Public Service Pensions Bill

Debate between John McDonnell and Chris Leslie

Monday 22nd April 2013 Commons Chamber

[John McDonnell]

I welcome the new enthusiasm on both sides of the House for negotiating with trade unions. We have seen 18 months of industrial action followed by the imposition of a pensions settlement on a large number of civil service workers. I therefore welcome this enthusiasm for negotiating the issue out.

The Government’s policy on pensions was twofold: they wanted to bring together a consistent retirement age across the services, while, as part of public service reform, ensuring a process of modernisation, with retirement schemes reflecting the requirements of service delivery. From what we have received today, I think we are reintroducing an element of chaos into the retirement age. Far from ensuring consistency, we seem to be building anomaly upon anomaly. Far from pragmatically reflecting the reality of delivering a service, we are about to undermine another service.

On delivery, we should learn the lessons of 2007. I did not support the increase in the retirement age for firefighters in 2007, just as I have not supported this legislation. The lesson that the Fire Brigades Union taught us was that once we increase the retirement age in such a physically demanding job, apart from having a physical effect on those workers and their lives—and on their families, too—we do not save money, because people take ill-health retirement, as others have said. At the end of the day, this is not part of a modernisation process; it is a step backwards.

The other issue raised was consistency—this argument that there will be consistency across the uniformed services. However, that was never the case anyway, because we argued for the Prison Service and uniformed services in the health service to be included, but they were excluded. The issue of consistency is drawn even more sharply by the exclusion of the group of staff we are discussing in this debate, who are clearly part of a uniformed service. They are being discriminated against purely on the basis of who employs them. Firefighters who are employed by local government via a fire authority are within the scheme at age 60, whereas those employed by these other bodies are not. That is not just policy making on the hoof; to be frank, it is incompetent policy making.

As for the disbenefits, when a general agreement is taken into legislation in this way there is always the facility for the employer and others to adjust contribution rates, albeit as part of a negotiated settlement, but we usually legislate and then iron out the detail of the contribution rates, with the matter usually being resolved through an adjustment of the employer’s contribution.

Let me turn finally to the process. The Minister helpfully tried to respond, but there was insufficient detail. If there is to be negotiation on this issue, we need at least a commitment about the time scale. There has to be a limited time scale, over the next three months, in which we can resolve these anomalies and give this group of workers some security, because the current insecurity is causing concern.

[Chris Leslie]

My hon. Friend is spot on. We need that time frame, but do we not also need a commitment from the Minister today that the age of 60—this is the equality issue—is, at the very least, a possibility that is on the table? So far we have not had that.

[John McDonnell]

Today we have at least set out the parameters of what the negotiations will be. The age of 60 has to be No. 1 on the agenda, followed by ironing out other anomalies. The second issue is the point I raised in an intervention on the Minister. We have to have a clear definition of the legislative process by which the negotiated settlement will be speedily agreed through the House. Will it be tacked on to other primary legislation or might there be a speedy regulation change that enables us to implement the process?

Public Service Pensions Bill

Debate between John McDonnell and Chris Leslie

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 ---

[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.

Finance (No. 3) Bill

Debate between John McDonnell and Chris Leslie

Tuesday 5th July 2011 Commons Chamber

[Chris Leslie]

There are serious issues about the balance of power between management and ownership. Many shareholders are also very exercised about excessive remuneration, compensation pay or call it what we will, and I believe that the balance of power needs addressing in the longer term. It is interesting to note how banks have tried to shift their remuneration approaches according to the political and tax arrangements of the day. While the Minister will no doubt tell us that bonus payouts for the City in 2010-11 were predicted to come down by 8% in comparison with 2009-10, what he will not tell us is that that apparent fall in bonuses was largely offset by a 7% increase in salaries for senior banking executives. The roundabout continues, but some people never lose out when it comes to this particular game.

Analysis of official earning figures by pay research specialists Income Data Services showed that large payouts in the financial sector during February and March this year helped to maintain payments during the 2011 bonus season at a similarly high level to that recorded in 2010. Not enough has changed; Ministers are not exercised or angry enough about this particular scandal, and action is necessary.

