HMRC Impact Analysis: Customs

Jeremy Lefroy Excerpts

Tuesday 8th October 2019 Commons Chamber

[Jesse Norman]

I think the hon. Lady misunderstands. Only in the event of a no-deal Brexit would we incur any of the additional declaration costs described here. This is not a tax; these are the administrative costs associated with a change in the country’s trading position.

[Jeremy Lefroy (Stafford) (Con)]

Does my hon. Friend agree that there will be extremely serious impacts on exports? We have been trying to promote exports for many years, given that we have such a large trade deficit, but the fact that 60% of our exports to the EU will now incur tariffs will be a real problem for our exporters—particularly of ceramics in my area, but also for exporters in many other areas. What does he say to that?

Spending Round 2019

Jeremy Lefroy Excerpts

Wednesday 4th September 2019 Commons Chamber

[Sajid Javid]

I welcome the scrutiny from the hon. Lady’s very important Committee. She might not have enough time, but there is a lot of detail in the book has been published alongside my statement today. She referred to a figure of 85% for the ratio of debt to GDP. I think the last Office for Budget Responsibility forecast in March had it at 82.2% and on a declining trajectory. On the changes to the fiscal rules, I have set out that I am looking at the fiscal rules in time for the Budget. There may well be changes, but I do not want to set out what they will be today, because we have not decided.

[Jeremy Lefroy (Stafford) (Con)]

I welcome the Chancellor and his statement. Does the spending round contain any provision for the establishment of a UK development and investment bank, which I believe would be an extremely strong vehicle to make the kinds of investments that he talks about in the public and private sectors and internationally?

[Sajid Javid]

Today’s statement does not focus on capital, but my hon. Friend’s suggestion would certainly involve capital investment if it happened. I know that he has spoken to the Economic Secretary to the Treasury about this, and we are happy to have further discussions.

Summer Adjournment

Jeremy Lefroy Excerpts

Thursday 25th July 2019 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

It is a great honour to follow the hon. Member for Preston (Sir Mark Hendrick). In Stafford, we, too, have the issue with county lines, which our police force is going after at the moment. I accompanied police on a raid just two weeks ago, when they managed to seize a considerable quantity of drugs, but that is just the tip of the iceberg. A lot more has to be done.

I want to start by talking about development, particularly unauthorised development. Later today, with your permission and your favour, Mr Speaker, I shall present a petition that I should have presented on Monday. It is about authorised development in Penkridge that should not have been authorised. The council and local people objected to it, but because, on a technicality, the council had slipped below the five-year land supply for a short period, the developer claimed that the council was in breach and that this totally unnecessary and unwanted development should therefore go through. We must listen more to local people on things such as this, not just have a tick-box exercise and permit developments that are long term and not wanted. This is in an area where we are building more than twice the national average in terms of housing. This is not about nimbyism at all.

I also want to point out the importance of the quality of new housing. Many of the new houses that are being built are not up to standard, and it is vital that that should be tackled, but not only that—we should go further, including with insulation. We should ensure that all new houses are built to the highest possible energy saving standards; that they have, where possible, integrated solar; that they have car charging points; and that they have the highest quality insulation.

My local hospital, County Hospital, has had its difficulties over the years, but I want to praise the work that it has done such that, in most weeks, more than 95% of people are seen, admitted, treated or discharged within four hours. That is one of the best records in the country and the hospital deserves great credit for that, but it is under consultation at the moment, and one of the issues is, again, the future of our emergency department. However, I am glad that the trust has made it clear that that department is secure. It has my absolute support in that. I will not tolerate the downgrading in any way, shape or form of the emergency department.

However, the stand-alone maternity department is at more risk. The reason is that people are not using it. This is one of those “use it or lose it” cases. I urge all those in my area who are talking with their patients—pregnant women—to say, “Look, there is this alternative.” Clearly, it has to be a safe alternative, which I fully understand, but I want that stand-alone maternity unit—

[Bob Stewart (Beckenham) (Con)]

I know Stafford quite well. If those people are not using the unit, where are they going?

[Jeremy Lefroy]

Most women will be going to a consultant-led unit in Stoke, Wolverhampton or Walsall. I understand that, and they may have received advice from their GP on the issue—this has to be clinically led—but I very much value the stand-alone unit in Stafford and want it to continue.

We also have a problem with shortage of general practitioners in Stafford. In fact, there is a shortage across the country, so I welcome the new medical schools that are being opened. I am delighted that my wife, who is a GP, was up in Sunderland this week giving some training at the new medical school, which is about to be opened. I welcome the ones that are going to be opened in Chelmsford and other places.

I want to raise a few other issues, such as visas, including for foreign spouses and partners. Many people have come to my surgery with real problems in getting visas, including visas to visit, let alone visas for residence, and those issues need to be looked at more sympathetically, as does the issue of visas for visitors from Africa. Last week, the hon. Members for Glasgow North (Patrick Grady) and for Newcastle upon Tyne Central (Chi Onwurah) and I published a report on the difficulties that African visitors have in getting visas. These are Government officials and business people. I had one case recently involving the headmaster of a school in Ghana who was coming to visit his brother for a couple of weeks—a very distinguished man. Of course he does not want to stay in this country—he would much rather go back and teach his students in Ghana—but it has taken ages and he still does not have that visa. We must, must do better and I urge all Members to read the report that we jointly produced.

Turning to business, this is a minor matter, although not so minor for those affected by it—bailiffs. The behaviour of bailiffs has been considered by the House and new rules have been put in place. However, there is also the matter of fees. Sometimes, fees go up enormously—exponentially—over time. We should look at capping bailiff fees. I understand that bailiffs are necessary; their role is important in enforcing payment of debt, but it must be carried out in a reasonable manner.

We also need to look at the infrastructure for charging electric vehicles. We talk about needing to move to electric transportation. Quite frankly, the charging infrastructure is very poor. It is getting better, although not nearly fast enough, but the grid is simply not there to support it, nor is the generating capacity. I have asked questions about this in the past. I believe that we are too complacent. If we are to move to electric vehicles fast—we are making them in the west midlands and in Sunderland—we need the infrastructure to support that.

Finally, two issues. First, I welcome the start, after about 30 years of discussion, of the African continental free trade area. This will be tremendous for the African continent, but also for all those such as the United Kingdom who wish to trade and invest far more with our friends and neighbours across the Mediterranean in Africa.

Secondly, I have recently had the pleasure of being appointed to the Environmental Audit Committee. We have heard that Natural England is grossly underfunded and cannot do the work that needs to be done on all these fantastic sites of special scientific interest, so I ask the Treasury to look carefully at restoring the funding that has been cut from Natural England.

