Economic and Fiscal Outlook
Debate between Huw Merriman and Peter Dowd(6 years, 6 months ago)
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Peter Dowd
I would rather not respond to a rather crude comment, which is quite frankly almost as crude as the Government’s economic policy.
Number 3 is profligacy. The right hon. Lady talked about it, but here is a bit of profligacy: since coming to power, the Conservative Government have added more than £700 billion to the national debt. There was no mention of that. The UK’s debt-to-GDP ratio this year stands at a staggering 86.4%, as referred to by my hon. Friend the Member for High Peak (Ruth George). The UK has a higher debt-to-GDP ratio than 20 out of the 27 other EU member states after eight years of this so-called economic miracle.
Sin No. 4 is misplaced pride. The Government have long prided themselves on being the so-called party of business, yet in eight short years they have managed to alienate the business community. Business investment has been revised down for the next two years, and businesses are holding off key investment decisions due to the uncertainty caused by this Government’s shambolic approach to the Brexit negotiations. Ministers claim that the Government have raised an extra £175 billion from clamping down on tax avoidance—another visit to fantasy island—but they have refused to offer a breakdown of this figure, a list of the anti-avoidance measures involved and the amount each has raised.
Huw Merriman (Bexhill and Battle) (Con)
What does the hon. Gentleman think would be the view of the extra 1.2 million businesses that have been created since 2010 on his proposed increases in taxation?
Peter Dowd
I suggest that the hon. Gentleman read the Labour party’s “Funding Britain’s Future”—our Grey Book. I will send him a signed copy for him to look at, and it will show that what he has said is arrant nonsense.
Under the Conservatives, Her Majesty’s Revenue and Customs has become a pale imitation of its former self, with staff and resource levels cut by 17% since 2010. HMRC’s failure to investigate Lycamobile, one of the Conservative party’s largest donors, for money laundering raises further questions about its independence and effectiveness. The Chancellor has been privately lobbied into supporting the former Prime Minister’s UK-China investment fund, but we now learn that it will be domiciled in the Republic of Ireland. That, presumably, is for tax purposes—it is certainly not for charitable purposes. So much for this being the most transparent Government in history.
Sin No. 5 is bullying. I have often heard Ministers speak about the resilience of the economy, but they say little about the resilience of the workers who work in it. The reality is that this Government have spent the past eight years laying siege to the poorest in our society and the public services they depend on. They bully the powerless and, in oleaginous fashion, suck up to the powerful. The Government’s austerity agenda has left our local services on their knees. Since they came to power, local authority spending on early intervention has had a 40% cut in real terms—and so it goes on. I could give a catalogue or litany of these issues, but we know what they are. Rather than throwing our indebted and overstretched local authorities a lifeline, this Government are instead pushing ahead with further cuts.
With sin No. 6, we turn to education, which the Chief Secretary mentioned. The Conservatives are responsible for the first real terms per capita cut in schools funding in 20 years, and they have deprived 1 million children of a decent free school meal. [Interruption.] They just do not like the truth. The trebling of tuition fees, the abolition of maintenance grants and the sale of the student loan book have ensured that students leaving university today will be the most indebted in our country’s history. Meanwhile, the NHS moves from a winter crisis to a spring crisis—and it will go on to a summer crisis —and the staff who run it continue to struggle. Under the Conservatives, they find themselves understaffed, underpaid and under-appreciated. While Rome burns and our public services crumble, the Chief Secretary can be found instagramming and tweeting selfies of herself at the Dispatch Box with other Treasury Ministers.
The last of the sins is pomposity, which the Government do very well: they are very good at pomposity. Listening to the Chief Secretary speak about the need for robust public finances and the merits of the free market, people would wonder which country she has been living in for the past eight years. After all, the Government have missed every deficit target they have ever set themselves. The former Chancellor’s target for a 2020 surplus is but a distant memory—an inconvenient truth, quickly forgotten. Public debt stands a £1.8 trillion, and the Government have put more debt on to the shoulders of the people of this country that any other Government. When they came to power, they proclaimed that we were all in it together—we are all in it together right up to our necks —but eight miserable, oppressive years later, communities have been left to fend for themselves.
What will be the Tories’ parting legacy as we leave the EU? It will be a divided, poorer, less confident, low-growth, low-wage, low-skilled and less productive country, all thanks to a clapped-out, self-obsessed and failing Government who rely on oligarchs to give them £160,000 bungs to help them to hang on to power—I hear the Foreign Secretary say, “Anyone for a game of tennis?”
Savings (Government Contributions) Bill (Third sitting)
Debate between Huw Merriman and Peter Dowd(8 years, 1 month ago)
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Peter Dowd (Bootle) (Lab)
The Opposition’s new clauses 1 and 2 are designed to address the concern expressed across the board, including by the pensions industry, the trade union movement, Select Committees of this House and the Office for Budget Responsibility, that the lifetime individual savings account poses a threat to traditional pension savings, and most significantly to auto-enrolment.
