Infrastructure (Financial Assistance) Bill

Kelvin Hopkins Excerpts

Monday 17th September 2012 Commons Chamber

[Danny Alexander]

I would point out to the hon. Gentleman that one of the announcements in the autumn statement was about local authority major projects. He will know, for example, that the Kingskerswell bypass is under constructions, that the A164 Humber bridge to Beverley improvements are under construction, and that the east of Exeter scheme improvements to the M5 junction 29 are under construction. I could carry on, but I will save the rest of the list for further interventions.

[Kelvin Hopkins (Luton North) (Lab)]

Will the Chief Secretary give way?

[Danny Alexander]

I will give way one more time and then I will make some progress.

[Kelvin Hopkins]

The fact is that public sector investment fell by 29% between the last year of the Labour Government and this year, and that it is forecast to fall further to 32%. Given that borrowing money is as cheap as it has ever been, surely the decision is just a matter of reversing what the Government have been doing.

[Danny Alexander]

The hon. Gentleman will know that the headline plan set out by the previous Chancellor and Government included cuts to capital spending that were substantially greater than those being implemented by this Government.

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[Danny Alexander]

As I shall explain, we are not seeking to circumscribe unnecessarily the nature or structure of the guarantees, either through the Bill or through the announcements that the Government have made. We are willing to have discussions with those involved in projects that meet the criteria that have been set out, and it might well be that different structures of guarantee will be appropriate for different projects. I do not wish artificially to circumscribe the flexibility of the scheme in advance of the discussions with the individual projects. I am sure that those involved in the projects will be well able to have discussions with Infrastructure UK about the nature of the guarantee that would suit them best.

I was explaining the convention that the Government should not rest significant expenditure under common law powers on the sole authority of general supply legislation. Accordingly, to offer the support we want to see, Government need Parliament’s authority to incur expenditure in connection with agreements to provide financial assistance and to pay out on liabilities should they be called upon.

Today we seek authority for the Treasury to incur up to £50 billion of expenditure in connection with giving financial assistance to infrastructure across the UK. That financial assistance might take the form of guarantees, loans, indemnities or other support backed by public funds. It could be used—

[Kelvin Hopkins]

rose—

[Danny Alexander]

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

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

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[Danny Alexander]

I think it important for legislation to contain provision for appropriate environmental impact assessments, but this Bill is not the proper place for such a provision. Such assessments will have already taken place as part of the consenting process. As I have said, the Government will offer guarantees only to projects that can get under way in less than 12 months and have secured the relevant consents.

[Kelvin Hopkins]

Private companies in Britain are sitting on a cash surplus of £700 billion, but they are, in effect, on investment strike. They will not invest because the economy is depressed and they see no possibility of a profitable return. Is it not the case that only the Government can drive us into growth again, and that the Government must take the lead to unlock that money for the private sector?

[Danny Alexander]

One of the things that the Bill will do, which I hope the hon. Gentleman will welcome, is help to generate private investment in this nation’s important infrastructure, which has suffered from under-investment for so many years. Perhaps that is the answer that he was seeking.

The Government will use their hard-earned fiscal credibility to pass on lower costs of borrowing to support the long-term delivery of new affordable and private rental homes. We plan to issue debt guarantees for a private rental housing scheme and the affordable housing scheme to give institutional investors the assurance that they need to invest in housing. Under those schemes, the Government would enable providers who commit themselves to investing in additional new-build rented homes to raise debt with a Government guarantee. Housing proposals will be scrutinised and approved on the basis of presenting low-risk, high value-for-money investments.

As with UK guarantees, there will be a minimal impact on public sector net borrowing, as the developments we expect to back will be structured to minimise the potential losses to the Exchequer. For the private rented sector guarantee, we intend to levy a commercial charge to reflect the benefits that companies receive and to cover the risk taken by the taxpayer.

The actions made possible by the Bill would provide enormous benefits across the UK. We expect the boost to housing construction, combined with our recently announced planning reforms, to generate about 140,000 jobs in the construction sector, and the infrastructure unlocked through UK guarantees could provide hundreds of thousands more. However, this is not just about a near-term boost. The projects that go ahead as a result of the action that we are taking will provide major long-term benefits for individuals, firms, households, and the whole UK economy. They could help businesses to take better advantage of 21st-century technology by improving broadband and mobile speed and connectivity. They could help businesses to connect with consumers, employees and each other, and allow workers to gain access to new job markets by improving our major ports, airports and corporate centres, and the transport links between them.

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[Rachel Reeves]

I look forward to reading the book that the hon. Gentleman mentions, but I do not think that the Bill is pure Keynesianism—that would be doing things that Labour Front Benchers are recommending, such as introducing a temporary reduction in VAT, a tax on bank bonuses, genuinely bringing forward infrastructure investment and a national insurance holiday for small businesses. Those are the things that would kick-start the economy, get people back to work and get the deficit down in a sustainable way, because there would be more people in work and more businesses succeeding, unlike what we have from this Government, which is £150 billion of additional borrowing because more people are on welfare and fewer businesses are succeeding.