Youth Services

Jeremy Lefroy Excerpts

Wednesday 24th July 2019 Commons Chamber

[Cat Smith]

I agree. That is why much of the excellent work that is being delivered is being done by volunteers and lower-level qualified youth workers. Many services are lacking that sufficiency of management and the qualified youth workers, as well as the administrative resources, which are all too often focused on applying for short-term funding.

Voluntary sector innovation has not happened everywhere, and it is reliant on talented individuals and committed organisations. Does the Minister agree that we are feeling a real gap as a result of the withdrawal of local authorities’ role in leading and facilitating youth work provision and that this is a burden on the already overstretched voluntary sector?

[Jeremy Lefroy (Stafford) (Con)]

The hon. Lady is making a very important point. I have been involved in youth work off and on for most of my adult life, and what I see now is voluntary organisations providing fantastic work—she has already referred to the uniformed organisations and YMCAs such as mine in north Staffordshire—but, to coin a phrase, there needs to be a backstop and that backstop needs to be the statutory services. Nowhere is that felt more than in rural areas, where often, despite the fantastic efforts of volunteers, there are simply not enough people who are able or who have the necessary training—even volunteers need training now—to fulfil that, so young people in rural areas are missing out.

NHS Pensions: Taxation

Jeremy Lefroy Excerpts

Monday 8th July 2019 Commons Chamber

[Elizabeth Truss]

There are specific issues affecting the NHS that the Health Secretary is rightly looking at and is about to conduct the consultation on. As I have said, the Treasury constantly reviews our tax system to make sure that it has the right incentives in it and that it is helping people to save for later years.

[Jeremy Lefroy (Stafford) (Con)]

In addition to the important points made by my right hon. Friend the Member for Wokingham (John Redwood) and my hon. Friend the Member for South Thanet (Craig Mackinlay), would it not be simpler and fairer to restrict pension relief to the basic rate and scrap all annual and lifetime allowances?

[Elizabeth Truss]

I thank my hon. Friend for his policy suggestion. I am afraid that during this urgent question I will be unable to commit to it, but it is certainly an interesting idea.

Precious Metal Markets

Jeremy Lefroy Excerpts

Monday 8th July 2019 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

It is a pleasure and an honour to speak about this subject. In fact, my good friend the Minister may be a bit surprised that I wish to speak about it, because I think that he would, like me, agree with the biblical verse which states:

“Lay not up for yourselves treasures upon earth, where moth and rust”

can damage them. However, I think he would also agree that trust in all things is incredibly important, and it is on that aspect that I wish to concentrate tonight, rather than the treasure that precious metals represent.

I am raising this subject for a number of reasons, which I shall go into in a moment. First, however, I must declare an interest, in that I have invested an extremely limited amount in precious metals as part of my pension provision.

My first reason for raising the subject is the importance of gold and silver as a store of value internationally. There are those who say that gold in particular is a relic of the past with little relevance to the modern financial system, but many countries do not seem to agree. Russia is steadily building up its gold reserves, which, 20 years ago, were well below those of the UK; now they are seven times as high. China rapidly increased its gold reserves in 2015. Several European countries, notably Germany and France, hold more than 60% of their reserves in gold. The United States—the owner of the world’s main reserve currency, which would perhaps have the least reason to hold gold reserves—still believes in gold, which comprises some 73% of its official reserves. And what of the UK? With just 310 tonnes—pretty much the same quantity for more than 15 years—we hold 8.5% of our official reserves in gold. However, this debate is not about the merits of the UK’s policy on official reserves, although I will refer to that briefly at the end of my speech.

If gold plays such an important role in nations’ reserves, it is vital that the means of trading it and establishing its price on the exchanges be fair and transparent.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on securing this debate. I sought his permission to make an intervention beforehand. Does he agree that there is a real need to safeguard investors and that the present procedures do not go far enough to protect them? They appear to be weighted on the side of the market, and this truly is not equitable or just.

[Jeremy Lefroy]

The hon. Gentleman makes a good point, and that is what I want to talk about: trust in the markets—and I am asking questions, not giving answers, because I do not have them.

We should note that gold and silver both act as currency crosses, trading as components of the $5-trillion-a-day foreign exchange marketplace. That is an astonishing figure. Clearly gold and silver are a very small part of the crosses market, but nevertheless they form part of it, and I have to say personally that I get increasingly worried by the huge volumes of daily trades on international markets and the vast amounts of derivatives that are outstanding at any one time. The last report I saw from the United States, I think from the last quarter, showed that something like $200 trillion-worth of derivatives were open at that time.

My second reason for raising the subject is that considerable quantities of gold and silver—and indeed the other precious metals, palladium and platinum—are mined in low and middle-income countries. As with other commodities—such as coffee and cocoa, with which I worked for many years, and still do a little bit—the price has a major impact on the economies of the producers; it has an impact on those who work in the mining industry and on the taxation revenues of the countries.

The third reason is that London is at the heart of the global trade in precious metals and has been since the late 17th century. At a time when institutions and businesses are under intense scrutiny, it is vital that we in this country uphold the highest standards, and I am sure my hon. Friend the Minister entirely agrees with that.

Just last year, a former vice-president of a major US bank pleaded guilty in the US to spoofing precious metals markets

“hundreds of times with the knowledge and consent of his immediate supervisors.”

Sentencing has been delayed; the implication is that the person is assisting the US Department of Justice’s investigation into others, possibly both within and outside the bank. Spoofing is a technical term, defined in the USA’s Dodd-Frank Act 2010 as

“the illegal practice of bidding or offering with intent to cancel before execution”,

or, in other words, to deceive the market. In another case, in January 2018, Deutsche Bank, UBS and HSBC paid $46.6 million in the US to settle Commodity Futures Trading Commission charges relating to spoofing in the precious metals markets.

I was first alerted to this subject by a constituent who had bought limited quantities of silver as an investment from Deutsche Bank while he was resident in Germany. Over the period in which he purchased the silver, the price peaked at $48 an ounce in 2011, and declined to below $20 by the end of 2014. It is always very difficult to determine the precise causes of a market’s movement; this was at a time of global uncertainty, financial stress in Europe and North America, and increasing demand for physical silver in electronics and other industrial purposes. My constituent stated in courts in both Germany and Birmingham in the UK that the bank had been manipulating the precious metals market. His cases were dismissed; nevertheless, shortly afterwards, in 2016, Deutsche Bank and others confirmed that market manipulation had indeed been taking place, and they paid penalties in the USA.

My constituent’s contention, with which I have considerable sympathy, is that it is the small retail investor who pays the price for such illegal behaviour of traders and the banks for which they work. The regulators, and hence the Governments, receive the fines, but investors find it almost impossible to prove a loss directly, because a number of factors affect market prices, not simply the illegal activity.

