Oral Answers to Questions
Ian Mearns Excerpts(12 years, 12 months ago)
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Mr Osborne
I join my hon. Friend in celebrating the good news about the successful bid for the renovation of the pier. She is right to point out that there are specific issues associated with seaside towns across the country which are well known to the Members who represent them and well known also to the Government. We intend to come forward with proposals later this year to help those seaside towns.
Ian Mearns (Gateshead) (Lab)
T8. Household debt has been revised upwards by £300 billion, and my constituency, Gateshead, has one of the highest rates of personal insolvency in the country. What is the point of cutting the national debt, only to transfer the burden on to the personal finances of ordinary families? It is blindingly obvious that we are not all in this together—some of us are in this up to our necks.
Mr Osborne
I am afraid the hon. Gentleman misses two important facts. First, the most recent figures—within the past week—for personal insolvencies showed a welcome fall. Secondly, household debt reached a record level under the previous Government. As I said in response to the first question today, we are introducing a Financial Policy Committee to assess overall levels of private debt, including business debt, in the economy so that we do not allow dangerous unsustainable levels to grow. That will now be a judgment for the Financial Policy Committee and it will have the tools to do something about it.
Finance (No. 3) Bill
Ian Mearns Excerpts(13 years ago)
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John McDonnell
I agree with my hon. Friend, but I will come to that point later. The way in which the banks have continued their profligate distribution of bonuses looks like them cocking a snook at the Government and the level at which the levy has been set.
When the Chancellor appeared before the Treasury Committee, he advanced two arguments on how the levy was constructed. First, he argued that the levy was based on the price of the insurance that the Government and the taxpayer now implicitly offer for the wholesale funding of the banks; the levy is therefore a tax on the wholesale funding of banks’ operations. However, a calculation of the appropriate insurance for that scale of banking insurance, which could surely be done, would show that that sum is significantly more than the current bank levy proposal would raise.
The Chancellor’s second argument was that the levy was in the interests of equity: the banking sector, as well as the rest of us, should make a contribution to resolving the economic crisis. However, the amount that the bankers are being asked to provide to help to tackle the crisis that they created is piffling in comparison with the damage caused to our wider society, and minute in comparison with the burden that is being carried by others in terms of job losses and services cuts. Whole communities now face significant suffering and deprivation.
The Chancellor himself admitted that the targeted revenue sum was “relatively small” because, he argued, it balanced fairness with competitiveness, yet no study has been published and no evidence has been produced on the impact on banking competitiveness of varying the levy. Like my hon. Friend the Member for Nottingham East (Chris Leslie), I want to know what independent assessments have been made of the balance between fairness and competitiveness and how the calculation was arrived at. I agree with my hon. Friend the Member for Edmonton (Mr Love), who said that the measure throws the Government’s commitment to tax simplicity out the window. The taxation system on this issue is now more complex than any other point of taxation in the tax book, so I endorse the questions about how HMRC, with its current staffing cuts, can cope with the implementation of the levy. I would also welcome the Government publishing the consultation on the assessment of the amount of tax take from the proposed levy, because it looks like consultation was either non-existent or fairly minimal.
The amendment would require the report to consider
“the adequacy of the bank levy in the context of other reforms”.
Our understanding is that the levy was set to assist the implementation of the Merlin agreement and to ensure that the banks had a lending strategy to help get the economy moving and out of recession. As others have said, the levy must be set so as to ensure a continued influence on banks’ behaviour in relation to remuneration and bonuses. While promoting the bank levy, the Prime Minister and Chancellor exhorted bankers to show restraint. Is the levy set at the right level to ensure that the other reforms linked to it are completed and adhered to?
Ian Mearns (Gateshead) (Lab)
The evidence of our eyes and ears of the relationship in recent months between the Chancellor and the Prime Minister and the bankers is that there has been one word from the Chancellor and another word from the Prime Minister, and the banks have continued to do exactly what they want.
John McDonnell
That is exactly my point. It might be that the levy is being set in relation to other banking reforms, particularly those on bonuses and remuneration, but not only have we seen the complete disregard of the Chancellor’s and Prime Minister’s exhortations, with bonuses continuing at a very high level, but we have seen, as another Member said, a diversion into other forms of remuneration and salary increases. That is almost an abuse of the system as set out in the Government’s proposals.
If the debate is about the adequacy of the levy, and in view of the fact that in spite of the Government having set down a marker in the proposals, bonuses have continued and remuneration has increased, can the Government not support the amendment? If the review reported at least by December—I would prefer the autumn—we could consider increasing the levy to ensure adherence to the wider banking reform proposals the Government want implemented. It is clear from the evidence produced today that the banks need a continuing threat—a sword of Damocles—hanging over their heads, if we are to get any change in the bonuses and remuneration that are so offensive to all our constituents suffering in the recession.
