Public Service Pensions Bill

John McDonnell Excerpts

Tuesday 4th December 2012 Commons Chamber

[Chris Leslie]

My right hon. Friend is correct. When we get a sense of the Government pulling the odd thread here or there or watering down elements of the provision—if I may mix my metaphors—it is no wonder that people start to question whether the words of Ministers at a particular point in time will carry through into what should be a 25-year commitment as set out in legislation. The provision was part of those negotiations but it has not found its way into the Bill.

Even more worryingly, the Economic Secretary made some peculiar statements in Committee about something that we thought was a done deal. He said:

“it is important that we consider in full the views of all stakeholders, including of course those who will be affected, through further consultation before making a final decision on the issue. It would therefore be inappropriate to include the fair deal policy in the Bill.”––[Official Report, Public Service Pensions Public Bill Committee, 22 November 2012; c. 459.]

It is as though negotiations had not been completed or decisions reached. Indeed, it sounded very much as if the Government were reneging on their commitment.

The Government need to lay to rest any suggestion that they are going back on their promise, and the only way to do that is to accept new clause 3. Failure to do so risks reopening debates and potential disputes with public service workers who will—justifiably—feel they have been misled.

[John McDonnell (Hayes and Harlington) (Lab)]

Part of the concern and need to write such provisions into the Bill comes from the fact that no one predicted clause 3. It has been described as a Henry VIII clause, as it gives sweeping powers to Ministers to legislate on schemes through statutory instruments or even retrospectively.

[Chris Leslie]

Indeed; we will debate some of the worst aspects of clause 3 later. It feels as though when writing the Bill Ministers did not consider it as enshrining an arrangement involving give and take on both sides. They have included certain things to the advantage of the employer, but there are scant—if any—safeguards of sufficiency and longevity for the employee, and that is causing anxiety.

--- Later in debate ---

[Mr Gibb]

I fear that we are straying slightly from new clause 3 and the group of amendments, but I believe that the Government’s economic strategy is right. It is a judgment call, but one that I believe has been proven right by the fact that the Government’s borrowing cost for 10-year bonds, as they seek to fund the deficit, which has been reduced by a quarter over the last two and a half years, is 1.8%. That is a tribute to the difficult judgments Treasury Ministers have made, and they should be given credit for their achievements. As a consequence, however, there have had to be increases in the contribution rates of active members of public service pension schemes. In addition, Lord Hutton believes that even if there was not a deficit, major reform of public service pensions would still be needed, if they are to be sustainable in the long run.

The Government’s commitment to sustainable public finances is of more concrete value than a proposal from a party with a track record of undermining the public finances. Ultimately, in a pay-as-you-go public service pension scheme, the quality and assurance that members want will depend on the ability of the Government to maintain stable public finances.

[John McDonnell]

I rise to speak to the amendments in my name: amendments 4, 7 and 8.

Throughout the progress of the Bill, I have tabled a series of amendments with a central thrust—the same one raised by my hon. Friend the Member for Nottingham East (Chris Leslie)—which is about trust. The amendments would ensure that at each stage and for each grouping, there would be full consultation with and the full involvement of representatives of employees and scheme members. I apologise: I should have declared an interest as a member of the local government pension scheme. Nevertheless, each amendment would address the issue of confidence and secure a recognition, as promised by the Government, that employees will be fully consulted and represented and kept fully informed of changes to their pension schemes, which has not been the case up to now.

It is worth remembering that the pension deal was not a deal for a large number of unions; for more than 1 million workers, it was imposed. The Northern Ireland Public Service Alliance, the National Union of Teachers, the Public and Commercial Services Union, the Prison Officers Association, the University and College Union and Unite did not agree to the deal or the heads of agreement; instead, the deal was imposed upon them. There is deep scepticism amongst workers, and if Government Members do not recognise that, they are not living in the real world, or encountering the same constituents I am, or receiving the letters I get from police officers, teachers and local government workers across the piece.

Even organisations that signed up to the heads of the deal are now expressing concerns. The British Medical Association, whose briefing Members will have received, thought it had signed up to an assurance from the Government, which I remember being made, that there would be a 25-year guarantee of no change around a number of protected issues. The Government said:

“This means that no changes to scheme design, benefits or contribution rates should be necessary for 25 years outside of the processes agreed for the cost cap. To give substance to this, the Government intends to include provisions on the face of the forthcoming Public Service Pensions Bill to ensure a high bar is set for future Governments to change the design of the schemes. The Chief Secretary to the Treasury will also give a commitment to Parliament of no more reform for 25 years.”

Yet clause 3, described in briefings by the Royal College of Nursing, the BMA and others as a Henry VIII clause, gives extraordinary powers to the Secretary of State to return to these issues, introduce further reforms and make fairly significant changes through statutory instruments, not primary legislation to be debated in the House. Consequently, there is a lack of confidence in the words of Ministers, particularly given that, as my hon. Friend the Member for Nottingham East said, those words are contradictory, not just across Government, but within the same Department. It is extraordinary.

Others also signed the deal. The RCN wrote to us explaining its concerns:

“Clause 3(3) is a Henry VIII clause which enables the Government to amend the Act at a later date through the use of secondary legislation. The RCN is concerned that, as a result, the Bill gives powers to the UK Government to amend and make retrospective provisions to any other related legislation without sufficient member consultation or scrutiny by Parliament.”

I also received a letter from Mary Bousted of the Association of Teachers and Lecturers, which also signed up to the deal. She wrote:

“As you may know, the ATL accepted the Government’s proposed final agreement on changes to the teachers pension scheme as the best that could be achieved through negotiations. We now find the Bill contains additional elements that go beyond what was agreed in March 2012 and believe that the proposed changes could adversely and unfairly affect the quality of education that the nation’s children receive in our schools.”

[Andy Sawford]

Is my hon. Friend aware of the concern among police officers, highlighted last week in an excellent Westminster Hall debate led by our right hon. Friend the Member for Leicester East (Keith Vaz)? Many police officers feel that the arrangements they have made for their later life and approach to retirement—for doing things such as helping their children to get into housing or paying their university fees—have been completely undermined by changes that have pulled the rug from under them right at the end of their working life, after they have made an incredible contribution to keeping our communities safe. It is those kinds of people we must think about today as we make these changes. As my hon. Friend says, we must give them much greater confidence and assurance.

[John McDonnell]

I fully concur with my hon. Friend. I received—perhaps he did too—an e-mail from Inspector Nick Smart, who wrote:

“I am a serving police inspector in West Yorkshire of 17 years. I am about to see my life plans thrown into chaos with the proposed pension changes, with my retirement age extended by at least two years plus a 20% cut in my lump sum—about £40,000—and a significantly worse annual pension.”

It is no wonder that people are demoralised and do not trust the Government. They thought there was at least a 25-year guarantee, but we now know that that is not the case, because the Government are giving themselves the power to change schemes at will in the future.

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman, like other hon. Members, will be aware of the indication that teachers will be asked to pay 50% of their contributions up until 2015, and they are not even safeguarded beyond 2015. Does he agree that, if the Government are not careful, they will create a breeding ground for discontent among teachers?

[John McDonnell]

Exactly, but I think it is across the piece. Whether or not we agreed with the last negotiations, or whether they were imposed or signed up to, at least some people felt there was some security for the future. People are becoming demoralised, which is why it is important that we insert in the Bill provisions for full consultation and agreement with organisations representing employees and for full openness and transparency. That is why new clause 3, moved by my hon. Friend the Member for Nottingham East, is critical. As has been said, at least in the private sector there is full display and transparency in what people sign up to, but there is no display or transparency in the public sector, particularly now that the Government have given themselves these powers.

[Mr MacNeil]

Given the comments about the police pension scheme, I am sure the hon. Gentleman understands the wish of the Scottish Police Federation that police pensions be controlled independently in Scotland. For England and Wales, however, does he feel that in future Governments should act more morally in relation to the terms of agreements that were made years before and under which police officers expect to retire, while also understanding, of course, that in Scotland they want clear of the system?

[John McDonnell]

I can fully understand the feelings of police officers in Scotland, as I can those of officers across England and Wales. People now just want safety and security in their pensions, which are theirs—they have paid for them and contributed to them. As my hon. Friend the Member for Nottingham East said from the Front Bench, they are nothing more than deferred wages.

[Richard Fuller]

I am intrigued by the hon. Gentleman’s point. He is absolutely right that firefighters, prison workers, doctors and nurses contribute to their pensions, but so do taxpayers. Indeed, a considerable amount of most public pensions is paid for by the taxpayer. If he wishes to push the point about certainty, does he agree that the Government should have considered a fully funded pension scheme, rather than rely on future taxpayers to pay for future pensions, with all the uncertainty about whether they will be able to afford it? Should the Government not have grasped the nettle and gone for a fully funded pension scheme now?

[John McDonnell]

The local government scheme is fully funded, yet the Government seek to interfere with that, too. If we are to open up the debate, let us do so; however, the Government seem to be making piecemeal reforms for their own economic objectives and then not even standing by them. The problem is the uncertainty.

Let me turn to the detail of amendment 4. As those of us who have been involved in pension negotiations will know, one of the most important elements is ensuring that the valuation process is right, because that is what determines not just the future payouts from the scheme, but its future security; there are also probity issues. I am concerned that the legislation as drafted would give no role to employees or their representatives in the revaluation system. My amendment 4 is a mild-mannered amendment to provide that the valuation report should be sent not just to the scheme manager and the employer, but to the employees’ representatives. That would promote at least some openness and transparency, which might reassure participants in the scheme.

Few pension decisions are more important to employees than the contribution levels, which stem from the valuation process. We have seen a unilateral change in contribution rates, which I think, to be frank, will deter many people from participating in those schemes and may throw the long-term future of those schemes into jeopardy. If there has been a valuation, the report should be sent to the employees’ representatives. It should be open and transparent, and it should then be possible to have a discussion about the valuation. That is what amendment 4 seeks to do. It simply says that the report should be sent not just to the scheme manager, but to the employee representatives, and that the terms of the revaluation should be mutually agreed. It is simply about participation.

[Richard Fuller]

Would the hon. Gentleman, like me, put this issue in the same area as transparency and giving information to people in pension schemes, which will help people to make better judgments? Just as we heard when new clause 2 was being moved, the provision of information about what is in their pension or how that is assessed helps people to make rational decisions.

[John McDonnell]

That is exactly right. There has to be openness and transparency. The point has already been made, but some of us will now have to go out there and campaign to keep people in these schemes. The way to do that is by having openness and transparency about what they are paying in, the benefits being made and, I agree, the overall contribution made by taxpayers.

I fear for the future. We have seen the Fire Brigades Union survey of what would happen if there were increases in pension contributions to those workers’ scheme and also a reduction in benefits. Some 30% told the survey that they would question whether they wished to continue in the scheme. A 30% withdrawal rate would undermine some of those schemes. That is why openness and transparency are important. One of the key areas for openness and transparency is in the valuation process, with the terminology and methodology agreed with the employee representatives, so that they have confidence that the process is being conducted fairly, openly and, to be frank, professionally. In addition, once the revaluation is done, the report should be provided to the employee representatives. I can see nothing in that with which the Government could disagree.

[Mark Durkan (Foyle) (SDLP)]

The hon. Gentleman is right that many of us might well have to campaign to ensure that people invest in and stick with these schemes, but even if we get valuation and transparency right, is there not a “There’s a hole in the bucket, dear Liza” syndrome with these Henry VIII powers? People will say, “You can say all that, but you can’t promise that it will be so when I reach pension age.”

[John McDonnell]

I fully agree. What concerns me is that the Henry VIII powers in clause 3 are retrospective. This is another reason why the valuation process is so critical: if there is not full openness, transparency and consultation, in particular with employee representatives, the Government could in future use the valuation process to withdraw some of the benefits of the scheme or increase the contributions retrospectively. People can sign up to a scheme and pay into it for 20 years, but then be told that the benefits are different—although I think that will be tested in law, because I believe that legally we are talking about accrued rights that are protected under European legislation. The Government do not accept that argument, but it is a critical point. That is why I have tabled my amendments. The Government underestimate the anxiety and fears out there—particularly among trade unions, but also in other organisations—which arise from the lack of confidence in the future management of the schemes in the best interests of employees and members.

Let me turn to my amendments 7 and 8. The Government’s reform was meant to change the nature of the schemes, so that they would be based on career averages, exactly as my hon. Friend the Member for Nottingham East said from the Front Bench. However, that is for a defined benefit scheme, not a defined contribution scheme, yet the Government have not committed themselves to that in the legislation. That is why I have tabled amendments 7 and 8, so that where a scheme is rearranged or staff are transferred into a new scheme, they must be defined benefit schemes, because that is what was promised in the negotiations with the trade unions. It is argued that we are binding future Governments, but all legislation is meant to bind future Governments, and any future Government could revisit this matter. At the same time, we need to try to give at least some security and ensure that the promises given by the present Government are adhered to. That is not much to ask, and it is all my amendments are designed to do.

[Mr MacNeil]

The hon. Gentleman puts his finger exactly on the issue: insecurity for future pensioners. That, combined with ever-growing inequality in our society and the economic multipliers that we might see operating, means that people who are now living quite comfortably might be facing penury in their old age, due to the root insecurity at the base of this Bill, which he is doing a good job of exposing.

[John McDonnell]

In part, this is linked to other reforms that the Government are introducing—my hon. Friend the shadow Minister touched on this. Where changes have been made to the delivery of public services—some of this relates to outsourcing, reorganising government or delivering direct services through new Government agencies or public bodies—people understood that there would be a commitment from the Government that they would be transferred into the same scheme they are in now, which would be a defined benefit scheme. That is not in this Bill, which is why I have tabled my amendments.

The amendments put the onus on whatever bodies are established—non-departmental public bodies or whatever—to ensure that they offer a defined benefit scheme. If they do not, they are breaking the commitment that the Government gave. In addition, it will create a disincentive. When staff transfer, they transfer into the new scheme that will be established. Many people now in a defined benefit scheme—whatever its nature, whether final or average salary, although we are moving towards average salary—fear that if at some stage they move, they will be offered only a defined contribution scheme. That is why I want more certainty in the legislation. The amendments propose that whatever happens in the future, whatever restructuring the Government bring in and whatever new schemes are established, the Government will adhere to their promise that there must be a defined benefit scheme. I do not want to be cataclysmic about this, but if that does not happen, the legislation could undermine the whole provision of public service pensions. People could start to withdraw from the schemes because they did not have the certainty that they thought they had when they entered them.

The amendments might seem relatively minor, but they are absolutely key. If we do not bring the employees with us, if we do not consult their representatives, if we do not involve them in the valuation process and if we do not stand by the guarantee of a defined benefit scheme that they have been given, we will break down people’s confidence in the public sector pensions system overall, and we will certainly break down their confidence in this Government’s ability to adhere to their promises. This is not the 25-year guarantee of no further reform that we were given from the Dispatch Box only a matter of weeks ago.

[Robert Neill (Bromley and Chislehurst) (Con)]

I am always delighted to follow the hon. Member for Hayes and Harlington (John McDonnell). He and I have been circling around issues of local government finance and pensions for—

[John McDonnell]

For more years than I can remember.

[Robert Neill]

I have worked it out; it must be well over 30 years in chambers of one kind or another around London. We do not always come to the same conclusions, but I take on board the expertise that he brings to this topic. I agree with his point that it is important, when dealing with the schemes that he and I have been involved with, to give the members of the schemes an assurance that they will have a secure pension in future.

I have spent most of my life dealing with the local government pension scheme, and I am going to talk about that today. Indeed, I should declare an interest as a member of that scheme. I recognise that change often raises concern and creates a measure of insecurity, and it is the job of those of us who have governance of these schemes, locally and nationally, to deal with that. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr Gibb) pointed out, however, the biggest cause of insecurity and the biggest risk to scheme members would be the lack of a secure financial basis for the future of the scheme. That is why the Government’s reforms are necessary; that is the most important reassurance that we can give to people.

