Spending Review 2020 and OBR Forecast

John Penrose Excerpts

Wednesday 25th November 2020 Commons Chamber

[Rishi Sunak]

I am grateful to the hon. Gentleman for his question. I know that it is a topic on which he speaks passionately. He will be pleased to know more generally about our record spending on R&D next year of just shy of £15 billion; the exact allocation is for the Department for Business, Energy and Industrial Strategy, but there is a significant increase for basic research. Also, within the Department of Health and Social Care Budget settlement, there is about £1.3 billion to fund research for the National Institute for Health Research and Genomics England—both of which do a fantastic job, and I am sure will be working on treatments for us all for many years to come.

[John Penrose (Weston-super-Mare) (Con)]

I welcome the Chancellor’s continuing commitment to sound money. It is particularly easy to forget, in a year when we have just seen an 11.3% cut in the size of the economy, that ultimately, all the money that we are borrowing must eventually be paid back by us as taxpayers. So I urge him not to lose that focus, and as soon as possible to get back to a sustainable basis. As part of that, could he say more about the Restart programme, which he mentioned earlier—a crucial thing to get members of the long-term unemployed back into work? How many people does he expect that to help, and what benefit does he expect that to have for our long-term, sustainable economy?

[Rishi Sunak]

As ever, my right hon. Friend speaks fantastically good sense. He is right; we will need to return to a sustainable fiscal position, not least to build resilience for the next crisis or shock that comes along. We want to be able to react in the same comprehensive and generous way that we did this time, and that requires us to have a strong set of public finances going into it.

My right hon. Friend is right about the Restart programme, which will help, we hope, around 1 million of those who are long-term unemployed; it will be an exciting and ambitious programme. The Institute for Employment Studies has spoken very well about the evidence in favour of that type of high-quality, individual work-focused approach making an enormous difference in getting people back into work. If we can do that, we can reduce some of the long-term scarring that they will face. So I have high hopes for what that programme can achieve.

Coronavirus Job Retention Scheme

John Penrose Excerpts

Thursday 17th September 2020 Commons Chamber

[Patricia Gibson]

My hon. Friend is absolutely correct. We need sectoral support, and some areas are desperately looking for help, but we also need to extend this scheme in general.

To wind down the scheme and withdraw all support at the end of October, just as payment holidays are ending, will do huge damage to workers and their families, as many will face losing their homes and any hope of financial recovery. Tens of thousands of viable jobs could be saved with an extension of support. We know, as we have heard from my hon. Friend, that the aviation and aerospace industries and the tourism and hospitality sectors are struggling badly, as are our night-time industries. They have been hit very hard, and the Institute for Public Policy Research has estimated that 3 million jobs could be lost, most of which would remain viable in the longer term if support were to continue.

The Fraser of Allander Institute reports that 55% of Scottish businesses using the job retention scheme expect to reduce employee numbers when it ends.

[John Penrose (Weston-super-Mare) (Con)]

Like the hon. Lady, I have had letters and emails from people in similar situations, and I am sure everyone here has a great deal of sympathy. She mentioned the importance of maintaining jobs that are going to be viable after this is all over, but one of the things most people are saying to me is, “We don’t know what the new normal is going to be like,” so how is she going to choose between jobs that are going to be viable and those which will just be fundamentally changed because their industries are changed as a result of consumers behaving differently once the pandemic is over?

[Patricia Gibson]

The hon. Gentleman makes a fair point, but the whole point is that we do not know. We need to get our economy on an even keel; we need to make sure it is healthier so that then the damage can be assessed—but what a crime it is to throw away viable jobs because we think that some jobs will not be viable. There are potentially millions of jobs that are saveable here, and I think investing in our jobs is a price worth paying in order to save the vast majority, because that is what the experts are telling us.

Economic Update

John Penrose Excerpts

Wednesday 8th July 2020 Commons Chamber

[Rishi Sunak]

Procedures are in place for any employee to talk to HMRC if they believe that they themselves have been the victim of fraud or that the company for which they work has not acted in a way in keeping with the guidance. I urge any employees of any company who feel that that has happened to take up the matter via the HMRC hotline, the details of which are online.

[John Penrose (Weston-super-Mare) (Con)]

First, I thank the Chancellor for, as far as I can work out, subsidising me to go down the pub; that is very welcome indeed. I also thank him for the effect that his announcement about tourism VAT will have on hundreds of businesses and thousands of jobs in my constituency of Weston-Super-Mare. May I suggest to him that over the medium term, the best guarantee of jobs and employment has to be to have competitive businesses? I therefore urge him to consider, over the more medium term, sharpening our competition laws and opening up our market economy to tougher competition, as the best long-term guarantee of employment for everybody.

Finance Bill

John Penrose Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution
Monday 27th April 2020 Commons Chamber

[John Penrose (Weston-super-Mare) (Con) [V]]

We have already heard how the coronavirus crisis has fundamentally changed our economy and is in the process of changing our society too. We have also heard how the Bill makes changes to important items such as entrepreneurs’ relief. As someone who co-founded and ran two software start-ups before being elected to Parliament, I am a huge advocate of encouraging wealth creators, particularly the ones who are at the technological leading edge and may be creating the fourth industrial revolution jobs in Britain in companies and industries that have hardly been invented yet.

But we have to be fair in the process, and the coronavirus lockdown has revealed an uncomfortable truth. It has turned Britain into a two-nation society, where better-paid, white-collar professionals work from home, while often less well-off key workers keep travelling to work, often on crowded public transport, in riskier jobs where they have to wear PPE. Of course, the lockdown is temporary, but it has shone a spotlight on a more long-term structural problem. Those less well-off key workers are paying a much higher overall tax rate—the marginal effective tax rate, or METR—than the safer, better-off white-collar professionals, because tax rates on investment income are lower than on wages and salaries, and because benefits withdrawal rates only apply to low-income households. The combined effect often means that low-income key workers pay an effective marginal tax rate of up to 75%, while better-off people pay dramatically lower rates. The haves are being subsidised by the have-nots. If we are all in this together, and if we are to go down in history as acting in the Conservative party’s best and finest traditions, how can we ignore that? How can we not act? It cannot be right.

The changes to entrepreneurs’ relief are a small but extremely welcome step in the right direction, but I hope the Chancellor will use the clarity and the challenge of the coronavirus process to make it the first step in a much longer journey. We need to encourage wealth creators, but they should not pay lower tax rates than the people who clean their offices or drive the trucks that deliver their goods. If we believe—as I and many others do very strongly—that rates of tax much above 40% will undermine an incentive to work for high earners, why is the same thing not also true for someone on the national living wage? The last time Britain taxed earned income and investment income equally was under a Conservative Government, when Nigel Lawson was Chancellor.

If we can go back to taxing all income the same, whether from benefits, work or wealth, it will be transformational. It will show that we are serious about helping the people who voted Conservative in their tens and hundreds of thousands, some for the first time ever, in the general election last year. It will create clear and stronger work incentives for everybody, not just the rich. It will make our economy work better by allowing investment to flow to wherever it can be used best without distortions in the tax system, and it will make taxes simpler and harder to dodge. It will reduce in-work poverty, because less well-off families will keep more of any extra money they earn, and, as we come out of the coronavirus crisis, it will prove beyond a shadow of a doubt that Conservatives really mean it when we say we are all in this together.

Changing entrepreneurs’ relief is a good sensible Conservative idea, but it is only a start. The Chancellor has taken the first step. I hope we will all go with him on a much longer and more important journey.

Social Mobility

John Penrose Excerpts

Wednesday 12th February 2020 Westminster Hall

[Sir David Evennett]

I thank my hon. Friend for giving us that informative statistic.

Conservative Governments have made considerable progress since 2010, particularly on education standards and opportunities. Education gives us a better understanding of the world around us, helps us to develop a perspective for looking at life and helps us to build opinions. It is key to social mobility. Some 86% of schools are now rated good or outstanding, compared with only 68% in August 2010. That is a real improvement, and the Government should be congratulated on it. More young people than ever go to our world-class universities, and the highest ever proportion of 16 and 17-year-olds participate in education. We will increase the schools budget by £2.6 billion in 2020-21, £4.8 billion in 2021-22, and £7.1 billion in 2022-23, compared with 2019-20. That will help schools to develop the talent of our young people.

We should all be proud of what the Government have delivered so far and what they continue to deliver. In my borough, Bexley, we are fortunate to have many brilliant schools, both primary and secondary, and a wide range of job opportunities, including apprenticeships. Bexley has been listed as a “social mobility hotspot”, as children from both disadvantaged and advantaged backgrounds achieve excellent results at school and benefit from a wide range of opportunities.

However, there is still more to be done, in Bexley and across the country. Clearly, there is still a social mobility postcode lottery in Britain: the chances of someone from a disadvantaged background being successful are still linked to where they live. I am concerned about underachievement. There are areas throughout the UK and in my constituency where many children do not reach their full potential. Young people—particularly young males—in certain areas of the country have become more disengaged from all aspects of society and, regrettably, have fewer aspirations. For some, their teachers, parents and peer groups do not expect them to do well, and there seems to be an acceptance of that. I believe that talent is uniform across all sections of our society, but opportunity is not always so.

