amendment of the law

Jonathan Evans Excerpts

Monday 24th March 2014 Commons Chamber

[Hilary Benn (Leeds Central) (Lab)]

Let me say how grateful I am to the Secretary of State for his very kind words of condolence, which mean a great deal to me personally and to the rest of our family.

We have a chance today to discuss the impact of the Budget on families and communities when it comes to their chances of getting a home, deciding where that home will be built and by whom and whether the policy the Government are pursuing meets the simple test of fairness. Those are the things that I want to address in my remarks.

We know that housing is at the heart of the cost of living crisis facing many of our constituents. Parents worry about whether their children will be able to afford a home. Young people who want to get a foot on the housing ladder see house prices disappearing into the distance. People who are renting worry about the impact of rents that are going up faster than their wages. As I think the whole House will acknowledge, that is the result of a housing crisis that has come upon us over many years, as successive Governments have failed to build enough homes. Let me just say before anybody jumps up that it is a fact that, despite all the words we have heard from the Secretary of State and his colleagues today and on previous occasions, housing completions were higher in every single year of the previous Labour Government than they have been in any year under this Government. That puts into context what the Secretary of State had to say. Although I recognise that the previous Labour Government and our predecessors from both parties did not do enough to build homes, I would take our record over his any day.

[Jonathan Evans (Cardiff North) (Con)]

The right hon. Gentleman suggests that the Government before the previous Labour Government had a similarly poor record, but in fact theirs was better.

[Hilary Benn]

I am very proud of the record of the previous Labour Government: 2 million new homes, including 500,000 affordable homes, and a huge number of social homes that were brought up to decency standard. One thing that the previous Conservative Government bequeathed the previous Labour Government was a lot of council houses that were in poor condition because they had not invested any money in improving them. When the Secretary of State is next having a conversation with the Prime Minister, he might point out that the next time he walks down that famous staircase in No. 10 past the photographs of his predecessors, he will have to get all the way to Stanley Baldwin to find a Prime Minister with a worse record of building houses than the current occupant of that office.

In his 2011 Budget speech, the Chancellor told us that he would deliver an economy

“carried aloft by the march of the makers.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]

Although, as the Secretary of State says, housing starts are now finally up, what has happened to construction output overall? It has fallen by 4.2%. I do not know how many marches the Chancellor has been on, but the general idea of a march is that one goes forwards rather than backwards.

Although the Government’s record of building houses has been poor, they have intervened in the mortgage market through Help to Buy, and last Wednesday the Chancellor made an announcement about extending the equity loan scheme to 2020. As I have said before from this Dispatch Box, we support help for people, especially first-time buyers, to realise their dream of home ownership, but if the Government simply increase demand and do not do enough to increase supply, all that will happen is that house prices will rise further out of reach of the very people we are seeking to help. That is why the Treasury Committee and the International Monetary Fund express concerns about Help to Buy. I presume that the Chancellor has now finally acknowledged that, as he told the House last week that he has asked the Bank of England

“to be particularly vigilant against the emergence of potential risks in the housing market.”—[Official Report, 19 March 2014; Vol. 577, c. 783-84.]

That is progress, but could the Minister tell us when he replies exactly what that means in practice and how we and the public will be kept informed of how that vigilance is operating?

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[Ann McKechin (Glasgow North) (Lab)]

I welcome the comments made by my hon. Friend the Member for Blyth Valley (Mr Campbell), who recommended a precautionary approach to the proposed changes to pensions. They are huge changes with many unanswered questions. At the weekend, the Chief Secretary to the Treasury was quoted in the papers as saying that intuitively he did not foresee undue harm to the public purse. Rather than his personal rose-tinted view, we need hard facts and well researched analysis to allow Parliament to make an informed decision about the proposals.