There are other important points that we can take on board in the context of the amendments, and I want to talk about the local government schemes in particular. It has already been recognised in the House that they fall into a different category because of their substantially funded nature, which places them in a different position, and because of the considerable diversity within the sector. There are a number of schemes involved, and they generally have a good management track record and a system of management that creates transparency and democratic accountability. I hope that we can ensure that the regulations that will finally embody the schemes will recognise those differences.

I agree with the right hon. Member for Wentworth and Dearne (John Healey) that we should take at face value the assurances given by those on the Treasury Bench, and I have no hesitation in doing so. I put it as gently as possible when I say that there has been a degree of needless raising of concern among scheme members, perhaps—dare I say it?—for partisan reasons. That is unhelpful.

--- Later in debate ---

[Sajid Javid]

I have not seen all that correspondence, but to my knowledge the Scottish Government have not asked for any such amendments.

On amendment 12, I welcome the opportunity to reaffirm the Government’s commitment to the defined benefit structure of the new schemes. I would hate to think that the hon. Member for Nottingham East is unaware of the 85,000 or so public service workers who are already members of the current career average schemes. His amendment, which he says is designed to reassure public service workers about the nature of their pensions, refers only to final salary schemes. I can reassure all public sector workers, including those currently in career average schemes, that the Government are fully committed to implementing the defined benefit schemes that have been negotiated. I assure the House, just as I assured the Committee, that the Government have no intention of replacing these defined benefit schemes with different types of scheme designs.

There is no secret plot here. We have spent a long time in discussions with trade unions and member representatives to get where we are today. It would be foolhardy to throw away 18 months of work and do something entirely different. We do not intend to move away from defined benefit schemes in public services. Defined contribution schemes would not be the right kind of pension provision for many public servants.

[John McDonnell]

Will the Minister therefore meet with the War Graves Commission, because that looks as if it is planning to move from a defined benefit to a defined contribution scheme?

[Sajid Javid]

If the commission would like to have a meeting with me, I would be happy to do so.

However, we must not vilify defined contribution schemes either. There might be a small group of individuals who consider that their needs are better served by defined contribution schemes—for example, those spending a short time in public service roles who would prefer to use their employer contributions to maintain their existing defined contribution schemes. Approximately 7,000 people are already in that type of scheme by choice. There is nothing wrong with giving people such a choice. The Government believe that clause 7 already provides the right powers to allow the new defined benefit schemes to be set up while allowing alternatives types of scheme for those who want them.

I turn to amendments 19 to 28 to clause 16. I understand the concerns raised by the hon. Member for Nottingham East and others in Committee and this afternoon. We have provided reassurances on some of those concerns in correspondence. I hope that all hon. Members are now assured that the effect of the clause will not be to crystallise liabilities or to wind up any of the funded schemes. The amendments highlight those issues over which there are lingering doubts. As the hon. Gentleman set out, those relate to the extent and effect of the closure of the current schemes and the dates on which the changeover will take place.

[Sajid Javid]

I thank the hon. Gentleman for his kind remarks and hope that I can provide further such reassurance on the clause this afternoon.

Amendments 19 to 21 seek to provide that the reforms are made by replacing the existing regulations. The scheme regulations made under the Bill would therefore have to provide for both accrued rights and new service, which we do not believe is sensible. The hon. Member for Nottingham East has expressed concerns that the Bill, as drafted, could create two separate schemes and that that could create extra costs. The Local Government Association has further clarified its outstanding concern that members of existing schemes are treated as deferred members of the existing schemes when the new schemes are introduced. That is not our intention. We will look closely at that, with the Local Government Association and others, to see whether any changes are desirable or needed to put that beyond doubt.

With regard to amendments 22 to 28, the purpose of clause 16 is to prevent benefits from being provided under existing terms in respect of a member’s service after the schemes are reformed. It closes the existing schemes, but only by closing them to future accrual. Clauses 4 and 5 already provide for existing and new arrangements for each work force to be managed and administered together. The old and new schemes will be administered by the same scheme manager, who will be assisted by the same pension board. From a member’s perspective, the transition between their old and new pension rights and the administration of their pensions will be seamless.

The dates proposed in amendments 21 and 22 do not fit with the dates agreed for the reform of the schemes: 1 April 2014 for the local government schemes in England and Wales and 1 April 2015 for the other public service pension schemes. I appreciate that the date set out in clause 16(4)(b) might also look a little odd. It allows schemes that want to reform at the start of the public sector’s financial year—1 April—to do so while leaving the option open to make reforms at the start of the tax year instead.

Although I remain convinced that the Bill will deliver what we want, I am aware that others believe that the dates are confusing. It is a concern that I will continue to consider. I regret to say that we cannot accept these amendments, because I am afraid that they would not work. However, they are clearly well intentioned and we can see what they are trying to achieve. As I said in Committee, we will continue to work through the outstanding concerns. I will reflect further on the amendments and we might return to the matter in the other place.

I turn now to amendment 4, tabled by the hon. Member for Hayes and Harlington and others. I thank the hon. Gentleman for the amendment; its purpose is clear but the practical effects would be fraught with problems. First, in England and Wales the appointed person will be reviewing the valuation and employer contribution rates of 89 separate pension funds. The appointed person will not know who the employee representatives are for each of those funds. The clause already requires the appointed person’s report to be published. That is the appropriate course of action. We envisage that the appointed person will publish a single report covering each and every one of the local authority funds. The Bill rightly requires that a copy is sent to the relevant authority and to the scheme managers, because those persons might need to take action as a result of the report.

If the appointed person identifies a problem in a pension fund, under the Bill the scheme manager would be required to take remedial action. The Bill also allows the relevant authority to intervene if necessary. However, members and their representatives will not need to take any action. The management of local authority pension funds needs to be more transparent, and the clause achieves that. The information will be published and members, local authority residents, Parliament and others will be able to see and consider it. The amendment would add no value, but it would create unnecessary costs and burdens.

I will now speak to amendments 7 and 8. I have already reassured the House that the Government have no intention of replacing the current defined benefit schemes with different scheme designs. Clause 7 allows the necessary flexibility for future Parliaments and pension scheme members to decide on the most appropriate pension scheme design for future generations of public service workers in the largest schemes. Clause 28 allows the same flexibility for the smaller public body schemes made under clause 28(7) or other powers. The Government expect that in most cases employees of the bodies listed in schedule 10 will join the reformed civil service pension scheme and have the same choice that civil servants have now: whether to join a defined benefit or a defined contribution scheme. The amendments would deny the employees of the other public bodies listed in schedule 10 that choice.

[John McDonnell]

The Minister, as ever, is being generous with his time. On amendments 7 and 8, his response will have a chilling effect for trade unions representing members across the piece, because the Government are not adhering to the direction of travel indicated in their assurances on the 25-year guarantee—that we were moving to defined benefit, not defined contribution schemes. Will the Government at least monitor the process and report back to the House, because I do not think that it is their will—it is certainly not the will they have displayed up to now—that there should be a flourishing of defined contribution schemes which would undermine defined benefit schemes?

[Sajid Javid]

I hope that I have made the Government’s commitment to defined benefit schemes very clear; I do not think I can make it any clearer than I have already from the Dispatch Box today. That commitment clearly has not changed.

Finally, on amendment 32, I am confident that the Scottish Government can achieve the 2015 timetable. Even more importantly, I have no reason to believe that the Scottish Government share the concerns expressed by the hon. Member for Banff and Buchan (Dr Whiteford). The Scottish Government’s Finance Minister, Mr John Swinney, has not requested that the Bill be amended to allow for a delay for implementation in Scotland. Indeed, such a delay would disadvantage lower and middle-income public service workers, who often benefit from a move to career average schemes. Furthermore, a delay in implementing the reforms would result in additional liabilities being built up in those schemes. These additional costs, running to hundreds of millions of pounds, would have to be paid for through the Scottish budget.

--- Later in debate ---

[John McDonnell]

Let me follow on from what my hon. Friend the Member for Nottingham East (Chris Leslie) has just said, which relates to the previous debate. The running theme is trust. Every one of the trade union organisations that signed up to the deal or had it imposed upon them in the pensions dispute has expressed reservations about clause 3. That is why amendment 10 from our Front-Bench team seeks to address that matter.

The logic is fairly straightforward, but let us get it on the record again. The Government promised a 25-year deal—a once-in-a-generation commitment that there would be no further reform of public sector pensions and that this would be guaranteed in legislation. However, clause 3—we had a discussion earlier about Henry VIII clauses—gives the Government extremely wide-ranging discretion, through the use of statutory instruments and all forms of delegated legislation, which, more importantly, includes the discretion to act retrospectively on what are clearly accrued pension rights over a long period. The saving grace, as presented by the Chief Secretary to the Treasury, was that the same protection would be written into this Bill as is in the Superannuation Act 1972—as my hon. Friend the Member for Nottingham East (Chris Leslie) said—which is that no changes would be made without the consent of the employees’ representatives. Again, that provision, which was promised, is not in the Bill.

What we now have in the Bill is the exercise of discretion, which breaks the commitment of the 25-year guarantee and does not even go as far as past legislative protection. The argument is that in future the Government will need the flexibility to introduce minor changes in legislation, without being impeded from making minor reforms or tidying things up. However, minor reforms or measures to tidy up the legislation—to reflect changed circumstances or change minor details of a scheme or pension arrangements—should be introduced by consent. Unions have never withheld that consent in past discussions about minor changes in pension provision. That has been the nature of the relationship between the Government and employee representatives up until now. This Bill breaks all that and undermines confidence not just in the Government’s commitments to date, but in their good will on this matter for the long term.

My amendments 3, 5 and 34 relate to exactly the same issue of trust. I am trying in some way to establish further transparency and openness in the management of the future pension schemes that will be established. Amendment 3 relates to valuations, which we discussed in the previous batch of amendments. As I have said, valuations are critical to all those involved in a pension scheme, and certainly to employees who have contributed over the years. They will want to ensure that the valuation is done effectively, on professional terms and with their agreement. That is why my amendment 3 would amend subsection (3)(c) of clause 10, which deals with valuations. As set out in subsections (3)(a) to (3)(f), the Treasury directions under which valuations will take place will include

“how and when a valuation is to be carried out”

and

“the time in relation to which a valuation is to be carried out”

but more importantly,

“the data, methodology and assumptions to be used in a valuation”.

If we are to have real employee participation in a scheme, which involves the management of their money—their deferred pay—it is critical that they are fully involved in the valuation process and therefore that they are consulted and agree to the data, methodology and assumptions to be used. Otherwise, we will yet again undermine members’ confidence in the process of evaluating their own schemes. I do not understand why that is not in the legislation throughout. I hope that the Minister can assure us either that I have missed the mention of full employee involvement in the Bill or that he is willing to amend it accordingly.

Let me turn to my amendments 5 and 34. Again, I just do not understand the drafting of the Bill. These proposals refer to the consultations that will be undertaken before scheme regulations are made. Again, this might seem like an esoteric point, but the scheme regulations are critical because they will determine the nature of the scheme under which the funds will be managed, contributions will be made and benefits will be paid. It is therefore critical that the regulations should be made following full consultation.

In legislation of this kind, when consultations take place and schemes are drafted that are likely to affect their members, the form of words that is normally used includes

“with a view to reaching agreement”.

That intention is always set out in the legislation. Indeed, those exact words are used in clauses 20 and 22 of this Bill. Clause 20(2) states:

“The responsible authority must…consult the persons specified in subsection (3) with a view to reaching agreement with them”.

My amendment 5 would simply put that form of words into clause 19, so that when consultation took place, it would be done with the intent of reaching agreement. I do not understand why it was deleted from that clause in the first place. This is just another way of seeking to reassure the employees, the members of the pension schemes, that they will be fully involved in the process, and that the aim, in introducing any changes to the scheme, is to reach agreement and secure their consent whenever possible. This is not a contentious matter.

I have also tabled amendment 34. An assurance has been given that there will be no further changes for a generation, or 25 years, that new schemes will come into force and that the vast bulk of them will, we hope, be defined benefit schemes, but the whole process involves the security of the elements of the schemes that the Government have guaranteed not to change. Those arrangements must be secured by agreement in the future. If those protected areas of the schemes, which the Government have until now guaranteed, are to change, there should not just be consultation with the employee representatives; there should be consultation with a view to reaching agreement. That consultation should have to secure that agreement. That would give the employees, the members of the pension scheme, the protection that they need, and the reassurance that nothing would be done to those protected areas of their pension without their agreement. Those areas include contributions and benefits.

The whole ethos of the Bill fails to recognise that pensions are not solely in the ownership of the Government or the employing organisation, and that they are paid for by the employees over the years. Those who have paid into the schemes should therefore have a role in managing them. It is interesting that the Bill does not mention the representation of employees on the pension boards that are to be established. We should at least have a proper consultation process, and that process should involve some security that any changes, particularly to those guaranteed areas, should be achieved by agreement.

I do not know of any other walk of life in which people contribute towards the funding of an organisation or a benefit without having a role to play in the management of it, or at least in the direction of policy. The Government are saying in the Bill that those who have paid vast sums into their pensions should have no say, no role and no entitlement to have their views sought or to have agreement reached. I hope that the Government will take on board some of the amendments and send out a message to the trade unions that represent the members of the pension schemes that yes, they do recognise their rights and they do want them to be fully involved. That full involvement would reassure those members of the Government’s good will and willingness to adhere to their commitment to a 25-year guarantee.

--- Later in debate ---

[Sajid Javid]

If the shadow Minister will allow me to continue my comments on this important issue, I shall, I hope, be able to give him some reassurance, but first I want to explain the reasons for the Government’s approach.

Since the courts could set aside unlawful scheme regulations, responsible authorities have strong reasons to respect pension protection rights.

There is a third reason for our approach. In order to provide the statutory protections that underpin our commitment on accrued rights, the Bill establishes a common set of member consent and consultation requirements. In the case of the new schemes set up under the Bill, any change in scheme regulations will require a prior, statutory consultation with all who are likely to be affected, or with their representatives.

Clause 20 provides that if any changes are made that could have “significant adverse effects” on members, consultation must be conducted with a view to the reaching of an agreement, and preceded by a report to Parliament or the relevant legislature. Any such changes will require explicit approval by that legislature under the affirmative procedure. They cannot simply be nodded through under the nose of Parliament. Taken together, the rule of law and the specific provisions in the Bill should give members the strong reassurance that there is already a very high hurdle against unlawful interference with pension benefits that have been built up.

As I have said, this is an important issue, and we must get it right. We are adamant that the application of universal consent locks is not an avenue that we intend to investigate. As a matter of principle, we do not believe that members, employers or anyone else should be given a ticket unreasonably to hold each other, or the Government, to ransom and to inhibit changes that are for the greater good. The Government feel strongly that it is right to prevent that scenario from occurring in the future, and that is why we cannot support the amendment.

Most retrospective changes in accrued rights are either minor and technical, or in the interests of the vast majority of scheme members. As I have said, however, it is vital that we strike the appropriate balance between member protections and the efficient operation of public service schemes. Although I firmly believe that the provisions in the Bill achieve that balance, I can tell the House that the Government do not have a closed mind on this serious issue, which has been raised thoughtfully by Members on both sides of the House, both today and in Committee. I can only reiterate that we are listening and do not have a closed mind. I am sure that the issue will be discussed in the other place, and we shall listen carefully then as well. I hope that, in the light of the reassurances that I have tried to give, the shadow Minister will consider withdrawing his amendment.

