for compensation? Will the Minister speak to Rothschild to make a moral case about what the bank may end up defending in courts in Spain, the UK and elsewhere on the flimsy pretext of, “Not me, guv”?

The matter resembles nothing more or less than an equity release scam, and it is not only Rothschild that is linked to it. Other banks, including Scandinavian and British ones, lured pensioners into gambling away their lifetime savings and homes on two enticing but ultimately flawed pretexts: first, that by investing in a loan secured against a mortgage on a property in Spain, they would obtain a small income additional to their often limited pension in retirement; and, secondly, that by registering a mortgage on that property, they could be helped in eliminating inheritance taxes for their children. Imagine an elderly couple who have worked hard all their lives, paid their taxes and contributed to society and the community—a professional couple who have planned for their retirement carefully, one of whom has suffered significant health problems in later life. They have invested all their wealth and savings in one retirement property in Spain. They do not have other assets or sources of wealth, and they are offered an enticing double bonus of releasing equity and gaining inheritance tax advantages regarding their retirement property in Spain.

Such an enticing offer perhaps sounds too good to be true, and it certainly was for my constituents, a retired couple whose lives I have just described in summary. When that offer is packaged and presented as being backed by such an eminent and reputable financial institution as Rothschild, that is the icing on the cake. They might have thought twice if they were dealing with some fly-by-night operator, but Rothschild? Even someone unfamiliar with the financial world would recognise that name and see it as conferring some prestige and status on any product being offered.

Rothschild is, as its website and company information proudly proclaim, one of the world’s largest independent financial advisory groups, employing around 2,800 people in 40 countries around the world. This worldwide brand proudly states that its 200-year-old reputation is based on clear values of excellence, teamwork, focus on the client, the long-term interest of the client and—at the top of the list—putting the client first. Rothschild explains:

“We provide outstanding client service, with the highest standards of professional integrity to build enduring relationships of trust and confidence.”

I say to Rothschild: “You have badly deviated from your core values, badly served your brand and reputation, and badly served people who regarded themselves as your clients and not the clients of some intermediaries, as you claim. They are now facing penury after investing in products in which your name—Rothschild—your integrity and your values were used as a key selling point.” To walk away from those hundreds of citizens and to deny not only liability, but any assistance, and to force them through costly court actions in Spain or elsewhere, is a stain on Rothschild’s history. The Rothschild family motto “Concordia, Integritas, Industria”—harmony, integrity, industry—seems somewhat absurd when my constituents and others face personal ruin.

As I mentioned earlier, Rothschild is not alone in the firing line. Danske Bank, Sydbank, Nykredit and others are not only in the firing line over this, but in the dock, with some people in custody. A warrant was issued in Spain by the general directorate of police and the Guardia Civil in Madrid on 26 November for two Rothschild employees, Mark Coutanche and Stephen Dewsnip, who are directors, to appear in court to face criminal charges. The warrant relates to accusations that N. M. Rothschild & Sons sold mortgages to Spanish-based pensioners as a tool, albeit a legal one, to defraud the Spanish tax office and deliberately concealed crucial data that would prove that its equity release product was impractical as an investment.

Let us look at the evidence for the case against Rothschild and others. They completely, unarguably and incontrovertibly provided support, training, the terms of business for intermediaries selling the inappropriate products, supportive promotion through glossy brochures and websites, and much more. For Rothschild to say that it was not directly involved and that the product was sold through intermediaries, which distances it from the situation, is akin to a parent saying to their child, “It’s not my fault that the Christmas presents are broken or cruddy, it’s Santa’s—sue him!”, or to a retailer blaming its supply chain for worker exploitation in Bangladesh when it is selling T-shirts for £2, or for horse meat in its beef lasagne. It is not good enough. We all know who should take responsibility.

[Heather Wheeler (South Derbyshire) (Con)]

I apologise for not being present at the start of the debate, Mr Turner; we had a little vote at the 1922 committee. When we look at the terrible tragedy that has happened, does the hon. Gentleman agree that the only safe way for people to take forward equity release is to use firms that are part of the Equity Release Council, which holds them to a high standard? In saying that I should declare an interest, because I hold an unremunerated position on the advisory board of the UK Equity Release Council.

