Court of Auditors 2009 Report

Jim Shannon Excerpts

Wednesday 2nd February 2011 Commons Chamber

[Justine Greening]

That remoteness—the lack of the ability, day to day, rigorously to monitor how spend is going on—is one reason why we have reached this stage today. Also, it is fair to recognise that 80% of the spending happens at member state level. Therefore, there is some challenging complexity for any system in ensuring that that spend across those disparate member states, some of them new, is effective.

In spite of that, we have to get a grip. Our Government in the UK are getting a grip on departmental spending and the EU needs to do the same. I say to my hon. Friend the Member for Crawley (Henry Smith) that I think that there is now an appetite across member states to start to address the issue. There is more of a common agenda—perhaps at the EU and member state level—to address financial management. I welcome that development, but I am also determined to harness it while it is there to get change for the better.

As I was saying, the Court of Auditors report was published at the same time as the EU-level negotiations were taking place on the 2011 annual budget.

[Jim Shannon (Strangford) (DUP)]

The number of member states has risen from nine to 27, and the number of staff involved here has risen to some 200, yet the number of reports produced has gone down from 15 to six. If we are going to get a grip, we also need to get a grip on the financial situation in relation to what the Court of Auditors delivers and the work that it does. Does the Minister agree that something has to be done about that as well?

[Justine Greening]

Yes, I do. The Government thought it totally unacceptable that EU officials received a 3.7% pay rise when our Government had to propose a pay freeze for public sector workers. We are not the only member state taking difficult decisions such as that. The debate the hon. Gentleman is referring to is the one we have already actively engaged in, which is about not only the level of the EU budget, but what we spend that money on and ensuring it is spent on the right things that deliver the right priorities for people on the ground, whichever member state they are in.

We are about to engage in a debate, which is important for the longer term, on how we change that mix of investment to make it more significant. It is called the debate on the financial perspective, and the hon. Gentleman will be aware that that relates to the seven-year plan, whereas early last year we debated the budget for 2011. We have a chance to have that more fundamental debate about how we spend money within Europe. The Government are keen to lead that debate at EU level.

Loans to Ireland Bill

Jim Shannon Excerpts

Wednesday 15th December 2010 Commons Chamber

[Mr Osborne]

I have said that I regard this as a case in its own right—a very specific case. As I have explained, quite candidly, my officials offered me two options: a general, enabling piece of legislation allowing us to make bilateral loans to other countries, and the much more narrowly drafted Loans to Ireland Bill. I think that the clue is in the title.

[Jim Shannon (Strangford) (DUP)]

Over the past few days we have seen substantial growth in the economy of the UK mainland, but that growth has not been reflected in Northern Ireland, as some of its financial institutions—notably Ulster bank—have indicated. What assurance can the Chancellor give the Northern Ireland Assembly, the Minister of Finance and Northern Ireland Members in the House that, at every stage, full consideration will be given to how loans to the Republic of Ireland will affect the economy in Northern Ireland? At this stage, we feel apprehensive about what is being proposed.

[Mr Osborne]

I completely understand the hon. Gentleman’s apprehension, given the close connections between the economies of Northern Ireland and the Republic of Ireland. Let me make two points. First, as I said earlier, the loan has enabled us to be part of the international discussion about the restructuring of the Irish banks, some of which—as the hon. Gentleman knows even better than I do—are incredibly important operators in Northern Ireland. I appreciate that he will not have had a chance to study the loan agreement, as I have laid it before the House only within the last couple of hours, but one of the conditions is that there should be

“no amendments to the Restructuring Plan that would have a material adverse financial impact on the UK operations of Anglo Irish Bank, Allied Irish Banks and Bank of Ireland”.

That partly addresses the banking situation in Northern Ireland, and, as I have said, it gives us a seat at the table in discussions that affect the UK.

Secondly, as the Secretary of State for Northern Ireland said this morning during Northern Ireland questions, we want to engage with the Executive, with representatives of the Assembly and, indeed, with Members of Parliament about how we can enable the Northern Ireland economy to grow. A draft paper has been put to the Executive. I am very engaged in the process, as is my hon. Friend the Financial Secretary to the Treasury. I repeat the offer that I made earlier to hold a detailed discussion with Northern Ireland representatives, at any point, about some of the broader economic measures that we might be able to take in Northern Ireland to help its economy.

Crown Currency Exchange

Jim Shannon Excerpts

Tuesday 7th December 2010 Commons Chamber

[Tessa Munt]

Absolutely. Alarmingly, the FSA website states:

“We keep an up-to-date record of all FSA-regulated firms, bodies and individuals doing business in the UK. Our register is available to the public, so you can search for more information on all of our authorised firms.”

The problem is that the FSA seems to use “registered”, “regulated” and “authorised” almost conversationally, but in legal terms those definitions should not be bandied around on its website in such a way.

[Jim Shannon (Strangford) (DUP)]

Throughout the whole United Kingdom, not just on the UK mainland, but in Northern Ireland, those who can least afford it have invested money in that system. I understand that a police investigation started today. Does the hon. Lady agree that, on the back of that investigation, a Government investigation should follow?