Many questions arise, in particular about the level and quality of the financial advice that will be available to people to enable them to make proper decisions. How will pensioners be protected from the scams that my hon. Friend mentioned? If people choose not to take the annuity route, they will require active management of their investment over a prolonged period, at a time when many of them will experience increasing incapacity. It is vital that we have full consultation on the changes, and that any legislation is considered in draft format by the Work and Pensions Committee before it is presented to the House.

[Jonathan Evans]

As the hon. Lady will know, on Thursday the Government published a consultation paper and said that the consultation would be open until June. No doubt she will make her proposal as part of the consultation.

[Ann McKechin]

I welcome the fact that we will have a proper consultation. The depth of it, and the analysis that will be required before people can provide their opinion, will also be vital. I also expect draft legislation to be put before the Work and Pensions Committee to be considered line by line in close detail.

While the Budget focused on pensions, many significant challenges were either ignored completely or—at best—addressed only superficially. To name just a few, they include stagnating incomes; the lack of business investment compared with our international competitors, a matter addressed by the Civitas report published today; high personal debt levels; and a distorted housing market.

The Resolution Foundation’s annual report on living standards, “The State of Living Standards 2014”, points out that

“it has become harder to live a comfortable life on a modest or even typical income in modern Britain”.

The biggest increase in poverty is now among those already in work, trying to make ends meet with average wages consistently falling over the last five years. Before Conservative Members claim that the latest Office for Budget Responsibility figures show that we are coming to the end of that fall in income growth—even though the timeline keeps moving backwards—I should say that the situation is not as positive for a huge swathe of our population. The wage growth figures are based on the CPI index, which excludes housing costs. When the figures are recalibrated on an RPI-adjusted formula, as the Resolution Foundation report shows, the picture is much gloomier. For those on median earnings, there will have been barely any wage growth for more than a decade up to 2018.

Currently, the bounce we are witnessing is based primarily on increased consumer spending and greater levels of personal debt. Scottish Widows reported only last week that there are now 1 million more people than last year who have no savings at all—9 million people. Given the slow to negligible wage growth, that level of spending cannot continue forever. We risk returning to the problems that were at the root of the global collapse in 2008. Putting an extra 17p on the minimum wage rate and having approximately 1 million workers stuck on zero-hours contracts is not the way to increase incomes. That will simply push more people into a debt that will become increasingly unaffordable when interest rates start rising again.

The biggest omission in the Budget is the complete failure to tackle the causes of the housing crisis. Land prices are still far too high in comparison with average incomes and they take money away from our productive economy, yet the Government are perfectly happy to advertise in the Red Book, on page 107, that they forecast house prices to increase by 8.6% in the next year against an inflation rate of 1.8%. You would never guess, Madam Deputy Speaker, that an election was due.

Week after week, I hear from desperate young people, often with young children, about their fruitless search for stable and affordable housing. Last month, I met a young mother with two children who was looking for her fourth private tenancy in as many years. It was not that she wanted to move—either the landlords wanted their houses back to live in or to sell on, or, in the latest case, they had failed to pay their own mortgage. She is currently in overcrowded housing simply to ensure that her eldest child can remain in the same school. She faces a sector with perverse incentives, such as Help to Buy, which in its latest format is not even linked to house building. No attention has been given to reconstructing a rapidly growing but highly fragmented private rental market that could provide greater security of tenure and better service levels. The stubborn failure to boost house building, which is now at pre-war levels, is made worse by the slashing of investment in social housing, with the result that prices are kept high.

The right hon. Member for Mid Sussex (Nicholas Soames) made some very good comments on the rapid changes occurring in the manufacturing sector. If we make the right choices now, we can benefit from the revolution in manufacturing; I agree entirely with his comments. We need to invest in skills, not just for young people but for the existing work force. In too many factories across the land, we will find Jimmy and Johnny aged 69 or 70-plus, because companies have no one younger with the right skill sets. The Government continue to be complacent about the rise in inequality and about wasting talent.