[Huw Irranca-Davies]

The hon. Lady is absolutely right to guide people towards good and assured equity release products. Not all such products are bad and nor are all sellers. It is a question of how the products are used and at whom they are targeted—I will come to that in a moment.

How can companies such as Rothschild choose to distance themselves from this matter when the people affected are UK citizens who were sold to by a Rothschild subsidiary based in Guernsey—Rothschild, of course, was established in England two or more centuries ago? It is not good enough for Rothschild to say that the situation is nothing to do with it and that people should take the matter up in the Spanish courts. The hon. Lady’s advice, however, is very good.

We all know who should take responsibility. As we say at home, “Man up.” Rothschild backed these products to the hilt, resourcing and designing them. It lent its name and support to the selling of them. It was party to the flogging of unfit products to unsuitable clients who did not suspect that they were on the back-end of a dodgy scam that was fit for Trotters Independent Traders. At least we could laugh along with Del Boy and Rodney; there is no laughter when my constituents and many others face poverty and hardship in their retirement.

Rothschild and its compliance and legal teams have been robust in disputing the allegations and, indeed, have threatened legal sanctions against those who repeat them. The allegations are very sensitive. When I first raised the matter on the Floor of the House, I received a letter offering a meeting and suggesting that the facts, as explained to me, were “both incomplete and inaccurate”. The letter went on:

“Your statement that Rothschild gave advice and support is factually incorrect.”

I dispute that, as evidenced by my earlier comments and the further remarks to follow.

This debate has obviously caused Rothschild some consternation, as it contacted me yet again to stress that there were “serious factual inaccuracies”. It wrote:

“We trust you understand the importance to us that the position is fairly and accurately portrayed in Parliament.”

Here then is the truth, put fairly and accurately.

Although Rothschild has not provided me with wholly precise figures, it has advised me that just short of 130 loans were provided, of which fewer than 50 were loans to Spanish non-tax resident individuals, some of whom live in the UK. Parliament will note that the reason why Rothschild has those statistics is because a Rothschild product underpins the scam. Let us remember that it disputes that the situation has anything to do with it—it is those pesky intermediaries and savings people. As the now infamous CreditSelect series 4 product is a Rothschild product, I am sure that after this debate Rothschild will be able to provide me and Parliament with the precise figures on the number of loans and the number of people affected who are in this country, along with what the total and the average level of loan debt are for UK citizens, as well as the age profile of those UK citizens. It is a Rothschild product, after all—it is not delivered by Santa or anybody else.

I am fortunate to have seen—indeed, I have it with me—a copy of the presentation pack used back in 2006 to support the sale of these Rothschild products and to train and inform the intermediaries who went on to sell them to unsuspecting victims. It is prominently marked as

“not for circulation to the public”.

Its title is “Rothschild Channel Islands: CreditSelect Series 4 presentation”, and it is by none other than “Stephen Dewsnip, Director”, who as I mentioned earlier has been served a warrant to face charges in Spain.

The first slide—this is not for public consumption, remember—tells aspiring intermediaries and salesmen who want to flog this dodgy deal that Rothschild Channel Islands is the

“premier choice for offshore private banking services”.

That would have been reassuring for the intermediaries, who no doubt repeated the bold claim to future victims.

After detailing the design and extensive back-up for the CreditSelect series 4 product, the presentation lists by name, with phone numbers and e-mail addresses, five Rothschild contacts, including Dewsnip and Coutanche —he was also mentioned in connection with warrants in Spain—who were the guys behind the package. “Contact them,” it says. “You won’t be on your own as intermediaries. Look at this back-up provided directly by N.M. Rothschild and their senior people. They are, after all, the premier choice for offshore banking services.”

The presentation goes on to explain how the initial launch of the product in Spain will be followed by its roll-out in Portugal, France, the UK and so on—how exciting! It explains how Rothschild will instruct the valuer, check the application pack, clarify the details with an independent financial adviser and prepare the credit papers for the Rothschild credit committee, and how the lawyers would be instructed to prepare the legal documents. It goes on to explain the benefits, saying that there is no upper age limit, which is very handy for retired folk, and that no proof of income is required. Of course not; it is the property as collateral, stupid. There is no need to worry if those people are retired pensioners and the property is the only thing they have—if it is their life savings and entire worldly wealth invested in bricks and mortar.