It might be that the levy was set so that the Merlin agreement could become fully operable and lending might start in earnest again. As my hon. Friend the Member for Nottingham East noted, however, so far all the indications are that the revival of lending has not taken place. The Government’s proposals therefore warrant a review at the earliest stage, because even now, while they are still being implemented, they are not working. The evidence for that is all around us. It is clear now—this is why the review is so important—that the levy has become almost irrelevant to the real issues of capitalisation and regulation.
Mr Jones
I agree. I am sorry that I forgot to welcome Reverend McCrea to the Chair; it is a pleasure to serve under his chairmanship. The hon. Gentleman makes a good point. It was taxpayers’ money that rightly bailed out the banks; if they are making excessive profits now, which clearly they are, the banking levy would allow some payback.
If the Government are feeling timid and do not want to upset the banking sector, the amendment provides them with an obvious get-out by making it clear that there is a review at the end of the year that would enable us to see whether the levy was having a detrimental effect. Evidence to date suggests that the £3.5 billion that the bonus tax took out of the banking sector has not damaged the banking system in any way, shape or form. The public expenditure effects, however—they will affect my region and also the area that the hon. Member for Strangford (Jim Shannon) represents—are going to be absolutely devastating.
Ian Mearns
I wonder whether my hon. Friend would reflect on the view of many of my constituents, who feel that the Government’s reticence in tackling the bonus culture or in tackling the banks in any tangible way has much to do with the number of Members sitting on the Government Benches who have an employment history within the banking sector?
Mr Jones
My hon. Friend brings me on to a new relevant area, because he shows how the banking and financial sector are able to influence the debate. The previous Labour Government as well as this Government might have been somewhat in awe of the threats made by the banking sector—for example, to move offshore, with a consequent effect on jobs, if too much regulation is imposed. It might just be coincidental, but since the right hon. Member for Witney (Mr Cameron) became Leader of the Opposition, donations to the Conservative party have increased, and about 50% of them come from the City and the financial sector, including some donations of £500,000 from four or five key individuals, including from Finsbury and Pelham PR, whose job it is to persuade politicians and other decision makers of the importance of, and the need for, the banking sector. As I say, it could be completely coincidental that the Tory party gets large amounts of money from this sector, but one could draw the conclusion that this is one of the reasons this Government have taken such a light-touch approach to regulation of the banking and finance sector.
Mr Jones
That was too subtle for me.
The important point was made by my hon. Friend the Member for Nottingham East when he talked about what we would do with this money. As my hon. Friend the Member for Hayes and Harlington said, if the levy is seen as a tax, it is a pretty meagre tax on the banks, as it raises a small amount of money. However, the question is still about what we then do with the money. We could put it into rebuilding the economy by investing in housing and the regional economy, as has been said. The Government have allocated £1.4 billion over the next three years to projects, which is two thirds less than the £1.4 billion that the previous Labour Government invested in regional development agencies per year. In regions such as mine, the north-east, companies and individuals have to bid for that money. A banking levy could come in very useful for the investment that is being put forward.
The problem with the Conservatives—the Liberal Democrats have gone along with this—is that they have this notion of “Public sector bad, private sector good.” What they have failed to realise in regions such as the north-east is that large-scale public expenditure cuts have a huge knock-on effect on the private sector. The unemployment level is already 10.2% in the north-east, whereas it was as low as 4% under the previous Labour Government. Durham university has done a study suggesting that if 45,000 to 50,000 public sector jobs in the north-east are cut, 20,000 jobs will actually go from the private sector. Regions such as mine had no responsibility for the mess, but those responsible for it could pay for some of that reinvestment and that could be done through the banking levy.
Ian Mearns
The point that my hon. Friend is making about the north-east economy is appropriate. Clearly the job cuts in the public sector have not yet hit the employment market, yet the statistics for last month showed that although there had been a national decrease in unemployment of 17,000, it had increased by 11,000 in the north-east, which has a population of only 2.5 million. That is happening even before the job cuts hit the market, so the situation up there is very serious indeed.
Mr Jones
It is very serious. What my hon. Friend describes will have an effect on the private sector and on what has already been seen in the banks. The Government have set great store by making sure that banks lend to small businesses. That was one of the things talked about at the general election by both the Conservatives and the Liberal Democrats, but we have seen little evidence of it actually happening. As I said, it will be painful for many small businesses, particularly those in the north-east, when they see the amount of bonuses being paid to bankers and find that when they ask those same banks for investment they are told that either it is not available or that the terms on which it is available involve such horrendous rates of return. As my hon. Friend the Member for Wansbeck (Ian Lavery) has said, the same may also be true of personal finance, whereby certain individuals who would in the past have got access to credit will no longer be able to do so.