I am particularly worried about the underachievement of white working-class boys. My hon. Friend the Member for Mansfield (Ben Bradley) led a Westminster Hall debate on that subject this morning. I will not repeat what was said then, because he covered the issue very well and the Minister responded, but I share the concerns that were highlighted. We need to give young people from all backgrounds the tools and knowledge they need to succeed; then, the world will be their oyster, and the opportunities to reach for the stars, or whatever, will be there.

The “Elitist Britain” report published by the Sutton Trust and the Social Mobility Commission laid bare

“the lack of opportunities for so many young people”.

I will not go through the statistics, because I want others to be able to participate in the debate. Unfortunately, however, the elite still dominates, so we have a lot of work to do to give people an opportunity to rise up.

[John Penrose (Weston-super-Mare) (Con)]

My right hon. Friend is setting out his case eloquently and beautifully. May I push him a little on his point about some people not being advised to aim high or encouraged to be the best they can? Does he share my fear that in some parts of the country, as he describes, there is some sort of inverse snobbery, and that some people are just told to aim low because the people around them are not willing to transcend the images they have—social images, perhaps—of the people who should and could aim high?

[Sir David Evennett]

That is a good point, and that is regrettable in 21st century Britain.

The “Elitist Britain” report made a number of policy recommendations, but I want to highlight two of them:

“Recruitment practices should be open and transparent”

and

“Leading social mobility employers should take a sector leadership role and share best practice.”

In the previous Parliament and the one before that, I was a strong supporter of the social mobility pledge, championed by the former Member for Putney, Justine Greening. The pledge is made up of three interlinking commitments. The first is partnering directly with schools or colleges to provide coaching through quality careers advice, enrichment experience and/or mentoring to people from disadvantaged backgrounds or circumstances. The second is access, providing structured work experience and/or apprenticeship opportunities for people from disadvantaged backgrounds. Thirdly, there is recruitment, adopting open employee recruitment practices that promote a level playing field for people from disadvantaged backgrounds or circumstances, such as name-blind recruitment and contextual recruitment. The initiative is backed by hundreds of businesses, because they understand that improving social mobility is good for them as well as for individuals and communities.

The pledge was set up to tackle the social mobility problem, share best practice and ideas and to boost social mobility. It covers more than 3 million employees and 1 million students across the UK. Partners include PricewaterhouseCoopers, Sainsbury’s, BP, the AA, various universities, and some of my local housing associations. That is important and welcome.

I also want to stress the important role that further education colleges can play in improving social mobility as well as helping to solve our country’s skills shortage. Further education has always had close links with local employers, so it is in a unique position to fill their skills gaps, but that needs businesses, local authorities, schools and colleges to work together.

Last week, I visited the Bexley campus of London South East Colleges, which is an excellent college in our area that understands the vital importance of providing good training and education and promoting social mobility and opportunity. I discussed finance, and I do believe that our further education colleges are underfunded. I hope the Chancellor of the Exchequer, the Secretary of State for Education and indeed my hon. Friend the Minister will take action to fund colleges better. It would be a good investment in our nation as well as for individuals, and it would help global Britain succeed.

As well as speaking with staff and students, I was privileged to meet some inspirational apprentices studying on apprenticeship schemes. Apprenticeships are an engine of social mobility, particularly as they create routes into stable, highly skilled and well-paid jobs. It is important to note that learners from deprived backgrounds may need to be in employment while learning, rather than going on to colleges. A report by Universities UK called “The Financial Concerns of Students” found that living costs to be a more significant concern than the level of tuition fees for undergraduates and that the financial aspects of going to university are more important to those from under-represented and lower socioeconomic groups. Nearly all the apprentices I spoke to there and across Bexley—a very good local authority in promoting apprenticeships—see a tremendous beneficial impact from apprenticeships on their career. The majority were satisfied in their job and felt they were better at doing their job since starting their apprenticeship.

Worryingly, though, the report found—this was repeated at my meetings—that a majority of apprentices said their secondary schoolteachers had not discussed apprenticeships as an option with them. Similarly, a majority of teachers said they would rarely or never advise their high-performing students to choose an apprenticeship over university. That overall experience of the apprentices I talked to is rather disappointing. They felt, and I agree, that we need a more innovative and proactive approach to raise awareness and break down those barriers among staff and pupils in schools.

There is a lot to be done. I know the Government are committed to creating a country where everyone has the same chances to go as far as their talents allow. I am a strong supporter of the Prime Minister’s agenda of opportunities for all across our country. We must now ensure that people are encouraged from a young age to engage with education and training and understand the long-term benefits. Without action—the Government must be involved, as must all the others I have mentioned—social and economic divisions in the UK could widen, meaning our country and our workforce will not be geared up to ensure that global Britain is the success that our PM wants and we all strongly believe we can achieve. This is an important issue and, at this time in our history, social mobility should be top of our agenda.

Draft Public Bodies (Abolition of Public Works Loan Commissioners) Order 2019

John Penrose Excerpts

Monday 3rd February 2020 General Committees

[John Glen]

I am keen to respond to the points made by the hon. Members for Stalybridge and Hyde, and for Glenrothes. I stress, as I did in my opening remarks, that the order removes a purely ceremonial role. Although we are removing a function, it is one that does not exist in a meaningful sense, in terms of arbitrating on individual loan decisions.

The issue of commercial property speculation was raised. Local authority borrowing and spending decisions are made at a local level with reference to the Chartered Institute of Public Finance and Accountancy’s prudential code and the Ministry of Housing, Communities and Local Government’s statutory guidance. Those bodies revised the guidance in 2018, which makes it clear to local authorities that if they borrow more than or in advance of their needs solely to generate a profit, they are not acting in accordance with the prudential framework. MHCLG is reviewing the impact of the revisions to the prudential framework. When local authorities borrow, they must have regard to it to ensure that their borrowing is sensible and affordable.

Borrowing and capital spending decisions are devolved to local councils, but it is expected that they should not take on disproportionate levels of financial risk. PWLB finance continues to play a critical role in helping local authorities to transform services, but they cannot use that provision for day-to-day spending, which must be balanced off by the accounting officers each year.

The hon. Member for Stalybridge and Hyde asked about the interest rate rise before Christmas. I am sorry about the apparent lack of answer to any question he may have asked. The Government raised rates to slow borrowing, because of the statutory lending limit; they also raised that limit by £10 billion, to ensure that lending remained available. Let me stress that that is managed by the Debt Management Office; the rates are set daily against benchmark gilt prices, and should be seen against the spending round provision for local government. The forecast is for a 4.4% increase in real terms this coming year—the largest increase in spending power since 2010. I should also mention the additional grant funding available for adults and children in social care announced in the spending review.

[John Penrose (Weston-super-Mare) (Con)]

Could I press the Minister a little more on his answer about the interest rate rise? Since there is concern in the Treasury and elsewhere in Government about borrowing to invest in commercial property, as he mentioned in his reply letter to the Chair of the Treasury Committee, and as he just laid out, is he at all concerned that raising the interest rate from 1.8% to 2.8% may have a depressing effect on local authority investment in non-commercial property—that is, in genuine capital expenditure? As he rightly laid out, the Public Works Loan Board was originally constructed to enable that investment.

[John Glen]

All these matters are subject to ongoing review. There is no evidence that the rate is depleting the ability of local authorities to borrow to invest in the sorts of projects that the Government, CIPFA and MHCLG would deem appropriate, but as I indicated, the subject of this SI is much narrower than that. The wider issue is a separate matter, which is always under review. I would be happy to engage with my hon. Friend on any issues that he wants to raise from his experience of his local authority.

[John Penrose]

Since the Minister kindly makes that offer, the Treasury has raised the interest by what must be roughly 35%, from 1.8% to 2.8%. Surely that must have an impact on the amount of borrowing that local authorities are willing to do for what are presumably much-needed capital projects. Does the Minister have any assessment of the likely impact on demand for that kind of genuinely needed loan?

Low-Cost housing

John Penrose Excerpts

Wednesday 8th February 2017 Westminster Hall

[John Penrose (Weston-super-Mare) (Con)]

I beg to move,

That this House has considered low cost housing.

It is good to have you looking after us this morning, Mrs Gillan. It is also good to see the departmental Whip in her place—she is a fully-fledged Minister in her own right anyway. As a former Whip, I feel it is always good to see a Whip temporarily released from the office’s vow of omerta and allowed to show their knowledge of the area they cover for the Whips Office.

Housing, whether rent or mortgage payments, is probably the single biggest monthly bill that most of us face and because we have not, as a country, built enough new houses for decades, no matter who has been in Government, the costs have been getting steadily steeper. The result is less living space, longer commutes, less cash left over at the end of each month for other things and, overall, a lower quality of life for all of us. We need to increase the number of new homes that are built and yesterday’s welcome White Paper contains some important steps towards that goal. Most important, from my point of view, were the ideas to make it easier to build up, not out, in urban areas—greater housing density, in the jargon.