My intention in calling for this debate is not to seek any conclusions at this stage, or to go into the details of precious metals trading—still less of the complexities of derivatives contracts that piggyback on the metals—but rather to ask the Minister and the Government some questions and to call for action. My reasoning is that our country depends, more than any other major economy, on the stability of and trust in our financial services sector. The sector provides much well-paid employment, not just in London. Here I should express my regret at the job losses announced today in Deutsche Bank. At least 2 million people are employed in financial services throughout the UK, not just in London, and the sector contributes up to 10% of Government revenue. It also includes our heavy responsibility for and stewardship of the precious metals that we store and trade on behalf of most of the countries in the world.

I wish to ask the Minister a number of questions. First, have the Treasury, the Financial Conduct Authority or the Bank of England made an assessment of the result of the recent J.P. Morgan case involving the rigging of precious metals markets and its potential impact on the UK? After all, we are talking about financial institutions with a global reach. Secondly, do the UK authorities believe that any similar activity could take place, or has already taken place, in the UK, or by a bank domiciled here? Thirdly, if there is evidence that the manipulation of bullion markets by banks over a period has resulted in lower prices than would otherwise have been the case—that is clearly something to be proven—what recourse do producers and retail investors have against banks for that manipulation?

Fourthly, it is estimated that the quantity of so-called paper gold—that is, delivery contracts for gold—is approximately 100 times the quantity of available physical gold. That is not peculiar to the precious metals market; it happens with other commodities as well, but it is nevertheless a noteworthy situation. I accept that it is unlikely that most such contracts will end up requiring the delivery of physical gold, but what assessment have the authorities made of the risk that if delivery is required, those requirements might not be met? We have to take into account the steady increase in demand for gold—and, indeed, all precious metals—by states as well as by industry.

I suggest that, in addition to answering these questions, the Government commission an independent inquiry or review into the bullion market, particularly in the UK. Gold and silver are not simply commodities like coffee, cocoa, sugar or copper, vital as those are; they are a bulwark of the global financial system, the importance of which is possibly increasing. The UK is a relatively minor holder of gold as part of our reserves, but gold constitutes the majority of the reserves of many other countries. We have a significant role in the stewardship of the reserves of others, both physically and in their valuation. The trust that others place in our country and our institutions in this area matters enormously. An independent inquiry or review at this time would underline the fact that we value that trust greatly, and that we will strengthen controls wherever necessary. Indeed, I believe that some controls have already been strengthened in the recent past. Such a review or inquiry would also flag up risky or illegal activity and ensure that those responsible were brought to book, including by being required to compensate those who have suffered from it.

As I said at the beginning, my aim in this debate is to see whether there has been any activity in these markets in the United Kingdom that we should be taking a closer look at on behalf of investors, particularly the small retail investors who put some of their savings into these commodities; but it is also about the trust in our system in the United Kingdom. There is a huge amount of trust in the UK and its institutions. I believe that that trust is almost always well placed, but it can only continue to be well placed if we constantly scrutinise the system and check instances where we have an indication that things have not always gone well, or perhaps are not going well now, and take action quickly.

[The Economic Secretary to the Treasury (John Glen)]

I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for raising a set of complex but important issues with the rigour and grasp of detail in his analysis that has characterised virtually every speech that I have heard him make in his nine years in the House. I listened carefully to what he said and I am grateful for our earlier conversation, which helped me in preparing what I hope is an appropriate response to the points that he has raised. Although I cannot comment on individual cases, I would also like to express my sympathies for the constituent whose experience he referred to.

The precious metals market is an important part of our economy, as my hon. Friend said, and London is one of the most important gold trading centres in the world. They and markets like them have a real impact on individuals, households and businesses, which includes his constituent. Those markets underpin borrowing costs, exchange rates and the cost of food and raw materials, and they help firms and households to manage financial risks and investments. A well-functioning derivative market fulfils a vital role in that process.

[Jeremy Lefroy]

One point that I should have mentioned but did not is that precious metals, probably with the exception of gold, have many other uses—silver in antimicrobial products and platinum and palladium in exhaust pipes and reducing emissions—so they are extremely important, both as a store of value and in having real practical uses.

[John Glen]

My hon. Friend is absolutely right and draws attention to the ever-expanding functional use of these metals in ever more sophisticated ways.

Precious metals allow businesses around the world to hedge their risks by reducing uncertainty about future prices. For example, a mining company can agree a price today for the gold that it will extract in the next year, safeguarding itself against potential future price movements and providing certainty over its income. Attempted market manipulation, such as the type that occurred in the US, undermines integrity, reduces public confidence and impairs the effectiveness of the financial markets. We take this extremely seriously, and it is therefore vital that we do everything in our power to detect and prevent such abuse.

Additionally, gold plays an important role in nations’ reserve policy. The Treasury’s role is to ensure that its choice for the strategic composition for the benchmark asset allocation of the reserves, including gold, meets the policy objectives of the exchange equalisation account.

My hon. Friend raised several important questions, which I will attempt to answer. I want to refer first to the significant volumes of derivatives and his question about the potential risk for financial systems. Derivatives are an important risk management tool and are used to hedge positions in underlying assets against adverse movements. They allow financial institutions to identify, isolate and manage separately the market risks in financial instruments and commodities. It is internationally recognised in forums such as the G20 that derivatives need sound risk management. Global financial regulators work to ensure that the derivatives market has robust oversight, monitoring, reporting and controls. In the EU, the legislative framework, which includes the market abuse regulation and the markets in financial instruments directive, does this.

The market abuse regulation, or MAR, provides the Financial Conduct Authority, as the relevant national competent authority, with the powers it needs to detect and prevent financial market abuses, such as insider dealing, unlawful disclosure of inside information and market manipulation. The regulation has been regularly revised and updated, most recently three years ago in 2016. MAR covers all financial instruments traded on regulated markets, multilateral trading facilities and organised trading facilities in the EU. It also covers financial instruments not traded on such markets, where the instrument’s price or value is dependent on the price of a financial instrument traded on a regulated market, multilateral trading facility or organised trading facility. Included in this scope are exchange-traded commodity derivatives. This means that gold futures, for example, are in scope of MAR.

MAR imposes stringent requirements on UK trading venues and firms, which have a duty to detect and report market manipulation. Trading venues and firms are required to establish and maintain effective arrangements, systems and procedures to prevent and detect all types of market manipulation.

--- Later in debate ---

[John Glen]

These arrangements must allow for the analysis of each and every transaction executed, and order placed, modified, cancelled or rejected. UK trading venues are also obliged to report to the FCA, immediately upon detection, all orders and transactions, including any cancellations or modifications, that could constitute market manipulation, attempted market manipulation or any other type of market abuse.