[Kelvin Hopkins]

I compliment my hon. Friend on her excellent speech and may I say that Friedrich von Hayek has caused more damage in this century and the last than any other economist in the history of the world? Nevertheless, she is absolutely right; this is about a supply-side measure which is not Keynesianism. Assisting and providing a little bit of investment with a little bit of Government subsidy is not Keynesianism. Keynesianism is direct spending to create demand in the economy. The private sector will not create demand. Only government can restore the demand where there is the vacuum at the moment.

[Rachel Reeves]

I thank my hon. Friend for that intervention. Of course he is agreeing with something that the Business Secretary said, which is that the real problem in the economy is a lack of demand. Supply-side measures will not do very much to help with that. When the Chief Secretary was asked in intervention what projects would be supported by this Bill he could name not one. That is the problem; this is a guarantee scheme, but we do not know what it guarantees. This is a project to help infrastructure investment, but we hear no announcement about which infrastructure investments will go ahead that would not have done previously. No wonder businesses and Members are sceptical and no wonder we are still in recession, if this is as good as the Government can get.

We will not oppose the Bill, but nor will we allow the Government to use the scheme as a substitute for the real plan that the economy and businesses so desperately need. Instead of devoting themselves to the task of getting our economy moving again, the Government have put before us an infrastructure investment guarantee that guarantees no infrastructure investment—fast-track legislation that has had the effect of getting the scheme stuck in the slow lane. The Government are preoccupied with distracting us from their fundamental failure and inaction, but people’s patience is wearing thin. We have had enough of initiatives and announcements: no more excuses, no more evasions—the Government need to get serious.

Two years ago, we warned that the Government’s economic plan would choke off recovery, shatter business confidence and add to borrowing, and that it would make it harder, not easier, to balance our books and pay our way in the world. A year ago, we called on the Government to bring forward infrastructure investment; we called for a bank bonus tax to fund the construction of 25,000 new affordable homes and to deliver a programme of youth jobs. If the Government had taken our advice then, just think how much progress we could have made by now.

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[John Healey]

My hon. Friend is right, and I hope that he gets a chance to make a speech. I will move on in a moment to some of the changes in policy and cuts since the general election that have made infrastructure projects and that sort of investment harder, not easier.

There are big causes for concern behind the two big questions I mentioned. First, there are questions and concerns about speed and how serious the Government are about getting infrastructure work going. It is almost a year since the Prime Minister promised

“an all-out mission to unblock the system and get projects underway”.

It is almost two years since the Government published their first national infrastructure plan and almost two and a half years since they set up Infrastructure UK in June 2010 in the Treasury. Most seriously, since the Government’s second infrastructure plan in November 2011 the economy has shrunk by nearly 1% and Britain has become one of only two G20 countries in a double-dip recession.

On the point of concern about clarity and simplicity, the Infrastructure Investor journal recently conducted a survey of 200 industry investors. Lack of finance, poor regulation and procurement weakness are all problems they face, but some 60% said that confusion and lack of clarity from the Government are a far greater disincentive. What matters most is confidence in the pipeline of projects, often based on clear Government policy decisions and commitments. The Government are failing that test over big projects and policies such as High Speed 2, aviation capacity and power generation. Their record on other policy decisions that at first sight have nothing to do with infrastructure is also making it harder to put in place the funding required. The abrupt change and then change again in the solar feed-in tariffs, the benefits reforms and cuts, the tripling of student tuition fees, creating “core and margin” university course places, and the rebanding of renewables obligation certificates have all changed the risks and the costs of long-term capital—so much so that a senior figure in the industry recently said to me: “Investors are now asking for the first time how you can price in public policy risk.” The guarantee scheme needs to be flexible and straightforward. The devil is in the detail, and Government revel in the detail. Is every Department going to introduce and run its own scheme with its own rules? Who in Government will be accountable for the programmes and the problems on the guarantees?

On housing, let me take issue with the hon. Member for Reigate, because the Chief Secretary and the Government are right and he is wrong. I welcome its definition as infrastructure. It is basic to people’s lives and to a good society, and central to wider economic growth and to productivity. Above all, it is a long-term good. We are still getting rent from Bevan’s post-war council housing a long time after the cost of the capital to build them has been paid.

I am looking to the Government for reassurances on four questions, especially in relation to housing. First, the Chief Secretary said that he did not want to prescribe and would not circumscribe the stages of projects that credit guarantees can support. The Treasury has said that guarantees can cover key project risks including construction, performance and revenue risk. Will that apply equally to housing as to the other categories set out in clause 1(2)? Secondly, some housing associations already have a presence in the capital markets and can raise finance in their own names, so will such organisations with significant project proposals be able to push ahead without the creation of any intermediary or aggregator?

Thirdly, the best housing developments are mixed and help to support mixed communities. The Government have said that the guarantees will support private and social housing. Will those building new homes be able to source guarantees for both sectors from the same fund scheme? Fourthly, I expect that security requirements will be part of the arrangements for the borrowing guarantees. Will developers building homes be able to provide the security on completion of those homes rather than in advance? If the Government want these guarantees to work, and to work rapidly, to boost housing, jobs and the economy, they need to provide answers and reassurance on all four points.