Anyone walking around most British town centres, passing train stations or high street shops, should look upwards. The chances are that they will mostly see fresh air—skyline. British towns and cities are some of the most low-rise in Europe, which seems bonkers for a country that is also one of the most crowded. Much of this is self-inflicted. For many Brits taller buildings create instant mental images of 1960s brutalist concrete tower blocks on sink estates—the backdrops for gritty dramas of social decay from left-wing film auteurs. This mental trope has had some real-world consequences for the country too because it means that we are, as a society, instinctively resistant to anyone who proposes building upwards. So let me sing a fierce anthem of praise for taller buildings—not necessarily brutalist tower blocks, although they have their admirers, but for elegant, well-proportioned apartment blocks and terraces where the design stands the test of time.

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

I thank the hon. Gentleman for giving way and apologise for interrupting him as he gets to the chorus of his eloquent speech. He talks about the need to build upwards. Does he agree—he has alluded to the ’60s-style connotations that building upwards has for many people—that we need to have planning forethought in terms of what buildings will be like in 20 or 30 years’ time so that we do not repeat the mistakes of the 1950s and 1960s?

--- Later in debate ---

[John Penrose]

That is absolutely right. There are some people who, from a purely aesthetic point of view, love brutalist concrete architecture and rather more who dislike it a lot. For most of the rest of us, one of the crucial tests is not merely the aesthetics but whether this stuff remains liveable, not only in the first few years after it is built but over many generations. Another is whether it is therefore acceptable to the rest of the community. It is not just a question of what somewhere is like to live in as a location; it also has an impact on other people as they walk past.

As the hon. Gentleman said, it depends on how the design stands the test of time. There are places such as four or five-storey Regency terraces and Victorian town houses, which people still want to live in and walk past a century or two after they were built, or their slightly taller and more modern equivalents, which provide trendy new city centre living space for young professionals or well-designed retirement homes for older folk. We do not need to be scared of these buildings. One of the densest urban areas in Britain is Kensington and Chelsea, which is hardly a byword for inner-city decay. Elegant continental cities such as Paris and Madrid are far denser than almost anywhere in Britain too.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

I am grateful to the hon. Gentleman for giving way; he is giving a very powerful speech so I am loth to interrupt him. He mentioned the international comparisons and Kensington and Chelsea, but I think he is missing the suburbs. I represent a suburban seat. He said that housing is the single biggest bill, but it is also the single biggest issue in surgeries. I had a candidate stand against me as a “no to tall buildings” person. His slogan was, “We want to be living in Acton, not in Manhattan.” Has the hon. Gentleman had similar experiences as a constituency MP? People just do not like these buildings; they crowd out light and are not in keeping with the suburban landscape.

[Mrs Cheryl Gillan (in the Chair)]

Order. May I remind Members that interventions are supposed to be short and not too discursive?

[John Penrose]

The hon. Lady just gave a classic example of this instinctive British fear. I have discovered that in general if people see a beautiful building that is well-designed and moderately, but not too enormously, tall—Manhattan being an example of where things are incredibly tall—many of those concerns are greatly reduced. The taller something is the more impact it has on everybody else for miles and miles around and therefore the greater care we have to take. There is a middle ground that I will talk about in a minute, which will provide us with a great deal of building and housing opportunity to reduce the cost of housing without having to make everywhere look like Manhattan, if I can put it that way.

The hon. Lady’s intervention leads me to say that we need to throw off these mental shackles—these 50-year-old emotional architectural scars—and instead count the blessings of building up, not out.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for bringing forward this important issue of how we better utilise our space. He will know—I am sure this is the case in his constituency, as it is in mine—that people have the opportunity to live above shops. That is a special scheme brought in by local councils and local departments and is a way of utilising the space that is there. Does he agree that that is one method for addressing the issue of low-cost housing?

[John Penrose]

That is a very good example—a classic example—of the kind of thing we need to look at. Many British high streets are two storeys, or perhaps three storeys, tall. Not only are those upper storeys lightly used, and in some cases unused, but there are two or three further storeys of fresh air above them that could be developed into housing as well. The crucial point that was made yesterday in the White Paper, but has been more broadly accepted for years, is that the only way to bring down the overall cost of housing in this country is by increasing the supply. We have to make sure that more of this stuff is built and finding those right, convenient locations near social and physical infrastructure is crucial. I will expand on that point a little more in a minute, but the hon. Gentleman has touched on a particularly good example.

I was about to number the blessings of building up, not out and I shall now carry on doing so. First, it will attract much needed new investment to regenerate and save tired or rundown town and city centres, bringing fresh life, a broader mix of businesses and longer trading hours to high streets that—as the hon. Member for Strangford (Jim Shannon) mentioned—are suffering under the twin attack of out-of-town shopping centres and online retailers.

Secondly, building up, not out could help break the stranglehold of large house building firms over the number of new homes that are built. Those firms tend to focus on larger sites, whether greenfield or in towns, and rarely pick up smaller plots where an individual bungalow or two-storey shop could be redeveloped into four or even eight smart new apartments on the same site. By releasing lots of overlooked smaller urban plots we can create a fast-growing cadre of insurgent new developers, adding much needed new capacity and competition to the sector and its supply chains and speeding up the too comfortable, cosily slow rate at which the big firms currently convert their land banks and planning permissions into completed homes.

Thirdly, building up, not out will reduce urban sprawl by cutting the pressure from builders to concrete over green fields and green belts at the edges of towns and villages across the country. Given the strain and pressure on our green spaces, they should be our last building resort, not our first. Fourthly, it will cut commuting by allowing people to live closer to work, shops and other community hubs from libraries to GP surgeries. The reductions in emissions, and the effects on both our quality of life and the wider environment, will be very significant indeed.

Finally, building up, not out would release huge numbers of new urban house building sites to solve the housing shortage. As the Secretary of State said yesterday in his new White Paper, the only way to make homes more affordable for everybody is to build a lot more of them. Whether we are talking about renting or buying, the basic laws of price and demand mean that the prices will never stabilise, much less fall, unless the supply of housing increases dramatically.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

I congratulate my hon. Friend on securing the debate. He is making very good points, and I agree with him about the Government’s welcome White Paper yesterday on improving the housing supply. Does he agree that one of the challenges can sometimes be the fairly entrenched, long-held concerns that people raise locally about higher properties? Incentives are needed in the system to encourage local authorities to give planning consents if we are going to overcome some of the problems.

[John Penrose]

I agree with my hon. Friend for two reasons. When taller buildings excite the kind of Manhattan-ish concerns that we just heard about from the hon. Member for Ealing Central and Acton (Dr Huq), there clearly has to be careful consideration and community buy-in, because they have such a profound, wide-scale impact on local views and local infrastructure. Smaller and more modest proposals—I will talk about those in more detail in a minute—are much more absorbable and go much more with the grain of local things, so they may well not need a huge number of extra permissions and incentives, beyond the fact that they provide an opportunity for individual landowners to make a contribution and perhaps to increase the value of their particular site. I will expand on that, and perhaps if my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) is not completely convinced, he will intervene later.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on obtaining the debate. I am glad to hear that he is talking about building up rather than out, given that in the past we have built on the green belt, destroying our environment. Does he agree that no matter what form of building there is, it is vital that the infrastructure is correct, because we have faced major problems in our cities from flooding over the past few years?

[John Penrose]

I absolutely agree. One advantage of building up rather than out in existing urban environments is that an awful lot of infrastructure is in place anyway. Less brand-new infrastructure needs to be constructed as a result. Other problems come from building in urban environments—for example, existing infrastructure may be put under strain and need to be expanded in some way—but flood defences are a good example of where the effects are perfectly scalable. When a flood defence wall has been built, an awful lot more can be built behind it. The flood defence wall does not need to be upgraded just because more has been built behind it, even though it may need to be upgraded when it wears out in 50 years’ time. I thank the hon. Gentleman for that very good example.

As I was saying, prices will never stabilise, still less fall, unless the supply of housing increases dramatically. Cheaper homes are one of the cheapest, simplest, most effective ways of raising living standards for everyone and, by making our available cash go further, of improving the country’s economic productivity.

In the 1970s and ’80s, our towns and cities were places without an economic purpose. Their industrial manufacturing centres were dead, social problems multiplied as jobs dried up and people left in droves. But now, urban living in towns and cities is fashionable again, because, even in our highly connected, distance-defying online world, it turns out that there is huge value in people clustering together. Ideas flow more freely; skills and knowledge too. Firms in similar sectors create clusters that feed off their neighbours’ energy, hire each other’s staff and drive each other on. Building up, not out helps those things to happen more easily, so more wealth can be created. It is greener and cheaper, and it makes us richer and improves our quality of life, so clearly, the idea’s time has come.

To their eternal credit, I think the Government get that. The new White Paper has much to say about developing smaller sites of half a hectare or less, and subdividing large sites so that smaller developers can get in on the act as well. Local development orders and area-wide design codes, which streamline planning permission if people want to build particular pre-approved types or styles of property in a specified area, make a strong showing too. There is a range of new permitted development rights, which allow everyone from hospitals to brownfield site owners to build without all the red tape, heartache and uncertainty of getting planning permission.