[Jeremy Lefroy]

Is my hon. Friend able to confirm whether there has been any indication, not necessarily just in precious metal markets, of this nefarious practice of spoofing within markets in the UK?

[John Glen]

I am just coming on to that, and I will make reference to some of the observations that have been made.

We are confident under MAR that where market abuse behaviour relates to exchange-traded commodity derivatives, as in the J.P. Morgan case, we have robust transparency systems and controls in place. Furthermore, in terms of enforcement, there have been examples in similar markets where traders have been caught attempting a similar type of market manipulation. For example, in 2013 a trader was fined almost £600,000 by the FCA for the manipulation of exchange-traded oil and gas futures.

The recent J.P. Morgan manipulation case in the US involved activity on a US-regulated exchange. The FCA’s regulatory scope obviously does not extend to oversight and enforcement in the US market. The FCA’s remit covers instruments traded on UK markets. The US authorities, therefore, have a remit over this behaviour, and it is in their competence to act against it on behalf of consumers.

On the manipulation of bullion markets, it is important to distinguish between the underlying market for commodities and the market manipulation of exchange-traded commodity derivatives. With regard to the former, precious metals are global commodities, where price is determined by the forces of demand and supply.

It should be noted that the Government have already taken action to ensure that specific commodity benchmarks for price setting are in scope of the market abuse regime. The London Bullion Market Association gold price and silver price—the global benchmark prices for unallocated gold and silver delivered in London—are within scope of the UK’s domestic benchmarks regime, which is the world’s first framework for regulating benchmarks. This means the administrators of those benchmarks, and those firms submitting to them, became subject to FCA authorisation and regulation. Manipulating the benchmarks is a criminal offence. The benchmarks are also regulated under the EU benchmarks regulation, which will supersede the UK regime when it comes fully into force in 2020.

My hon. Friend raised the potential risk of “paper gold” contracts, which are designed to reflect the market price of gold. Investors may use the contracts for hedging or speculative purposes, and without any overall intention to receive or deliver the physical asset. For example, a customer may have a claim on a bullion bank account provider for an amount of gold without physically possessing it.

This type of activity, relating to unallocated gold, does not guarantee an equal exchange for metal. Therefore, the risk that delivery is not met as part of the contracts should not undermine the overall market, given that this delivery is not guaranteed and the risk is priced into the instrument.

The Government commissioned the “Fair and Effective Markets” review in 2014 to restore trust in fixed income, currency and commodities markets. This review made several recommendations for the commodities markets, including the benchmark reforms I spoke of earlier. The review also established the FICC Markets Standards Board—the FMSB—an industry body to improve standards in wholesale fixed income, currency and commodities markets. The FMSB has already produced several industry-led standards and statements of good practices that have seen widespread adoption. The FMSB also supported work by the London Bullion Market Association to develop and issue the global precious metals code in May 2017. The code applies to the LBMA’s members’ dealings in the bullion market. It sets out the standards and best practice expected from market participants in the global wholesale precious metals market. It covers a wide range of topics, such as conduct, information to clients and the avoidance of market abuse. The code applies to LBMA members, who must publicly attest their compliance with it.

To conclude, I am confident that the robust regulatory framework in place in our country provides the FCA with the right tools in its regulatory perimeter to detect and respond to these attempts and ensure that the market works in a way that is fair and effective for all who wish to participate. I thank my hon. Friend for raising these important issues in the manner that he has. I trust that this response gives him considerable confidence in the sophistication of the regulatory regime that we have in place. There is never room for complacency in these matters. I acknowledge the concerns he has raised and I will take them on board as we look to the future.

Oral Answers to Questions

Jeremy Lefroy Excerpts

Tuesday 2nd July 2019 Commons Chamber

[Elizabeth Truss]

The universal credit policy has been designed to make sure that people who are being supported by the Government are in a similar position to families who have to make their own financial decisions based on the wages they earn every week.

[Jeremy Lefroy (Stafford) (Con)]

The decision by the European Union to suspend the equivalence agreement with Switzerland seems to be very damaging. My right hon. Friend the Chancellor has done a fantastic job over the past few years. Will he confirm whether the United Kingdom was consulted on whether the decision should go ahead?

[Mr Hammond]

We have been closely involved in this issue, discussing it both in the EU and with the Swiss. I can tell the House that although on the face of it the withdrawal of equivalence had a very significant effect on the ability of UK shareholders to trade Swiss shares on the Swiss stock exchange, the measures that the European Securities and Markets Authority announced on Friday significantly mitigate the impact. So we very much hope that the European Union and Switzerland will be able to reach agreement, and of course there is a very direct relevance to the UK’s own negotiations with the European Union.

Co-operative and Mutual Businesses

Jeremy Lefroy Excerpts

Thursday 27th June 2019 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

As always, it is a real pleasure to follow the hon. Member for Huddersfield (Mr Sheerman). I thank the hon. Member for Harrow West (Gareth Thomas) and my hon. Friend the Member for Wycombe (Mr Baker) for bringing forward this really important debate.

Over the years that I have been in business and, indeed, in this House, I have come to see more and more the importance of the co-operative and mutual movement. Perhaps some Members know this, but I wonder how many people know which bank in the world is top of global sustainability rankings. It is Rabobank, a co-operative bank from the Netherlands, which, last year, had a net income of €3 billion and a balance sheet of more than €40 billion. That shows that a co-operative can be a global player. I have had the honour of working with the Rabobank Foundation in Tanzania where they supported a shallow well drilling project, which my wife was helping to run. I also have seen its work in other countries both as a commercial entity and through its magnificent foundation. That is one thing that a co-operative bank on that scale can do; it can give back enormous sums to the communities in which it works, both through better and cheaper services, financial services in this case, and also through supporting community work.

Further afield across Europe in Switzerland, the two biggest retail groups are both co-operatives: the Co-op itself and Migros, which has more than 100,000 employees. They show how co-operatives can work on a major scale and provide great benefit to their communities and to their staff.

On the international scale, I want to draw attention to Fairtrade, which I have been involved in for many, many years. Without the co-operative movement in the United Kingdom and, indeed, across Europe, Fairtrade would simply not be where it is. We need to remember that the UK has the greatest level of sales of Fairtrade goods of any country in the world—more than £2 billion a year—and the co-operative movement deserves huge credit for that.

[Stephen Doughty]

I thank the hon. Gentleman for giving way. Is he also aware of the role that the co-operative movement and co-operative MPs have played, along with MPs from across the House in the all-party group for Fairtrade, in highlighting corporates, such as Sainsbury’s, that are trying to downgrade the role of Fairtrade products? We highlighted the fact that it was selling tea that it called “fairly traded” which was not Fairtrade tea. It is not only about boosting Fairtrade globally, but about defending its position. That is at the very heart of the co-operative principle.