The fact is that banks are now more likely to pay discretionary bonuses, which would be captured by our proposed bonus tax, instead of paying the guaranteed bonuses that they used to get away with—the multi-year contractual bonuses that looked to the rest of us like salaries but that they called bonuses, which would not be caught. If the guaranteed bonuses become the exception and not the rule, as the Chancellor says, it might provide us with an opportunity to capture more of the discretionary bonuses through our bank bonus tax. As I said, we estimate the yield to be £2 billion.

We have to resolve the sense of anger felt by UK taxpayers towards the banking institutions that they had to bail out. The public are still rightly angry about the greed and irresponsibility of some of the senior executives at our largest banks and about the size of the bonuses. There is simmering anger out there still about the bonuses that continue to be paid when austerity is biting very hard for many of our constituents. Real and visible action is needed on bonuses, not secret voluntary arrangements behind closed doors between the big banks—as with Project Merlin, which the Chancellor pursued before. As my hon. Friend the Member for Coventry North West (Mr Robinson) described it, it was little more than a damp squib.

The banks provide an important utility in our society. They are a key part of our economy, and a strong banking sector is in all our interests. However, by talking tough and acting weak the Government are fuelling public anger while doing little to address the issues. They should stop treating people like fools, and do far more to ensure that the banks and senor banking executives are paying back their fair share—a fair share that could generate money to repair some of the damage to jobs and the economy, and help tens of thousands of young people to secure a decent start in employment.

We are not asking very much. We just want a review of whether the bank levy could be augmented with a repeat of the bonus tax. We want the taxpayer to be given a fair deal in return for rescuing the banks, and we want the Government to take seriously the threat of a lost generation of young people struggling to find work. A fair tax on banker bonuses to help people off the dole and into work is the best way to get the deficit down and stop Britain’s talent going to waste.

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

Amendment 31, which stands in my name, proposes a report reviewing the possibility of incorporating a financial transaction tax within the Government’s proposed bank levy, which would also examine ways in which any funds raised through such a tax could be invested in tackling not just unemployment and poverty in this country, but deprivation in the developing world. Many will remember the financial transaction tax in its former life as the Tobin tax; last year it was relaunched as the Robin Hood tax, focusing largely on the campaign to tackle poverty in the developing world.

I can think of no better day on which to debate this issue, having seen the pictures shown on our television screens last night and today of the tragedy that is taking place in the horn of Africa. This morning, Radio 4 broadcast the story of a family—parents with one child—who had walked for miles to the aid station, only to find that the one-year-old child had died as a result of suffering the drought and famine. I also commend last night’s “Dispatches” programme, presented by Jon Snow, which identified the activities of Rachmanite landlords in west London. Some of those landlords operate in my constituency, and the matter has been raised in the Chamber in the past. It demonstrates the poverty that still exists in this country.

On a personal note, let me say that this morning I received letters from children at Cherry Lane primary school in my constituency as part of their campaign to encourage politicians to think about how we can fund education in the developing world so that children there can go to school. That is what my proposal is all about.

When the transaction tax was relaunched last year as the Robin Hood tax, it was supported by a wide range of churches and religious organisations. I will not name them all, but let me give Members a flavour of them. They included the Trades Union Congress, Crisis, Action Aid, Article 12 in Scotland, Barnardo’s, the Catholic Fund for Overseas Development, Christian Aid, Church Action on Poverty, Comic Relief, the Church of Scotland’s Church and Society Council, the Christian Socialist Movement, the Disability Alliance, the Ecumenical Council for Corporate Responsibility, EveryChild, Family Action, Faith2Share, Friends of the Earth, the General Assembly of Unitarian and Free Christian Churches, Greenpeace, Oxfam, Quaker Peace and Social Witness, Save the Children, Tearfund and the Salvation Army.

That was the largest alliance of civil society organisations that we have seen in generations campaigning on a single issue, and, as you know, Mr Speaker, they came here last month. Twelve hundred people came to Parliament, and met us in Central Hall over a cup of tea. The event was organised in particular by Oxfam, Action Aid, Save the Children, Tearfund, CAFOD and Christian Aid, and their message was simple: 1 billion people have no access to clean water and 2.5 billion lack basic sanitation, and it is time for change and action.