Banking Reform

Jim Shannon Excerpts

Monday 29th November 2010 Commons Chamber

[Mr George Mudie (Leeds East) (Lab)]

I compliment the hon. Member for Bromsgrove (Sajid Javid) on a thoughtful speech. At one point, I disagreed with him and at other points I found myself very pleased with the sentiments that he expressed. The Backbench Business Committee deserves congratulation for tabling the motion and I hope we will have more opportunities to discuss the subject in Government time. We must reach consensus if we are to get this right.

I worry, particularly against the background of what is happening in Ireland, that we are going too slowly. There was an argument in the beginning that we should not do things in haste and that was sensible, but three years on from the time Northern Rock went down we should be starting to implement some of the measures, not merely discussing them. I know that there is an international context, but on the domestic front we should be further forward than we are.

The Government’s amendment mentions matters such as “regulatory architecture” and “prudential regulation”, both of which are part of the package that is going through the Select Committee on the Treasury and that will eventually come to the Floor of the House. I am not sure that they alone will matter. Basel III, according to the Governor of the Bank of England, “won’t prevent another crisis”. I think that is fair.

So, Basel III, regulatory architecture and prudential regulation are what the Government initially—certainly in this low-key debate—are putting forward as important. They are secondary to an acceptance by those who are in the banks and who own the banks of the fact that they need regulating and that they should share the objectives of the regulators. Sadly, in the past three years I have not seen any signs that that has been accepted at a senior level in the banks. If we were to look for one person, organisation or thing that started or caused the crisis, we would be wrong, but central to it were the banks’ securitisation exercises and adventures, which paralysed the whole financial structure and the wholesale markets. They must be accepted as a major part of where we are now and of what we have gone through.

[Jim Shannon (Strangford) (DUP)]

The last bank bail-out—for the Royal Bank of Scotland, Lloyds TSB and HBOS—cost £37 billion and we were told that there would be conditions on staff bonuses, but nothing has happened in the past three years. Does the hon. Gentleman agree that one of the things that annoys people the most is the bonuses that go to staff members when the banks are not doing their job?

[Mr Mudie]

The hon. Gentleman makes a very powerful point which links with a point I was about to make. I have described the regulatory structure. There are differences between regulators throughout the western world, but the fact that they were all caught out shows that structure is secondary and that changes to structure alone will not prevent another crisis. We have all been affected despite those different structures, so one cannot attack regulatory structures or see them as a salvation. I regard such restructuring as simply rebuilding the Maginot line: it shows the public that we are doing something, that we are hard at work and that there is something concrete, but when it comes to effectiveness, it would suffer from the same deficiencies as the original Maginot line, so I do not think that structure matters.

If the banks, the bankers and their shareholders do not accept that they have to change their practices then what do we have? We have no regret from the banks and no acceptance that they played a part in events. Let us consider their behaviour over bonuses.

Independent Financial Advisers (Regulation)

Jim Shannon Excerpts

Monday 29th November 2010 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I congratulate the hon. Member for Wyre Forest (Mark Garnier) on securing this important debate. I am pleased that the hon. Member for West Worcestershire (Harriett Baldwin) referred to the Kensington Friendly Collecting Society, which is a very good organisation in my area.

As a Co-operative Member, I represent the interests of some people on low incomes who have been denied access to financial advice and products provided by friendly societies and mutuals as a result of the qualification requirements contained in the retail distribution review. The Kensington is a friendly society that has existed in Middlesbrough for 106 years. Mark Brooks, who is the chairman of its committee of management and a constituent of mine, and James Lancaster and Phil Carey wrote to me from the Kensington to raise their situation. The Kensington has 10,000 members throughout the Teesside postcode area. It provides savings and insurance products to those members for as little as £1 per week and a maximum of £5.70 per week. It provides opportunities for its members to obtain basic financial products. Without this provision, members of the society would largely be excluded from financial services and have to go to more expensive services, namely the banks, or to loan sharks.

The RDR is currently being finalised by the FSA. Its most likely outcome will be that the society will close down, which will mean that 10,000 members will lose their ability to save small sums of money for their funeral or for a rainy day. The reason is that the FSA is proposing a blanket qualification for any person offering financial advice—a qualification that is considerably higher than the current requirement. The FSA will not permit exemptions to this qualification structure, and it will not permit a gradual increase in qualifications vis-à-vis the risk and complexity of the product being advised on. The advisers at the Kensington and other societies will be required to obtain degree-level qualifications to sell a simple endowment or whole-of-life policy for a maximum premium of £5.70 per week. This is the only type of product that they sell, and the level of qualification required is disproportionate to the advice that they give.