Auto-enrolment has been a success story in the pensions environment. As Members will recall, witnesses who gave evidence to the Committee had one or two things to say about LISAs. For example, some made it clear that there is concern about the LISA interfering with the roll-out of auto-enrolment. Mr Davies suggested that although few object to the LISA, there is concern about
“where it fits within the overall landscape of provision for retirement”.––[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 38, Q65.]
Given that, it is incumbent on us to ensure that any reasonable concerns are assuaged. The cost to the taxpayer, certainly in the longer term, was also of concern, given that for a standard taxpayer, the LISA is tax-free going in and going out, so to speak. Mr Davies of Union Pension Services certainly alluded to that.
New clause 1 would require Her Majesty’s Revenue and Customs to conduct a review of the impact of the lifetime ISA on automatic enrolment in workplace pensions and pension savings within one year of the Act coming into force and every year thereafter. The conclusions of that review would have to be made publicly available and laid before both Houses of Parliament.
It is patently obviously that automatic enrolment, which was brought in by the Labour Government, is an outstanding initiative and is starting to achieve the objectives set for it as the years pass by. It has been rolled out to large businesses and is well on its way into the small business sector. That is clearly good news, as I am sure the Minister will acknowledge. I appreciate that neither she nor other Committee members are partisan on that matter. However, not all employees will be auto-enrolled until February 2018, and the increase in minimum contributions to 8% will not be completed until April 2019. Drop-out is relatively low among younger people. We do not want anything in the meantime to jeopardise the maximum possible number of people enrolling, or to provide an incentive to opt out; that is not an unreasonable position to take.
Auto-enrolment is one of the few success stories in the pension landscape, and is widely acknowledged in all sectors to be right. I fear that the Government’s policy—intentionally or not; I do not point the finger—may put the wider landscape in jeopardy and be a dangerous path, and the history of pensions suggests that that will be recognised only in years to come. By that time, it will be too late to turn back. As my hon. Friend the Member for Salford and Eccles highlighted on Second Reading, the OBR agrees with that assessment, and has reported that the Government’s pensions and savings policies have
“shifted incentives in a way that makes pensions saving less attractive—particularly for higher earners—and non-pension savings more attractive—often in ways that can most readily be taken up by the same higher earners.”
The Minister may respond that this is not an either/or situation, but of course she would say that. I respectfully suggest that that demonstrates a potential lack of appreciation that many people out there cannot afford to pay into both a pension and a LISA. In fact, many can do neither. The Work and Pensions Committee has warned the Government that
“Opting out of AE to save for retirement in a LISA will leave people worse off. Government messages on this issue have been mixed. While the DWP has been very clear that the LISA is not a pension product, the Treasury has proffered an alternative view.”
Those are not my words, but those of the Work and Pensions Committee. That simply affirms that there is confusion over the matter. At the very least, that is the perception abroad, and as some people say, perception is reality. If we have learned one thing over the years, it is that confusion in the market simply puts people off.
Moreover, we heard in evidence from Ms Lowe of the Women’s Budget Group that making a LISA
“available to everyone does not make it gender-neutral”—[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 51, Q96.]
She said that account had to be taken of people’s capacity to access the LISA, and in that regard, many women would be left out. That is a salutary observation.
Although Mr Bennie from Scottish Friendly supported the LISA, he recognised that people’s experience of pensions was sometime bad, which could be a problem for take up. In response to the hon. Member for Ross, Skye and Lochaber, he said that he recognised that for some, given their experience, pensions are a broken product. He also indicated that he saw LISAs as being complementary to a main pension, as did Ms Knight of the Tax Incentivised Saving Association, hence the Opposition’s caution about pushing on with this product without appropriate review.
It is fair to say that messing about with the pension system over the years has left people sceptical and blaming politicians for the mess. I worry that that we will be seen as messing about again, even with the best intentions. Our proposals today are a form of inoculation against the problem. The Women Against State Pension Inequality campaign is an example of a pension issue, albeit a public pension one, coming back to haunt us—or rather, it is the women concerned who are coming back to haunt us. That has shown the scepticism about pensions in general.
The Work and Pensions Committee recommended that the Government conduct urgent research into any effect of LISA on pension savings through auto-enrolment. That is another sensible bipartisan approach to the issue, which, political banter apart, is worthy of consideration by the Government. After all, the wisdom of Conservative Members on that Committee—and on this Committee—is always welcome on these matters.
Our new clause 1 would require the Government to carry out the review every year after the passing of this Bill. I hope that the Minister will consider accepting the new clause, or at least take it away for consideration.