Amendment 3 would place a statutory requirement on the Government to seek the agreement of employee representatives when the data, methodology and assumptions to be used in pension scheme valuations is set. I agree that we must get those elements of the valuations right. We must be sure that a valuation accurately calculates the scheme’s costs. I understand that Members want to be certain that the Government will honour their commitment to ensure that stakeholders are involved in the process, and I can tell the House that they will be so involved.

I believe that the amendment is both unnecessary and unworkable. It is unnecessary because we have already made it clear that the Government will engage with stakeholders over the directions on valuations. Transparency and consultation are extremely important principles, and it is important for everyone to have a say in how the valuation process works, but that does not mean that we will allow the whole process to be stymied by a very small group of people. That would hardly be democratic, let alone a rational way in which to proceed, and it would mean that the employer contributions would not be set at the correct rate. I am sure that that was not the intention of Members when they tabled these amendments, but we think it right for discussions about the valuation process to take place within the normal scheme governance procedures. I am also sure that in the normal course of events the vast majority of the discussions will prove to be sensible and constructive, resulting in broad consensus between all parties. I hope Opposition Members recognise that if the worst happens and the talks break down without a full meeting of minds, it is important that, where necessary, the Government can make the final decisions.

On amendment 5, I understand why Opposition Members want to ensure there is meaningful consultation with scheme members before scheme regulations are made, and clause 19 requires precisely that. All scheme consultations on regulations will be conducted in line with the Government’s consultation principles, as set out by the Cabinet Office. As they make clear, the Government are committed to consulting on our proposals and to ensuring consultations are carried out proportionately. Clause 19 as currently drafted provides for a good and comprehensive consultation standard. It also recognises the genuine interests of the members and employers in how their scheme is run.

The clause ensures that whenever a change is proposed to the scheme regulations, the responsible authority must consult everyone whom the authority considers to be affected. Since this will be a statutory consultation, the authority must set out clearly on each occasion the matters on which it is consulting. It must provide enough information and time to allow for considered responses. The authority also needs to keep an open mind until the consultation has closed, and must give fair and proper consideration to those responses before making its final decision. It is worth setting all of that out in detail in order to reassure those who might feel clause 19 does not provide for meaningful consultation; on the contrary, it does precisely that.

Moreover, there are many reasons why the Government may wish to consult scheme members and other stakeholders when making scheme regulations. In many cases the Government will consult with a view to reaching an agreement for proposed changes. Clause 19 as drafted does not prevent that. As the Government have made clear, the enhanced consultation standard should apply to some elements of the scheme, and they are specified in clause 20. It is not necessary to extend this provision to cover every other possible element of scheme design.

[John McDonnell]

I am not trying to be obstreperous, but in a former life I drafted this stuff, so I would be grateful if the Economic Secretary clarified why the phrase

“with a view to reaching agreement”

is in clause 20 but not in clause 19, because I consider the scheme regulations and the aspects addressed in clause 20 to be of equal importance?

[Sajid Javid]

The hon. Gentleman has approached this issue in a very thoughtful way. We consider that the high hurdle of

“with a view to reaching agreement”

should not apply to every scheme change that might need to be made. I appreciate that the hon. Gentleman has a different view about when it should apply, but I think I have made the Government’s case clear.

--- Later in debate ---

[Chris Leslie]

I have great sympathy with many of the arguments that my hon. Friend the Member for Hayes and Harlington (John McDonnell) made. He has tabled a series of amendments and has highlighted a couple of appropriate points. He seeks to pin down what happens in respect of changes that affect data, methodology, assumptions and valuations. Those are the long-grass details that many people often put in the box marked, “Too difficult to handle”. However, it is really important that people realise that a tweak here or a change there to the way in which some pension metrics are defined can seriously affect the retirement incomes of hard-working public sector employees, so he is right to shine a bit of a spotlight on those areas. I am not necessarily sure about his drafting, but he has brought an important proposition to the House’s attention. Similarly, he raised some issues we debated in Committee, such as why certain parts of the Bill talk about consultation being done in the way that many of our constituents have become used to—as a cynical box-ticking exercise. There is consultation, but most people have, sadly, grown used to the notion that consultation in that context means a form being sent out that they can send back if they want to, which Ministers will just ignore when it comes back.

Ministers then say that they will have a special enhanced consultation process, which means that it is done with a view to reaching agreement. As the hon. Member for North Down (Lady Hermon) pointed out, even in an enhanced consultation process there is no guarantee that agreement will be reached. It is difficult to know how anybody participating in that consultation would enforce the process, but that consultation is the so-called protection in the protected elements of the Bill. In a sense, my hon. Friend the Member for Hayes and Harlington is debunking a lot of the differentiation between consultation and enhanced consultation.

[John McDonnell]

I have not seen this before, but we now have two types of consultation. The first is, “We’re consulting you because we hope you agree with us,” and the other is, “ We’re consulting you but we couldn’t care what you say to us.” Amendment 34 is simply trying to protect the Government, so that they can demonstrate that they are adhering to their promised level of consultation.

[Chris Leslie]

I suppose it is a case of diet consultation—or consultation-lite—versus full-fat consultation, which I know that my hon. Friend would be far more keen to see. I think he has done the House a service by casting some light on those issues, but I hope he will forgive me if I focus mostly on amendment 10 and the issue of retrospectivity, which is, ultimately, to me one of the worst aspects of the Bill.

I am glad that the Minister said that the Government have an open mind on retrospectivity—at least, he said that they do not have a closed mind, which is a similar thing. We hope for great things in the other place when the question is considered. He gave a set of reasons: a court might come along and set aside scheme regulations or there might be technical reasons for raiding people’s accrued savings and pension benefits retrospectively. I must say to the Minister, however, that when the Chief Secretary to the Treasury—for it was he—promised “No ifs, no buts” and said that he did not want that retrospectivity, not to have put that particular provision clearly and explicitly in the Bill is a major failing that will leave many employees with a sour taste in their mouths. They want some pretty basic protections to stop the notion of clawback and the ability of Ministers to sequester savings that they thought were safe—the deferred wages they have set aside for their long-term well-being.

We need to ensure that we focus on the confidence of employees in the scheme, as this is their property too, as my hon. Friend pointed out. It is not just the preserve of the Government; they are not simply giving out a pension as though it were a state pension scheme or however they wish to characterise it. These pensions are a joint endeavour between employees and employers and that is why we have said that the Superannuation Act 1972 protections need to be transposed into the Bill. The provision, derived from that Act, states:

“Scheme regulations shall not make any provision which would have the effect of reducing the amount of any pension, allowance or gratuity, insofar as that amount is directly or indirectly referable to rights which have accrued”.

The protection we need is very straightforward and we wanted to put it into our amendment. The Minister needs to go back and think about this again, as it is a signal issue that is at the core of the trust we need to have in the scheme. We want the scheme to work and we want members to stick with it and not opt out, but they need to know that their money and their savings are safe. That is why I would like to test the opinion of the House on amendment 10 by pressing it to a Division.

Question put, That the amendment be made.

--- Later in debate ---

[Richard Fuller]

Other Members want to contribute to the debate, so I will not give way to the hon. Gentleman. He might have an opportunity to speak later.

If we are to change the retirement age for the careers in question, we must undertake those physical tests as well. My hon. Friend the Member for Finchley and Golders Green (Mike Freer), who is of a similar age to me, has said that he is going to do the police test, and I have agreed that I will do the firefighter test. I reiterate his challenge to the shadow Minister and to the Minister, both of whom are at least a decade younger than us, to sign up to do those tests if we are to proceed with the Bill at the end of Third Reading. I would be very grateful to hear them accept that challenge, and indeed to hear the Government Whip, the hon. Member for Chelsea and Fulham (Greg Hands), do so.

[John McDonnell]

I wish to speak in support of amendments 1, 2 and 9. Amendment 2 is straightforward: it seeks to ensure that people are not forced to retire beyond the age of 65, as most of our work force have planned to retire then. On the argument that the amendment is unaffordable, let me remind hon. Members of what Hutton said about the 2007-08 changes. He said that they are likely to reduce costs to taxpayers of the pension schemes by £67 billion over 50 years, with costs stabilising at around 1% of GDP or 2% of public expenditure.

The other issue involved here is what our priorities are. The last figure I had for how much the unfunded public sector pension schemes were costing us was for 2009-10, when it was less than £4 billion. Some 60% of gross tax relief on pensions goes to higher rate taxpayers—that is £22 billion. The cost of providing tax relief to the 1% of our population who earn more than £150,000 was double the amount we are funding with regard to the public sector unfunded pensions—that is £8 billion. So the fact that we are willing to subsidise the higher paid—the rich—while forcing others to work longer and cutting their pensions at the same time reflects our priorities. That is why I have tabled the amendment: I do not accept the settlement or the Government’s rationale for these proposals.

Amendment 1 was eloquently discussed by my hon. Friend the Member for Wansbeck (Ian Lavery), and I must declare an interest at this point: I am an honorary life member of the Prison Officers Association. One point that the POA made, which we made on Second Reading, is that if we increase the pension age for prison officers, we lose money because more of them will become injured and more will go off sick, and more cost will be incurred in compensation. The actuarial figures are there almost to prove it, so it is anomalous not to include prison officers. The point about psychiatric nurses is the role they play, particularly in institutions such as Broadmoor, where they are dealing with the most difficult cases—physical challenges—within the NHS. I find it bizarre that we are expecting police officers to retire “early” at 60—I hope we do not go to that—because of the physical nature of their jobs in dealing with criminals, yet when those criminals go into prison it appears that they no longer provide a physical challenge to the officers dealing with them then. The situation is anomalous, which is why I support the amendment to include psychiatric nurses.

I also tabled amendment 9, and this is specifically for the Fire Brigades Union. As my hon. Friend the Member for Nottingham East (Chris Leslie) has said from the Front Bench, the Government have set up, in agreement with the unions, the working longer review in the NHS and the physical assessment in respect of the fire service. Evidence is piling in to those reviews—independent academic evidence, and details of physical tests that have been undertaken—to demonstrate that it is tough to do the job at 55, let alone at 60. I have seen some of the evidence put forward in the fire service review. When the previous Government increased the retirement age to 55 it was on the basis that there would be more firefighters doing preventive work and people could be redeployed into that work. This year, only 15 posts nationally have been available for redeployment, so redeployment is not an option. These people are still out there doing that physical job, and it is unacceptable to push the retirement age to 60. That is why amendment 9 would ensure that the pension schemes would be able to take into account the reviews currently taking place and that we would be able to adhere to a lower retirement age, particularly for firefighters and others as they are justified.

I am interested to hear what the Government’s responses will be, so I shall finish on this next point. Overall we seek to ensure that there is justice in the Bill, and that is certainly not the case at the moment. I reiterate that the Bill is increasing the contributions and increasing the length of time that people will be working. Given the life expectancy in my constituency, a large number of my constituents will not reach retirement age. Already, a third of all members across the schemes retire within three years of when they should normally do so because they cannot physically continue in the job. They therefore live on reduced pensions and in some poverty. My constituents will contribute more, work longer, most probably have a reduced pension at the end of it and have to retire early. That is an unjust deal when we are subsidising the wealthy through tax relief on their pensions.

[Sheila Gilmore]

I want to address a couple of issues and reinforce some of the points made in Committee. It is not good enough to say that the normal retirement age does not matter because people can retire early if they need to, as they will retire on much lower pensions—that is what actuarial reduction means. Those with many chronic conditions might have several years of suffering with the condition that has made them retire. That is not good enough.

The way in which the Bill is formulated fixes the retirement age in a way that makes it very difficult to introduce the flexibility that might be required by some scheme reviews. There will be a battle every time a review shows that there should be a lower retirement age, as the Government will be able to point to the Bill and say that that age cannot be moved as that is what Parliament voted for. However, amendment 16, for example, would allow the degree of flexibility required. Many people already do not work in the years running up to the normal retirement ages, not just across the public sector but in the private sector, too. As many are living on reduced incomes and having to dip into any savings they might have put aside for retirement, they are much more likely to become dependent on other state support in older age.

We have the big issue of longevity, but underneath that lies the fact that a substantial proportion of the population cannot even work until the normal retirement age, particularly men between 60 and 65 in many private sector jobs. Those people are already living on reduced incomes, so if we keep increasing the retirement age more and more people will be in that position.

Public Service Pensions Bill

John McDonnell Excerpts

Monday 29th October 2012 Commons Chamber

[Katy Clark]

I am interested in the scheme to which my hon. Friend refers, and I might get more information about it from him later.

[John McDonnell (Hayes and Harlington) (Lab)]

It is worth putting on record that under the deal negotiated by the Labour Government, if there were increased costs with regards to longevity, there would be a cap on the employer’s contribution and the additional cost would be borne by the contributors—the scheme’s participants. The issue of longevity was therefore dealt with by agreement with the unions.

[Katy Clark]

I listened carefully to the hon. Member for Finchley and Golders Green (Mike Freer) and I can say to him that while there needs to be a review of the local government scheme, I understand that the current position is that it is perfectly viable. This proposal has been made because Government Members take the view that public sector schemes are too generous and form too large a part of the employment package in the public sector. We actually need to use the public sector schemes as a model to ensure that pensions are a much greater part of everybody’s employment package. If we do not do so, we will simply end up paying in other ways, whether that is because people opt out, or because people will rely on the state as they are living in such poor circumstances. We should have a debate about how we can move towards a situation whereby, collectively, we save more for retirement, so that people have decent pensions that they can afford to live on and do not need to rely on the state in other ways.

--- Later in debate ---

[John McDonnell (Hayes and Harlington) (Lab)]

I declare an interest as a member of a local government pension scheme.

Let me put it clearly on the record that the Bill does a number of simple things: it means that civil servants—teachers, firefighters, hospital workers and council workers—will work longer, pay more and get less. That is the reality. It was said that this has been agreed by the trade unions, but it has been rejected by the Public and Commercial Services Union, the National Union of Teachers, the Prison Officers Association, the Fire Brigades Union and the National Union of Rail, Maritime and Transport Workers, which represents the royal auxiliary workers. Not a single union has supported the Bill or expressed satisfaction with it, and that includes all those in negotiations, the Royal College of Nursing and the British Medical Association. Why? For me, the Bill embodies the Government’s policy and prime objective that the economic crisis will be paid for by public sector workers rather than those who caused the crisis in the first place. It typifies the Government’s approach.

[Richard Fuller]

One issue is the fact that the cost that will fall not during this Parliament but on future taxpayers—our children and grandchildren. Does not the Bill do something to relieve some of the burden on future taxpayers? As the Intergenerational Foundation has said, that is a fair way to proceed.

[John McDonnell]

Let me quote the Treasury, which has said that the cost of the unfunded public sector schemes—I am particularly interested in the civil service one—as

“a share of GDP was 1% in 2007-08 and was projected to rise to only 1.2% in 2057.”

Only 18 months ago, the National Audit Office produced the report, “The cost of public service pensions”, and showed that

“when projections of liability are based on earnings, the total annual payments from the civil service pension scheme will be largely stable over the next 50 years.”

So no, I do not accept that analysis, and neither did the Treasury at the time.

I oppose the Bill. Members of my Front-Bench team will abstain tonight, I believe, because they hope they can amend the Bill. The Bill is unamendable to make it acceptable to me. Therefore I oppose it and I wish to have the opportunity to vote on the Bill if I can. If that means walking through the Lobby on my own, I will. I will find a teller somewhere, I hope.

The Bill is extremely damaging to the well-being and living standards of ordinary working-class people. We know that. My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) quoted the definitive piece of work, an independent analysis from the Pensions Policy Institute, which is a charity funded by the Nuffield Foundation to undertake the research. It confirmed that the Bill means that pension benefits will be cut by a third. My hon. Friend the Member for Leeds West (Rachel Reeves) referred to the shift from RPI to CPI, which was a further 11% cut. What the cuts in pension benefits mean is exactly as others have said—a reduction in participation that will ultimately threaten the viability of the schemes. Perhaps that is what the Bill is about—the degradation of the schemes so that they will eventually be replaced by the private sector.