The syllabuses of the proposed qualifications are irrelevant to the needs of those on low incomes. The exams focus on trusts, inheritance tax, capital gains tax and portfolio management. Those on low incomes may aspire to require this level of financial planning, but in the here and now they need advice on issues such as debt and benefits. The qualification requirements will mean that members of this society and others will be denied access to financial advice after 2012. The society will be unable to recruit new members because its advisers will be unable to offer advice to prospective members. A lack of new members will mean that this society and others will close. As a result, their members will lose access to financial products that they can afford and, in all likelihood, will be excluded from financial services thereafter.

That outcome seems to contradict the aims of the FSA and the Government in tackling financial exclusion. The RDR, while seeking to protect the interests of high net worth consumers, is by default taking away one of the few opportunities that those on low and insecure incomes have to obtain financial products. If the Government and the FSA are keen on promoting financial inclusion and financial literacy, then the existence of friendly societies like the Kensington is essential in delivering such benefits to those on low incomes. The concept of mutuality appears central to the idea of the big society, yet the consequences of the RDR would be to remove the remaining friendly societies that promote this notion.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Gentleman agree that the reduction in IFA numbers would also have an impact on the volume of new insurance policies and the work that would come from that?

[Tom Blenkinsop]

Yes, I certainly agree. We would lose skills and experience, as well as putting people out of jobs for no good reason whatsoever.

The qualification requirements would deliver no discernable benefit to the vast majority of consumers beyond the wealthiest few. Let me assure hon. Members that by arguing against the proposed qualifications, I am not saying that such members deserve less than the better-off, but merely stating that they require different things.

The Kensington has increased its premium income by over 40% in the past seven years despite the fact that tax-exempt premium limits have not been increased during this period. That indicates that there is a demand for the service and the products. The Kensington delivers products that fulfil real needs for those on low incomes. For example, in the Teesside area, owing to bad debt difficulties, undertakers will not proceed with a funeral unless the deceased’s relatives can provide a deposit of £750. The Kensington, among others, can fulfil that need because its minimum premium is £1 per week, which is enough to generate £1,000 of death cover. It has a local presence, which means that the agent can deliver a death claim cheque to the family directly within two working days of the member dying, and the whole process is conducted by someone whom the family knows.

The majority of members of the Kensington and other friendly societies in Teesside live in the poorest and most socially deprived council wards in the UK. Our people require honest and appropriately qualified agents who understand the benefits system, can provide advice on debt issues, and can generally assist in all forms of financial planning for those with limited disposable incomes. It is difficult to imagine that any such member would ever require advice on IHT planning, trusts, corporate financial planning, portfolio management or CGT.

The QCF level 4 is a disproportionate qualification for the home service market operating within tax exempt limits. It will not add value to consumers, nor improve the service that they receive. It will make home service sales forces even more expensive to run and will generate further financial exclusion. A more considered qualification that focused on the real, everyday financial issues that affect those on low incomes would be welcome. Current academic thinking reinforces my view, which I assume is shared by other hon. Members, that the only effective method of accessing and engaging those on low incomes in savings and protection products is a direct sales force. Indeed, the Department for Work and Pensions website states that tenant engagement teams are being piloted to increase take-up of home contents insurance,

“particularly as all other traditional methods of promotion (leaflets, flyers, competitions, prizes etc) have not resulted in large scale increases in the number of policy holders.”

In conclusion, the RDR qualification requirements for advisers selling tax-exempt, small premium assurance products are disproportionate and irrelevant to the needs of those on low incomes. The RDR will reduce the access of those on low incomes to basic assurance products at a time when significant amounts of energy and money are being invested in promoting financial inclusion in that area.

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Members for West Worcestershire (Harriett Baldwin) and for Wyre Forest (Mark Garnier) on introducing this apt motion. It has certainly galvanised a lot of interest in my constituency. Like all hon. Members, I have received e-mails, letters and phone calls, and I have held personal interviews, so I have had lots of information. My constituents have made it clear to me from the outset that this is not just about advisers who provide help to wealthy people who can stay at home and watch their money work and grow. I am speaking tonight on behalf of people who have a small sum of disposable income and who wish to enhance their small pensions at retirement age and seek help and advice from financial advisers. They have asked me to speak on their behalf, and I happen to know that some of them are watching the Parliament channel to see that I say what I said I would say.

One constituent sent me some background information, which sets out the situation very clearly. The retail distribution review appears to offer solutions—at least on paper—to matters which the FSA has identified as problematic within the industry. I am not aware of those problems, which concerns me. The FSA believes that the measures set out in the RDR proposals will provide for greater consumer confidence and engagement within the industry. It is planned that all advisers attain the qualifications and credit framework level 4 qualification by 31 December 2012.

A constituent of mine wrote:

“I have attended seminars at which RDR and the future of Independent Financial Advisers are discussed. They all have the same line…segment your client base…they give guidelines how to do this so that we have an income stream from a fee base structure. If I were to follow this suggestion I would have 3 clients left. When I question this approach, on every occasion the reply is…I need to change my market.”

Did anyone ever hear such advice in all their life? Goodness me!

[Tom Blenkinsop]

Building society closures and the exodus of the large phone service companies have reduced almost to nil the supply of premium products for those on low incomes, particular the 4 million who still feel disengaged. What do the hon. Gentleman’s constituents think about that?