[Jeremy Lefroy]

I welcome what the hon. Gentleman says, and he is absolutely right. I would say that Sainsbury’s has also been a strong supporter of Fairtrade, but we do not want to see any dilution or diminution of those principles. Fairtrade is like a brand. People will pay that bit extra because they know that what they are buying has been reliably sourced from farmers or other producers who have been properly paid for their work. It is a brand like any other brand, but it is more than that; it is something that we have to have trust in, and we do not want to see any diminution of that at all.

I want to talk briefly about the role of co-operatives in financial services, in three specific areas. First, my constituency is home to the excellent Stafford Railway Building Society, which was founded in 1877. It is local and exists to provide mortgages to local people. It was set up, obviously, by the railway workers of Stafford—Stafford is one of the major railway junctions in the whole UK rail network—and it is still there, providing excellent financial services, profitably, to my constituents and the near neighbourhood. I pay tribute to all those who have made it what it is, because people give up a lot of their time to serve on the board or as staff in the building society. Particular credit goes to Mike Heenan, a friend of mine who was very much involved in the building society for many years; Susan Whiting, who took over from him as the chief executive; and the current board and management of the building society.

Stafford Railway Building Society will be around for the next decade, two decades and three decades, because it is run responsibly and its capital is built up every year as it does not have to pay dividends. Where it can help is by providing cheaper and better services to its members through the retention of that capital.

The second area I want to discuss is credit unions, which have already been mentioned by the hon. Member for Stoke-on-Trent Central (Gareth Snell). I declare an interest in that I was a member of the Staffordshire credit union and was very sad indeed when it closed. I have to give credit where it is due; it was closed in a responsible manner and people got their investments back, but it was very sad that it had to happen. I ask the Government to look at why such an important local institution has to close because of regulation. We all know that there has to be regulation, but are there ways in which regulations could be changed so that they would not have such a dramatic effect on a very important and loved local institution? I very much hope that we will see the return of a Staffordshire credit union at some point in the near future.

The third area where the co-operative and mutual movement has a very important role to play is in small business finance, but it is not able to do that enough at the moment. The Co-operative Bank clearly has an excellent record in lending and providing accounts for small business, but the co-operative and mutual movement should have a much greater role to play in the provision of loans to start-ups or equity capital for small businesses. I pay tribute to the Black Country Reinvestment Society, of which I am a member. The society provides lending to businesses in Staffordshire in my constituency and across the Black Country. It is an excellent institution, but we need more such institutions and we need them to play a greater role in the provision of the equity capital that is so often as important—particularly for modern, high-tech businesses—as the loan capital that they more traditionally provide.

I pay tribute to the role that the co-operative and mutual movement has played in the history and economy of the United Kingdom. All speakers, including my hon. Friend the Member for Wycombe have mentioned the fact that it is about not just the money and the business, but the co-operation. It is about building our social fabric—goodness knows we need to bring people together more and more at the moment, in times of quite considerable division. I urge Members on both sides of the House to support mutuals and co-operatives in their constituencies, as I know many do, as much for the fact that they bring people together to work for the benefit of their community as for the undoubted financial and economic benefits that these great movements bring to our country.

--- Later in debate ---

[Gareth Snell]

I thank my hon. Friend for his intervention, because he takes me neatly to my next point, which is about learning from good practice on a smaller scale that directly benefits our economy. The Co-operative Councils’ Innovation Network, of which he and I were both members when we were council leaders, demonstrates overwhelmingly what can be done if we put a small amount of investment into local projects. Tudor Evans, who leads the council in the constituency of my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard), and Sharon Taylor in Stevenage are just a few examples of people who are pushing this agenda nationally.

If we put a small amount of investment into a group of people who want to change the way that their town works, we can get huge dividends back. If we move away from a simple contractual relationship for a new business towards profit share for rental purposes or an equity share in lieu of rent, we can suddenly start to sustain our high streets better. We can see empty units revitalised by businesses that can think about long-term business planning, rather than short-term business planning to meet next month’s rent and rates bill. We end up with a greater economic benefit to the local community.

If the Government thought about how they could help local authorities to do the sort of work that the Co-operative Councils’ Innovation Network is doing across the country, they would see an increase in potential tax take, because there would be more thriving small businesses. What do we know about thriving small businesses? We know that the people they employ spend their money in the neighbouring shops, and we have a circular economy, whereby one or two different thought processes about how we include more people in decision making in a community leads to economic benefits for not only the Treasury but local communities. That should surely be looked at by this Government or the next Government or as part of Labour’s commitment to at least double the co-operative sector.

The mutualisation argument extends to not only high streets but things such as public services for buses and trains. There is an argument for utilities to be mutualised, because these are things that we all use. If we mutualise and say that the people who use those services should have a stake in the control of them, those services can be driven to a higher quality and standard. There can be financial dividends for the users, but there can also be improvements in standards of delivery, because the people using the services are in control of how they are used. That is a fundamentally simple model that is not being exploited sufficiently by a number of Government bodies at the moment.

[Jeremy Lefroy]

The hon. Gentleman is making an extremely important point, and I agree with everything he is saying. One body that is, in effect, a mutual and is growing month by month almost under the radar is the National Employment Savings Trust—NEST. It is growing by several hundred million pounds. Last I saw, it had £5 billion, and by the end of the next decade, it will probably be one of the largest financial institutions in the country. It is doing a great job in many ways, yet almost all the top 10 investments of NEST are in overseas companies, not ones in the UK. It may have operations in the UK, but they are overseas investments. Does he agree that, given that it is a mutual, or at least owned with social purpose in the mutual interest, at least some of those investments could be put into precisely the things he is talking about?

[Gareth Snell]

I agree entirely. The hon. Gentleman, as always, has touched on a pragmatic and simple way of fixing something that should not be a problem to start with. He talked about the Staffordshire Credit Union. The reason the Staffordshire Credit Union ended up folding was that we were unable to meet the Prudential Regulation Authority’s 3% threshold rule between capital and assets. With a very small investment that a body like NEST could have provided, we would have been able to continue helping the thousands of people who were members, offering secure, low-return financial products to people who need it the most—people in communities such as Stoke-on-Trent, where payday lenders prey because they know that people want to borrow money quickly. While credit unions do not provide an immediate alternative to payday lending, they are part of the mix that is available. I can immediately think of a number of organisations that would benefit from the sort of investment the hon. Gentleman mentioned, and then the mutual role of NEST would get to grow and become even greater.