Let me deal with the issue of private sector pensions, which is dragged out on every occasion. It is a rewriting of history. Let us go back to the 1980s and 1990s. The state pension was undermined by the Thatcher Government when they broke the link between earnings and pensions. That also undermined the earnings-related element of the state pension. They encouraged people to enter private sector schemes but, as we heard, they allowed many employers to take pension holidays, not for one or two years but for long periods. Eventually that undermined the schemes and a number of them in my constituency were wound up almost overnight.

Individuals were urged to enter into their own arrangements, which they did, only to be fleeced on their endowment policies and other mechanisms. Previous Governments, particularly in the 1980s and 1990s, destroyed private sector pensions and now this Government are moving on to destroy public sector pensions in the same way.

[Mark Reckless]

I do not want to let this point go—the hon. Gentleman’s claim that somehow Baroness Thatcher broke the link with earnings. Between 1974 and 1979 Labour claimed to link earnings and pensions, but for much of that time wages went up by less than prices, and for five months of the highest inflation in that period they were not linked at all, giving pensioners a very bad deal.

[John McDonnell]

Under legislation promoted by Thatcher, the House in 1981 broke the link. That undermined in the long term the value of the state pension—it is irrefutable—and then undermined the earnings-related portion of it.

[Mark Reckless]

Will the hon. Gentleman allow me to refute that? For the first two years of the Thatcher period, there was a link. The only other period in which there was purported to be a link was under the previous Labour Government. For much of the Thatcher period there was no link and wages went up by less than prices.

[John McDonnell]

There was always a link with earnings or inflation, and pensions went up accordingly. Why did the previous Government not replace it? I sought on every Budget to enable that to happen and I wish we had done so.

[Andrea Leadsom]

rose—

[John McDonnell]

Let me press on with the points that I am making.

What the Government are now doing is exactly the same as they did to private pensions, but we were told by the Chief Secretary that this is a settlement for a generation—that it will restore stability and predictability to public sector pensions for the next 25 years. No, it does not. As has been said before, the Henry VIII clauses in the Bill not only have the potential to undermine future benefits but are retrospective. I urge Members to look at the BMA’s legal advice on clause 3 and the vast remit that that gives future Governments to undermine future protections. Under clauses 3 and 21 and other clauses, public sector pensions do not even get the protection afforded in the private sector. In the private sector, if an alternative benefit is proposed, it must be actuarially evaluated as a viable alternative and one that does not undermine an equivalent benefit.

I agree with my right hon. Friend the Member for Wentworth and Dearne (John Healey)—we all agree on this—that pensions are deferred earnings, something people invest in and, therefore, something they should have some say in, but the Bill will take away all participatory control by the members who contribute. As he said, the Treasury will now control the design of the schemes, the revaluations and how they are undertaken, and the cost cap and what is included within it. There is a lack of commitment in the Bill, contrary to all that Hutton said, to ensuring that any future changes or reforms are made on the basis of agreement or at least joint engagement.

I am now secretary of the Fire Brigades Union parliamentary group and wish to circulate the evidence the FBU provided to Ministers on the physical work firefighters now do. Under the new pension scheme the retirement age in the fire services has been lifted to 60. The previous Government argued that there would be preventive measures to enable firefighters who could no longer undertake the physical rigour of the job to undertake lighter duties, as the hon. Member for Bromley and Chislehurst (Robert Neill) said. This year, 16 posts in the whole the country have been offered for redeployment alone, so that is unreal. Frankly, I do not believe that a 60-year-old firefighter can cope with the rigours of the job, no matter what improvements there have been in technology.

The hon. Member for Banff and Buchan (Dr Whiteford) mentioned the briefing from the Prison Officers Association. There are five physical tests that every prison officer has to undertake in order to be able to continue doing the job. If they fail in any one, they cannot do the job. The POA therefore predicts, quite rightly, that the cost of medical retirements will outweigh any savings gained as a result of the increased pension age. The same information came from the Royal College of Nursing with regard to nurses and paramedics and from the National Union of Teachers with regard to teachers teaching at 68.

The Government said that they would set up the longer life review. Its first meeting was held in September and the results will not be out for at least another six months, yet this Bill allows no flexibility. My right hon. Friend the Member for Wentworth and Dearne was right: even if the money is there and the employer agrees with it, the Bill provides no flexibility in any of the proposed schemes. It is lunacy to bind the hands of negotiators in that way.

There is no legal requirement on the pension boards to consult or negotiate, contrary to what Hutton recommended, and we can see no representation from the work force. There should at least be some assurance in the Bill that there will be an element of representation on the boards. With regard to the closure of the existing schemes, some protections are being put forward, but there is none on ill health or redundancy. I find clause 23 almost sinister. It will enable employers to offer benefits as an alternative outside the schemes, which is another way of using private sector schemes to undermine the public sector overall.

I am worried about this Bill, which is why I want to vote against it. I think we will look back on today as the day when public sector pensions started on a downward slope, with the erosion of benefits and increasing contributions leading eventually to the undermining of the schemes and their closure. I think it will result in many people being impoverished and greater inequality being created in our society. That is why I will oppose the Bill tonight.

[Mr Tom Harris (Glasgow South) (Lab)]

On a point of order, Mr. Deputy Speaker. I apologise for interrupting the flow of the debate, but I need to raise an important matter. It will be recorded in tomorrow’s Hansard that the Minister of State, Department for Environment, Food and Rural Affairs, the hon. Member for Somerton and Frome (Mr Heath), told Members that the Government’s commitment to introducing a ban on the use of wild animals in circuses was confirmed by the fact that such a commitment was made by Her Majesty in the Queen’s Speech to Parliament. You will, I know, agree that that is a powerful riposte to those of us who had dared to doubt the Government’s good faith on this issue. However, a subsequent inspection of the two most recent Queen’s Speeches of this Parliament finds no mention whatever of such a commitment. Is it in order for any Minister to pray in aid of his argument a part of Her Majesty’s Gracious Speech that turns out to be wholly fictitious? Has the Minister in question contacted you or Mr Speaker to schedule an apology to the House?

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the hon. Gentleman for his point of order. I have not been notified that any Minister wishes to make a statement on this matter or any other matter from the Dispatch Box this evening. As for whether the Minister was in order to give the response that he did, Ministers and, indeed, all right hon. and hon. Members are responsible for their own speeches.

[John McDonnell]

Further to that point of order, Mr Deputy Speaker. On a serious matter such as this where a Minister has inadvertently misled the House, it is the norm for him to be asked to return to the House as soon as possible to correct the record and explain his position. May we now express the view on the Floor of the House that the Minister has time now to come back to the Chamber to explain the situation?

[Mr Deputy Speaker]

I thank the hon. Gentleman for his point of order, which I am sure those on the Treasury Bench will have heard. Should a request be made to make a statement or to raise a point of order, the Chair will be notified and I will make sure that the House is informed in the usual way.

--- Later in debate ---

[Sajid Javid]

I will give way to the hon. Lady in a moment. If I remember correctly, she said in her speech that she was taken aback by the support for the public sector that she observed among Conservative Members. Well, she had better get used to it. My father was a bus driver. He was a proud trade union member, and he was the first person from whom I learned about the importance of our trade unions, and I will never forget that. That is why, in putting this important piece of legislation together, we have been working with trade unions to win their support, and I am pleased we have got it.

I think the hon. Member for Hayes and Harlington (John McDonnell) said that not a single trade union supported our approach. A majority of trade unions have accepted the deal. Unions representing approximately two thirds of members have accepted our proposed schemes.

[John McDonnell]

The Minister must listen to debates. What I said was that not a single trade union supports this Bill in its current form.

[Sajid Javid]

As I said, unions representing two thirds of union members have accepted our proposed schemes, and the vast majority of unions have taken a very constructive view.

Infrastructure (Financial Assistance) Bill

John McDonnell Excerpts

Monday 15th October 2012 Commons Chamber

[Mr Redwood]

I normally agree with my hon. Friend, but I am afraid that I do not on this occasion. There is not now an excuse to go in for projects that do not make any economic sense just because we all want some more growth and jobs. Indeed, that would be a very good way of setting us all back further as it would damage the public finances without giving us the benefit of a good project that people wanted to use and that produced plenty of user revenue. When one is in a financial hole, as our country is, one needs to be very careful. We look to the Treasury, in particular, to evaluate such matters carefully and I want a little more guidance because £50 billion is a huge sum. I am not surprised that so few MPs want to discuss it—if we were debating £500 million, the place would probably be packed, but because we are discussing £50 billion everyone has gone off for a tea or a coffee—but to me it is a serious sum of money and I want some reassurance that we will get something worth having for it.

[John McDonnell (Hayes and Harlington) (Lab)]

The right hon. Member for Wokingham (Mr Redwood) roamed over many of the issues covered on Second Reading and over the scepticism on both sides of the Committee. I say to the hon. Member for Cities of London and Westminster (Mark Field) that I think evaluation is critical, as we have seen with the west coast main line, and undertaking projects on a wing and prayer at this stage is dangerous, to say the least.

The Bill, as we said on Second Reading, seems to be the reverse of the private finance initiative. PFI was meant to shift the risk on to the private sector, yet the Bill seems to shifting it back on to the public sector. I share the concerns. Clause 1(4) defines financial assistance in the broadest terms possible, so it could involve revenue assistance, and clause 1(3) refers to the operation of a project. In addition to a capital project, we could be subsidising in revenue terms the operation undertaken by a capital project. That leaves open the issue of hospitals being built by the private sector and then revenue supported under the Bill.

--- Later in debate ---

[Mr Blunt]

The thrust of my speech will reinforce the remarks made by the hon. Member for Hayes and Harlington (John McDonnell) and my right hon. Friend the Member for Wokingham (Mr Redwood) about the reassurance we should receive about the possibilities opened up by the Bill. The mechanism I have chosen to secure that reassurance is to table an amendment that would delete the reference to housing. I have no intention of pressing it to a Division; I am merely seeking clarity on what we want to achieve with the Bill.

On Second Reading, the Opposition spokesman said he thought that housing was infrastructure, but I am afraid that I do not—neither does the “Oxford Dictionary of Economics”, nor do The Economist or the Government in their 2011 national infrastructure plan. That does not mean, however, that I do not think that investment in housing is essential or necessary, which was the conclusion slightly unfairly drawn by the hon. Member for Hayes and Harlington on Second Reading. Given his interest in criminal justice, I was somewhat surprised that he then juxtaposed the need for decent prison facilities—

[John McDonnell]

I admit that I was a bit harsh.

[Mr Blunt]

I am extremely grateful to the hon. Gentleman for his customary self-criticism and generosity.

The Minister must give us the necessary clarity. I note that the right hon. Member for Greenwich and Woolwich (Mr Raynsford) has tabled an amendment on housing schemes that would add the words “of national significance”—or words to that effect. It is at that point that alarm bells start ringing for me, as the Member for Reigate, a constituency wholly within the metropolitan green belt. We have had a significant increase in housing, particularly through infill but also through new housing schemes that were agreed and supported by the local authority, and there has been development in parts of Redhill, but that has actually led to a shortage of infrastructure to support the people in that housing.

We desperately need two new primary schools locally, and then there is the small matter of the M23 never being finished. In these circumstances, when we are looking for capital schemes, it might be rather nice if the M23, several decades later, was finally finished properly where it joins the A23. In addition to the schemes that the Government will come forward with, which I anticipate will be announced in the expenditure statement, I hope that we can begin to look at some of the schemes that have been around for a long time and that these funding mechanisms will help to enable expenditure on them to take place.

I am seeking the same level of reassurance that my right hon. Friend the Member for Wokingham seeks. I have the same implicit trust that he has in the ability of the Economic Secretary and the team of Treasury Ministers to manage these things satisfactorily, but Parliament is owed proper accountability on this.

I am concerned that we will find housing schemes, particularly those of national significance, being imposed in the way they were under previous regional development strategies, with housing numbers simply being cascaded down from Whitehall to the regions, to the counties and then to local authorities, such as mine, in a way that leaves the borough councillors, as owners of the planning policy, completely unable to do anything other than mitigate the consequences. They have never been in the position that we, as a localist Government, want them to be in, in which they can judge between the economic and social need for housing locally and the environmental consequences of such development. Those are the balances that local authorities are there to draw.

The Bill will suddenly enable a substantially greater amount of new expenditure to take place, but where is the link with the rhetoric about planning policy? I just want to raise that concern, as I did on Second Reading. I do not want the financial provisions set out in the Bill to be combined with planning policy debates that take place elsewhere, and then suddenly find that in constituencies such as mine the powers of local representatives are being overridden in some rush to develop housing, which by no stretch of the imagination is infrastructure in the proper sense of the word.

Infrastructure (Financial Assistance) Bill

John McDonnell Excerpts

Monday 17th September 2012 Commons Chamber

[Danny Alexander]

I am going to make some progress; I will come back to the hon. Gentleman later.

It could be used to support investment in utilities, transport, other infrastructure for the provision of economic and social public services or housing.

[John McDonnell (Hayes and Harlington) (Lab)]

Will the Minister give way?

[Danny Alexander]

No. I am going to make some progress.

The Bill does not affect any existing authority to incur expenditure that might already have been conferred on a Secretary of State; nor will it cover expenditure by a Secretary of State that can properly rest on the authority of annual supply legislation, without requiring specific statutory authority.

Where costs connected to the guarantee are incurred by the Exchequer that cannot reasonably be absorbed by the funds already provided by Parliament and where it is not possible to seek authorisation of Parliament for the additional expenditure—for example, because the House is not sitting—the Bill allows provision to be made from the Consolidated Fund. This is to cover the commercial reality of situations in which payments need to be made very quickly following an unforeseen obligation. Without this provision, any guarantee could lack commercial viability.

[John McDonnell]

rose—

[Danny Alexander]

I am going to make some progress; I shall take some more interventions later.

The Government intend to offer assistance in the form of guarantees, although the Bill makes provision for other forms of assistance that we intend to use only where unforeseen urgent provisions are required. We believe that up to £40 billion of investment in infrastructure could be brought forward or accelerated under the UK guarantee scheme, using the powers in the Bill. That will help to deliver core infrastructure that supports growth, to improve the UK’s energy, transport, water, waste and telecommunications, and it includes about £6 billion-worth of public-private partnership projects delivering essential public service infrastructure. We will issue guidelines and scrutinise proposals to ensure that any proposal that receives an infrastructure guarantee is nationally significant, financially credible, good value for the taxpayer, requires a guarantee to get under way and is ready to start within a year.

--- Later in debate ---

[Danny Alexander]

It is not an omission from the Bill, which puts in place broad and permanent powers to issue guarantees for infrastructure projects. The Government expect that under the UK guarantee scheme, which will be the first manifestation and use of the Bill’s powers, nationally significant projects will be the sorts of projects able to apply. That means projects listed in the national infrastructure plan or other such projects as may come forward, but the Bill gives a broader authority to the Treasury to issue guarantees in other circumstances. What I am describing is how the Government intend to use the powers in the Bill.

[John McDonnell]

rose—

[Danny Alexander]

I will give way to the hon. Gentleman, who has not intervened in the debate so far.

[John McDonnell]

On that specific point, I hope that the right hon. Gentleman is going to deal with clause 1(2)(b), which is one of the provisions defining the range of facilities that will be funded in this way. It refers to

“railway facilities (including rolling stock), roads or other transport facilities”.

Will he clarify whether those “other transport facilities” include airport expansion and runways? Although the third runway at Heathrow, or perhaps elsewhere, is not listed in the national programme and will not be brought forward in the next 12 months, there are no sunset clauses, so this Bill could be used to that effect.