[Dr Huq]

From a design point of view, I completely get the hon. Gentleman’s argument, but how would he inject affordability? The rate in London has been at up to 80% of market rates, and units in high-rise buildings in my constituency seem to be bought off-plan by people at property fairs in Singapore and by Russian oligarchs—the lights are always off—so how would he make that link and build affordability in?

[John Penrose]

The hon. Lady tempts me into a slightly wider area of discussion than the one I was focusing on. However, my broad point at least is that we will not be able to make all housing more affordable, whether that is for those on lower or middle incomes, unless we dramatically increase the supply of new homes of whatever tenure—whether we are talking about homes for rent or for buying. Only by doing that over the longer term will we manage to reduce the cost of housing for everybody at all income levels. The hon. Lady might like to propose some additional measures and, if so, I am sure that she will make some remarks later to turbo-charge some other opportunities for those on lower incomes as well. However, as a starting point and a fundamental, we are kidding ourselves if we think we can get away without increasing the overall level of new homes that are being created in the first place.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I congratulate the hon. Gentleman on securing the debate. One aspect concerns me slightly about the London model: is there not a risk that people being allowed to build upwards will lead to the creation of single town houses that have become much larger, therefore creating half-a-million-pound houses rather than low-cost housing, which is the thrust of the argument?

[John Penrose]

If demand is unsatisfied in any part of the housing market—whether at the top or bottom end—that will spill across. If people are looking for a particular size of house—if their family is growing and they need a three-bedroom house as opposed to a two-bedroom house—and they cannot find one, the demand will spill over into other areas of the housing market. Demand will drive up price, no matter what, and that will knock on through to other areas of the housing market. The hon. Gentleman is right that there are hotspots in the housing market—geographically and in terms of kinds and sizes of house and tenures—where this problem is particularly acute, but we cannot afford to be that choosy. We need to build an awful lot more of all kinds of houses if we are to reduce prices. Some of the hotspots may well apply to people on lower incomes and, at that point, we should be doing something about it, but that should not be to the exclusion of everything else; otherwise the knock-on effects will still be felt throughout the tenure range.

With what I have said in mind, I would like to take up the offer in the White Paper and make a formal submission to the consultation that the Minister launched yesterday. I want to make a concrete proposal—please forgive the pun—for a new permitted development right to add to the suite that the Government suggested. The right would allow small-scale additions to town and city centre properties when the final result is still below the treeline or other buildings in the same block. Converting existing shops or offices would still require planning permission, but building new apartments within those height limits above them, or above existing housing, would not. It would not apply to substantial new buildings or major developments, nor to listed heritage buildings or conservation zones.

That measure is safe, sensible and proportionate and should not scare anyone—certainly not those worried about Manhattan-style buildings. It would offer a little piece of freedom from the cold and clammy hand of bureaucracy: a chance for every householder to help solve the nation’s housing problems by extending the size, and value, of their property by adding extra bedrooms or perhaps an entire apartment on top of what is there already. It would provide an opportunity for energy and ideas to have their head, without being diverted, amended or discouraged by official objections, rooted in the very British fear of any building that is taller than two storeys high.

Without the measure, officialdom will be too slow to change. They will not be forced to look upwards, and will carry on thinking the same way as they have for the last 50 years. We need change immediately, not at some distant future time. Without a shock—a stimulus—and some creative development yeast, the White Paper’s dough will never rise. Many valuable town and city centre sites will continue to be ignored.

The new permitted development right could be that stimulus—that little piece of freedom. It could be a creative spark that lights the blue touch paper of Britain’s stodgy, slow-paced, cosily comfortable housing market so that it takes off like a rocket. It would improve our economy and our quality of life, make our homes more affordable and reduce development pressure on greenfield and green belt sites. I hope the Minister will agree.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mrs Gillan. As a Back Bencher, it is certainly unusual for me to be second in the speaking order.

I congratulate the hon. Member for Weston-super-Mare (John Penrose) on securing the debate. He has campaigned on this issue and raised it in Parliament before, so it is clearly something that he is keen to see progress. I agree in principle with much of what he said about ensuring vibrancy in main streets at night. If that can be done by building upwards above shops, that is a good thing, but in the long run we really need to be careful. I have already touched on my concerns that the proposal might open the door for the construction of large town houses without delivering low-cost housing, which is the thrust of this debate. I am also slightly concerned that there may be a rush by too many people to do it. We need to ensure that the right controls are in place, including building standards and building controls, and that the processes can be inspected. Clearly some low-rise buildings were only ever designed to be low-rise buildings, even though they may be adjacent to higher buildings.

[John Penrose]

Just to clarify, nothing in the proposals that I have made today would affect building control or building regulations. Clearly we would need all the usual checks to ensure that buildings will stay up and be safe once they have been constructed.

[Alan Brown]

I fully accept that. I know that is the premise; I am just saying that we need to ensure that the resources are there to keep an eye on things. We have heard stories about properties in London getting built in the rear of gardens and so on, which is done without planning consent or building standards consent. It is a question of ensuring that procedures are properly followed. Foundations need to be checked and may need to be strengthened, and buildings that are structurally tied to adjoining buildings need proper structural design. I recognise the hon. Gentleman’s good point about controls, listed buildings and exemptions, and I agree that a controlled method of allowing building up can work.

Let me return to low-cost housing, which is the title of this debate. We need to do more to make low-cost housing available. I welcome the UK Government’s White Paper, but neither I nor my party think it goes far enough. As was raised yesterday, the elephant in the room for low-cost housing is the right-to-buy model. In the long run, the extended right-to-buy model for social housing will eat into the availability of low-cost housing. Subsidies from the public sector to allow people to buy properties use money that could otherwise be going directly into stimulating housing growth or be put towards brownfield development. Members have raised concerns about building outwards and eating into the green belt. Clearly brownfield regeneration is a good thing, especially in the urban environment. The money being taken out of the system for right to buy could be put to better use, either directly for building new social housing or for stimulating new brownfield development.

By ending right to buy, the Scottish Government have protected 15,500 properties that would otherwise have been sold from stock. Quite often, houses that are sold end up in the buy-to-let market, which pushes rents up because social rents are always cheaper than private rents, and that has an impact on the housing benefit bill. Again, that means more money from the public purse that could otherwise be going towards housing.

The Scottish Government are making a record investment in council house building. I request that the UK Government consider going back to that model and funding the construction of public housing. Because there is no right to buy for housing in Scotland, housing associations have more confidence to build housing. They can also get subsidies from the Scottish Government. The Scottish Government delivered 30,000 affordable homes in the last Parliament and have a target of 50,000 for this Parliament.

I recognise that the White Paper targets affordable homes, but the argument goes full circle: for the UK Government to deliver affordable homes, they need to put public money to the best possible use, not subsidise the purchase of properties for people who already have one and who do not need a discount to become a homeowner. I know that a lot of people have aspirations to become homeowners, but the No. 1 thing is to ensure that there are enough homes for everybody. We can look to further drive home ownership once there are enough homes for everybody, but once that happens the market will even out and we will not see the continued push on prices.

The hon. Gentleman said that there would be controls on listed buildings. My other concern is that we would need tight controls on the aesthetics of buildings to ensure that they blended in with the surrounding environment. Where there are permitted development rights rather than planning controls, there still need to be tight guidelines.

[John Penrose]

May I press the hon. Gentleman a little on that point? I take his point with respect to areas that have a homogeneous architectural style and that therefore have conservation of one kind or another, but not areas that have no such homogeneous style and no conservation control or anything like it. Most British cities are a hotch-potch of things built over several centuries, and that is fine. I am concerned that he is trying to create a sort of clammy bureaucratic control where historically there has been none and everyone has been happy with the outcome.

[Alan Brown]

I take the hon. Gentleman’s point. Perhaps, as always, the truth is somewhere in the middle. However, I would have real concerns if people were just able to throw up these buildings. There could be real issues with the materials used, with long-term maintenance and with the aesthetics of buildings. For instance, if people use the wrong materials for wood fascias and do not maintain them, they become a real eyesore in the long run. I am just putting that out there; I think those issues should be considered within permitted development rights. Local areas might not have a completely homogeneous style; as he says, cities may have developed as a hotch-potch, but that is not always an attractive look, and if we do not watch out, it can become even less attractive. Clearly that is not the desire behind the hon. Gentleman’s proposal, but I conclude by congratulating him on advancing it.

--- Later in debate ---

[Ruth Cadbury]

My hon. Friend and constituency neighbour is absolutely right. I have experienced that in my own constituency. We still have newly built homes that are never let, because they are seen as nothing more than an investment, and many of them are very high in price.

As I have said, the latest affordable housing statistics have fallen to their lowest levels in 24 years. Of course I welcome any credible initiatives to provide low-cost housing, but where is the evidence that this well-meaning initiative to extend permitted development rights, which the hon. Member for Weston-super-Mare has discussed today, will actually deliver low-cost housing?