Those organisations pointed out that—as we have seen in the horn of Africa—the situation is dramatically worsening as a result of drought and famine. They raised three issues with us: the need to ensure that all Governments commit themselves to devoting 0.7% of gross national income to aid, the need to tackle tax evasion and avoidance, and—this was their key demand—the need for a Robin Hood transaction tax on banks. The amendment does not ask the Government to make an instant decision; it simply asks them to help us move the debate on. It is an attempt at a bipartisan—or whatever the correct term is as so many parties are represented in the Chamber—or consensual approach to enable us to move forward. I am not asking for its immediate adoption, although I would like that; rather, it specifically asks for a report to be prepared so that we can be convinced about the way forward both in principle and in respect of the practical arrangements, to ensure that whatever Government introduce this tax, it proves to be successful. It simply asks the Government to review and report.

Finance (No. 3) Bill

Debate between John McDonnell and Chris Leslie

Tuesday 3rd May 2011 Commons Chamber

[Chris Leslie]

Absolutely, and, as we have heard time and again, Government Members clearly do not understand the causes of the deficit, so they are not the right people to solve it. If they understood and acknowledged that the banks played a significant role in causing the deficit, maybe—just maybe—we would take up their suggestions on how we go forward, but they choose to ignore the role that the banks played—[Laughter.] If the hon. Members for Chippenham (Duncan Hames) and for St Austell and Newquay (Stephen Gilbert) think that the banks did not play a role in the deficit, we will all be interested to hear from them, but surely they have to acknowledge that point.

The bonus pools and pots continue to be significant, however, and some bankers receive obscene, life-changing sums of money, so we do not really need to worry too much about poor banking executives; we should worry about those who depend on vital services but will now go without as a result of Ministers’ choices.

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

I have only just understood the criticism from Government Members. The criticism of the bankers bonus levy, however, which the previous Government introduced, was that there would be tax avoidance and it would not raise enough. I attacked the former Chancellor on the bonus levy, because I felt that his estimate of £500 million was pathetic and did not go far enough, but may I now admit guilt? It actually raised seven times that amount, £3.5 billion, so it was probably one of most successful tax regimes that the previous Government introduced. I thought I had better get that off my chest.

[Chris Leslie]

My hon. Friend’s arguments become increasingly attractive, and he makes an important point. The bank bonus tax, which the previous Labour Government introduced, appeared at first to be modest, but in fact the yield was very significant indeed. Did the banks collapse as a result of the bonus levy? No. Did they all flee abroad to relocate somewhere else, as threatened? Absolutely not. So, too, with the continuing scale of the bonus pot, which has hardly changed at all, it is absolutely right that we look to reinstitute the levy this year, along with a decent bank levy, as we are discussing today.

Hon. Members will know that the concept of a bank levy was first developed at the G20 summit in Pittsburgh in 2009, and then championed by my right hon. Friend the former Prime Minister and taken forward by the International Monetary Fund in its report, which aimed to encourage less risky funding to enhance financial stability. Two broad conclusions were reached at the Pittsburgh summit. There was a call for a financial activities tax, or financial transactions tax, which we need to debate another time when we consider some of the extra levies that might be put on activities. The Chancellor of the Exchequer himself still professes to be in favour of a financial activities tax, although he has done absolutely nothing to advocate it in ECOFIN or in other financial meetings around the world, so we will see whether anything comes of his repeated promises to pursue it.

The second prong of the IMF’s report was a financial stability contribution, otherwise known as a bank levy, to be charged on equities and liabilities rather than assets or profits because of the need to disincentivise dangerous potential charges such as those that landed on the taxpayer during the credit crunch. The bank levy is a sensible idea in theory, and we broadly support it. However, the yield suggested in the Bill—only £2.6 billion—is not just small but pathetic by international standards when compared with the rate being pursued in other countries. It is perplexing that Ministers settled on that figure, and there has never been any evidential basis published for why they did so. Will the Minister clarify why the Chancellor chose the figure of £2.6 billion, as that seems to be the pole around which all aspects of the bank levy revolve? If there is any sense in which the revenue might go beyond that envelope, the Treasury tweaks and turns down the dials on the other aspects of the levy to squeeze it back into that £2.6 billion of revenue—the predetermined level that it put out to consultation last summer, never explaining why it was set. Compared with the substantial amounts of taxpayers’ money put up in the bail-out of the banks—£76 billion of shares purchased in the Royal Bank of Scotland and Lloyds, £250 billion of guarantees, another £280 billion of other insurances, and a further £100 billion of annual implied subsidy, according to the Bank of England—a £2.6 billion bank levy is very puny.