[Jim Shannon]

I thank the hon. Gentleman for his comments. I have the same concerns.

It is estimated that it takes 400 hours to do the exams. That is approximately 10 weeks when people do not have the opportunity to earn money or do what they normally do. Advisers in Strangford have painted a different picture to that painted by the retail distribution review. Most of the customers of advisers in my constituency are working class. I have been informed by many financial advisers that they have spent time with people without receiving any financial reward—we have heard that from hon. Members on both sides of the House tonight.

One adviser offered advice to a female client who was about to go through a separation. She was stressed out about her finances, but the adviser spent a lot of his time on the phone to her. For all his work, he earned not a penny. The road that the regulator is pushing advisers down will mean that they will be unable to afford time if they do not get paid. Will we therefore end up with people being unable to afford sound financial advice, exactly as the hon. Gentleman said?

I represent a rural area, as do many hon. Members, including the hon. Member for Aberconwy (Guto Bebb). We are aware how the proposals will affect and impact on people in rural areas. Consumers will suffer substantial and unprecedented detriment owing to the unintended consequences of the proposals. Would it not be wiser or better to protect grandparent rights, as at least two or three hon. Members have intimated? Doing so would give the protection that many need. A substantial portion of the adviser population will leave the industry. Various surveys have been conducted and although there is no consensus on the figures, it is obvious that adviser numbers will fall drastically.

One of my constituents in Strangford wrote:

“I am 54 years of age…the heavy regulation is taking its toll. I am ¾ of the way through the new exam structure. Many advisers are finding it impossible to pass these exams as many are over 55 and are finding the stress unbearable.”

Another hon. Member referred to a 63-year-old adviser for whom contemplating exams will put him away in the head. The result will be anxiety, depression and stress. My constituent predicted a drastic fall over the next three years in the number of independent financial advisers. He continued:

“Advisers are finding the regulations unbearable, and many are having problems due to”

what is taking place. He made a statement that I found moving and honest:

“We are all starting to swallow the negativity thrown at us by the regulator over the past numbers of years, which is trying to kill us off”.

Now IFAs are facing another obstacle and barrier. We cannot afford for any businesses to be lost, especially ones that will take the financial burden off the state by enabling people to supplement their pensions and not need state aid and benefit. They are the people in my constituency and across Northern Ireland on whose behalf I wish to speak.

Robin Stoakley, head of intermediary business at Schroders, said:

“I do see up to 30 per cent of the IFA market leaving”.

How on earth could we support something that would take away 30% of the IFA market? Furthermore, Aviva UK Life marketing director, David Barral, said the firm predicts that by 2013, IFA numbers will fall to 10,000, leaving middle market consumers unserviced.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does the hon. Gentleman agree that at a time when we desperately need small and medium-sized enterprises to be increasing their activity, not reducing it dramatically, this is a disastrous thing to be happening?

[Jim Shannon]

I agree wholeheartedly with the hon. Lady. The one great thing about tonight’s debate is that we have, I think, a united front—if that is the way to put it. All the parties are in agreement, which is good news.

Time does not permit me to go through the long list of people in the industry agreeing with the prediction of a sharp decline in the number of advisers owing to these proposals. However, it is clear that there is a definite problem with these regulations and their impact on IFAs. If the adviser population falls by about a third, as predicted, it will leave millions of consumers without an adviser. Some will migrate to other advisers—we understand that—but a great many will be left without a trusted source of advice. The UK currently suffers from the largest saving retirement and protection gaps in its history, and it is essential that these gaps and the current over-reliance on the state are reduced. I think that many in the House are prepared to accept that.

The UK can ill afford to lose 10,000 advisers. Such a catastrophe would intensify the existing problems. The UK’s leading consumer champion, Martin Lewis, of Money Saving Expert, remarked:

“There’s a worrying possibility that the FSA is about to kill off”—

his words—

“independent financial advice in the UK for all but the wealthy. I do hope I’m wrong. I’m not convinced most people will want to pay for advice. The commission route has the advantage that you don’t pay a fee each and every time you want information; you can go without the worry of laying out cash.”

That is an expert’s opinion.

I speak not only for the financial advisers in my area who have been forced out of their jobs, but for the wee man and the wee woman who have asked me to come here and fight their case for them. I also stand for the thousands of people in my constituency who benefit from the current system. People who are forced to pay for all advice offered will be unable to invest much, and therefore will not invest or, worse, will invest somewhere they should not, with dire consequences. I am aware that it is the FSA that is making these recommendations, and I ask the Minister to do the honourable thing and support the alternative proposals put forward. They would benefit the larger advisers, as the FSA is trying to do. However, we also have to look after those disadvantaged consumers, so I urge the House to support them.