I want to go back briefly to my point about railways and buses. I may end up falling out with my Front-Bench colleagues on this issue, as on many others. State ownership is still a monopoly, and if we are talking about ways in which we could open up public services to be democratically controlled by the public, we need to mutualise them. We should allow and facilitate worker and management buy-outs of existing companies that are looking to be sold, and enable places to allow municipal bus companies to come back into the mix. This would help to sustain the market and—again, I go back to this point—make sure that people using those services have some semblance of taking control of those services and delivering them in a way they think is appropriate for their communities and sustainable in the long term.

This goes not just for public services. We have not touched on the potential economic benefits of things such as fan-owned football clubs and how we should do more to push fan-owned stadiums. In many other countries, it is not uncommon for sporting facilities and sports clubs to be owned, operated and managed by the users of those facilities. In this country, we have not particularly got into that model, as far as I can see, with the depth and the courage that others have.

Finally—I am conscious of the time—about 18 months ago, my hon. Friend the Member for Harrow West (Gareth Thomas) ran a very clever social media campaign pointing out that if the 5% profit of some of the largest companies in the country was shared among their employee base, each employee would receive a certain amount of money, emulating the French profit-sharing law. To turn full circle back to my first point, if we had such a law in this country—it is not necessarily a co-operative solution, but it is about profit sharing and sharing the values of co-operation—what would happen to that money? Most people who work in such companies and small-scale industries will spend that money locally: more money in their pockets means more money going into their local high streets, shops and facilities. I am sure the Government have already looked at the circular effect of an economic benefit coming from a co-operative solution, even if it is not a co-operative model, and if they have not already committed to looking at the French profit-sharing law, I would encourage the Minister to do so.

It would be wrong of me not to talk about the Co-operative Group as a whole. As has been mentioned by a number of my colleagues, it is not just about the financial products and services it offers, but the values and ethics it brings to them. The Co-operative Group is leading the way on dealing with modern slavery, food injustice and food hunger, and retail crime. It knows that, at the heart of everything it does, is its staff and its consumers, and those are the values that I am sure the Minister will have heard about in every contribution today and will want to make part of any Government strategy on co-operatives.

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[The Economic Secretary to the Treasury (John Glen)]

It is a privilege to respond to this debate today on behalf of the Government. I would like to thank the hon. Member for Harrow West (Gareth Thomas) and my hon. Friend the Member for Wycombe (Mr Baker) for securing the debate, and the 11 Back-Bench Members who have spoken this afternoon about the enormous positive contributions that co-operatives and mutuals make to our economy and society.

I start by paying particular tribute to the hon. Member for Harrow West for his nearly two decades of leadership of the all-party parliamentary group for mutuals. In my rather more modest tenure of not even 18 months as Economic Secretary to the Treasury, he has lobbied effectively and constructively on these matters, and I will respond to the points he and other hon. Members have made in the course of this debate. I would also like to congratulate the hon. Member for Redcar (Anna Turley) on her recent election as Co-operative party chair and thank her for her contribution today.

The House has heard some impressive figures on the economic contribution made by co-operative and mutual organisations in this country and more widely across the globe. I would like to acknowledge the experience of my hon. Friend the Member for Stafford (Jeremy Lefroy), who brings great insights through his work in this country and also in Tanzania. That came over strongly in his thoughtful contribution and his suggestions.

[Jeremy Lefroy]

I thank the Minister for all the work that he does. Another major co-operative that is important to my farmers is an overseas-based one called Arla. It is based in Denmark, but it is a co-operative that works across borders for the benefit of all farmers—in Britain, Denmark or wherever else.

[John Glen]

Once again, my hon. Friend makes his knowledge clear. We should be looking to replicate the principles behind that model and to examine how we can extend it.

The all-party parliamentary group for mutuals found that mutuals generate over £130 billion of income each year but, of course, the contribution they make is about so much more than the raw numbers. Crucially, the House has also heard about the positive difference that such organisations make to people’s lives across the UK. I have been fortunate in my time as Economic Secretary to witness their impact at first hand. Last year, I visited 1st Class Credit Union in Glasgow, where I saw the effect of its work to help its members save and borrow responsibly. In my constituency, I am delighted to see my local co-operative, Chalke Valley Stores, flourishing as a community hub, providing a shop, café and post office to local people who might otherwise be underserved in this rural location. Various Members made the point about the welcome opportunities that exist, given the changes on the high street.

From fishing and school meals provision in Plymouth to funeral savings in Stoke, we have heard a large number of relevant examples this afternoon. Whether it is a young family able to buy their first home thanks to a mortgage from their local building society, a community that comes together to keep their local pub or lido running, or an individual able to pay off their debts and start building up savings with the support of their community credit union, mutuals and co-operatives bring choice and agility to our financial system and economy, ensuring that it can meet the varied needs of society.

As we have heard, mutuals are diverse organisations, found in almost every sector of the economy, meaning that the opportunities and challenges can be different. Let me first talk about building societies. Earlier this year, I was pleased to attend a reception to mark the 150th anniversary of the Building Societies Association, which has been the keeper of the flame for the building society movement since 1869. Building societies have been around since almost a century before that, with largely the same core purpose as they have now: helping people to buy their own homes. Building societies provide almost a quarter of UK retail mortgages, including one in three of new mortgages approved in the last quarter.

Although the core purpose remains unchanged, building societies have not stood still. Modern branches offer video mortgage advice and banking on iPads. They are also driving some of the most interesting innovations in the mortgage market. For example, the Saffron Building Society has launched a guarantor mortgage, while Marsden is the latest building society to offer a joint borrower, sole proprietor mortgage. Those two schemes take into account the financial circumstances of family members in order to give first-time buyers a leg up on the property ladder. Meanwhile, the Ecology Building Society offers green mortgages for self-build properties and discounted borrowing for home improvements, which is another great example of how the mortgage market can respond to the needs of society and of the generations to come.

As for retirement lending, it is hugely encouraging to see regional building societies, such as those in Leeds, Nottingham and Loughborough, offering retirement interest-only mortgages.

Oral Answers to Questions

Jeremy Lefroy Excerpts

Tuesday 9th April 2019 Commons Chamber

[Elizabeth Truss]

I think the hon. Gentleman should speak to his friend the Mayor of London about what he is doing to increase house building in London.

[Jeremy Lefroy (Stafford) (Con)]

What plans are the Government making for a UK investment bank to take over the role of the European Investment Bank in the UK economy?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

In the spring statement, my right hon. Friend the Chancellor launched a review of our infrastructure financing, which includes that question on whether the UK would benefit from institutional arrangements. We have also made significant funds available to ensure that there is no shortfall for businesses that rely on the EIB.

Taxation of Low-income Families

Jeremy Lefroy Excerpts

Wednesday 16th January 2019 Westminster Hall

[Jeremy Lefroy (Stafford) (Con)]

I beg to move,

That this House has considered taxation of low-income families.