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[Jonathan Evans (Cardiff North) (Con)]

Let me begin by saying to the hon. Member for Sedgefield (Phil Wilson) that I wish to draw attention to my entry in the Register of Members’ Financial Interests, and my specific interests in the life insurance industry, because later I shall say a few words about the annuity market changes. Before that, I want to talk about the impact of the Budget on my constituency. The House will be delighted to know that I do not intend to trawl through all the provisions; I shall merely mention three specific headline issues that my constituents raised with me after the Budget, and were very pleased to raise with me.

The first of those issues, which has already been mentioned, is the increase in the personal tax allowance. That increase is significant, and I think it a mistake for any Opposition Member to talk it down. The allowance used to be £6,500, and next year it will be £10,500. That is a measure that will help the lowest paid: it will take 3 million people out of tax altogether. I am amazed that some Opposition Members are still shaking their heads over that proposition.

Secondly, my constituents were delighted by the announcement about child care costs that was made the day before the Budget. It will mean real help for people who want to get back to work. Thirdly, although this too will not be popular with Opposition Members, my constituents have told me how pleased they are that there is now petrol price stability—a stability that will be underpinned by the continual fuel duty freezes that we have seen.

Let me say something about the impact on the business community in my constituency. When I went to my constituency business club on Thursday evening, three items were mentioned specifically. The doubling of the investment allowance to £500,000 a year has been warmly welcomed, and there has been a widespread welcome in Wales for the announcement of a package for heavy users of energy. The right hon. Member for Neath (Mr Hain), who is present, will know how strongly Tata argued for that, and Celsa in Cardiff is delighted as well. There has been a universally positive response to the Government’s determination to lower corporation tax to 20% from the Welsh chambers of commerce, the Institute of Directors and the Federation of Small Businesses and others.

Let me now say something about the pension changes. The pensions landscape has changed dramatically since the 1990s. The shadow Secretary of State, the right hon. Member for Leeds Central (Hilary Benn), told us that he was very proud of the last Labour Government—the Government who scrapped dividend tax credit, which cost pensioners £5 billion each and every year from 1997 onwards. Subsequently, we have seen Government policy pursue low interest rates and quantitative easing, which have driven down the value of our pensions. No one has mentioned that so far. Annuities are on the floor in comparison with their level in the 1990s: they are down to a third of that level. The fact is that those on both Front Benches are responsible for that. Between 2009 and 2012, the Bank of England and members of the Monetary Policy Committee claimed that £375 billion of quantitative easing would have a neutral effect on annuity holders. However, in a report published two weeks ago, Ros Altmann made it clear that it was monetary policy that had driven down annuity rates.

One of the strengths of the Government’s announcement is the positive response not just from those approaching retirement, but from savers more generally. Along with the announcements of an increase in the amount that can be held in individual savings account and the National Savings & Investments pensioner bonds, it has lifted interest among savers. However, I think that we need to concentrate on two other issues. First, the Government’s changes apply only in relation to direct contribution pension schemes. They have no relevance to, for instance, direct benefit schemes in the public sector, including those applying to Members of Parliament. Currently, however, it is possible to convert one to the other, and the Government have already signalled that they intend to block that conversion. If we want pensioners to be trusted with their own money, how can we easily restrict that principle to people who have direct contribution rather than direct benefit pensions?

Secondly, there is the potential negative impact on infrastructure investment. On Thursday, the Government signalled that they were aware of it. Insurers will undoubtedly be less interested in purchasing long-dated Government gilts if the long-term liabilities of those companies are cut to the extent that has been estimated by Barclays, which has said that in 18 months’ time the annuities market in the United Kingdom will be down to a third of its present level, and by investment advisers Panmure Gordon and accountants Grant Thornton, which have predicted that it will fall to a fifth of that level. Whichever may be true, that is a significant reduction in the demand on the part of the industry for those long-term infrastructure projects that back so many of the demands that are made by Members on both sides of this House. We all want to see that public sector investment, but the reality is that the pensions landscape is being changed. It is crucial that the Government consider the impact of this in order to ensure that this reform does not produce unexpected or unanalysed impacts.