[Danny Alexander]

The hon. Gentleman is right: there is no sunset clause. That is because we think that it is important to introduce these powers, not just for now but for the future. By circumscribing the financial limit of the extent of the powers and also by establishing strong requirements for reports to be made to Parliament, we can ensure that Members continue to be informed on how they are used. As the hon. Gentleman says, no such proposals are on the table at present, but in principle, should a major infrastructure scheme arise in the transport sector but be unable to attract the necessary finance because of conditions in the funding markets, it could be eligible in the future. However, that would be a decision for the Government of the day.

--- Later in debate ---

[John McDonnell (Hayes and Harlington) (Lab)]

This debate, on a Bill that most people agree with, has been fascinating. The last five speeches, by my hon. Friends the Members for Easington (Grahame M. Morris), for Glasgow North East (Mr Bain) and for Walthamstow (Stella Creasy), my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) and my hon. Friend the Member for Scunthorpe (Nic Dakin), are worth reading. They were superb. I do not usually follow the parliamentary convention of saying, “It is a pleasure to follow”, but it was a pleasure listening to their speeches. My hon. Friend the Member for Easington demonstrated a commitment to, and deep knowledge of, his constituency. My hon. Friend the Member for Glasgow North East set out the implications for Scotland and the overall economic situation. My hon. Friend the Member for Walthamstow was passionate about the problems and returned, as ever, to Wonga. My right hon. Friend the Member for Greenwich and Woolwich displayed his ministerial experience, while my hon. Friend the Member for Scunthorpe demonstrated his passion.

A succession of MPs have stood up and urged the inclusion of particular projects in the Bill. May I be a contrarian and suggest one that should not be included in the Bill—the expansion of Heathrow airport? I am worried because although the Bill is meant to account for ready-made projects—those on the drawing board and ready to be implemented over the next 12 months—there is no sunset clause. Furthermore, it can be renewed and additional sums can be bestowed simply by statutory instrument. Now, I am not a conspiracy theorist, but my constituents might start to believe in conspiracies: we had 12 months of intensive lobbying by the aviation industry; after that, the Chancellor expressed scepticism about existing Conservative party policy, which was against a third runway at Heathrow; then the Prime Minister announced a review of that policy by someone who was director of the CBI, which had lobbied for a third runway; and now we have a Bill that would go on the shelf as almost suitable for funding the expansion of Heathrow. It is no wonder, then, that my constituents are anxious about the attitude of the Government to that measure.

The measures in the Bill would perfectly suit Ferrovial, the Spanish company established by a fascist in the 1930s who made his profits as a result of contracts awarded to him by Franco. It would ideally suite Ferrovial to come forward and seek funding for the infrastructure expansion at Heathrow. I am sure it would be willing to pay for the tarmac, but not for all the infrastructure that goes with it, particularly the road and rail network needed to support a third runway. I fear that Ferrovial will come forward seeking Government guarantees to fund and back up the expansion. I say that because its construction company globally is in serious difficulties, or certainly is in doubt.

I give notice that despite the cross-party support for the Bill, which I also support, I will be moving amendments to ensure that the expansion of Heathrow is not part and parcel of it. I expect coalition support for that on the basis of the existing coalition policy, sworn in this Chamber by the Prime Minister, that the Government will not bring forward the expansion of Heathrow during the lifetime of this Parliament.

[Stephen Pound (Ealing North) (Lab)]

I am not entirely sure if Ealing North and Hillingdon constitute a coalition but, if it does, may I say that that coalition is solid and that we are as one on this?

[John McDonnell]

Interestingly, the coalition against the expansion of Heathrow has been cross-party up until now. If I remember rightly, the Government’s deputy Chief Whip committed to lying down in front of the bulldozers if it ever came about, and he was not moved in the reshuffle, so I take that as another commitment to opposition to the policy. I hope that the Government will support an amendment to prevent the Bill from being used to give guarantees on the funding of the expansion of Heathrow, certainly during the lifetime of this Parliament. We can then debate the matter with the subsequent Government.

Like everybody else, I am desperate for infrastructure investment in my constituency, which is suffering from a housing crisis on a scale not seen since the second world war. Housing should be included. The hon. Member for Reigate (Mr Blunt) argued for the funding of prison cells, but was not willing to argue that housing be funded. Housing my constituents is just as important as housing prisoners, given the housing crisis.

My schools also need to be renovated, because Hillingdon council pulled out of Building Schools for the Future at the last minute and pupils in my constituency are now being educated in crumbling schools. The buildings that are being built for new classes are portakabins, which are substandard for the long-term future.

On alternative energy, I want the green new deal to be implemented in my constituency as rapidly as possible. It has ground to a halt as a result of the Government’s measures on solar panels and on the funding of alternative energy in general.

As my hon. Friend the Member for Leeds West (Rachel Reeves) said, there has been an element of déjà vu to this debate. I remember Alan Milburn arguing in favour of private finance initiatives in 1997. We were told then that PFI was the solution to our infrastructure and investment problems and that it would transfer the risk from the public sector to the private sector. With the greatest of respect to a number of my hon. Friends, that did not happen. What we saw instead was profiteering at vast expense to the taxpayer and profligate expenditure that produced very little for the amount that we invested.

The bizarre thing about the plan under discussion, which will introduce another scheme to keep expenditure off the books and within the parameters set by the European Union with regard to public expenditure, is that it will transfer the risk back from the private sector to the public sector, so now the public sector will take all the risk for schemes. My hon. Friend the Member for York Central (Hugh Bayley) raised a number of detailed points that need to be answered and I have an additional question. If we look at the briefing paper for the Bill, we will see that it will also be able to fund revenue expenditure. Therefore, in addition to the capital expenditure, I take it that if some of these capital schemes go wrong, we will fund the revenue consequences as a result. There needs to be a detailed analysis—my hon. Friend the Member for Walthamstow mentioned the Public Accounts Committee—and it needs to take place now, before the next debate on this Bill. We are almost entering into another PFI-type situation whereby a grab of short-term resources will result in long-term costs.

That is all because no Government will grasp the real nettle, which is that there is no lack of resources in this country; the problem is that they are in the wrong hands and are not being used productively. The crisis in the economy was not caused by over-expenditure by the previous Government. The only time borrowing went up dramatically was when they had to bail out the banks and bring in large-scale quantitative easing. In fact, the level of public expenditure in relation to GDP just about met the John Major levels. The problem was that we never balanced that expenditure with an appropriate taxation regime. What we need to do now is introduce a fiscal package that includes a wealth tax, a financial transaction tax, land valuation taxation and measures to tackle tax evasion and avoidance, so that we can fund public expenditure and not have to create devices that in the long term will cost us more and produce so much less.

I regret that we may well be here in five years’ time—I do not look forward to it—as a result of this Bill, counting the cost as we did with PFI. Members need to consider the Bill’s detail as we move to the next stage, because it is the detail that will cost taxpayers dear and result in profligate spending and some abortive spending on some of the projects that have been mentioned tonight and that we all hold dear on behalf of our constituencies.

This has been an interesting debate, but I worry that when everyone agrees that we need to speed up and expedite the Bill, we will not give it sufficient consideration. That is what happened to the PFI legislation and we lived to regret it. I hope that we do not live to regret this Bill.

Bank of England (Appointment of Governor) Bill

John McDonnell Excerpts

Friday 6th July 2012 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move, That the Bill be now read a Second time.

I have had the good fortune of coming top of the ballot for private Members’ Bills for two Sessions running, which is unheard of. The BBC calculated the odds at 58,000 to one. I wish I had put a bet on—I certainly will next time the ballot comes up.

Hon. Members can choose to use private Members’ Bills to promote a minor good cause or to redress a small anomaly in the law, but they can sometimes use them to send a message to the Government about the need for reform in the interests of good governance. If Parliament wishes to send such a message to the Government, it is best that the message is conveyed with a cross-party voice.

The Bill is an attempt to send such a message to the Government, and I have sought a strictly cross-party support base for the Bill, hence the Bill’s sponsors include the hon. Member for Chichester (Mr Tyrie), the Conservative Chair of the Treasury Committee; my hon. Friend the Member for Leeds East (Mr Mudie), the Labour vice-Chair of the Committee; the hon. Member for Bury St Edmunds (Mr Ruffley), a Conservative; my hon. Friend the Member for Edmonton (Mr Love), a Labour Member; the hon. Member for South Northamptonshire (Andrea Leadsom), a Conservative member of the Committee; my hon. Friend the Member for Bassetlaw (John Mann), a Labour member of the Committee; the hon. Member for Dundee East (Stewart Hosie) of the Scottish National party; the hon. Member for Foyle (Mark Durkan) of the Social Democratic and Labour party; and my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce), a Labour member of the Committee. Two senior Members expressed an interest in the issue—the hon. Members for Cities of London and Westminster (Mark Field) and for Altrincham and Sale West (Mr Brady)—and sponsored the Bill. I am grateful for their support for the measure. I would have been able to demonstrate wider cross-party support if more sponsors were allowed. Support was expressed by the leaders of Plaid Cymru and the Green party. There is balanced and wide-ranging cross-party support base for the proposal.

The message that the Bill conveys to the Executive is straightforward. The Government’s Financial Services Bill is creating an immensely powerful post in the Governor of the Bank of England. The new Governor will be given a vast range of new powers and responsibilities. The Financial Times has said that the Bill will create the most powerful Governor in the history of the Bank of England.

[Mr Denis MacShane (Rotherham) (Lab)]

It is often said that the European Parliament is powerless because it cannot initiate legislation. Although the House approves, votes on and debates legislation, it can never actually initiate it—the House does not have law-initiating powers. My hon. Friend is trying to initiate a law, but I worry that the Bill will be talked out and walked out by lots of whipped Conservative colleagues. Parliament is powerless. Mr Speaker calls Ministers to the House so they can be held to account by hon. Members, but is it not worrying that Parliament is powerless to initiate legislation?

[John McDonnell]

This is one of the few opportunities when the House has the opportunity to initiate legislation. I take what my right hon. Friend says as a caution that we should take that initiation role seriously. We should take all our activities seriously, but Back Benchers should be especially serious when the onus falls on them to make a change in the nature of our governance.

[Karen Bradley (Staffordshire Moorlands) (Con)]

If the hon. Gentleman does not mind, I should like to make a public service announcement. The Procedure Committee is holding an inquiry into private Members’ Bills, and would welcome all comments from hon. Members in the Chamber.

[John McDonnell]

That is a really useful advert—it might be one of the most constructive things said this morning.

I shall be as brief as I possibly can. The message contained in the Bill is that the appointment of the new, powerful post of Governor of the Bank of England should not be left solely to the Executive, and that Parliament, on behalf of the people, should also play a decisive role. The appointment is too important to be left in the hands of a single Minister.

[Mr Andrew Tyrie (Chichester) (Con)]

As the hon. Gentleman knows, his Bill has the support of the Treasury Committee—it is similar to the Committee’s proposals. The principle of greater parliamentary engagement that he is articulating is a strong one, but does he agree that it could be enacted in a number of ways? Does he also agree that we need flexibility from the Government on accomplishing that engagement while the Financial Services Bill is in the Lords?

[John McDonnell]

That is an incredibly constructive proposal, and I hope the Minister heard it. There are other ways of approaching this matter and we should be open to considering them. Yesterday, the Government entrusted the hon. Gentleman with a major inquiry—the inquiry Committee will comprise members of the Treasury Committee and Members of the other House. If the Government have the confidence in Treasury Committee members to undertake that inquiry, it should have the confidence in their having a decisive role in the appointment of a new Governor of the Bank of England. I therefore welcome the hon. Gentleman’s constructive comments.

May I thank Kate Emms, the Clerk, and Gordon Nardell QC for their assistance in drafting the Bill and the explanatory notes? I am extremely grateful for their assistance. The Bill amends the Bank of England Act 1998 to give effect exactly to the recommendation of the Treasury Committee from its report of October 2011 that the appointment of the Governor should be subject to the approval of the Treasury Committee.

Between the time of choosing the appointment of the Governor of the Bank of England as the subject of my private Member’s Bill and debating it, the world has changed somewhat. Last week’s revelations about the role of Barclays bank—and, more than likely, others—in the LIBOR scandal have given the Bill a new context, and there is a new significance in the appointment of the Governor of the Bank of England. Mervyn King will retire in the next year, and the new Governor will play a pivotal role in what, it is increasingly clear, will of necessity be a radical reform and reconstruction of our financial system.

[Mike Freer (Finchley and Golders Green) (Con)]

From the debate yesterday, the Opposition seem to hold the view that the Treasury Committee is not qualified to investigate banking and banking reform, yet the hon. Gentleman today argues that the Committee is qualified to appoint the Governor.

[John McDonnell]

I am pleased that consensus was eventually reached yesterday and that the Chair of the Treasury Committee will now be able to perform his role in that inquiry. The Government’s confidence in the Treasury Committee Chair and its members in respect of that inquiry contrasts with their lack of confidence in respect of allowing the Committee a decisive role in the appointment of the Governor.

It is increasingly clear that the new Governor will have significant responsibility, and it is becoming obvious that we need root-and-branch reform of our financial services and our banking system. Therefore, whatever recommendations come out of the various inquiries, and especially the inquiry that was established yesterday, much of the work of implementing reforms will fall on the shoulders of the new Governor.

[Richard Harrington (Watford) (Con)]

The hon. Gentleman mentions the Treasury Committee’s role in the inquiry into LIBOR, but does he accept that inquiries are the traditional role of Select Committees, and that making Executive appointments is a very different role?

[John McDonnell]

The roles are different, as I will mention later, but the Chancellor did give the Treasury Committee responsibility, in the way it is asking for here, for the appointment of senior members of the Office for Budget Responsibility. Obviously, then, he had sufficient confidence in the Committee to involve it in appointments.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Of course, there is a distinction between the chairman of the OBR and the Governor of the Bank of England. The former does not have an Executive role; their role is more akin to that of the Comptroller and Auditor General.

[John McDonnell]

I shall come to that almost Jesuitical distinction between Executive roles.

It is critical that the right person be appointed to the crucial role of Governor of the Bank of England in this coming period. The new Governor will need to demonstrate not only that he or she is professionally competent, but that they can exercise sound ethical judgment. They must be able to convince the public and the markets that they can turn the liner that is financial services around. To have any credibility they will need to demonstrate that they have the confidence of not only the Chancellor of the Exchequer but of Parliament as a whole, and that they are independent—no crony, no place person, no political appointee—and able and willing to give robust independent advice. Given the scale of the task facing the new Governor and the heightened political atmosphere and context in which the banking reforms are to be developed, now, more than ever, this critical appointment cannot be left in the hands of a single Minister.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I understand what the hon. Gentleman is saying, but there is a significant difference between having confidence in the Treasury Committee and having its consent. At the moment, Select Committees have the power to suggest changes, but I am not aware that they have a veto.

[John McDonnell]

The hon. Lady needs to recognise that the Treasury Committee has a veto over the appointment of senior members of the OBR, but I will come to that point, because it is a valid one and was also raised by the hon. Member for Watford (Richard Harrington).

[Katy Clark (North Ayrshire and Arran) (Lab)]

I am a member of the Business, Innovation and Skills Committee, where recently there was a political divide over whether to approve the appointment of the director of the Office for Fair Access for higher education. Does he agree that ideally we would have a political consensus over the appointment of the Governor, so that the person knows they have the full backing of Parliament, at least when they are appointed?

[John McDonnell]

If Members keep on intervening and reading parts of my speech, I will not get very far. I fully concur. It is exactly as my hon. Friend describes it; she makes an important point.