It is a great pleasure to serve under your chairmanship, Sir David. As a Conservative and a Christian, I believe passionately in the importance of caring for those families who find themselves at the bottom of the income distribution. It is vital that there is a proper, decent safety net to enable families where the adults either are not in work or cannot work to have a decent standard of living, to live in proper homes and to have a proper income. At the same time, making work pay has been a priority for the Conservative and Conservative-led Governments since 2010. In this context, the effective marginal tax rate—the proportion of any additional £1 earned that one would lose in the form of tax, national insurance and lost benefits—is the key consideration.

If we look at a one-earner, two-parent family with two children, paying income tax and national insurance and in receipt of tax credits, we see that they face an effective marginal tax rate of 73%. That means that, as they look at the prospect of earning more, they will be confronted by the fact that they will get to keep only 27p from every additional £1 earned. If a 73% higher rate tax was introduced—I recall when it was well into the 80s; indeed, on unearned income it was 98% at one point—there would be an outcry from higher earning people and probably from the whole public. Yet that is the effective marginal rate of tax that we, though the system that we in Parliament are responsible for, expect low-income families to pay.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the hon. Gentleman on securing the debate. This is an issue that I and many others have taken an interest in for a long time. Does he agree that, particularly for those who are on full-time low pay, or part-time pay, if we gradually moved toward a position where the first £15,000 per annum was tax-free and there was no requirement to pay national insurance contributions on it, that would be a huge incentive against the black economy, as well as promoting people’s getting out of the working tax credits system and into employment, to try to work their way up through the salary chain?

[Jeremy Lefroy]

The hon. Gentleman makes an extremely important point. I shall refer to three reports today, but this one, “Make Work Pay: A New Agenda for Fairer Taxes” by the Centre for Policy Studies, suggests a tax and national insurance-free income of, I think, £12,000 a year, which is similar to what he suggests. I have a lot of sympathy for that. I would counsel against those who say that national insurance is a thing of the past and totally irrelevant; I believe in the importance of a social insurance contribution-based system, provided that it is progressive and proportionate, and I would not like to lose that, but I entirely agree with the principle of what he says.

Lest anyone wonder whether these high effective marginal tax rates are just an anomaly that, for some curious reason, only impacts one-earner, two-child families on 75% average wage, the point must be made that our high marginal rates are a problem for all family types: single parents, single-earner couples and dual-earner couples. One in three in-work families with dependants are likely to be facing high effective marginal rates. That is 2.5 million families—or 1.6 million couples—of whom 1 million are single earners, 600,000 are dual earners and 900,000 are single parents.

Put simply, any family paying tax and national insurance and receiving tax credits will be looking at an effective marginal tax rate of 73%. Families that, in addition to receiving tax credits, also receive housing benefit and council tax benefit will be looking at a marginal rate of 96%. Under universal credit, the 73% rate will increase slightly to 75%, but the 96% rate will come down to 80%. A 16% drop is significant, but an 80% effective marginal tax rate is still far too high. There is a lot that I would like to say about improvements that I would propose to universal credit, but that is a debate for another day.

Instead of encouraging aspiration, the combined impact of our tax and benefits system suffocates aspiration, trapping families in poverty. That is a burning social injustice that must be addressed. Much of the cause of our high effective marginal tax rates, particularly for single earner couples, is as a result of the introduction of independent taxation in 1990. Since then there has been little or no recognition of family responsibility in the tax system. Not recognising that responsibility in income tax, through a system such as elective joint taxation, has led to a tax arrangement that is anti- aspirational. It is interesting that the former Chancellor, Lord Lawson, wanted to include some kind of joint responsibility in the new system when it was introduced, but it was opposed by the then Prime Minister.

Families in poverty pay thousands of pounds of income tax, but then have to be supported by very inflated benefits, which offset the failure to recognise family responsibility but with the very costly downside of cripplingly high effective marginal tax rates that suffocate aspiration as the inflated benefits are withdrawn. In 2014 I co-authored a report with my hon. Friend the Member for Congleton (Fiona Bruce) and two other colleagues, “Holding the Centre: Social Stability and Social Capital”, which touched on many of the issues we are debating today, although not in such detail on this particular subject. As we noted in the report, many of the Government’s—all Governments’—most important goals rely on the contribution of families. However, too often that contribution is under-recognised and the impact of policy on these relationships ignored, under all Governments.

The report pointed out the vital role that family relationships play in our economic prosperity, wellbeing and the life of our children, as well as the cohesion and social stability of our nation, where growth and prosperity are underpinned by fairness, responsibility and community. The stability of marriage and supporting aspirational families are integral parts of the social capital of our country that leads to social stability and economic prosperity. A Government who draw on and nurture the wealth of our social capital, supporting families and strengthening relationships, can give people confidence about their future prospects and the ability and opportunity to see aspiration fulfilled.

These issues are vital, and therefore I note with pleasure that the Strengthening Families Manifesto group of Conservative MPs, led by my hon. Friend the Member for Congleton and by Mr David Burrowes, the former Member for Enfield, Southgate, has recently held an inquiry into making work pay for low-income families. The report was published this morning to coincide with this debate. My hon. Friend will outline in greater detail some of the report’s specific findings and recommendations. I underline the call in the report for the Chancellor to review formally the effective marginal tax rate for families, assessing the reasons why work does not pay for so many families and evaluating the possible solutions, with a particular focus on the tax system and the recognition of family responsibility.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

I congratulate my hon. Friend on securing this important debate. Despite all the other things going on, this is hugely important. He mentioned a burning injustice—all our ears will have pricked up at that phrase and he is absolutely right. I and other colleagues signed a new clause to the Finance (No. 3) Bill, which was not selected for debate, but does he agree that this does not need an Act of Parliament for the Chancellor to review it, and that the Chancellor can still review it despite the fact that the new clause was not selected or debated and is not part of a formal Act of Parliament?

[Jeremy Lefroy]

My hon. Friend is absolutely right, and that is why both the debate and that report are so important in showing the Chancellor that this issue is vital for many colleagues across the House.

I will finish with the fact that it is surely very telling that in 1990, just as independent taxation was introduced, far from 73%, the effective marginal tax on a one-earner family with two children on 75% of the average wage was just 34%, close to the average 33% effective marginal tax rate on such families today across the OECD as a whole. We are a total outlier in this respect, and in the wrong direction. If we managed without such aspiration-killing tax rates on working, low-income families in the past, we can and must do so again.

I very much hope that the Minister, for whom I have the highest regard, agrees and will tell us that the Chancellor is willing to review our marginal tax rates, as my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) mentioned, and bring forward strategies to gradually bring them in line—I realise this is a huge ask— with the OECD average over the years, so that we can become an aspirational economy once again.