Between February and April in 2016, the Government consulted jointly with the Mayor of London on proposals to deliver more homes in London by allowing a limited number of additional storeys on existing buildings through a permitted development right, local development orders or development plan policies, which is exactly what the hon. Gentleman is seeking. That was part of the Government’s commitment to explore how more homes could be built on brownfield land, in order to reduce the pressure on greenfield or metropolitan open land. The Government summary of the responses that they received to that proposal says:

“More than half of those were not supportive of the proposal, with a one-size-fits-all permitted development right approach considered unworkable. While it was noted that it could support town centres and deliver more homes, it was recognised that the complex prior approval that would be required to protect neighbours and the character and amenity of an area would result in a permitted development right that is no less onerous than a planning application.”

Specifically, a couple of the consultees—the Planning Officers Society and Historic England—did not support the proposals. I am well aware that the British Property Federation welcomed them.

[John Penrose]

I just wish to clarify something for the hon. Lady. I have read the document she is quoting and learned of the concerns surrounding the proposed permitted development right, which has been consulted on already, but my proposal is different. It starts from the same place, but is designed to avoid the criticisms that were levelled, which she has rightly pointed out. I have endeavoured to modify my proposal in a way that will allow it to sidestep those issues.

--- Later in debate ---

[Ruth Cadbury]

Having been a councillor myself for many, many years, I am well aware of that pressure, which is why we have the appeals system—it is why we have that check and balance. Let us remember that one can only get away with refusing a planning application if the refusal is made on good planning grounds. Officers are there to advise councillors, and if councillors ignore officers, the application will go to appeal, and, if it is a good application that was refused for the wrong reasons, the Planning Inspectorate will overturn the refusal and the application will be granted.

The planning system is there for a reason. It is there to protect communities and ensure good development. It ensures that there are appropriate facilities, amenities, space standards, parking provision and so on. When permitted development rights are extended, a lot of that is lost. I am sure that the hon. Member for Weston-super-Mare does not want to see a load of high-rise buildings going up that do not meet basic standards and do not provide a basic quality of life for the people living in those dwellings and in surrounding dwellings.

[John Penrose]

I repeat that I am not proposing huge high-rise dwellings at all; I am proposing things that can be built up to the height of the local treeline, for example, which is four or five storeys at the most. I gently say to the hon. Lady that if the planning system works so bleedin’ brilliantly, we would have four or five-storey developments in market towns and seaside towns around the country, but we do not. I doubt very strongly that that is because communities everywhere have roundly decided that they cannot live with anything taller than two storeys. I suspect that it is because there is a chilling effect. People are being discouraged from putting such applications in because of officialdom knocking them back all the time.

[Ruth Cadbury]

With the greatest respect to the hon. Gentleman, I believe he was in the same meeting as me last week, where we talked about converting empty space above flats into residential. In that interesting and informative roundtable, we heard that there is a whole host of barriers to converting empty space above shops, and the same applies to the proposal to increase heights. The planning system was not suggested as the main barrier. There are other barriers, such as structural ones, security ones, issues of funding and whether it is worth the cost. Except in very high-price property areas, such as those that my hon. Friend the Member for Ealing Central and Acton (Dr Huq) and I represent, it is just not worth landowners’ while to do it. There is a range of barriers.

No one denies that enabling more homes in town centres is a good thing for the life and vibrancy of those town centres. I wholeheartedly agree with that sentiment, but the hon. Member for Weston-super-Mare could do better than blaming the planning system for the lack of delivery. The planning system can deliver what he wants now. He has brought no evidence that this little tweak of the planning system will deliver more housing, let alone more affordable housing. He has made circumstantial links between more supply, of which the proposal would provide a tiny amount, and a crashing fall in housing prices. There is no evidence.

We have seen problems when permitted development rights are extended, such as with the coalition Government’s policy, which has now been enshrined permanently, of allowing employment space to be converted into residential without planning permission. In Hounslow—I represent half of the borough—we have seen poor-quality housing, poor space standards, inadequate parking and issues with everything from refuse disposal to access. That policy is not providing good-quality housing or affordable housing.

The other extension of permitted development rights that was enacted under the coalition Government allowed homeowners to extend the rear of their homes by 6 metres, rather than the 3 metres it had been previously. Those developments have a massive impact on the neighbours. That is why we have to be careful about extending permitted development rights, and the Opposition do not support such extensions.

Building can be done at height with good design, but there is no reason why that cannot be done through the normal, transparent and accountable planning application process. In the years I was a planning committee member—some of those were as chair—we granted many applications for increasing the height of buildings and homes or for building new higher ones. We refused some terrible applications. The system allows for that to happen. We have a massive housing shortage in west London, but the prices are high enough that it is worth the developers’ while. We saw the applications; we approved the good ones and refused the bad ones. The market in west London is doing exactly what the hon. Gentleman desires.

[John Penrose]

I thank the hon. Lady for giving way yet again. She is being very generous and kind. I gently say to her that the London economic microclimate is not typical of the rest of Britain. I am rather reassured by some of the things she has said about what is happening in parts of London and how these things are being handled, but I do not think those incentives, processes or habits of mind among councils and council officials are broadly spread across the country.

[Ruth Cadbury]

In which case, the hon. Gentleman is effectively admitting that it is not the planning system that is the problem, but the state of the property market and other barriers to development. The market in west London is doing exactly what he wants, and I suggest he looks elsewhere for the cause of the problem and, therefore, for the solution.

The hon. Gentleman wants beautiful buildings; that is why a planning system is needed. He is proposing a solution that removes local oversight, but there is no evidence it will work and it could create unintended consequences. Furthermore, his proposal does not address the subject of the debate: low-cost housing. I am almost inclined to dissent when the Question is put at the end of the debate as to whether we have considered low-cost housing, but I will leave that for then.

--- Later in debate ---

[John Penrose]

I would like to extend my thanks to everybody who participated in this debate, in particular my hon. Friend the Minister—and Whip—for responding so constructively and helpfully. As she said, the timing of this debate was slightly fortuitous. As everyone here will appreciate, when we put in for debates we have little control over precisely when our names will come up, so I had no idea that it would take place 24 hours after the publication of the housing White Paper.

As the Minister said, I have been campaigning on this issue for some time, so this is at least partially a celebration of victory, because I am pleased to say that the Government have listened. There is a great deal in the White Paper about building up, not out, and it contains some very welcome steps. The Government deserve full credit for taking some major steps in the right direction. Therefore, my modest proposal, as the hon. Member for Brentford and Isleworth (Ruth Cadbury) called it, is a final flourish or a final capstone—a residual step to ensure that it is done well and fully, rather than only partially. I think I am very close to the summit of achieving what we need to do, and I want to take this final step. This is, at least in part, a celebration of victory as much as a request for further activity.

I want to pick up on the Minister’s comments about there being a slightly miserable tone to the debate. She is absolutely right that there is no silver bullet to this problem, but it is perhaps a little reductive to say that because one particular proposal—in this case, my final step—does not solve all the complicated, deep-rooted and long-lasting housing problems that this country faces, it should therefore be opposed. If we let the best be the enemy of the good, we will get nowhere. This is a far broader issue than we can possibly cover in one debate, but I am pleased to say that we will make some progress.

I will finish on this point, which I direct to the Labour party and the hon. Member for Brentford and Isleworth in particular. My hon. Friend the Minister said there was a cultural divide over tall buildings, but I think that in this Chamber there has been a cultural divide over the approach to regulation, too. I accept that the planning permission and planning regulation process plays an important role in preventing substandard building and inappropriate large-scale building—the hon. Member for Brentford and Isleworth was right to point all those things out. However, when it comes to regulating our fellow citizens in a free society, the burden of proof is on us to show why what we are doing to take away their freedoms is right, not on them to explain why they should have them back. Therefore, if I have a modest suggestion for an extension of those freedoms—a rolling back that will not impact on the broader points that the planning system is rightly geared to prevent abuses of—then it is up to us to justify why that should not happen. The burden of proof should be on us.

[Ruth Cadbury]

rose—

[Mrs Cheryl Gillan (in the Chair)]

Can I check that the hon. Gentleman is not giving way?

[John Penrose]

I have finished my remarks.

Question put and agreed to.

Resolved,

That this House has considered low cost housing.

UK Sovereign Wealth Fund

John Penrose Excerpts

Wednesday 14th December 2016 Westminster Hall

[John Penrose (Weston-super-Mare) (Con)]

I beg to move,

That this House has considered the UK Sovereign Wealth Fund.

It is good to have you looking after us this morning, Mr Owen. The title and subject of this debate come from a proposal I published recently, with help from the good people at the Social Market Foundation, called “The Great Rebalancing: A sovereign wealth fund to make the UK’s economy the strongest in the G20”. It is available in all good book stores; failing that, the Library refers to it in a good deal of detail in its excellent debate briefing note. For anyone who is sufficiently riveted to want more details, it is available on my website with a slightly pithier summary alongside it, written for The Times’s “Red Box” column.

The reason for writing the proposal was simple. This is a crucial moment for Britain. Brexit creates an inflection point—an opportunity to ask ourselves fundamental questions for the first time in many years about what kind of country we want to be once we leave the European Union. How can we best use the spur of our newly won freedoms to change the way our country works? What do we want our economy, our society, our cities and our countryside to look like? “The Great Rebalancing” is an attempt to answer at least some of those questions.