Let me press on. I want to return to the question of probity, because there are issues outside the House this morning that we need to take into account. Given the scale of the task facing the new Governor, the heightened political atmosphere and the banking reforms, now, more than ever, this appointment cannot be left in the hands of one Minister. Leaving it solely in the gift of the Executive in what is, unfortunately, a tense political context, runs the risk of allegations of a political appointment, a lack of independence and even cronyism.

In the cold light of day, after yesterday’s ferocious party political knockabout and, at times, unfortunately very personal debate, it is important that calmer judgments now prevail and that we seek a consensus, as far as possible, over the key decisions, such as this one, that the House needs to take in reforming our financial system. This is a time for consensus building and a display of magnanimous behaviour on all sides, if we are to get through this crisis and restore confidence in our financial system. Sharing responsibility for the appointment of the new Governor and seeking consensus on this appointment would ensure the credibility of the appointment process and the appointee themselves.

[Mr Hoban]

In seeking that consensus, how would we avoid the risk highlighted by the hon. Member for North Ayrshire and Arran (Katy Clark) of the politicisation of an appointment, as happened in the situation to which she referred?

[John McDonnell]

I suggest that people listen to my speech. I will get to that point, but if I miss it out, perhaps the Minister can intervene again.

The wider engagement of Parliament in the appointment process is more likely to result in the appointment of a talented and competent professional whose independence is demonstrable and protected, and who will therefore have the authority to drive through the reforms and change of culture in our banking system for which we are all calling.

This is not a revolutionary proposal. To allow Parliament, via the Treasury Committee, to have a decisive say in the appointment of key posts is nothing new. If Members read the Institute for Government’s excellent report “Balancing Act”, by Akash Paun and David Atkinson, which the Committee recommended, they will see that the Bill stands in an evolutionary line on the growing role of Parliament in public appointments. In the past 30 years, there has been an evolution from all public posts historically being appointed by prerogative of the Executive through to pre-appointment hearings, confirmation hearings for the Monetary Policy Committee, to the current Chancellor granting the Treasury Committee a veto over the senior posts in the OBR. That was enshrined in the Budget Responsibility and National Audit Act 2011, the wording which I have simply transferred into my Bill.

The OBR is not the only area where appointments are made subject to the approval of a Select Committee. For example, last year the Ministry of Justice announced that the appointment of the Information Commissioner would not be made if the Justice Select Committee opposed it. The proposal in today’s Bill, then, is nothing new or revolutionary but simply part of the evolving relationship between Parliament and the Executive.

In line with the evolutionary progress in that relationship, when the Treasury Committee undertook its investigation into the accountability of the Bank of England, the report of which was published in October 2011, it examined parliamentary involvement in the appointment and dismissal of the Governor and concluded:

“The power of veto with respect to the OBR was given to ensure the independence and accountability of that body. The Governor of the Bank’s independence from Government is crucial for his or her credibility. Given the vast responsibilities of the Governor, the case for this Committee to have a power of veto over the appointment or dismissal of the Governor is even stronger than it is with respect to the OBR.”

The Committee recommended, therefore, that it be given a

“statutory power of veto over the appointment and dismissal of the Governor”.

That was a fair, appropriate and responsible submission from the Committee.

[Neil Carmichael (Stroud) (Con)]

I wonder whether the Bill is really necessary, given that the process, which we discussed yesterday—oddly enough—in the Enterprise and Regulatory Reform Public Bill Committee, for decisions on public body appointments vis-à-vis Select Committee endorsement is already well enshrined. There is a list, which was last reviewed by the previous Labour Government in 2009, to which we can add or subtract.

[John McDonnell]

If there was a way of moving forward by that process, I would use it, but the problem is that we have now debated this matter in the Financial Services Bill, both in this House and the other place, and the Government have refused to accept the Treasury Committee’s recommendation. I hope that once I have sent this message today, the Government will shift their position and use whatever device is possible—either an amendment to the Financial Services Bill, the route the hon. Gentleman suggests, other routes that the Chair of the Treasury Committee has suggested exploring or the acceptance of this Bill.

At the time of the Treasury Committee’s recommendation and the debates on the amendments here and in the other place, the Government set their face against the proposal. I shall deal with the five basic objections and arguments that Treasury Ministers have put forward. First, there is the argument made by the Chancellor to the Committee that the Governor must be independent. He said:

“I think it is proper that the Government of the day chooses the Bank Governor, is held accountable for that choice, but also that the Governor is given some protection, some independence, so it is quite difficult, to put it mildly, or extremely difficult, to get rid of them.”

Ironically, the Committee fully agreed that the Governor should be independent and that this independence should be protected, but concluded that the best way of securing that independence was to ensure that the appointment was not solely in the hands of the Executive or one single politician. It further concluded that dismissal should also be determined more widely. Logically, then, the Governor is more likely to be seen as a creature of the Executive if he or she is solely appointed by the Executive. Making appointments and dismissals subject to the Committee’s approval must logically increase a post’s independence from Government and free the appointee from any charge of being a political appointee.

The second issue, which the Minister raised, was potential politicisation.

[Stephen Hammond (Wimbledon) (Con)]

The hon. Gentleman is making the point that the Bill would make the Governor more independent of the Executive. However, one of the things that I am sure several of my hon. Friends will be exploring in their speeches is that it may, in fact, interfere with his independence from the Treasury Committee.

[John McDonnell]

It is a matter of striking a balance and, at the moment, the Governor’s independence is undermined by association with appointment by one Minister and the Executive. My Bill would spread the burden of accountability and responsibility for the appointment.

On the issue of politicisation, the argument was that the Committee veto would politicise the post of the Governor. However, spreading the decision, to include all parties in determining the appointment, would avoid the charge that the person had been appointed by one party or one coalition grouping and was therefore a party political appointee. The charge of politicisation also neglects to acknowledge that our Select Committees have, over decades, developed a good culture of cross-party working. Where there have been disputes over a ministerial appointment in the past, they have not been on political lines. There have been only two rejections of a Minister’s recommendation, and they were cross-party rejections. Having to secure the approval of the Treasury Committee would override any charge of a single-party or party political fix.

[Mr Hoban]

Will the hon. Gentleman explain what would happen, then, if a Committee voted on party lines and a minority party opposed the appointment? Would it not impair the Governor’s credibility if a bloc was against him?

[John McDonnell]

That charge was laid before, but when the Institute for Government examined it in detail, it found no example of that happening, because the Select Committee system—

[Mr Hoban]

indicated dissent.

[John McDonnell]

The decision in the case that my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) raised was not accepted. The Select Committee system has worked remarkably well, and when people have served on them, they have done so on a cross-party basis. However, the point the Minister makes still does not undermine the argument that it is better to have a group examining, interviewing and then coming to a decision about an appointment on a cross-party basis than to leave it in the hands of a single, party politician.

[Mr Sam Gyimah (East Surrey) (Con)]

rose—

[Mr Graham Brady (Altrincham and Sale West) (Con)]

rose—

[John McDonnell]

I have allowed large numbers of interventions. If I can press on, I will see whether I can allow further interventions later.

Let me go through the other arguments that the Chancellor has made. He also argued that involving the Treasury Committee in determining the appointment of the Governor would blur the lines of accountability, saying that

“it is proper that the Government of the day chooses the Bank Governor,”

and

“is held accountable for that choice”.

However, the reality is that the Governor’s term of office rarely coincides with a Government’s term of office. Many Governments inherit the Governor appointed by the previous Government and can therefore barely be held accountable for that appointment. The involvement of Parliament in the appointment would simply mean that both the Executive and Parliament would be held accountable for it. That is perfectly proper and appropriate.

Let me turn to Executive functions. When challenged over his decision to allow the Treasury Committee a veto over an appointment to the OBR, but to refuse it one over the appointment of the Governor, the Chancellor argued that

“the Governor…is carrying out executive functions on behalf of the State,”

such as setting monetary policy and monitoring financial stability. In the evidence session on 5 July 2011, the Chair of the Treasury Committee pointed out to him the contradiction between that argument and the argument that the Committee should have a veto over the OBR appointment precisely because it would be carrying out Executive functions. The Chancellor then made a rather bizarre distinction between different Executive functions, which was beyond the Committee’s comprehension.

The other argument, which was raised in the other place, concerned market sensitivity. The argument was that the appointment of the Governor was market sensitive and that involving the Committee in the process could have a detrimental impact on the markets by creating uncertainty over the appointment. It could just as easily be argued that OBR appointments are extremely market sensitive. However, whether the appointment of the new Governor is undertaken behind the closed doors of the Treasury or openly and transparently in the Committee, there will still be speculation in the markets about which candidate will be appointed and what the impact will be. If the post is so market sensitive, it is even more important that the appointee is seen to have the approval and confidence of both the Executive and Parliament.

[Mr Gyimah]

Let me take the hon. Gentleman back to his point about the Governor’s term of office, which would be a single, eight-year term. In other words, once appointed, the Governor does not have to seek reappointment and so can act independently. Therefore, we do not really need the Treasury Committee to be involved to ensure that independence.

[John McDonnell]

The key aspect is independence at the point at which that person is appointed, so it is critical that the new Governor, when they are appointed, is seen to be completely independent, and also carries the House as well as the Executive. That is the point I am making.

I have spoken long enough and many other Members wish to speak, so let me conclude. Over the coming period a new Governor of the Bank of England will be appointed. The new Governor will not only have more powers and responsibilities than any Governor before him or her, but will face the immense challenges of reforming and restoring confidence in our banking system and financial services. My view—and, I think, the view of others—is that it is therefore critical that the person appointed to this vital post has the credibility, independence and authority to meet those challenges. Engaging Parliament in determining the appointment, along with the Executive, will ensure that the new Governor has that credibility, independence and authority.

Those are the arguments, but let me say this to the House. I hear that there has been organising among Back Benchers to filibuster today and talk this Bill out. We have been here before, so let me say this to hon. Members. That is an extremely short-sighted approach, and it is not in the interests of the Government or good governance. If we get into the puerile antics that we have seen before, it just brings Parliament into disrepute and increasingly encourages people to judge this House to be degenerating into an irrelevant farce, especially on today of all days, when, outside this House, there are flood warnings across the country. Many hon. Members will want to return to their homes and their constituencies to be with their constituents. I therefore urge Members to take this matter seriously and ensure that their speeches are as brief as possible—I apologise for speaking too long myself—to enable the House to come to a decision that the Government can then consider. If the Bill gets talked out today, I will deeply regret that, but let me say this to the Government and to the House. This issue will not go away; it will return at a later date. I ask the Government and the House to seize this opportunity to make this reform. I hope that wiser counsels will prevail. I therefore commend this Bill to the House.

[Stephen Hammond]

(Wimbledon) (Con): I commend the hon. Member for Hayes and Harlington (John McDonnell) for the way he has introduced his Bill. He has made some thought-provoking remarks, but I would gently say to him that I am sure that Members on both sides of the House have been asked whether they would like to make a contribution today. I have cancelled a lot of things in my constituency to be here today, and I am now being called puerile and unprincipled, yet had I been speaking from the Opposition Benches or supporting his Bill from the Government Benches, I would now be principled and upstanding. Let me gently say to him that that is not entirely fair.

[John McDonnell]

The hon. Gentleman has never engaged in filibustering that I have been aware of, but he knows that last year it occurred on several occasions, and was publicly and roundly condemned for bringing the House into disrepute.

[Stephen Hammond]

I am grateful to the hon. Gentleman.

The Bill is supported by large numbers of Members from both sides of the House, including many right hon. and hon. Friends whose judgment and intellect I respect and admire. However, let me start by setting out the four points on which there are internal contradictions in the hon. Gentleman’s argument or where there are reasons to oppose the Bill. First, the role is unique, and its extension increases that uniqueness. Secondly, the Government are already putting safeguards in place through the Financial Services Bill. Thirdly, despite what the hon. Gentleman has argued, a lot of people would accept that what he proposes is a fairly major constitutional change. Moreover, an underlying point he made is that this Bill somehow fits with the principle “for the people, by the people” so that anything other than that would be unacceptable.

I recently participated in a transport debate and gave what I thought was a fairly good detailed speech; indeed, one or two people were kind enough to say it was useful. I was pleased to note that my hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) who was the duty Whip at the time, said something like, “That was one of the dullest speeches I have ever heard; more time limits, please”! I hope the Whips will find my speech today to be equally dull; perhaps there is a case for time limits in debates such as this.

It might bring a little colour to the debate as well as a sense of purpose if we look at one or two of the Governors of the Bank of England over the last century who have been extremely powerful figures on the economy and powerful figures in respect of their independence from Government. We could reflect on how their appointments were made. Montagu Norman, for example, the Governor of the Bank of England from 1920 to 1944 was described by many as more of a bohemian artist than a banker. He liked to wear Sherlock Holmes-type clothing, was prone to nervous breakdown, regarded politicians as asses and openly said so. I just wonder what the Treasury Select Committee might have said to him when he was appointed.

--- Later in debate ---

[Stephen Hammond]

My hon. Friend is absolutely right, and that is one of my concerns. I have tried to lay out some arguments suggesting that giving a veto to the Treasury Committee does not necessarily enhance the independence of the position of Governor.

Moving on now to my concluding remarks—my hon. Friend the Member for Altrincham and Sale West (Mr Brady), the chairman of the 1922 committee, will be pleased to hear that—I just want to bring the hon. Member for Hayes and Harlington back to his contention that this would not be a major change to our constitution. The Bill would put in place a legislative requirement for the Treasury Committee to have a veto over this appointment. The hon. Gentleman talked about the evolution of this role, but if he truly believed that, why does the Bill not seek to give Select Committees the power to veto all appointments—for there might be a number of Members of this House who would like to have parliamentary control of the appointment of the governor of the BBC, or the chief executive of Network Rail, or, closer to our hearts, the chief executive of the Independent Parliamentary Standards Authority? The hon. Gentleman said that private Members’ Bills give Members an opportunity to suggest changes to the Government. He might have had even wider support than he already has if he had introduced a Bill giving Select Committees the power of veto over appointments, so we could have had that more general discussion. To give that power of veto over this one appointment gives rise to considerable concerns, however, and it would create a major change in the constitutional position.

[John McDonnell]

I think that is the ideal argument for giving the Bill a Second Reading, so it can be amended appropriately.

[Stephen Hammond]

The hon. Gentleman and I disagree on that. I think it is the ideal reason why we should not give this Bill a Second Reading. We should be giving a Second Reading to the principle. We should be discussing the principle, not this specific case.

In my short speech this morning, I have tried to draw out a few reasons why it is absolutely right for there to be increased accountability and parliamentary scrutiny of the operation of the Bank of England and of its Governor. Although the Bill might appear to guarantee the independence of the Governor, it does not necessarily do so, and it would create a major extension of the constitutional position of Select Committees. Therefore, I hope Members will decline to give it a Second Reading.

--- Later in debate ---

[John McDonnell]

As extremely entertaining as the hon. Gentleman’s speech is, may I suggest that it is an example of the filibustering that, in the eyes of the general public, demeans the House? May I suggest that he addresses the Bill instead of using this mechanism in this way to embarrass himself and degrade the proceedings of the House?

[Madam Deputy Speaker (Dawn Primarolo)]

Order. That might be the hon. Gentleman’s opinion and the opinion of people outside the House, but the hon. Member for Finchley and Golders Green (Mike Freer) is in order. If he was not, I would prevent him from speaking. I appreciate that that is the view of the hon. Member for Hayes and Harlington (John McDonnell), and that he has now put it on the record, but the hon. Member for Finchley and Golders Green will be in order if he wishes to advance this argument.

--- Later in debate ---

[Matthew Hancock]

I certainly agree. The private consultation, for instance, would be a far better process to ensure that there is consensus and the strength of a broad agreement behind the incumbent, who has to rise above party politics once appointed.