[Several hon. Members]

rose—

National Insurance Contributions Bill

Jim Shannon Excerpts

Tuesday 23rd November 2010 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

I have always been a very practical person. I ran my own successful business for some 25 years before handing the work over to my son. I am the first to acknowledge that in order to spend money one must have money coming in as well, because if one does not have that, one does not have a business. I live in the real world in the area that I represent, with unemployment and bills, and with families struggling and businesses barely surviving. I fully grasp the very tenuous financial position that we find ourselves in as we try to claw our way out of the deficit. I accept that Government, the coalition, and all of us together have to be involved in that and make a contribution towards it.

I welcome the range of packages that the coalition has brought forward through the Bill, which will directly help the lower paid. That is positive, and I am glad to see it. The national insurance contribution holiday is also a positive move. However, I feel that I have to comment on behalf of people who may not always see the benefit of these measures—those to whom I have spoken over the past week in anticipation of this debate, who have concerns and have asked me to convey them in the House tonight. I understand that this further tax hike is a blow to some of the people I represent—the middle classes and the self-employed. They see it as such, and I have to say so. The rise in national insurance for employers and employees will dissuade some employers from offering additional hours.

A perhaps forgotten and ignored issue is the impact on the morale of people in such businesses who do not see the benefit in the proposals before us. There is no better way of illustrating a case than taking an example from my own constituency. Just in the past few days, I had the opportunity to speak to a young married couple who have two children. They are both working. They are not entitled to housing benefit, so some years ago they bought their own house, and they have a fairly large mortgage. For them, the cost of living has increased dramatically. The husband is self-employed, and he cannot raise his prices in line with the prices coming in, because then he would not have any business. Indirect taxation has risen, and risen again. His business has suffered because people simply do not have the money to decorate their homes, which is what he does. The wife received a rise, with the additional pressure and workload that came with it, yet they find that being on the borderline of the new tax threshold means that they are scarcely better off. They are just on the wrong side of that tax threshold. The frustration they expressed to me demonstrated the sobering reality of how some people see the future of their business.

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

People such as my hon. Friend’s constituents are looking forward to the increase in personal allowances to which the Government are now committed, which is a good thing. However, given the increase in national insurance contributions, the anomaly is that such people will find it even more difficult to move out of recession.

[Jim Shannon]

I thank my hon. Friend for his comments, which are very positive. I think that if everyone sat down for a moment and looked at their own constituency, we could all replicate this situation everywhere across the whole United Kingdom.

The couple who came to see me did not have any help when their boiler broke, their car broke down, or the heating bills came in: they had to manage all that themselves. That puts things into perspective. They did not ask for a handout, or believe that they were entitled to one. They simply asked me whether I could do something, as the Member for Strangford, to represent their viewpoint in this Chamber, and that is what I intend to do. This is an example of the low morale of a hard-working family who feel that they are swimming against the current. I would always caution that we should ensure at all times that people feel that it is better to work, and these people have that work ethic, which is good news.

I know that Government Members will say that this is “only” a 1% increase in national insurance contributions, and that is true. Let us remember, though, that it is to be coupled with an increase in university fees. It must also be coupled with an increase in tax on oil, which results in higher petrol and diesel costs across the whole United Kingdom, particularly in Northern Ireland. We have the highest price for diesel and petrol in the whole UK, and the VAT increase in January will add to the price hikes and the pressure on families.

As a balanced individual who can see the good element in the Bill, I point out that the fact that new businesses will get help with their first 10 employees’ contributions is good news. However, I have to ask: what about the small and medium-sized businesses that are currently struggling, such as the one run by the couple I mentioned? To them, a £2,000 bonus would be the incentive to keep pouring their energy into their business. Many other businesses in my area would love to have that opportunity as well. I ask the Economic Secretary whether there is any scope for businesses that have opened in the past few years to avail themselves of help that could save businesses and jobs, and subsequently ensure that their revenue continues to go into the contributions pot.

The hon. Member for Newton Abbot (Anne Marie Morris) hit upon an issue that other Members have also mentioned, and I agree with her comments. I believe that small and medium-sized businesses need help. I do not believe that that can be done through the Bill, but I would like them to receive some contribution and help as a next stage. Perhaps the Economic Secretary will indicate whether and how that can be done, and on what time scale. It is imperative that we in this House have a full grasp of what is intended in the next period, so that we can go back to our constituents and let them know.

It is not in my nature to oppose anything simply for the sake of it. That is not how I work. However, I honestly believe that many people are on the brink, and I have to say so. Consideration must be given to small and medium-sized businesses and those with a small number of workers. I know that money has to be raised and that someone has to provide it. That is the purpose of the debate. What I do not know is why it has to be the same people who provide it all the time. That is what has happened. The self-employed, the middle class, and small and medium-sized enterprises that exist today must all be part of the equation. On behalf of the people of Northern Ireland, and of my constituency in particular, I ask the Economic Secretary to consider those matters fully.

Equitable Life (Payments) Bill

Jim Shannon Excerpts

Wednesday 10th November 2010 Commons Chamber

[Mr Hamilton]

The hon. Gentleman makes a very good point, and I cannot give him a precise answer. The figures that I have quoted are estimates I obtained from the Equitable Members Action Group, which has quite a lot of good people working for it—people who have been in the financial services industry. I go on their expertise. This is the best estimate that we can gain.