For years, economists of all kinds, of left and right, have said rightly that Britain is worse at long-term planning than other countries. We save less, invest less and build less economically vital growth-promoting infrastructure, such as roads, railways and ports, than they do. Other oil-rich countries such as Norway have built up large sovereign wealth funds, but we have not. We have a rock ’n’ roll economy that lives for today and depends too much on consumer demand, unlike more sobersided countries such as Germany, which are much better at investing for tomorrow.

The result is that we lag behind the United States, Germany, France and even Italy in productivity. It takes a German worker four days to produce what we Brits make in five, so we work longer hours for lower pay than other countries, and we will not be able to raise our living standards sustainably or to build an economy that works for everyone unless we fix that fundamental underlying issue.

Even worse, we have huge national debt, partly as a hangover from the 2008 financial crisis, but mainly because the promises we have made in our pay-as-you-go pensions and benefits system create long-term liabilities that are, financially, effectively the same as debt. That is not fair to our children and grandchildren, who will have to repay the money we have borrowed. We are handing them the bills for our lifestyle, rather than paying for it ourselves. These are long-term structural problems that are deeply ingrained in our economy and in our politics. They have taken decades to build up, and they will take just as long to solve.

Part of the answer is to invest more in crucial economic infrastructure such as roads, bridges, railways and ports, and to keep doing it consistently and predictably. To my mind, the most important and least noticed bit of the Chancellor’s autumn statement was not the £23 billion investment pledge for innovation and infrastructure, although that was certainly welcome and valuable. It was the instruction to the National Infrastructure Commission to plan for a future where, every year, we spend between 1% and 1.2% of GDP on this stuff, rather than 0.8%, as we do today. That is not a one-off; it is a permanent change that he proposes. It stops the infrastructure boom and bust that we have suffered for decades, in which Governments postpone critical growth-promoting projects whenever money gets tight. Making our investments boringly predictable really matters, because stop-start spending does not only delay growth; if there is not a smooth pipeline of projects, taxpayers get less value for money, and we cannot build as much with the money we have.

But what about that huge national debt? How do we make things fair for our children and grandchildren? First, we have to stop adding to the debt, which means stopping borrowing. The autumn statement said the deficit will be down to 2% by 2020, cyclically adjusted across the business cycle, which is a vital step in the right direction. My proposal goes one step further and asks for an annual public declaration by the independent Office for Budget Responsibility to ensure the Government’s budget stays balanced across the economic cycle in future. That is a small but crucial piece of fiscal rule making.

We gave the OBR responsibility for the financial forecasts to stop Chancellors using fairytale projections to cover up problems when they were under pressure. Once we have finally balanced the budget, sometime during the next Parliament, we should extend that same mechanism a little further, to shine a harsh and unforgiving spotlight on any future Chancellor who is not prepared to live within the country’s means. We have not, after all, endured years of austerity and belt-tightening just to have a future financially irresponsible Chancellor toss it all away.

[George Kerevan (East Lothian) (SNP)]

Does the hon. Gentleman envisage a permanent budget surplus?

[John Penrose]

At this point in my remarks, I envisage a consistently balanced budget across the economic cycle. That would be a major step forward and, given this country’s history since the second world war, it would produce a welcome degree of certainty for businesses, Government and everyone else. I will come on to how we might then build up the sovereign wealth fund; the hon. Gentleman might like to come back at me at that point if he thinks I have not covered the issue properly.

Once we have stopped borrowing, we can start saving, which is the point the hon. Gentleman just made. That is where the sovereign wealth fund comes in. Most of that huge national debt comes from our pay-as-you-go state pension and benefits scheme, so paying off Government bonds—gilts—will not be enough on its own. Even worse, we cannot just grow our way out of trouble, because the pension and benefits scheme’s liabilities will just grow with us. Instead, we need a sovereign wealth fund to pay for what we owe in our pensions and benefits system.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

As the hon. Gentleman is one of the more assiduous members of his party, he will have seen that the Co-operative party floated in September 2013 this very idea of a UK sovereign wealth fund. Does he see our proposal of turning the Crown Estate into that sovereign wealth fund as an attractive idea?

[John Penrose]

I have not included in my paper any proposal to take existing Government assets and pour them into the sovereign wealth fund, to give it a kick-start. It would be possible, and there are parallels. The previous Chancellor floated the idea of a regional shale gas sovereign wealth fund, based on the proceeds from fracking. A number of Government assets could be added to any sovereign wealth fund, though in my paper, I do not propose that they should be, but there are respectable parallels. For example, the Norwegian sovereign wealth fund is based on the proceeds of its North sea oil. That is certainly an option to consider. I am not proposing it here, but it is certainly not beyond the bounds of possibility. There are very respectable parallels and antecedents elsewhere in the world.

We need a sovereign wealth fund to pay for what we owe in our pensions and benefits system. It would give the scheme the same strong financial foundations as other occupational pension schemes in the UK for the first time in our country’s history. Like those other schemes, it should be managed through a fully independent board—in this case, a new stand-alone national insurance trust with a heavyweight board of trustees, like that of the Bank of England, to prevent political meddling.

Building the fund is rather like repaying a mortgage or saving for a pension: we have to put a little aside every month for a very long time. We would start by creating a new national debt charge, carved out of income tax, to pay the interest on the national debt, currently projected to be just over 2% of GDP by 2021. It would be set as a percentage of GDP and, as the economy grew, any surplus would be used to build up the fund. The process needs to take a long time—several generations—so that the costs do not all fall unfairly on current taxpayers. It is urgent too, because we need to start soon. There will be a brief moment, when the Government’s budget reaches balance in the next Parliament, when we could set the fund up, but old, bad habits die hard. As soon as there is a hint, a sniff, of a surplus, there will be dozens—hundreds—of proposals for tax cuts or extra spending from both sides of the House. Many of them will be excellent ideas, but we must ensure that we do not miss the golden opportunity to set the fund up at that moment, when we can, before it is too late and any surplus money is earmarked for other things.

We must ensure that all the effort and sacrifice of getting the budget in balance is not wasted. A balanced budget cannot be just a one-off episode of fiscal sobriety, in which our rock ’n’ roll economy detoxes for a few months before hitting the party scene again. We need a long-term commitment to clean living—to the fundamental rebalancing of our economy that the sovereign wealth fund would deliver.

Creating the fund would rebalance our economy; build stronger foundations, so that we invest more for the long term; deliver faster growth and extra jobs, so that we could afford stronger and better public services; insulate us against the next economic shock, such as the latest banking crisis; make us less dependent on foreign investors once Brexit is complete; build our international heft around the world; and answer some of those fundamental questions about the kind of country that we want to be after we leave the EU.

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

I congratulate the hon. Gentleman on his choice of debate. I agree with him about the long-term thinking that will be required to create a sovereign wealth fund. Does he agree with me that successive Governments need to commit to the promotion of a wealth fund? Then the beneficiaries throughout the United Kingdom will support it, because they will see tangible benefits accruing from it.

[John Penrose]

That is a crucial point. As I said, we need to start building the fund soon. It is an urgent priority that we should begin it when the budget hits balance, but once we have begun, we need to save a little for a very long time, and that needs to last over several generations, so that the burden of setting the thing up does not fall unfairly on the current generation of taxpayers. The hon. Gentleman is exactly right: for it to be stable over such a long time, it needs to be politically stable. That means two things. First, I hope that it has cross-party consensus behind it, so that it will have some degree of political longevity; secondly, it will need institutional bulwarks to prevent Chancellors of whichever party, when they are under pressure—facing a general election or a cyclical recession—from interfering, meddling or trying to get their sticky fingers on the money. The hon. Gentleman is absolutely right: the fund will need very strong institutional safeguards around it. Those are laid out in some detail in my paper. I did not plan to go into huge detail about that here. I am happy to, if anyone wants me to, but I thought that I would spare everyone the detail at this stage, simply because of pressure of time and because other hon. Members want to add their thoughts.

If we could do what I propose, we would be a fairer, more generationally just country, because we would not be saddling our children and grandchildren with the bills for our lifestyle. We would be more socially just, because low and high taxpayers would all own the same personal stake in the fund that underpins their state pension and benefit payments.

I hope that all of us in the debate, including my hon. Friend the Minister, will deal with three issues. First, can we all agree that rebalancing our economy is necessary and important? A number of Members have suggested in interventions that there may be consensus on that, but it would be good to get that on the record from hon. Members on both sides of the House if we can. Secondly, can we all acknowledge that once we have the budget in balance, reducing the bits of our national debt that we happen to have issued as Government bonds will not be enough to achieve rebalancing on its own? Thirdly, can we all accept that a sovereign wealth fund to underpin the state pension and benefit system is at least one valid way of solving the deeply ingrained imbalances and problems in our nation’s economy and finances, even if there may be other ways as well?

Think of it: if we can agree on some or all of those issues, cross-party, we could launch a new Britain—a socially just, generationally just, asset-owning democracy on a scale that no other developed nation could match. The post-war Governments created new institutions such as the NHS and the welfare state, which had little relevance to rebuilding homes and cities damaged in the war, but everything to do with forging a new society and nation. The post-Brexit Government is our generation’s chance to do the same—to leave a mark, to mould and weld our fractured society into a new and better shape. This will be a brief political moment in which, if we grasp it without fear, whether we are from the political left or right, we can create a legacy for our children and grandchildren to remember us by with pride, so let us think big and long term, and let us do this together.