There have been some great central banking success stories over even the last decade. The Reserve Bank of Australia has an appointments process similar to that of the UK, yet no Australian bank needed a bail-out—so far—or suffered a downgrade, and Australia avoided recession. The Governor of the Bank of Canada is nominated by independent directors of the bank and confirmed by the Government. During the global recession, Canada’s GDP declined by 3.4%, compared with 4% in the US and more here. Not a single Canadian bank failed or required an emergency capital injection from the Government. Today, employment and economic activity in Canada are back at their pre-crisis levels, whereas here they languish below those levels because of the depth of difficulties that we got into when a Government did not listen to the Governor of the Bank of England. In addition the Bank of Canada had regulatory control over their banks, as proposed in the new Financial Services Bill.

This Bill is no magic bullet. It brings in risks without rewards, it is of a deeply constitutional nature, it deserves all the scrutiny that it is getting, and I oppose it.

[John McDonnell]

On a point of order, Mr Deputy Speaker. Whatever Members might think of the Bill, I think that it is worth putting on the record the abundant criticism on Twitter and elsewhere about what is happening in the House today. In normal circumstances there would be an opportunity to claim to move that the question be now put—a closure motion—but that is not possible today because many Members have returned to their constituencies because of the flooding. It is completely understandable that they should do so to look after their constituents’ interests, but it is worth putting it on the record that that is one of the procedural issues we have had to face today.

[Mr Deputy Speaker (Mr Nigel Evans)]

I do not think I really need to comment on the hon. Gentleman’s statement.

--- Later in debate ---

[Mr Hoban]

I hate to say it, but I thought my hon. Friend was uncharacteristically uncharitable about our hon. Friends the Liberal Democrats. Perhaps they did not get the three e-mails that I got from the hon. Member for Hayes and Harlington imploring me to be here today. I answered that call, and I am sorry that more Members on his side of the argument did not do so.

[John McDonnell]

Will the Financial Secretary give way?

[Mr Hoban]

No, I think I ought to have the opportunity to summarise the Government’s position on the Bill.

We are committed to maintaining the appointments process for the Governor, which is proportionate, attracts candidates of the highest quality and represents value for money for the taxpayer. It is important to ensure the credibility of the candidate, and to safeguard his or her independence and prevent them from becoming a political pawn.

The Financial Services Bill, which is currently in the other place, already contains provisions to strengthen the Bank’s governance arrangements, including moving the Governor to a single eight-year term. Much has been made of the enhanced powers that the Financial Services Bill bestows on the Governor, but it is important to remember that the Bill does not create new responsibilities for the Bank. Rather, it is returning the Bank to a role more akin to the one it played prior to the creation of the Financial Services Authority, when it was responsible for financial stability and prudential supervision of banks. In a way, we are going back to the situation prior to the Labour Government.

The Governor is already accountable to the court and to Parliament, and the Treasury Committee holds pre-commencement hearings for the Governor and deputy governors. That is the right balance. Of course, the Governor—rightly—is regularly called before the Treasury Committee. The market-sensitive nature of the Governor’s role makes it unsuitable to be subject to the approval of the Treasury Committee. Such a step risks uncertainty, delay and disruption to financial markets. That is also true in respect of the proposal to make the dismissal of the Governor subject to the approval of the Treasury Committee. I therefore cannot offer the Government’s support for the Bill.

Financial Services Bill

John McDonnell Excerpts

Tuesday 22nd May 2012 Commons Chamber

[Lisa Nandy (Wigan) (Lab)]

After that exchange, I rise to speak to amendment 45, which stands in my name and that of other Members, with some trepidation. I shall try to keep to the point.

The amendment places a duty on the Financial Conduct Authority, in its role as the UK listing authority, to require all applicants to the stock exchange to report on the human rights and sustainable development impacts of their operations. The Minister has said that the FCA needs to be a single-minded regulator. The amendment would not distract the FCA from its strategic objective, but would serve to uphold the integrity of the market and the London Stock Exchange in the fullest sense of that term. As the hon. Member for Hereford and South Herefordshire (Jesse Norman) has said, we must uphold honour and morality in the markets, but we must also maintain Britain’s international competitiveness. The amendment will achieve both objectives.

Conveniently, the amendment is also in line with the Government’s policy commitments. In June last year, the UK, along with every other member of the United Nations Human Rights Council, endorsed the UN framework on human rights and transnational corporations, which for the first time provides a framework for business and human rights. It was an historic agreement, and the Government are very supportive of it. The Foreign and Commonwealth Office has been particularly enthusiastic in its support for its principles, but so far the Government have not spelled out how they intend to fulfil them. Listing requirements specifically relating to human rights and sustainable development will be a very strong first step. As some Members may be aware, the LSE is currently host to a number of companies that have been found guilty of gross violations of human rights, particularly in countries that are in conflict or deemed high risk, yet very few companies have been held properly to account for such actions.

Last June, Richard Lambert, former director general of the CBI, wrote an opinion piece for the Financial Times. He said:

“It never occurred to those of us who helped launch the FTSE 100 index 27 years ago that one day it would be providing a cloak of respectability and lots of passive investors for companies that challenge the canons of corporate governance such as Vedanta…Perhaps it is time for those responsible for the index to rethink its purpose.”

Our amendment would clarify rather than rethink the purpose of the stock exchange, allowing the FCA to take into account an applicant’s respect for human rights and sustainable development, in protecting the integrity and respectability of the exchange. That has been done elsewhere, such as in Hong Kong, and Istanbul, Brazil, Indonesia, Shanghai, Egypt, Korea and South Africa have all taken steps in that direction.

Such regulation would not be burdensome on applicants. Publicly listed companies already report on their social and environmental impacts as part of the requirements under the Companies Act 2006. This amendment would simply make explicit the requirement to include human rights and sustainable development in their reports and demonstrate to applicants that the Government do not tolerate or accept failure to respect human rights.

Apart from the moral argument, there is a strong business case for such requirements. There is increasing recognition that environmental and social factors can have a material impact on business returns and a wider impact on reputation. The gulf of Mexico oil spill—which forced BP to cancel its dividend for the first time since the second world war and to report its first annual loss in 19 years—should have removed any doubt that environmental and social issues can be vital to company success.

One of the virtues of London’s financial services sector is its sustainability, security and stability, yet we are falling behind other countries in our commitment to sustainability. The Bill provides a great opportunity for Ministers to get on the front foot in respect of this agenda. The FCA’s purpose is to uphold the integrity of the markets. I ask Ministers to consider that term in its fullest sense in respect of companies’ environmental and social impacts.

This is a probing amendment, so I shall not press it to a Division, but I will listen very carefully to the Minister’s response.

[John McDonnell (Hayes and Harlington) (Lab)]

I apologise, Madam Deputy Speaker, for coming and going from the Chamber during the debate; I have been chairing another meeting.

I congratulate my hon. Friend the Member for Wigan (Lisa Nandy) on the way in which she has promoted the debate on the issue and on her amendment. She has approached the matter articulately and with considerable compassion. She has demonstrated that ability to the House on a number of issues, and I congratulate her on her promotion to the Labour Front Bench.

--- Later in debate ---

[Steve Baker (Wycombe) (Con)]

The hon. Gentleman makes a compelling case, but are not directors already responsible under the Companies Act 2006 for many of the matters he raises? Would it not be more expedient to pursue directors?

[John McDonnell]

I understand where the hon. Gentleman is coming from but we have tried that and it has not worked. We sought under the recent Companies Act to increase the responsibilities on directors, but unfortunately we were unsuccessful. The evidence that came to the London Mining Network report, which I shall send to the hon. Gentleman, clearly shows that the existing system is not working, and this Bill provides an opportunity to enhance the powers of the regulatory authorities in this country.

My hon. Friend the Member for Wigan will not push the amendment to a vote. I understand why, although I am a bit more proactive on these matters. May I suggest to the Minister that the Government usefully look at the report and bring together the relevant representatives, including the existing authorities and the new individuals who will sit on the various authorities when the Bill has gone through, to discuss where we go from here? How do we ensure that we have an effective mechanism that includes the monitoring of corporate ethical behaviour within companies that are listed in this country and that gain all the advantages from that, such as reputational advantage, but that are doing our country a disservice through their operations in the developing world?

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I am grateful for the opportunity to reply to this debate. The hon. Members for Wigan (Lisa Nandy) and for Hayes and Harlington (John McDonnell) have raised some very important issues and there is a lot of truth in what they say. The reputation of the UK listing regime depends partly on the behaviour of companies, and we need to think about that quite carefully. However, there are other forums in which these issues should be explored—I do not believe that the Financial Services Bill is the place for it. In the regulatory reforms we have brought forward, we have tried to be very clear about the responsibilities and focus of the new regulators, the Financial Conduct Authority, the Prudential Regulation Authority, and the macro-prudential body the Financial Policy Committee.

Matters of stewardship and corporate behaviour are predominantly the responsibility of the Financial Reporting Council, which is responsible for the stewardship code and corporate governance issues. I encourage both hon. Members to engage with the FRC on this issue. Of course, it is not only the FRC that is relevant. The hon. Member for Hayes and Harlington talked about the mining sector, and the Government are engaged in that debate. We are a strong supporter of transparency in the extractive sector and we are pressing for requirements to be placed on EU extractive companies to disclose the payments they make to Governments. That is flowing from the accounting and transparency directives. We are also very supportive of the extractive industries transparency initiative, under which companies publish the payments they make to companies in resource-rich countries, so we are aware of the need to increase transparency.

--- Later in debate ---

[Mr Hoban]

As my hon. Friend the Member for Wycombe (Steve Baker) highlighted, there is a responsibility on directors and there are criminal sanctions for criminal behaviour. We need to be very careful that we do not duplicate powers that already exist elsewhere and that we do not confuse the role of the regulators. It was the Treasury Committee that highlighted some of the problems in the existing regulatory system with the confusion of roles and remits. We want to be very clear in these reforms about what we seek to achieve.

The FSA—and in future the FCA—has a role to play. The FSA supports the FRC’s stewardship code through mandatory requirements on asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy. Those powers will transfer to the FCA.

[John McDonnell]

I hope that what the Minister just said was helpful. Is he saying that the stewardship role that he envisages for the FCA will include an element whereby judgments can be made about behaviour in terms of corporate ethics?

[Mr Hoban]

I am saying that what we need to ensure in terms of the stewardship code, and what the FCA does, is to require asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy, so the obligation is on asset managers rather than necessarily on companies themselves to disclose their adherence to stewardship matters.

[John McDonnell]

Will the Minister give way?

[Mr Hoban]

Yes, but I want to make some progress.

[John McDonnell]

All right, I will not be a pain any further. To be frank, that does not move the matter on. The Minister need not give an answer on this tonight, but it would be incredibly helpful if he or one of his colleagues met my hon. Friend the Member for Wigan (Lisa Nandy), me and representatives from the London Mining Network to talk this issue through because there is clearly a gap between the different institutions, which corporate ethics seem to fall down when it comes to their being pragmatically adhered to.

[Mr Hoban]

I am always loth to offer meetings on behalf of colleagues, because it has happened to me, but the hon. Gentleman may wish to approach the Minister with responsibility for consumer affairs, who is also responsible for corporate governance and the role of the FRC. That might be the most productive furrow to plough.

On amendment 38, the hon. Member for Nottingham East (Chris Leslie) is absolutely right that we have heard it before. It is identical to amendment 150, which we discussed at some length in Committee before rejecting it. I do not think his arguments today were any more persuasive than they were a few months ago. I know that he will find that personally disappointing but I am sure he will get over it. In short, the objectives of each authority are broad enough to enable them to make the rules suggested in the amendment.

More generally, these issues are better considered in other forums, including those concerned with governance across the corporate sector. I also point out gently to the hon. Member for Nottingham East that the Department for Business, Innovation and Skills recently consulted quite widely on executive remuneration and that it included in that consultation both the suggestions that have been made, neither of which received significant support. [Interruption.] The hon. Member for Nottingham East says that it depends whom we consulted but it was an open consultation. Views were encouraged from across a wide range of bodies, including investor organisations, and I am sure that institutions such as the TUC and others would have taken part. I know that the Treasury Committee is also looking into this matter, so perhaps the hon. Member for Edmonton (Mr Love) can illuminate us about the conversations he has had this afternoon with Baroness Hogg.

Financial Services Bill

John McDonnell Excerpts

Monday 23rd April 2012 Commons Chamber

[Mr Hoban]

The hon. Lady makes an important point. It is my understanding that some of these prepayment schemes get their income from being able to negotiate a discount with the supplier of the goods, as well as, perhaps, from the interest they earn on the prepayments. The question then arises whether the revenue the prepayment scheme gets is sufficient to outweigh the cost of enhancing customer protection. Some of these schemes are administratively expensive, and the cost of protection may exceed the income generated, which would lead to that service being withdrawn from the consumer.

As this exchange demonstrates, some complex issues are involved. The hon. Lady is right to raise them, and it is right that the Government should continue to address them. Many people rely on these schemes and it is important that they are well protected. We should make sure that there are alternative sources of information for them, in order to enable them to judge where they might get best protection and, perhaps, earn some interest themselves on the prepayment they are making, rather than the supplier making that money.

[John McDonnell (Hayes and Harlington) (Lab)]

Both of the issues under discussion have cross-party support. There is a consumer affairs element in them, and this kind of legislation comes around very rarely. Indeed, I doubt whether we will see such an all-encompassing Bill for another decade. There does not appear to be any consumer legislation in the planned Queen’s Speech, other than the proposed groceries adjudicator Bill. Will the Minister therefore reconsider these two matters, and meet the relevant Members to see whether there is any way they could be better addressed in this Bill before it goes to the other place or before the final vote on it?

[Mr Hoban]

I think that there is adequate provision in the Bill on consumer credit; the FCA has the powers to tackle that issue and I am confident that it will be able to make appropriate use of the remedies available to it. A different issue about pre-payment schemes has been raised, but that does not fall within the scope of the Bill. Of course there is a mechanism in the Bill to move the regulatory perimeter if appropriate, but I think that it is the Minister with responsibility for consumer affairs who needs to respond on that point.

I know that we want to move on to deal with the next group of amendments, but before concluding I just wish to say that there is support across the House for new clause 4, which enables us to complete the transfer of regulation from the OFT to the FCA. That does yield important benefits for our constituents. We need to get that regime right if we are to ensure that there is a reasonable supply of affordable credit to our constituents and that they are well protected—that is the goal we are all aiming at. The Bill contains the powers to do that, and I commend new clause 4 to the House.

Question put and agreed to.

New clause 4 accordingly read a Second time, and added to the Bill.



New Clause 1

Retrospective reviews of Bank performance by court of directors and publication of court minutes

‘(1) Section 2 of the Bank of England Act 1998 (Functions of court of directors) is amended as follows.

(2) After subsection (5) add—

“(6) The court shall conduct retrospective reviews of the performance of the Bank with respect to its functions and objectives.

(7) The court shall determine the particular matters to be reviewed under subsection (6).

(8) The court must publish a report on each review carried out under subsections (6) and (7) unless the court decides that all or part of such a report should not be published for reasons of confidentiality or because it would endanger financial stability.

(9) When all or part of a report of a review is not published under the provisions of subsection (8), the court must—

(a) publish as much as possible of the report,

(b) send a copy of the full report to the Chairman of the Treasury Committee of the House of Commons or, in exceptional circumstances, inform the Chairman of the Treasury Committee of the reasons for not sending it, and

(c) publish the report or part of the report as soon as possible after the court decides that the considerations in subsection (8) no longer apply.

(10) After each meeting of the court, the Bank shall publish minutes of the meeting before the end of the period of two weeks beginning with the day of the meeting.

(11) Subsection (10) shall not apply to minutes of any proceedings where the court has decided that publication should be delayed for reasons of confidentiality or because publication would endanger financial stability.