A slide labelled “Key Features” explains that these products are

“Well-structured loan and investment products from excellent brand names”,

and that clients are

“not exposed to unnecessary risks due to Rothschild’s conservative approach”—

there is that Rothschild name being used again as back-up.

Do we really think that the salesmen—the intermediaries —did not go big on the Rothschild name when they were flogging the product? Every single victim says that Rothschild was central to the sales pitch. It was made clear that Rothschild was behind the scheme and was backing the scheme—that it was the scheme. “No worries,” said the intermediaries whom Rothschild were training and supporting to sell CreditSelect series 4.

The main client benefits are listed in the document as an initial cash-back facility, liquidity providing a loan for investment, the prospect of long-term capital growth and tax planning opportunities. That is irresistible for the sales guys and for vulnerable victims, too.

In case anyone was in any doubt about how good the product was and who was backing it, the presentation told us that it was:

“A responsible, competitively priced asset-backed lending facility from a prestigious bank available to Spanish residential property owning clients.”

A “prestigious bank”: Rothschild Channel Islands, established in 1967 in Guernsey; a subsidiary of the Rothschild Group, established in England in 1798 and owned by the Rothschild family, whose motto is “Concordia, Integritas, Industria”, or harmony, integrity, industry. How incongruous that word “integrity” seems in the family motto in light of the action towards my constituents and others.

In case the role of Rothschild in this debacle is not yet clearly established, let me again go back to 2006 when Rothschild was saying this to promote the scheme:

“Our innovative product CreditSelect is available throughout a network of financial advisers around the world, thus giving clients straightforward access to credit”

for a wide “range of purposes”. It also said:

“To help support those professional financial advisory firms with whom we have agreed terms of business for the availability of CreditSelect, we have a website dedicated to assisting the promotion and delivery of the service...This website is regularly updated to ensure that our introducers have round the clock access to all facility documents for downloading and printing…clients brochures, the latest Funds List”.

Fast-forward to 2012 and Rothschild, faced by potential actions in Spain and elsewhere, has changed its tune. It is now saying to complainants:

“Hamiltons”—

that is one of the independent advisers, but you can insert any number of other financial advisers at your discretion, Mr Turner—

“were your financial adviser and acted as your agent in relation to your application for a CreditSelect loan facility, we are not able to accept responsibility for any advice that may have been given to you by Hamiltons”,

or any other assorted intermediaries. That is dissembling and distancing worthy of Pontius Pilate, and it is just as distasteful.

There are all sorts of scams and mis-selling, big and small: from the cowboy builder who sells someone roof repairs that they do not need, to payment protection insurance and mortgage mis-selling. There are real issues of mis-selling, but there are also fundamental issues of trust and integrity. We have seen a practice that can be described as predatory lending. Intermediaries might have laid a trap, but the trap was built by Rothschild. Unless Rothschild and others that are implicated in the scandal step up to the mark and accept their responsibility, this will become the latest chapter of banks and financial houses despoiling the very beds they lie in.

Rothschild’s family empire is estimated to be worth $300 billion to $400 billion. My elderly retired constituents’ net worth was tied up in the property in Spain that the Rothschild group ended up taking. Will the Minister examine the scandal and force Rothschild and the other banks involved to face their responsibility for impoverishing pensioners and to make good their losses? Rothschild can afford to do so; its reputation cannot afford not to. Rothschild has offered to meet me. I will be happy to do so on the clear understanding that I am looking for justice for my constituents and others, not excuses and legal defence.

[The Financial Secretary to the Treasury (Sajid Javid)]

I welcome you to the Chair, Mr Turner. It is always a pleasure to serve under your chairmanship. I thank the hon. Member for Ogmore (Huw Irranca-Davies) for making a powerful case on behalf of his constituents. I assure him that I have listened very carefully.

Some of us will have constituents affected by these products who now face an uncertain financial future instead of the comfortable retirement they thought they had earned. As the hon. Gentleman said, the equity release products in question were sold to some UK pensioners resident in Spain. It seems that they were sold by independent financial advisers operating in Spain who suggested that they release equity from their houses and invest the loan in a fund, often claiming that that would have inheritance tax benefits. The products were then provided by a variety of banks, mainly based in Scandinavia, but including Rothschild bank.