The purpose of new clause 2 is to ensure that those opening a lifetime ISA for retirement savings receive independent financial advice. Advice is a crucial in purchasing any expensive product, be it a car, house, university education, or holiday. The advice would be offered automatically through an opt-in service, and the service provider would sign a declaration outlining the advice that the applicant received. Any provider would have to confirm the status of the applicant, whether they were enrolled in a workplace pension scheme, whether they had signed a declaration of financial advice, and whether they plan to use the lifetime ISA for a first-time residential purchase. The Opposition believe that it is only right that anyone considering a lifetime ISA is given the opportunity to see its benefits, compared with those of other schemes on the market.
The new clause would: ensure that people make an informed choice, with the benefit of independent financial advice; create parity in the quality of advice for all those entering the scheme; and offer much-needed oversight and education about the benefits of the scheme. The purchase of a pension is perhaps one of the most important purchases a person makes. That issue has exercised the minds of many people in Government, the regulatory sector and the product sector. The history of mis-selling has left a long, deep shadow across the financial product sector, and we must take that into account. It is fair to say that all witnesses made this point, either directly or indirectly.
There was more consensus among the witnesses on the issue of complexity than a first assessment would suggest. Hon. Members may recall me asking Mr McPhail of Hargreaves Lansdown about his assertion that the LISA was a misguided policy. His response was that the product was not complicated—the point that the hon. Member for Bexhill and Battle made to Mr Lewis—but that the pension landscape was complex. Mr McPhail said:
“The product itself is reasonably simple…but you have dropped it…into a complicated landscape.”—[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 20, Q40.]
I repeat that he never said that the product was complicated. The assertion from the hon. Member for Bexhill and Battle that
“this morning we heard from some of the representatives from the financial services industry, who seemed to think that this was a complex product”
was seized on by Mr Lewis, who called that view “palpable balderdash”. However, Mr McPhail did not say that. What Mr Lewis said, which is more than reasonable, is that people need to understand what they are buying. He said of LISA:
“All products are complicated; all products can be explained…They have to be explained and they have to be communicated. They will take time.”
That reinforces the reason for supporting the new clause, and the need for independent robust advice, which, as Mr Lewis advised, should be given in
“nice, easy and real terminology and not jargon”.
Huw Merriman (Bexhill and Battle) (Con)
I am grateful to the hon. Gentleman for reading those passages. I was also struck by Mr Lewis’s comment that
“When you contrast these products with the state pension, they are pretty easy products to understand.”
Would the hon. Gentleman like to comment on that section of Mr Lewis’s assessment?
Peter Dowd
Yes, I am happy to. The point that we were discussing was that while the products may or may not be complicated, the environment and landscape in which they are being sold is complicated, as there are all sorts of other financial products out there. That was the issue.
The primary point is that if people are to make a decision about something so important in their lives, and especially a pension, they need as much simple advice as they can get, with
“nice, easy and real terminology and not jargon”.
Huw Merriman
It may seem a strange analogy, but there are lots of laws passed by this House that could be quite complicated; that does not stop us passing more laws that may help people, though. I find the defeatist attitude somewhat baffling.
Peter Dowd
I genuinely do not think that ours is a defeatist attitude. The responsibility of this House when we pass complicated laws, which we do all the time, is to make clear what they mean. I would rather we spent more time in here dealing with these matters, teasing and winkling out the issues, and being clear about what we mean. I would rather spend 10 hours in here dealing with an issue and sorting it out than one hour in here and 10 hours out there trying to unravel it.
Savings (Government Contributions) Bill (Second sitting)
Debate between Huw Merriman and Peter Dowd(8 years, 1 month ago)
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Peter Dowd
Q Can I take this in a slightly different direction? I suppose it is linked, to some extent, to some people’s concern about self-employment. That is perfectly legitimate and okay, but there are many people in effect being forced, de facto, down the self-employment line to take pressure off employers to pay national insurance and so on. Are there concerns that employers will encourage their employees to choose a LISA instead of a workplace pension, in effect reducing their contributions?
Bryn Davies: Of course, there are rules about enticing people away from automatic enrolment, and we want to see those enforced. The implication is that if people were offered a genuine choice, LISA would have to be better than the automatic enrolment offer. I am sure there will be some employers who decide to go down that road.
On the question of the self-employed, it has been identified that automatic enrolment does not really work for them. It is possible that something like a LISA would offer them something that can work alongside automatic enrolment for employees. That is leaving to one side the whole issue of whether this growth in self-employment is genuine self-employment or just a way of evading employment law by forcing people into self-employment when they should be employed—but that is a much broader issue, on which I am not an expert.
Huw Merriman
Q Mr Davies, could you help me a little? I have not come across Union Pension Services Limited before. Is there a formal link to the trade unions or do you represent anyone?
Bryn Davies: No, no—I am just an honest professional working to make my bread, but working just for trade unions. I work as a consultant to individual unions.