Alison McGovern
My hon. Friend makes an important, if a little lengthy point. People will not be fooled, because they will see fuel prices going up and ask themselves what the Government have done to help. People are connecting the impact on prices across the board with what happens when they fill up the tank. When they go to the shop, they see higher prices all around them and they wonder where they are coming from. There is one clear answer: No. 11 Downing street. The Chancellor has decided that people will have to pay more in the shops. Let us not imagine that he has said, “Well, I’m sorry everyone. These are tough times—we’re going to ask you to put your hands in your pockets until we can lower VAT again.” Rather, this is a permanent rise that will build in higher prices for the long term. Given the downward pressure on wages, the really worrying thing is that the rise is building in not only a reduction in quality of life, but inequality, which is very worrying and will hurt for many years to come.
Ian Mearns
I know that we are in Committee, but let me take this opportunity to send my best wishes to parliamentary colleagues from the north-east region who are unwell at the moment—the hon. Member for Hexham (Guy Opperman) and my hon. Friend the Member for North West Durham (Pat Glass), who are both incapacitated. I am sure that the House joins me in sending our best wishes to them both.
The amendment calls for the Chancellor to publish an assessment of the impact of taxation on fuel prices within three months of the Bill being passed. I will concentrate on the differential impact of fuel duty policy in the English regions. I say “regions” with some trepidation, because I know that the very concept, or even uttering the word, causes phobic shudders in some quarters on the Government Benches, but an analysis of road freight statistics by the North East chamber of commerce has demonstrated the extra burden that fuel taxation places on businesses in regions such as the north-east. Each tonne of freight brought in or out of the north-east of England delivers approximately £4.16 in fuel taxes to the Exchequer; although that figure probably changes daily, it is 18% higher than the average for English regions, which is only £3.52, and 74% higher than the figure for London. That analysis shows that more careful consideration should be given to fuel duty rates’ economic impact in regions and to differential rates.
Road freight statistics show the extra distance travelled by goods transported into or out of the north-east compared with other parts of England. Every tonne of freight transported by road into or out of the north-east travels an average of 119 miles, compared with an average of 111 miles for businesses across the whole of England. Only businesses in the south-west of England transport freight further by road, with each tonne of goods going into or out of the south-west travelling an average of 192 km, which is ever so slightly more than the average of 119 miles for the north-east. Duty on diesel is currently at about 58p a litre.
Mr Kevan Jones
Does my hon. Friend agree that the impact of fuel duty is exactly the kind of issue that could be raised in the proposed report?
Ian Mearns
That is exactly what I am suggesting such a report could achieve.
The VAT chargeable on the duty element of the fuel price brings the total impact of fuel duty to about 69p a litre—that figure is a few days old, so it might be more or less than that now, depending on the daily price rate. Using a typical fuel consumption rate for road haulage of 8.5 miles per gallon, that means that each kilometre travelled provides 22p to the Exchequer; given an average load of 10 tonnes, each tonne of freight transported into or out of the north-east region delivers £4.30 to the Exchequer in fuel taxes, compared with an average for goods moved between English regions of only £3.52. We are already starting to see the impact on an economically deprived region in terms of businesses developing there and on its prospects for employment, given its peripherality to the bulk of the English economy.
Many hauliers in the North East chamber of commerce membership have no choice but to pass a proportion of those costs on to their customers, the vast majority of whom tend to be based in the north-east region. The chamber of commerce has argued that decisions on fuel duty need to take greater account of the impact on businesses in each part of the UK, and that a more considered approach is needed than that of the automatic increases that have been fixed into Government policy for the upcoming period. The figures I have quoted exclude those for goods transported within regions, as the impact of fuel duty would be the same in each region for that type of journey.
If the amendment were accepted, I would ask that a detailed analysis be included of the introduction of a measure that would help to stabilise fuel duty. In fact, that is exactly what the Federation of Small Businesses has been calling for. We have had debates in the past about some sort of fuel duty stabiliser, and it remains to be seen whether that would be a workable option, but surely when carrying out such an analysis, the Government could look at measures that would stabilise fuel duty and the cost of fuel.
Andrew Gwynne
My hon. Friend is making a superb case stating the competitive disadvantage that the Government’s policies are placing on the road haulage industry in the north-east of England and in other English regions. Does he think that the reporting proposed in the amendment could help to determine Government policies for supporting economic growth in regions such as his?
Ian Mearns
I am trying to point out to Ministers that fuel duty imposed nationally has a differential impact across the different regions and indeed nations of the United Kingdom in terms of contacting the main hub of economic growth, the south-east of England. There has been a debate in my region about the dualling of the A1 north of Newcastle upon Tyne, but the main driver of growth in the north-east economy is actually to the south and west of the region in terms of the contact with the main drivers of our economic future.