The reality is that many of the annuitants are quite elderly. It is unlikely that in five years we will have the same number we have now. We already know, for example, that every single day since the disaster happened 15 policyholders throughout the entire spectrum of Equitable policyholders have died. We can therefore assume, unfortunately, that more will no longer be with us in the years to come, so the amount of money will be a diminishing sum. The best estimate that we can gain is £200 million, and that estimate comes from EMAG.

[Jim Shannon (Strangford) (DUP)]

Can the hon. Gentleman clarify that last point? Obviously, since our last debate on the subject in the Chamber way back in July, some people have passed away. Is there any provision in the amendment for the next of kin to take advantage, in the absence of those who have passed on?

[Mr Hamilton]

That is a good point, and it was made during the previous Parliament, in February, at a packed meeting with the former Chief Secretary to the Treasury, my right hon. Friend the Member for Birmingham, Hodge Hill, and Sir John Chadwick. My right hon. Friend made a commitment, which I am not sure the Financial Secretary has made, so perhaps he will clarify the situation in his contribution, that the estates of those who had passed away would receive some compensation. The point that I have just made may be contradicted, but it depends on what the Financial Secretary and the Treasury want to do.

Savings Accounts and Health in Pregnancy Grant Bill

Jim Shannon Excerpts

Tuesday 26th October 2010 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

It is a sorry day on which we are debating this Bill on the Floor of the House. It is a sorry day too, when we realise that the people whom the Bill will hurt are those whom we have always had concerns about. The hon. Member for Blackpool North and Cleveleys (Paul Maynard) said that he could not see the real benefits of the schemes. As the elected representative for Strangford, I can quite clearly see the benefits for the people who come to my office—the people I help, the people I see every day. The attacks and the changes for children and pregnant women are wrong. The policy and the strategy that the Government have put forward will unduly hurt those who can ill afford it, and who will feel the impact more than most. I understand the need for the coalition—indeed, the need for us all—to look at how we can best save moneys, but the question has to be asked: is this Bill the best way forward? Is the best way forward to deprive those who can least afford it, and who will feel the impact more than most?

I did some research on Strangford—with the help of the staff in this place, of course. The number of parents or guardians in my constituency who have taken advantage of child trust fund vouchers totalled just shy of 6,800, with some 5,000 being for accounts opened by the parents or guardians and just under 2,000 for accounts opened by HMRC. The figures for Northern Ireland are clear, and they send a message. Northern Ireland has taken advantage of the scheme, and the area that I represent is part of that. Some 123,000 vouchers were issued before April 2008. My constituency has the third highest take-up of vouchers by percentage. For me, and for where I work and live, that clearly shows that the child trust fund puts money into the pockets of those who will need it in the time to come. It also enables young children eventually—when they turn 18—to be presented with a tax-free fund. I believe that the child trust fund should and could have done that, if it had been given the opportunity.

[Mark Durkan (Foyle) (SDLP)]

The hon. Gentleman will recall, from his time in the Northern Ireland Assembly, the strong campaign that was fought there to ensure that credit unions in Northern Ireland could become providers of child trust funds. That campaign was fought in this House too, such was the demand to ensure that child trust funds were used in Northern Ireland and to improve direct take-up, with more choices being made by parents. That campaign was backed by all parties and all communities in Northern Ireland. That is how popular child trust funds were.

[Jim Shannon]

I thank the hon. Gentleman for his intervention. The credit unions facilitated that role for child trust funds, as other Members have mentioned. The scheme was extremely popular in the area that I represent and in Northern Ireland as a whole. The figures that have been released clearly show that.

Parents did channel moneys and savings through for their children, but with respect I feel that the coalition—our Government—has stopped a worthwhile scheme, which will hurt the pockets of those who need help most. The ripples of that will come through in the next few months.

[Dr William McCrea (South Antrim) (DUP)]

The hon. Member for Blackpool North and Cleveleys (Paul Maynard), who spoke on behalf of the coalition a short time ago, suggested that the best way to encourage savings was to have a piggy bank in the bedroom. With the greatest respect, when we think about the amount of money that the parents of many of those children will have to pay and how much less they will have to spend on their children, we have to ask: where will they get that money to put into the piggy bank, and will that not increase the divide in our society and penalise its poorest members?

[Jim Shannon]

It has been mentioned by others that, for a great many in this House, there is an equality issue with this Bill. It will disadvantage those who can least afford it, and will give an advantage to those who perhaps do not need such schemes. We will eventually end up with inequality in our society. Northern Ireland was offering an example of how things could move forward, and the take-up of the child trust fund was an example of that.