With the onset of the financial crisis, those investments did not perform, so many of the investors breached the terms of the loan they were given. That has left many expats in Spain, including those from the UK, with significant financial losses. Some of the banks involved, many of which were facing their own financial difficulties, have sought to repossess the properties on which the loans were secured. That has left some pensioners facing not only large losses, but the threat of repossession, which is a stark contrast with the comfortable retirement they had planned.

Of course, I am sympathetic to the difficulties that these people are facing. Many of them have lost a great deal, but I am afraid that the Government’s ability to act in this case is limited. The products were not sold in the UK or by UK companies and the loans were not secured against properties located in this country, so the UK authorities do not have any jurisdiction over that activity.

What I have said will be frustrating for the individuals involved, but the same rules allow our own regulators to protect our domestic consumers from foreign banks operating here in the UK. I realise that some banks in Europe were involved in providing the products sold by independent financial advisers in Spain. The hon. Gentleman highlighted Rothschild bank specifically. It has strong historic connections with the UK.

I have looked into the matter further, and I understand that Rothschild sold around 130 of the products between 2005 and 2008. However, that activity was carried out by its Guernsey-based entity and, as the hon. Gentleman knows, the Channel Islands do not come under the jurisdiction of the UK Government or UK regulators. The Guernsey regulator may have some jurisdiction over the design and distribution of the product, but that is not for the UK authorities to establish. I understand that some of those who have lost out have taken the case up with the Spanish authorities, and that may be an appropriate option for them.

I am sorry to report that the UK Government have limited influence over this case. I understand that Rothschild has provided affected customers with some flexibility. For example, it is my understanding that it is not repossessing the properties of those that have been affected. That, of course, is welcome. As I said, the UK authorities do not have any jurisdiction over this activity. However, I appreciate that Rothschild has major operations in the UK, so I am happy to write to it to pass on some of the concerns that the hon. Gentleman has raised. I will also raise the matter with my counterparts in Spain and Guernsey to bring it to their attention. I will be more than happy to meet the hon. Gentleman and his constituents if he would find that useful.

The hon. Gentleman may be interested to know that the UK ambassador to Spain wrote to the Spanish regulator about this issue in 2012. Following that exchange, the Foreign Office published advice for people considering taking out equity release products in Spain. It highlighted the importance of checking that the company offering the mortgage is registered with the Spanish financial regulator, known as the CNMV. The publication explains that consumers unhappy with the product should first complain to the company responsible and that, if they are still dissatisfied, they can complain to the Spanish financial regulator.

In a broader context, my hon. Friend the Member for South Derbyshire (Heather Wheeler) gave sensible advice for people who are thinking of taking out similar equity release products in the UK.

In summary, I fully understand and support the hon. Gentleman’s concerns for his constituents affected by these products.

[Huw Irranca-Davies]

I thank the Minister for a very positive, full and helpful response. He may not be able to answer this question now, but does he think that there is any scope within European legislation or elsewhere to avoid this situation happening in the future? In this situation, a UK-based company that has a subsidiary in Guernsey operates in Spain, and people assume that it is applying the same ethical and moral standards elsewhere. Let us lift the debate above Rothschild for a moment. Any company doing what has been described could, within the European Union, be brought to book in one way or the other. Does the Minister think that there is something there that we should be exploring?

[Sajid Javid]

When I first looked into the issue, I thought about that. Unfortunately, I do not think that there is such an avenue through European Union institutions. I am happy to explore the matter further; perhaps when we meet, I can give the hon. Gentleman more information. He may be interested to know that there is currently a mortgage market directive. It is in its final stages in the European Union, but I think that I am right in saying that it does not include equity release products. Obviously, it would not have helped the hon. Gentleman’s constituents anyway; it is for the future.

I am happy to raise the issue with people in the way I have explained to the hon. Gentleman and I thank him again for bringing up this case. I will be happy to report back to him.