It is interesting to look at the Treasury document that lists the respondents to the bank levy consultation. There were 44 respondents, all of which are major financial institutions.

--- Later in debate ---

[Chris Leslie]

I wonder whether Hansard is able to record the irony in my hon. Friend’s comments. Sometimes I wonder whether we need a new annotation in our proceedings, because I do not honestly think that he is showing sympathy. I think he is suggesting that even when there is an apparent reduction in bonuses, the sums of money involved are the sort for which our constituents would buy a lottery ticket in the hope of winning. If they won that amount it would change their lives tremendously, yet those life-changing sums of money are not even salaries but bonuses on top of salaries.

I wish to talk about the rate at which the Government have chosen to set the bank levy, because it is a low rate by international standards. It is less than a third of the level that has been set in France, for example. Ministers will know that the rate varies in a number of jurisdictions, but I think that it is 0.25% in France. The levels involved are still quite small, but in Hungary it is 0.53%, in the USA it is 0.15%—although, as I said, it has not been enacted at this point—in Portugal it is 0.1%, and so on. It is to be only 0.078% here in the UK for short-term liabilities, and 0.039% for long-term liabilities, which is very small by international standards.

[John McDonnell]

To emphasise a point that my hon. Friend made earlier, does he agree that the robustness of the statements of the Prime Minister and the Deputy Prime Minister on bankers’ bonuses before and just after the election led the general population to expect a much stronger and more ferocious levy?

[Chris Leslie]

Indeed, and not only can we see the low yield figures in this country; we can also look at international comparisons and see that the rate is clearly very low indeed. Ministers have let it drift—as soon as it looks as though it might be a serious tax, back they come from the rate they have set, saying that it would raise too much and they must reduce it again.

Finance Bill

Debate between John McDonnell and Chris Leslie

Monday 12th July 2010 Commons Chamber

[John McDonnell]

I was talking about what had been experienced in the past, but we can all sign up to the pious statement that we will achieve as much simplicity as possible. I merely say on the basis of practical experience in the House that, unfortunately, when we have sought simplicity, people have argued for further complexity to tackle the loopholes. However, we will all aim for simplicity, and the onus is on us to try to draft legislation in a way that achieves it.

I welcomed the Minister’s statement about the continuation of, and consultation on, the commitment to the anti-avoidance rule, but I hoped that at some stage a future report from Government would enable us to engage in a wider debate on how we could install in legislation the duty to comply more simply and effectively. As my right hon. Friend the Member for East Ham (Stephen Timms) pointed out, the issue that arises time and again is the ingenious use of devices to avoid the spirit of the law. In other contexts, we draft legislation in such a way that when a device appears it can be seen to be a device, which is patently against the spirit of the legislation and whose effect can therefore be outlawed. I also welcomed the wider debate on the anti-avoidance principle to be installed in legislation.

This has been a helpful debate. I leave the Minister to the savagery of Richard Murphy’s blog: I am sure that Mr Murphy will respond to each of the points that he raised. Let me make this point, however: whether the tax gap is £40 billion or £120 billion, when people out there are experiencing cuts in public services and reductions in their pensions and are having to work for longer, they will expect us to collect those taxes. The subtle distinctions between evasion and avoidance will be lost on them. They will expect the House of Commons to produce legislation ensuring that HMRC is sufficiently staffed and sufficiently resourced to bring in the tax, and to deal with the significant part of the deficit that we have identified in the past few weeks.

On the basis of the assurances that we have had from both Front Benches of co-operative working on this issue, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I beg to move amendment 21, page 1, line 6, at end add—

‘(2) The main rate of corporation tax for financial year 2011 will remain at 28 per cent. on the profits of banking institutions as defined by section 2 of the Banking Act 2009.’.