[George Kerevan]

There might be broad agreement on what we are discussing, but the hon. Gentleman has premised much of his case on a surplus being run. As I understand it, the three fiscal rules that the new Chancellor has introduced have moved away from the previous budget surplus rule, and nothing in the current fiscal rules says that we will run a permanent surplus.

[John Penrose]

What I propose would take effect once we had got the budget in balance. The Chancellor’s new set of fiscal rules is designed to take us through the next few years before we get the budget in balance, but once we do get it in balance, any Chancellor—as we are talking about the period after the next general election, I hope that it will be the current Chancellor, but I will not prejudge the results of that election—will need to rethink and reset fiscal rules. What I argue, as the hon. Gentleman will have heard, is that there should be a national debt charge, initially just to carve out what we are already committed to paying in terms of interest on the debt, but as the economy grows, that would slowly start to yield a very small surplus, which could be used to pay into the sovereign wealth fund. That is a very long-term process, but we need to start it soon.

--- Later in debate ---

[George Kerevan]

I could not agree more. I will come on to that, but the Norwegian example is slightly skewed by the fact that Norway is a relatively small country and, when its sovereign wealth fund was being built up, it had an excess of inward investment in the oil industry. Norway therefore did not need to tap the wealth fund for domestic infrastructure expenditure. Norway has also been canny in making significant investment in infrastructure anyway. There is a glaring gap in the UK’s infrastructure investment, and infrastructure would be one of the primary places to secure a positive income stream; it is therefore somewhere we would want to invest.

Just to finish on the Norwegian example, there is never a good time to start a sovereign wealth fund. It is interesting that the Norwegians did not start their wealth fund until the early 1990s, just as oil prices collapsed. They set up a spanking new sovereign wealth fund, and they chose to persevere after oil prices nosedived. Oil revenues built up again during the 1990s and the wealth fund powered away. On whether we should wait and whether there is a right time to start, there is never a right time. The Norwegians started their sovereign wealth fund at the worst possible time for the income streams that they were tapping, namely oil revenues, but they persevered. It is about perseverance and long-term thinking. The hon. Member for Weston-super-Mare made the key point that this works only if we think long term.

We must look at some of the counter-arguments, because as enthusiasts we tend to let our ideas run away with us. The fundamental argument that is always made, especially from the Conservative Benches, is “Why should the Government—or some Government agency, even at arm’s length—keep the revenues and invest them? Surely we should cut taxes and let people spend the money themselves, because they are better judges of how to invest for the long term.” It is a compelling argument, but the trouble is that historical experience does not bear it out: look what happened to North sea oil revenues back in the 1970s.

It has not yet been mentioned today that a prototype sovereign wealth fund, in the shape of the National Enterprise Board, was set up in 1975 by the then Labour Government to invest in domestic infrastructure. As I remember, it had £1 billion a year from North sea oil. It began by building up a portfolio of British industrial companies. There was a Scottish equivalent, the Scottish Development Agency. That was all abolished in 1979 when the Conservative Government came in under Margaret Thatcher. The argument was, “Individuals and private companies are better able to spend the money, so why not cut taxes?”

The 1980s were the decade of maximum inflow of funds from North sea oil. What happened to investment in that decade? Industrial investment fell—indeed, by the end of the 1980s, the UK turned out to be one of the lowest spenders on private industrial investment in the OECD. So it did not go into private sector investment; what about public sector investment? We started the 1980s with something like 2% of GDP being spent in net public investment in infrastructure, which is quite good by today’s standards. By the end of the decade, that had been reduced to something like 0.2% of GDP. There was a catastrophic fall in investment throughout the 1980s. Whatever the huge influx was of funds from North sea oil, it was not passed on in investments.

What about tax cuts? I always like to remind Conservative Members that during the 1980s the share of taxation in GDP did not fall. Yes, Mrs Thatcher cut income tax quite considerably, but she counterbalanced that by increasing VAT. The overall tax burden did not fall, so we have to ask where the North sea oil money—the excess revenue for the Treasury of more than £100 billion in that decade, in contemporary terms––went.

In the first half of the 1980s, there was a very serious recession, from which the economy took 18 quarters to recover and which reduced the Treasury’s overall tax income. Essentially, the Treasury made up the loss from that early-1980s Thatcherite recession by using the North sea oil money. In the end, in the 1980s—the peak years of income from North sea oil—the money was wasted. It did not go into private or public infrastructure investment and it was not used by private individuals to expand their savings; it simply went down the drain.

[John Penrose]

Does the hon. Gentleman agree that there is not necessarily a choice between tax cuts and a sovereign wealth fund? Potentially, depending on pacing, we could do both. In some cases, it might make sense to do both, if only because—as the Government have already said in answer to parliamentary questions—we will need to do something to reduce the country’s overall debt burden. All I am arguing is that we should not ignore the liabilities built up in our state pensions and benefit system as part of that burden. We need to address that and we may also want to make tax cuts, but for different reasons, to do with demand stimulation and so on.

[George Kerevan]

In a spirit of compromise and reaching a consensus that might have an impact on the Treasury, I happily take the hon. Gentleman’s point.

All I am trying to say is that the crude default assumption that taking the money and giving it to individuals or companies will resolve the infrastructure investment problem has historically not proven correct. We come back to the need for some kind of overall public agency that saves and invests. The crude Thatcherite argument, if Members will forgive me for putting it that way, that says “Leave it to the public” is wrong. Short-term pressures on the public and on companies are just as great as those on Governments and Ministers. Somebody somewhere has to create an agency that thinks long term. That is what we are talking about.

--- Later in debate ---

[Simon Kirby]

I often say as an MP—I suppose the same is true as a Minister—that it would be nice to have a crystal ball, a magic wand and a time machine. We are where we are, and we have to make the best decisions going forward—rather than looking back in anger, if I may quote the hon. Member for Harrow West (Mr Thomas).

The additional capital will take public sector net investment to over 4% of GDP for the rest of this Parliament, well above the average of the last 30 years; in real terms, it has been more than 50% higher on average this decade than it was under the whole period of the previous Government.

Another aspect of my hon. Friend’s excellent paper was the suggestion that a new national debt charge be carved out of income tax to help pay down the debt. He will know how much I share his conviction that we need to get debt falling, but I know he also shares the Government’s commitment to helping people who are just about managing. It is important that we build an economy that works for everyone. That is why we would not look to deliver a new income tax charge in our current position. Indeed, as part of the tax lock, we have legislated not to increase the main rates of income tax, national insurance contributions and VAT during this Parliament. Alongside that, we have prioritised an approach to taxation that supports working people, such as our increase in the tax-free personal allowance.

[John Penrose]

Just to ensure that we are all clear, I clarify that my paper supports what the Minister is describing. The proposal in my paper is that the national debt charge would not start until the budget was in balance and would only equal what we were already going to be paying in debt interest to begin with. I reassure him that I am not suggesting an undercutting or a swerving away from the fiscal rules announced in the autumn statement. Those are essential to get us to the point where the budget is in balance, as he is ably laying out at the moment.

[Simon Kirby]

I thank my hon. Friend for again demonstrating what a sensible person he is.

The hon. Member for Ross, Skye and Lochaber (Ian Blackford) asked about North sea oil and why we did not create a fund in the past. He knows full well that successive Governments made use of the revenue from North sea oil to support public finances in the years when the revenues rose. I can tell him that going forward from April 2017, his Scottish Government will have the powers to contribute to their own reserve fund if they so wish. Perhaps that is something they might consider. We all agree that investment in infrastructure is key to growing the economy. That is why the extra £23.7 billion announced in the autumn statement is important; it takes the total we are spending to £170 billion during this Parliament. That will improve productivity, increase living standards and be an essential part of our plan going forward.

--- Later in debate ---

[Simon Kirby]

Housing does raise productivity. It is a much-needed part of our economy. People need affordable homes to rent or buy. The building process, as I am sure the hon. Gentleman is aware, creates jobs and increases prosperity and productivity.

The hon. Member for Strangford mentioned a shale fund—a suggestion that others have made, too. The UK does not currently meet the criteria of a country that would benefit from a shale wealth fund: we have a high debt and a large deficit, and we do not have extensive commodity or natural resource exports. The development of the shale industry would leave a positive legacy for local communities and regions where it is based. The Government’s policy is for those communities to be able to choose to invest the funds for the long term. I thank the hon. Gentleman, as ever, for making a very thoughtful contribution that added greatly to the debate. [Official Report, 19 December 2016, Vol. 618, c. 9-10MC.]

The hon. Member for Harrow West apologised for not being able to be present during my speech, and I appreciate that. He asked about lifting investment restrictions on the Crown Estate. That is an interesting idea; I will do as he asked and write back to him on that matter.