The saving gateway account was a pilot scheme, and it never got as far as Northern Ireland—unfortunately. I was hoping that we could take advantage of the spin-offs for our constituents. There were certainly high expectations on the part of many, and that gave hope to a great many people. Again, the scheme was a savings account that involved the Government matching savers’ moneys, which encouraged people to be part of the process. Unfortunately, if the Bill receives its Second Reading, that scheme will also be knocked on the head, and that concerns me. I find it disconcerting that the saving gateway account should be banished to the dusty shelves somewhere, along with the opportunity that it could have given to those who need it most.

The health in pregnancy grant never was a good sum of money, but it did help those whom it was supposed to help. The hon. Member for Blackpool North and Cleveleys referred to the Ronseal test and the rhododendron test. The Ronseal test is whether something does what it says on the tin, and I have to say that the health in pregnancy grant did what it said on the tin. As a representative, I can honestly say that it did deliver.

[Sarah Newton (Truro and Falmouth) (Con)]

There is absolutely no doubt that women’s health during pregnancy is vital, but I really must take issue with the hon. Gentleman. The health in pregnancy grant was a universal benefit, so a mother of three children such as me could have received it and, in these extremely difficult financial times, we have to make difficult decisions to ensure that the available resources are targeted where they are most needed. The Government are really targeting support for families on lower incomes in a huge range of ways. Does the hon. Gentleman not agree that it is far better to target the limited resources at the families in the greatest need—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.

[Jim Shannon]

Thank you, Mr Deputy Speaker. I am sorry that the hon. Lady does not see this issue as clearly as I and many Members on the Opposition Benches see it. The grant did help people, because many of them came into my office and my advice centre, and I could see that they were benefiting from it. We have to target those people, but I do not believe that that will happen under the coalition’s proposals. Those who need help the most will be disadvantaged and will feel the pain from the changes more than anyone else. I understand that qualification for the grant was conditional on the involvement of a GP, a midwife, a welfare officer or a social worker.

[Dr McCrea]

Will my hon. Friend tease this out a little further? I am not sure what part of the coalition’s proposals targets the people the hon. Member for Truro and Falmouth (Sarah Newton) is talking about. The proposals deal with the removal of vital money, rather than with giving it to anyone.

[Jim Shannon]

I thank my hon. Friend for that intervention. We are clearly moving towards that, and if the Bill receives a Second Reading tonight, the opportunities will no longer be there for those who need them.

[Sarah Newton]

Will the hon. Gentleman give way?

[Jim Shannon]

As long as the intervention is shorter than the last one.

[Sarah Newton]

I would like to respond to the question from the hon. Member for South Antrim (Dr McCrea), because I can think of many clear ways of targeting people. We are absolutely committed to our investment in the national health service, to support for Sure Start centres and to the increased investment in district nursing through the Sure Start centres. As a result, a whole range of services will be available to pregnant mothers.

[Jim Shannon]

I thank the hon. Lady for her shorter intervention. I appreciate those opportunities for advancement, but the scheme we are discussing is targeted at a section of the community in which I can see its benefit. I have met many people who have been specifically targeted to receive the grant of £190. I dispute the view of those who think that many of the people who have received it should not have done so. That is certainly not my experience. Some coalition Members have referred to the grant as a gimmick, but I can tell them that it was not a gimmick to the people of Strangford whom I represent. It was something that they were able to use and take advantage of.

Household names such as the Royal College of Midwives have expressed disappointment at the decision to abolish the health in pregnancy grant, which, apart from providing pregnant women with much-needed financial support, provided an opportunity for midwives to communicate health advice to those women and their families. When such an astute body makes a statement like that, we need to take note. We cannot ignore it.

The National Childbirth Trust has also stated:

“At a time when families are trying to make ends meet, the Coalition Government has hit parents particularly hard.”

That is not Jim Shannon speaking; that is a quote from the NCT. Cutting pregnancy and maternity grants as well as cutting child benefits and tax credits will make things even more difficult for new parents and those wanting to start a family. I am very worried that parents and parents-to-be have been singled out unfairly. The coalition Government should stick to their commitment to making the UK more family friendly, but I believe that the Bill will change all that.

What will these measures mean for those who were destined to gain advantage for their health and their children’s health, and to stay out of the poverty trap? Some hon. Members have talked about the poverty trap today. The constituency that I represent has areas of deprivation, and I am sure that other Members are similarly disposed. I see my constituents regularly, and I have to tell the House that they will be disadvantaged by the proposals. I want to make it clear that I am here to represent them, and I hope that the Bill will be defeated. If it is, we will have done some good work here tonight.

I want the coalition Government to state exactly how they intend to stop even more people dropping into the poverty trap that I regularly see in my constituency. Will the Minister tell us what they are going to do to give hope to the people who will lose out as a result of the Bill? Are there any plans to fill that gap? Other Opposition Members have asked that question tonight. What is to be done to fill the gap, which has now widened? That question needs to be answered, and I am asking it on behalf of the people of Strangford and Northern Ireland whom I have the privilege of representing, and of the 123,000 people who took up the child trust fund and the 25,000 who benefited from the health in pregnancy grant. There are people out there who need that money and who benefit from it. I urge the coalition to think seriously about their proposals, because they will have a serious impact on the most vulnerable in society. That is something that I cannot support, and nor will I.