[Huw Irranca-Davies]

The few minutes remaining provide an opportunity to get more issues on the record. The Minister may be interested in responding to some other people who have written to me subsequently, when they learned of the debate. One of them wrote:

“When my wife and I met Mr Dewsnip”—

who came up earlier in the debate—

“at one of his public presentations and had a private chat with him after the main event, he most certainly did advise us as to the suitability of the investment fund and assured us that Rothschild would be working on a daily basis with the fund managers to ensure that it was meeting expectations and performing as expected.”

I could cite other examples that imply an intimate, daily, minute-by-minute relationship, but I have yet to discover whether that also means that Rothschild or anyone who worked for Rothschild was financially benefiting from it. That would be interesting and it may figure in a subsequent meeting that I have with Rothschild.

[Sajid Javid]

The hon. Gentleman is right to ask such questions and to raise them in any meeting that he may have with Rothschild and with the relevant regulators for the entities that we have discussed today. I will report back to the hon. Gentleman in due course. I thank him again for raising this important issue.

Question put and agreed to.

Banking

Huw Irranca-Davies Excerpts

Wednesday 15th January 2014 Commons Chamber

[Chris Leslie]

I will give way to my hon. Friend in a moment, but I want to finish this point.

The Prime Minister gave the clear impression at Prime Minister’s Question Time that he would veto higher pay and bonuses. Perhaps he was unintentionally misleading in the way that he made that point. He might want to come back to correct the record. Some of us think that he was conveniently looking at the total remuneration at RBS as a device to slip out of the question about how he will exercise the shareholder vote.

The House needs to know that RBS has reduced the number of bankers on its roll by about 2,000 in the past year. One would therefore expect its pay bill to fall, and so it should, but that does not get it out of answering the question about the individual senior bankers who are earning £400,000 or more. Will the shareholder, in this case the Chancellor of the Exchequer, give them permission not just to have bonuses of 100% of their salaries, but to bust through that and go to 200% of their salaries? That is a crucial test for the Chancellor. Whatever the sophistry and warm words we might get from the Prime Minister, they cannot wriggle out of confronting that decision.

[Huw Irranca-Davies (Ogmore) (Lab)]

Does my hon. Friend agree that this is a question of leadership? If leadership is not shown by the banking sector itself, it is for this House and this Government to show leadership. My constituents cannot understand why these people live in a stratosphere in which they are under no moral or financial obligation to behave properly. Let us show some leadership on this matter in today’s vote.

[Chris Leslie]

My hon. Friend is right. The motion states explicitly that the Chancellor should exercise his role as the majority shareholder to prevent an extreme approach to bonuses.

--- Later in debate ---

[Sajid Javid]

Again, my hon. Friend makes an excellent point.

[Huw Irranca-Davies]

The Minister is understandably making a case for the financial sector, as he also should for manufacturing and all other sectors. What my constituents fail to understand is why, when public and private sector employees over the last few years and now have accepted pay restraint and real-terms squeezes on their earnings, and we in this House, including Ministers, are facing public demands to accept pay restraint on our pay and conditions as well, top bankers are immune from those constraints.

[Sajid Javid]

I will come on to that topic shortly and share with the hon. Gentleman some numbers that show what has happened to the pay of top bankers.

Oral Answers to Questions

Huw Irranca-Davies Excerpts

Tuesday 10th December 2013 Commons Chamber

[Danny Alexander]

I am grateful, as always, to my hon. Friend for his question. He is absolutely right: it is a huge cut in income tax. In fact, over the course of this Parliament and before we take any decisions on next year’s Budget, we are already committed to spending £38 billion to reduce the income tax of working people. That is a massive commitment from this Government to cut income tax for the working people of the United Kingdom.

[Huw Irranca-Davies (Ogmore) (Lab)]

7. What recent representations he has received on reform of the Office for Budget Responsibility.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

The Chancellor receives representations on a wide range of matters, including on the role of the independent Office for Budget Responsibility.

[Huw Irranca-Davies]

Labour has called for the OBR charter to be amended so that it can independently audit the manifestos of political parties in the run up to elections. Will the Minister now support that proposal?

[Mr Gauke]

We are cautious about that because, as a Labour spokesman in the House of Lords said in 2010:

“the OBR should not become embroiled in political controversy.”

I understand that the Labour party is seeking ways to improve its economic credibility. I suggest that a better, more obvious approach would be to change the shadow Chancellor.