Mr Kevan Jones
Was not the Conservatives’ promise at the last election to dual the A1 another promise that they have reneged on?
Ian Mearns
What happened over a number of years—I am afraid that our Government were not immune from this—was that, rather than planning roads to encourage economic growth and development, we planned them to accommodate congestion. That was not always the best thing to do from an economic perspective. Down that road lies ruin, if you will pardon the pun.
The Federation of Small Businesses has asked for a fuel stabiliser. I am not saying that I necessarily agree with the federation, but stability in fuel prices is important. The Chief Secretary said of a fuel stabiliser:
“It’s a complicated idea and it’s difficult to see… how we achieve it, but it’s something that we are looking at very carefully to see if we can reduce the burden of fuel duty”.
I wonder whether the concept could be more straightforward. When oil prices increased, the stabiliser—or a stabilising impact effect—would allow the Government to reduce duty to a lower limit; when oil prices fell, the Government would be able to raise duty to a higher limit.
Critics cite the difficulty of knowing whether the fluctuations in the price of oil are temporary or likely to persist beyond the near term, saying that it would be difficult for a fuel duty stabiliser to set fuel duties effectively. To counter the volatility in the price of oil, a fuel duty stabiliser or a stabilising measure would need to be based on an official forecast of the future price of oil, and then adjusted regularly according to the actual oil prices. It will be difficult, given the volatility in how the international oil markets are working at the moment, but we need to try to find some measure to help our small and medium-sized enterprises through this difficult process at this difficult time; otherwise, we are in real danger of seeing fuel become a major blockage to economic growth, not only in particular regions, but across the whole nation.
Would this be bad for the public finances? The Chief Secretary said that we cannot “sacrifice income willy-nilly”. Critics argue that a stabiliser or a stabilising effect would be too expensive to implement during a time of austerity, but that criticism fails to take into account the wider implications of high fuel prices on the UK economy. If set correctly, the measure could be fiscally neutral for the public finances and help to provide much-needed economic stability for the UK economy. My main point in asking for some sort of analysis in a review is that the measure is needed so much more in the regions of England, particularly regions such as the north-east, but the south-west as well.
Mike Gapes
The amendment states that the Chancellor should
“publish, within 3 months… an assessment of the impact of taxation on fuel prices.”
I will address my remarks to the scope of such an assessment. It is important not to focus solely on the narrow issues surrounding VAT, although they are important, or on the global increase in fuel prices, which is one of the factors causing the revolutions in north Africa and elsewhere in the world as people suffer from rising food prices as a result of rising fuel prices.
There is something very specific about how we in this country choose to tax fuel. Compared with other European Union countries, we choose to have very high taxes on fuel. One consequence is the problems from which our road hauliers have suffered in comparison with some of their competitors in European countries that have road pricing.
It is interesting to note that in the 2010 general election, the Liberal Democrats proposed to move towards
“a rural fuel discount scheme which would allow a reduced rate of fuel duty to be paid in remote rural areas, as is allowed under EU law”,
as well as to prepare for a system of road pricing to be introduced “in a second parliament”. That was the Liberal Democrat position. The Conservatives, of course, had a completely different view, promising a “fair fuel stabiliser”, presumably designed to help people in the rural communities.
I represent an urban area. My constituents suffer high fuel prices in London and, unlike some people in rural areas, they do not have the advantage of having to pay only 11.14p duty on a litre of so-called red diesel, instead of 57.95p duty on a litre of low-sulphur diesel. We know that there is abuse of the red diesel system by certain people who, when driving on main roads, use diesel that should be used only for off-road activities. That opportunity is not open to my constituents. People living in Ilford and elsewhere in Greater London do not have access to red diesel that they can abuse in order to avoid paying tax. However, people who are represented by the Liberal Democrats, who are in favour of giving priority to remote rural areas but not to those of us who live in urban areas, or by Conservative Members who are happy not to enforce adequately the provisions against abuse of the red diesel system, are not concerned about that. I want the review to examine the abuse of the red diesel system. I believe that a lot of money that should be going to the Exchequer is not doing so and that there is discrimination against people who live in urban areas and have no access to red diesel for their motoring purposes.
Ian Mearns
I must say that I am completely overcome by the power of my hon. Friend’s argument and wonder whether the right hon. Member for Gordon and his hon. Friends on the Liberal Democrat Benches really want to argue at this stage for a late codicil to the coalition agreement on the issue.
Mr Jones
I have known my hon. Friend for more than 25 years, and I think that this is the first time he has ever been overcome by something I have said—it might be the first time he has ever listened to anything I have said. The idea of leaving oil and gas in the ground and not extracting it is absolutely ludicrous. It makes no sense whatsoever with regard to the investment that has already been made, and it makes no economic sense with regard to security of supply in this country.