I thank the hon. Member for East Lothian (George Kerevan), as ever, for his thoughtful contribution. He mentioned inter-generational fairness. I agree that that is an important issue, but at 90% of GDP next year, our debt is just too high. That represents a burden on future generations, and it is important that we retain our focus on our priority of returning the public finances to balance and getting the debt falling. Therefore, it is not possible, and it would not currently be appropriate, for the UK to set up a sovereign wealth fund. He also mentioned taxation levels; I feel duty-bound to remind him that from tomorrow, for the first time, his party—the SNP—will be able to put up taxes in Scotland. The Scottish Government can put their money where their mouth is, if they choose to do so.

[John Penrose]

The Minister is being generous. I want to pick up on the point he has now made twice: about prioritising the reduction of the overall level of Government debt in the economy once we have eliminated the deficit. I completely applaud that, but does he accept in return that the debt denominated as gilts or as bonds is only part of the overall picture of liabilities that the Government and successive Government have loaded up? A large proportion of the total liabilities—a larger proportion than the actual debt denominated as bonds—is embedded in the state pensions and benefits system. It would be a mistake for any of us to ignore those liabilities. They are equivalent to debt, so at some point we need to face up to the costs that they include, as well as to the ones he is rightly pointing out with the bonds themselves.

[Simon Kirby]

I thank my hon. Friend for that point, and I accept that the debt is made up of a variety of different things.

I commend my hon. Friend once again for securing the debate, which has been interesting. We have discussed some significant issues for the British economy. There are many areas where he and I are in full agreement, but in closing, I would like to highlight three key aspects.

First, rebalancing our economy is necessary and important. Secondly, dealing with the deficit and getting debt falling is necessary but not sufficient to rebalance the economy. A dynamic and strong economy where growth is shared across all parts of the UK is what we need. Thirdly, on the effectiveness of sovereign wealth funds in various countries, I must repeat our conviction that setting one up is not appropriate for the UK at this point in time when our priority is to get debt falling.

Indeed, as my hon. Friend the Member for Weston-super-Mare notes in his paper, there is little point in attempting to build up such a fund when debt is at

“its current, historically high levels.”

I share my hon. Friend’s desire to live within our means —the hon. Member for Strangford used the expression “to cut our cloth accordingly”—and to secure our public finances, to get debt falling and to invest sensibly in our future success, which are all important areas that represent core priorities for the Government. Those priorities were reflected in the approach that we outlined in last month’s autumn statement: to build an economy that works for everyone.

[John Penrose]

What a splendid debate. There is a high degree of consensus among all parties, with a few isolated islands holding out against the principle. Much of the debate has been about how we might set up a fund, the competing mechanisms that we might use to build it up, and when we should have started, but there has been widespread agreement that, in principle, such a fund is desirable. Scottish National party Members say they are in favour of the principle of a sovereign wealth fund, but they argued that we should have started it earlier and built it up from oil. None the less, they were in favour.

The voice of Northern Ireland agreed. The hon. Member for Strangford (Jim Shannon) said he was brought up to save for a rainy day, as were we all, and he is absolutely right. The hon. Member for Harrow West (Mr Thomas) brought up the Co-op party’s suggestion—similar but not identical to mine—which was helpful.

Although the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) was kind about my paper, I am not sure that the Labour party and I are at the same point on generational justice; it puts less weight on it than I do, although I reassure him that the fluctuations in the fund that he is worried about need not be fatal, but that is for a longer conversation on another occasion.

The Minister was very helpful in accepting the three questions that I asked. On the need for rebalancing, he was clear about the desirability of making our economy more robust and more sustainable. Is debt repayment sufficient on its own, or do we have to take into account our broader liabilities, to rebalance the economy? The answer to the latter is yes, and the Minister was clear about that. He left the door temptingly open on whether this proposal is the right answer. He was generous in his acknowledgement of the strengths and benefits of sovereign wealth funds around the world. He rightly says, as my proposal acknowledges, that it would be wrong to start such a thing now. He leaves the door temptingly ajar, so that it might be something we should consider in future, but I understand that he cannot commit Her Majesty’s Government to this at this point. However, that gives us plenty of opportunity, on a cross-party basis, to come back to this and make sure that that chink of light is brought into full focus.

Question put and agreed to.

Resolved,

That this House has considered the UK Sovereign Wealth Fund .

Autumn Statement

John Penrose Excerpts

Wednesday 23rd November 2016 Commons Chamber

[Mr Hammond]

I am not sure that receiving the OBR report constitutes an acceptance of anything; the report is the report and we have to respond to it. The hon. Gentleman asks about the imbalance in growth; of course that is a problem, and increasing economic growth in Northern Ireland is a high priority. Wages and living standards are lower in Northern Ireland than we would like, and the only way to address that is to improve productivity, increase the size of the private sector and get more investment into Northern Ireland so that growth rates are increased. Obviously I will respond to any proposals that come from the Northern Ireland Executive. I cannot promise him how I will respond to them, but I can promise him that I will respond.

[John Penrose (Weston-super-Mare) (Con)]

The extra investment in building affordable homes and infrastructure is excellent news. Does the Chancellor agree that cheaper homes are one of the most important ways of raising living standards for everyone and improving economic productivity? Will he therefore also support reported moves to increase the supply of urban house-building sites by allowing owners to build up, not out, to the height of other buildings in the same block without planning permission?

[Mr Hammond]

My hon. Friend is right to say that making sure that housing is affordable is not only a key social priority, but a key economic priority. As I said in my statement, it is clear that the unaffordability of housing, certainly in many areas of the country, has become a drag on productivity, economic growth and investment. Investment in housing not only advantages the economy, but directly helps families, so I am pleased that we have been able to do something on that front today. As I said, my right hon. Friend the Communities Secretary will be bringing forward a housing White Paper in due course and he will address the longer-term strategic problems, one of which is the subject of the point that my hon. Friend has made.

House of Lords Reform and Size of the House of Commons

John Penrose Excerpts

Wednesday 19th October 2016 Commons Chamber

[John Penrose (Weston-super-Mare) (Con)]

It is always a pleasure to follow the hon. Member for Edinburgh East (Tommy Sheppard), and I should probably start with a declaration of interest, as my wife is a recently appointed life baroness in the Lords. I should add, for the benefit of Members opposite, that I believe she is now reconciled to the fact that before she was appointed I had voted repeatedly to abolish people like her, so it would be rather self-serving if I changed my mind now, as I hope everyone would agree. I am happy to inform the House that we are still talking even so. Although I instinctively support Lords reform, I oppose this motion. Why? It is because it uses Lords reform not as a dead cat, but as an excuse to delay boundary reform, a much-needed and overdue improvement to the plumbing of our democracy.

As we have heard, our current constituency boundaries are based on voter data that are already 15 years old or more. If we do not reform the boundaries now, they will be 20 years out of date by the next general election. As the old boundaries produced constituencies that varied tremendously in size, votes in one part of the country carried far more, or far less, weight than votes in another. It is a fundamental principle of our democracy that everybody’s vote must count the same as that of their neighbour. It does not matter whether you are rich or poor, what colour your skin may be or what god you worship, my vote carries no more weight than yours, Mr Deputy Speaker, and yours is worth no more than Nicola Sturgeon’s. Without that, our elections will not be fair.

[Kirsty Blackman]

Will the hon. Gentleman give way?

[John Penrose]

I am happy to give way once—

[Kirsty Blackman]

Is the hon. Gentleman in fact making an impassioned plea for proportional representation?

[John Penrose]

Not at all. I am making an impassioned plea for equal-sized constituencies and for votes to weigh the same. I can think of nothing more dangerous for our democracy, and nothing more corrosive of trust in politicians and the political system, than a sense that some favoured voters get a better deal than others in other parts of the country.

[Chris Elmore]

Will the hon. Gentleman give way?

[John Penrose]

I really must continue. So votes must carry equal weight, but without boundary reform they will not. Anyone proposing delays to the reform will inevitably face the challenge, unfair and unworthy though I am sure it would be in the case of the hon. Member for Perth and North Perthshire (Pete Wishart), that delaying reform has a party political advantage, too. That is because many smaller constituencies have historically been in areas with lots of Labour and, in some cases, Scottish National party, MPs, so it has historically required fewer voters to elect Labour MPs than Conservative ones.

In other words, some people—not all, but some—want to delay boundary reform because they want to hang on to a system that gave them unfair, unearned, unjustified and undemocratic privilege. They will not admit it in public, of course, but that is what is behind it. So I say to those people, particularly those in the political parties with proud and distinguished traditions of progressive politics and of standing up for what is right against the forces of reaction who oppose reform, please think very carefully before voting to delay boundary reform, for you will lay yourself open to the charge of putting party advantage ahead of democratic principle and fair elections. If I, as a Tory, can vote for fair elections, so can you.

Linking reform of the undemocratic Lords to separate, much-needed reforms for fairer elections to the democratic Commons is just wrong. It is a recipe for endless delay, and will only fuel the cynics who believe the whole system is fixed against them. The referendum vote on 23 June was, in part, a howl of frustration—a cry of rage against an unfair system where some favoured electors’ votes count more than those of others. The sight of MPs voting to hang on to a cosy, unfair system will only make things worse. It will corrode trust in our democracy even further, so I urge, even at this late stage, the SNP to withdraw this motion as fast as possible.

[Several hon. Members rose—]