(12) Where any part of the court’s minutes is not published under the provisions of subsection (11), the Chairman of the court shall inform the Chairman of the Treasury Committee of the House of Commons of the reasons.

(13) Any part of the minutes of a meeting of the court must be published as soon as the court has decided that the considerations in subsection (11) no longer apply.”.’.—(Mr Tyrie.)

Brought up, and read the First time.

--- Later in debate ---

[Mark Garnier]

I am grateful for my hon. Friend’s intervention, because that is exactly the point I am coming to. What is the accountability of the FPC? Ultimately, it has to come down, in some way, to the court of the Bank of England making an intervention to assess what is going on.

As we have discussed, the FPC will have far-reaching powers to intervene, some of which we may never know about. Some might be restricted to a 30-year rule, so we might hear about them in the future, although an awful lot may well be published. However, it is incredibly important that we look at what the Bank of England does to supervise. Currently, the court of the Bank of England is responsible for administrative matters, as we have heard—it is responsible for pay and rations. What we on the Treasury Committee want is the Bank to have a proper board—probably with a new name that reflects its updated role, although I do not think that will happen. We recommended that it should have a majority of external members who must have the relevant skills and experience, and the Treasury Committee wants the court of the Bank to be able to conduct—this is an important point—retrospective internal reviews of policy decisions of the Bank. The Bank’s response envisages limiting that to commissioning external reviews or conducting internal reviews only of the decision-making process of the Bank.

The creation of the FPC—on which my hon. Friend the Member for Beckenham (Bob Stewart) intervened on me—makes this governance issue incredibly important. As we have heard, the Monetary Policy Committee has just two tools: quantitative easing and interest rates, which it uses openly and publicly. We see detailed minutes of the meetings, followed up by evidence sessions by the Treasury Committee, which is also part of an incredibly important scrutiny process, which is fully transparent and very simple. However, as we have heard, the FPC has a large range of tools at its disposal, which means that it might not be able to give a full and open account to the Treasury Committee or publish entirely transparent minutes. Moreover, as I have said, it might be years before we know what intervention has been made. That is why we need an organisation that can intervene to look at what the FPC is doing and take on a strong governance responsibility.

That is why the court of the Bank of England needs to be able to look at the merits of the FPC’s policies and not just the method. The Bank’s board must not be restricted to finding out whether the wrong decisions were made but in the right way. That is why I would be incredibly grateful if the Minister gave serious consideration to new clause 1.

[John McDonnell]

I am not part of the charmed circle of the Treasury Committee, but I wish to add my congratulations to the hon. Member for Chichester (Mr Tyrie) and the members of the Committee on the work they have undertaken in examining the Bill as it has gone through the House.

I have tabled amendments 46, 47, 49 and 50, which seek to enhance the Treasury Committee’s role in the appointments of the Governor and deputy Governors of the Bank of England, and the chair and chief executive of the Financial Conduct Authority. I have done so because the background to this legislation is perhaps the most catastrophic failure of the Bank of England and the financial regulatory authorities that we have seen in 70 years. Their failure to predict or intervene effectively to ensure that the financial crisis was averted or dealt with adequately, speedily and effectively is there for all to behold. It has brought this country to its financial knees and into a recession that is turning into a depression, which is something we have not seen since the 1930s. The reasons for that have been evidenced today. New clause 1 would address part of the issue—namely, the lack of transparency of the old regime—but another element was the lack of accountability.

This legislation will create, in the Governor of the Bank of England, one of the most important roles in the country. The Financial Times editorial of Thursday 19 April stated:

“The central bank governor is not just some technocrat, but the most powerful unelected official in the country. His role has become more political since the crisis, not less, and will be even more sensitive when the BoE acquires new powers to avert financial crises. The next governor must win public acceptance and possess sharply honed political antennas. This might be harder for a foreigner.”

That last comment refers to the speculation about some of the candidates that the Government are considering.

In today’s Financial Times, the shadow Chancellor sets out his concerns about the range of powers and responsibilities that the new Governor will have, stating that only a superman or superwoman need apply, because the job will be so influential and will have such a wide range of roles and responsibilities. The Treasury Committee appreciated that fact very early on in the game, in its consideration of the new legislation. That is why, way back in November, it recommended that it should have a role in the appointment of this significant post. The Chancellor of the Exchequer argued against that proposition. I find it extraordinary that the Treasury Committee won the right to have a veto over the appointment of the chair of the Office for Budget Responsibility, yet failed to win a role in the appointment of the much more significant post of the Governor of the Bank of England. Indeed, it has no role in the appointment of the deputy governors, and no effective role in the appointment of the Financial Conduct Authority proposed in the Bill.

I genuinely thought that the Government were about to shift their stance on this matter, because, back in November 2011, the Treasury Committee stated strongly that it was not persuaded by the Chancellor’s refusal to grant it a role in the appointment. It went on:

“The power of veto with respect to the OBR was given to ensure the independence and accountability of that body. The Governor of the Bank’s independence from Government is crucial for his or her credibility. Given the vast responsibilities of the Governor, the case for this Committee to have a power of veto over the appointment or dismissal of the Governor is even stronger than it is with respect to the OBR. We therefore recommend that, in order to safeguard his or her independence, the Treasury Committee is given a statutory power of veto over the appointment and dismissal of the Governor of the Bank of England.”

I wholeheartedly supported that view. The Chancellor’s argument was that the Treasury Committee could not have such a role because the Governor was exercising an Executive function and should therefore be a Government appointee. That is an absolutely specious argument.

The legislation to give independence to the Bank of England went through the House, although I never supported it. That means that the Governor has more than an Executive function. The Bank is not an Executive arm of the Government. The Chancellor of the Exchequer and the Government cannot have it both ways. If they support the independence of the Bank of England from the Government, they must establish some other form of accountability to Parliament. If they do not believe that it is independent, and that it is simply an Executive arm of the Government, the Governor will be appointed directly by the Chancellor of the Exchequer. Even if that is the Government’s argument, the Chancellor of the Exchequer is still accountable to the House, so there must be some role that the House can play in advising him on the appointment of this important post.

My amendments would simply reassert the role of the Treasury Committee and thus Parliament itself in this vital range of decisions about appointments to key elements of the new structure proposed by the Government. Let me be frank. I agree with everything said about the role of the Treasury Committee Chairman and I agree that he needs to be called “right honourable” and the all the rest of it, but sometimes people are born great and sometimes people avoid greatness being thrust upon them. I do not know what negotiations went on, and it might well be that the negotiations were along the lines of, “We will not push for a veto on appointment as long as we can get some transparency and thus at least some element of accountability for that post to the Committee itself.” If that was the tenor of the negotiations with the Government—I happily allow the Treasury Committee Chairman to intervene to clarify it—I am afraid that the deal is not good enough.

What needs to be said very clearly by this House is that these are such significant appointments—particularly the Governor of the Bank of England but also the head of the Financial Services Authority in view of its key role in seeking to avoid further crises and in regulating this country’s financial services—that this House must have at least some say over the calibre of these persons.

[Mr Tyrie]

I can reassure the hon. Gentleman that the report does not reflect any back-room deals, but I would like to ask him a question. I am strongly sympathetic to the approach set out in his amendments. He needs to know that the Treasury Committee intends to hold pre-appointment hearings for these jobs in any case, including for the very senior jobs like that of the Governor, when he is identified. In the unlikely event that a nomination were challenged by the Committee, many would argue that the position of the person, even at nomination stage before he or she took up the appointment, would be untenable. In that case, does the hon. Gentleman not agree that the sensible thing for the Government to do is to engage with Parliament and with the Treasury Committee a little earlier in the appointments process?

[John McDonnell]

I wholeheartedly agree, but sometimes in relationships with the Government a line is drawn in the sand, which makes the right of veto sometimes crucial, particularly if there is a bloody-mindedness in the direction of policy making by the Chancellor when it comes to appointments to key posts. Although I take the gist of the hon. Gentleman’s argument and can see how the Treasury Committee could create a climate of opinion or produce a report that influences the appointment in a way that makes it impossible for a person to take it up because of the lack of credibility, I think there needs to be an even stronger role for the Treasury Committee and therefore Parliament in all these matters.

This is a crucial opportunity missed in respect of the Treasury Committee’s ability to influence the Government; in respect of the Government’s ability to demonstrate to this House a greater openness when it comes to the transparency of the operation of the Bank of England and of the new regulatory authorities; and in respect of the Government themselves in how they make appointments to these crucial positions.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

Does my hon. Friend agree that this is not just a matter of the relationship between the Government and this House, as it also relates to the relationship between the Government and the public? As we move into a period of austerity, if there is not sufficient accountability for the sorts of measures the Government view as necessary, it creates political instability. People do not see where the accountability lies for some of the austerity measures that are coming—not just in this country, but across Europe.

[John McDonnell]

That is exactly the point I am seeking to make. This post will have wide responsibilities and the decisions taken will have immense ramifications for the country as a whole and for all our constituents. Because of the unique role of the Governor of the Bank of England, the individual will be subject to public scrutiny in a way that a Bank of England Governor has never been under scrutiny before. I think he will become an individual in whom people must have confidence. I have to say that I have some anxieties about some of the names being bandied about at the moment, such as the appointment of a former member of Goldman Sachs, a company that does not have a particularly distinguished record in relation to the operation of economies throughout the world before and after the financial crisis.

--- Later in debate ---

Bill to be further considered tomorrow.

[John McDonnell]

On a point of order, Mr Speaker. The main purpose of the Financial Services Bill—

[Mr Speaker]

Order. May I appeal to Members who are planning to leave the Chamber to do so quickly and quietly, so that the House can do the hon. Member for Hayes and Harlington (John McDonnell) the courtesy of listening to his point of order?

[John McDonnell]

Thank you, Mr Speaker.

The main purpose of the Financial Services Bill was to secure corporate responsibility in the financial sector, and the batch of amendments that were not reached dealt specifically with corporate responsibility. May I, through you, Mr Speaker, convey a message to the Leader of the House, who is present? There will be a second day of debate on the Bill, and he may well wish to look at the programme motion again to establish whether we can debate the important elements of those amendments on that second day.

[Mr Speaker]

I am grateful to the hon. Gentleman for his point of order. Let me say two things to him in response to it. First, as he can see with his own eyes, the Leader of the House is present, and will have heard what he has said. Secondly, business questions on Thursday will provide a good opportunity for him to pursue the matter further—and, knowing his indefatigability, I expect to see him in his place on that occasion.

Public Service Pensions

John McDonnell Excerpts

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

I hesitate to enter into any specific diplomatic disagreements of recent weeks, but my hon. Friend makes an essential point. The ability to negotiate such changes strengthens our fiscal credibility as a country, as well as the long-term sustainability of our public finances. To those who want to see that this Government are capable of making changes that reassure the markets and build confidence—not just in the short term, but in the medium term—this agreement is an essential building block. It is one that other European countries have not always been able to achieve—and again, it goes to show that this Government are making the right decisions in the national interest.

[John McDonnell (Hayes and Harlington) (Lab)]

Is not the truth of the matter that even with this settlement, public sector workers will pay more, work longer and receive less, that the Government have bullied into submission a number of trade unions, and that those that refused to submit have not walked away from the talks but have been refused access to them? Does the Chief Secretary not accept that his role in all this is to destroy the industrial relations climate in this country, possibly for a generation?

Prevention of Nuclear Proliferation

John McDonnell Excerpts

Tuesday 13th December 2011 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I, too, preface my remarks by stating that I have been a consistent opponent of the regime in Iran. I founded the Hands Off the People of Iran organisation in this country to campaign for the restoration of democracy in Iran and, with my hon. Friend the Member for Islington North (Jeremy Corbyn) and the hon. Member for Northampton South (Mr Binley), have signed a number of early-day motions in support of human rights in Iran. I have focused on the persecution of trade unionists, particularly those in the Tehran bus workers union, but I also led the campaign in this country to free Jafar Panahi, the film director.

Having said all that, I am extremely fearful of the statutory instrument under consideration, because I fear that it will take us into the cul-de-sac of war, which is an all too familiar path for us in this country: we seem to find an opponent, which is usually associated with minerals or oil; we then find that it is a threat to world safety; and we then find or concoct evidence of that threat. The International Atomic Energy Agency’s recent report failed to find any conclusive evidence of nuclear weapons production and, in fact, found no evidence of Iran’s

“diversion of declared nuclear material”

to weapons production.

The report relies on past evidence, which we have debated in the House before: a laptop computer, originating we believe from the Israeli or US intelligence services and referring to the development of a nuclear weapons programme by a certain scientist, Vyacheslav Danilenko. We were told at one point that this Ukrainian was a nuclear science expert, but we now discover that he was an expert in nanotechnology and had no real expertise in nuclear weapons. We were told also that there was a technique, supposedly being developed by the Iranians, involving a test explosion chamber, but we now know from the evidence of Robert Kelly, the chief of the IAEA for eight years in Iraq, that the chamber could never be used in a test.

[Mr Binley]

Will the hon. Gentleman give way?

--- Later in debate ---

[John McDonnell]

I would, but we are short of time, so if the hon. Gentleman does not mind, I will not. I am sure that he understands.

All that evidence led to the conclusion by Mr Mohamed el-Baradei, the former head of the IAEA, that he had “no confidence” in the allegations based upon it, but it has convinced the new head of the IAEA, Mr Yukiya Amano. WikiLeaks has, unfortunately, exposed comments from the US on Mr Amano, however, whom it describes as

“solidly in the US court”

and “ready for prime time”.

So I begin to doubt the independence of his judgment on the matter.

It seems that we are being drawn into an atmosphere of war, and sanctions lead to war. Recent research by Professor Robert Pape of the university of Chicago demonstrates that 95.7% of cases of sanctions since world war one have led to military conflict, but who suffers? I agree with my hon. Friend the Member for Islington North that it is not the elite, but the poorest. The reaction is usually for the ruling elite to blame the ills of the country on foreign forces, and sometimes it even unites the country against a foreign foe, but the tragedy is that sanctions often motivate a regime to seek to protect itself by acquiring the very weapons that we seek to rid ourselves of.

There has been military action on the ground already. We have evidence of that from various reports—not just the drone, but intelligence assets on the ground relating to assassinations. The chair of our own parliamentary Intelligence and Security Committee could not rule out such assassinations having been undertaken by Israelis, and he confirmed that on occasions the US and Israeli Governments have given authority for assassinations.

I just want to get on the record my fear that we have trodden this path before, and that after sanctions come the bombs, then invasion, then loss of life, destabilisation and a growth in terrorism, then usually the installation of a puppet regime and the privatisation and exploitation by western countries of the mineral and oil resources. I hope against hope that we are not embarking on that tonight with this statutory instrument, but I have this dreadful fear of “Here we go again”.

Autumn Statement

John McDonnell Excerpts

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

We are addressing the problem of basic need, which was ignored by the previous Government. I know in places such as my hon. Friend’s constituency, the problem is acute. Let me write to her about the specific impact on her constituency and how many additional places the investment will create in the surrounding area.

[John McDonnell (Hayes and Harlington) (Lab)]

In my constituency, religious and community organisations are now providing food parcels to poor families. At the same time, we are seeing executive pay and remuneration soar. There was nothing in the Budget statement that addressed executive pay or remuneration. Are the Government going to bring forward some controls to tackle that obscene inequality?

[Mr Osborne]

I know that the previous Government were

“intensely relaxed about people getting filthy rich”.

We are introducing transparency in pay. We are bringing regulations before the House to force banks to disclose the incomes of their eight highest paid employees. We are also consulting on high pay more generally. We have introduced the bank levy, which the previous Government failed to introduce in 13 years and which the shadow Chancellor could have introduced when he was City Minister, but never did.