Comprehensive Spending Review

Jim Shannon Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

They said very clearly in their article IV assessment of the British economy that the measures we had taken were essential for fiscal sustainability. They do not always say that kind of thing about economies—last year, they criticised the previous Government’s economic plans. To be honest with my hon. Friend, I did not share all my detailed budget plans with the IMF; I thought I would share them with the House of Commons first.

[Jim Shannon (Strangford) (DUP)]

In the statement, the Chancellor did not mention additions to tax credits at any stage. One of the anomalies before the statement was made was, I understand, that people on an income of £45,000 would be penalised in their tax credits whereas those who had two incomes coming into their house, perhaps totalling £80,000, would not be penalised. That money is not cappuccino and cupcake money—it is for education and clothing for their children and for the mortgage. What steps will the Chancellor take to help those people?

VAT (Charities)

Jim Shannon Excerpts

Tuesday 19th October 2010 Commons Chamber

[Ian Lucas (Wrexham) (Lab)]

It is a pleasure to be here this evening, Mr Deputy Speaker.

First, I would like to declare an interest as an unpaid patron of two charities in Wrexham—The Venture and Dynamic. Many Members will be involved in charities in their own constituencies. There are, in fact, 177 charities registered in my constituency, although, of course, many more provide services there. All MPs see the positive work that charities do. In Wrexham, I have seen the development of services provided by charities since I was elected in 2001, often co-ordinated by the Association of Voluntary Organisations in Wrexham. Many services are provided in partnership with the NHS, such as the Nightingale House hospice in the town, and some work with the local authority.

There has been an expansion of the work of charities in recent years often to cover work that previously was carried out by the Government—at local or, indeed, national level. It is this concept that, I believe, the present Government wish to accelerate through the development of the Prime Minister’s concept of what he calls the big society. This process has created an anomaly. Services previously provided by local government benefited from an exemption, under section 33 of the Value Added Tax Act 1994, allowing local authorities to reclaim irrecoverable VAT incurred for non-business purposes. The rationale was that the VAT burden should not fall on local taxpayers. In a world where services are increasingly provided by charities, it seems unfair to require charities to bear that burden. Although the problem has existed for some years, it will necessarily be made bigger as more services are provided by charities, rather than by central or local government.

What undoubtedly makes the problem more acute is the Government’s decision to increase VAT from 17.5 to 20%. That was a choice made by the Government. At the same time as deciding to increase VAT, the Government chose to announce a decrease in corporation tax, which benefits Barclays bank, for example, but does not benefit charities, which do not pay it. The Charity Tax Group has calculated that the increase will cost charities £143 million—money that will go directly into the pockets of the Government. I would like to place on record my thanks to the Charity Tax Group for the considerable work it has done in raising the issue. As a first step towards addressing the problem of irrecoverable VAT, will the Minister agree with me that the Government should not benefit from charities having to pay more VAT? If the big society is to mean anything, how can charities be expected to bear an additional financial burden while being required to provide additional services?

I contacted local charities in the Wrexham area to try to assess the impact of the VAT rise on them, and a number came back to me with figures. Earlier I mentioned Nightingale House hospice—probably Wrexham’s best known local charity—which provides excellent care to local individuals suffering from cancer, many of whom end up dying. We all have hospices in our areas that provide excellent care, and the Nightingale House hospice told me that the increase in VAT would cost it around £10,000 a year—money going directly to the Government.

Hardest hit, however, will be those charities that provide goods and services for sale to vulnerable people. Vision Support is a charity that helps those across north Wales with a visual impairment. It has a large trading arm and supplies specialist equipment to the blind and partially sighted, such as phones and computer aids. Its VAT liability was £155,371 for the year ending 31 March 2010. The Government’s action means that the charity would have to pay an extra £22,195.86 in VAT—money that it cannot use to provide services to some of the most vulnerable in the community that I represent. Again, the money goes directly into the pockets of the Government. Can that approach really be justified?

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman has clearly outlined the issue for charities, but along with charities, there are probably literally hundreds of thousands of volunteers who do great work in constituencies across the United Kingdom. Does he agree that the change will affect not only charities, but volunteers and the good work that they do, and that this underlines the need for a VAT exemption for charities?

[Ian Lucas]

Certainly. We want to encourage volunteers in our society. They contribute hugely to community spirit, but it must be demoralising for them to have the hard-earned funds that they have raised taken away from them.

The issue is one that the Government should try to confront and deal with. It has been dealt with in particular circumstances in the past; for example, it was recognised by the last Labour Government, in their listed places of worship grant scheme. This paid the equivalent of the VAT expended on repair projects for listed places of worship back to those organisations. I have received representations from the Church in Wales asking the Government to extend that scheme beyond its end date of March 2011. Will the Government commit to pay charities generally the extra VAT that they obtain from those charities as a consequence of their own decision to increase the level of VAT? If the Government do not do so, that will diminish the capacity of charities to carry out their work.