--- Later in debate ---

[Fiona Bruce]

That is absolutely right. We outline in our report several reasons why this needs to be addressed. I will touch on four of them.

First, the hon. Gentleman is right that these arrangements are anti-aspirational. Secondly, we believe that they are illogical. While we as Conservatives celebrate the family—my hon. Friend the Member for Stafford said families are the bedrock of a strong, stable and flourishing society—we tax them as if they are individuals while at the same time operating a benefits system that views them as families.

Thirdly, the current arrangement is anti-choice. The best systems of independent taxation give couples the choice as to whether the two people are taxed independently or jointly. Fourthly, it appears judgmental. Any family in which the second earner is either not in work or earning less than their personal allowance will be hit hard and judged for that arrangement. My right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) gave evidence to our inquiry and commented that we find ourselves in the peculiar situation of saying that we are not very judgmental, but being very judgmental at the same time. We are judgmental about couples who choose for only one spouse to work. The huge impact of that was underlined in evidence to us from the Child Poverty Action Group, which said that it looks like

“having a second earner in the labour market in Britain today is necessary to get oneself out of poverty”.

To some extent, we are telling parents staying at home to look after children or relatives that they are making the wrong choice, yet, as our report says, it is in the long-term interests of Government and society to have stable families in which children are nurtured and cared for to give them the best start in life, and if, in some situations, that means taking time out from work, particularly when children are under five, surely that should be encouraged and accommodated.

[Jeremy Lefroy]

My hon. Friend makes the incredibly important point that this is certainly about children, but is also about carers. The enormous number of unpaid carers in this country do a massive amount for our country and society, but the current system does not help them, either.

[Fiona Bruce]

That is absolutely right: they do indeed.

We talk about cripplingly high effective marginal tax rates, but actually it costs money to go out to work. Often, it costs money to clothe oneself for work and to travel to work, and it is more expensive if one has to buy lunch out, so some people will effectively earn nothing when they go to work. That cannot be right. As my hon. Friend has said, what is proposed will help different types of family: single parents, married couples and couples in which one person works or one person provides care for other members of the family. Work is good—we know that—but it costs, and it is outrageous that some of the poorest in our society face some of the highest tax rates. One of the highest priorities of the Conservative Government should be to tackle and solve this burning social injustice.

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[Chris Green (Bolton West) (Con)]

It is a pleasure to serve under your chairmanship, Sir David. It is a pleasure to follow my hon. Friend the Member for St Austell and Newquay (Steve Double), who highlighted something of immense importance: the ability of a family member to be able to care, not only for children, but for elderly relatives and other members of the family who need that support. It is so important that the state and society recognise the importance of carers. We have to enable them to care without being under too much pressure, financial or otherwise.

I welcome this debate, introduced by my hon. Friend the Member for Stafford (Jeremy Lefroy), on the taxation of low-income families. I am delighted that the strengthening families manifesto has been published today. I believe that the family is the building block of society—the foundation on which society rests. Family is the source of our health, wealth and happiness. That may be contrary to what many people believe about Conservatives. People often see Conservatives as hyper-individualistic—it is all about the individual. However, I believe that the foundations of much Conservative philosophy and Conservative values rest on the importance of the family.

It is vital that the Government recognise in their policies that work pays. I will not go into the details, which my hon. Friend the Member for Congleton (Fiona Bruce) went through so effectively, about the impact that the tax system can have on a low-income family, especially someone earning 75% of the average wage—it can be such a disincentive to work. We ought to be looking at the advantages that having a good job and place of work can give to someone as a role model in the family. If we hinder their ability to take those additional hours and to be at work more, we are effectively denying people the opportunity to gain experience at work. They do not feel there is an incentive to work, so they do not get that experience.

That also sends a message to the employer. Employers want to invest in their workforce, to give more skills to the people in their company or organisation. However, if someone is working relatively few hours, there is less return on that investment. If someone can work more hours, they are more likely to secure training provided by that company. If someone has more experience and training, that individual may be able to get a promotion or a better position at work, or may have the opportunity to change companies and find a different position. That is a huge incentive. It has been mentioned that the current tax system crushes that aspiration. It is so important that we change that for this really important sector of society, to give those people an opportunity to aspire and improve themselves. That attitude and those values will then permeate through the family and the wider community.

The manifesto published today provides a huge opportunity for the Government to change their policy. With their ideas of making work pay and supporting families, the Government are sympathetic to that. I recognise the current economic challenge, with many demands on Government time and money, but given the return on this investment—the improvement in society—it is worth changing the taper and improving it for those low-income families.

[Jeremy Lefroy]

My hon. Friend makes an important point about the money. These things do not come without a certain loss of revenue. Does he agree that one area to look at—it is interesting that the Centre for Policy Studies suggests that we look at this—is the higher-rate tax relief on pensions. As Members of Parliament we all declare an interest, because we are all taxed at the higher rate and all have pension contributions. That is given to people who already benefit from the 20% allowance and then there is another 20% on top of that. Although some restrictions have been introduced in recent years, that is an enormous cost to the Exchequer, to the benefit of people earning double or triple the national average wage.

[Chris Green]

My hon. Friend makes a superb point. It is a significant problem that apparent inconsistencies in the tax system give people who are already doing pretty well a further advantage, yet poorer people not do not receive that advantage. Looking more broadly at society, a few years ago there were riots in London and other cities around the country, and we are currently concerned about rising crime and the people causing those problems. We also have to look at how we can strengthen families, because I think that a certain societal cohesion comes from a strong family. That has so many other impacts across society. We may not immediately see income return, but in a stronger, healthier society the returns will be immense, not only for society, but for the Exchequer.

--- Later in debate ---

[Jeremy Lefroy]

I thank all Members for their contributions today. Extremely important points have been made. I thank the Minister for his commitment to look at this area, and I thank my hon. Friend the Member for Congleton (Fiona Bruce) for driving this forward, together with other colleagues here today. I also thank the hon. Member for Glasgow Central (Alison Thewliss) who made important points. I do not agree with all of them, but two need looking at, including the two-child limit, about which I have concerns. I am really pleased about the announcement made this week, but we need to go further. Secondly, I entirely agree with her on bringing families together. I have experience of that in my own constituency.

I also agree with the hon. Member for Bootle (Peter Dowd), who speaks for the Opposition. The Labour party did some extremely important things. Some were reversed, some maintained, and some I would like to see brought back. We need to go further. He is absolutely right: there is no monopoly of virtue or vice in this area in any party. We all have to work on this for the benefit of our constituents.

Question put and agreed to.

Resolved,

That this House has considered the taxation of low-income families.

Sitting adjourned.