The Chief Secretary mentioned the 1932 Baldwin agreement, which emphasises that where financial liabilities that last beyond the term of one Government or one financial year are introduced, they should be backed by specific legislation. I believe very strongly that improved long-term infrastructure should be a shared endeavour of all parties, because infrastructure projects do not fit neatly within the political cycles and are damaged by the chopping and changing of Government policy.

[Kelvin Hopkins]

On my right hon. Friend’s point about infrastructure investment covering more than one Government and different parties, there was a time, when I was young, when Conservative and Labour Governments used to compete on the number of council houses they could build during their term of office. We should get back to that kind of arrangement.

[John Healey]

I do not think I have ever heard my hon. Friend advocate competition in any circumstance on any policy before, but I am happy to say that he is right, and I support him. I hope that we may get back to those days. Just before the election, when I introduced the local authority new-build scheme, which boosted and supported local council housing for the first time, we had very strong bids and very strong support from 73 councils, including many Conservative councils that wanted to build council homes but were not, until then, getting support from Government to do so. They are certainly not getting that support now.

Since the election, this Government have done too little for too long on new infrastructure. This Bill could make an important difference. It deserves all-party support, and the Government will get it if they get this right.

Draft European Union Budget

Kelvin Hopkins Excerpts

Thursday 12th July 2012 Commons Chamber

[Mr Hoban]

We are going through the process and we have been very clear about our red lines for own resources and the rebate. We have tried to reach a common position with our allies on the size of the budget and of the multi-annual financial framework. We have been very clear that, at a time when member states across the EU are being asked to curb their spending, the EU should play its role in doing that, too. That is what we are seeking to do, not just in the budget but in the financial framework. Just as we have delivered spending restraint at home, we are urging the case for delivering spending restraint in the EU. We have argued forcefully that we need to tackle the chronic over-budgeting and strictly prioritise EU spending. We need significant cuts in the Commission’s spending and I think that they are possible without impeding efforts to boost growth.

[Kelvin Hopkins (Luton North) (Lab)]

I, like many Members, have criticised the decision in 2005 to give away part of our rebate in return for a non-existent reform of the CAP. The Government make much of that, but as I have said more recently, if they really are concerned, why not say to the European Union that we want the £2 billion a year back? We might not be able to recoup all the money that has been lost already, but at least let us get the rebate back to where it should have been had that 2005 agreement not occurred.

[Mr Hoban]

The hon. Gentleman makes a proposal. We are in the early stages of the discussion on the next multi-annual financial framework. Clearly, maintaining our rebate is a key priority in that debate and we will continue to work to protect the rebate, using our veto if necessary.

There are things that we can do to support growth without massive increases in spending. We can deepen the single market, sign free trade agreements with third countries and reduce regulatory burdens. The Commission claims that bills must be paid, but its proposals simply create new bills for future generations to pay by announcing new programmes this year. It cannot complain on the one hand about needing more money to pay bills due this year when it is also making fresh promises that will have to be paid for in future years. We expect the Commission to look for savings in programmes that either are not under way or represent poor value for money, rather than simply asking member states and their taxpayers to pay more.

It is time that Brussels woke up to the economic reality that member states face and started helping us to tackle our debts at home. Following the Commission’s proposal in April, we have been working with other member states to drive down the Council’s opening position on the EU budget but, as Members will be aware and as I mentioned in response to the intervention from my hon. Friend the Member for Stone (Mr Cash), the Council’s position on the annual budget negotiation is agreed by QMV, not unanimity. Following lengthy negotiations, the position in Council limits growth in spending to 2.79% on 2012 levels. We voted against that in Council because it is simply too high, but we must recognise that it is an unhappy compromise. A higher increase would have been blocked by net contributors such as ourselves and a lower increase would have been blocked by net recipients. Each, in different circumstances, have a qualified majority.

The outcome reached in Council cuts €5.2 billion off the Commission’s proposals and saves the UK taxpayer about £500 million. It is larger than the spending cut that saved us €3.6 billion last year and is €11.3 billion lower than the ceiling of EU spending agreed by the last Labour Government, saving the UK around £1.1 billion. Within the overall budget we have slashed the Commission’s proposed increase for the CAP by €490 million.

The debate on the budget will continue. We now have a period when we have to discuss the budget with the Council and Parliament and when we will come under pressure from both the Commission and Parliament to increase spending and move away from the 2.79% increase agreed in Council. That is why we have worked with France, Germany, the Netherlands, Sweden, Austria, Finland and Denmark, not only outlining our disappointment with the 2.79%, but making it clear in a statement made at a meeting earlier this week that further increases to EU spending should not be agreed later this year. That sends a clear signal to the Commission and the Parliament that they should not expect the Council to compromise in budget discussions later this year, and it is a reminder that we will continue to take a tough line on the multi-annual financial framework and on any spending increases proposed for the 2012 budget.

It takes a bit of barefaced cheek for the hon. Member for Nottingham East (Chris Leslie) to table an amendment that deletes reference to the fact that Labour gave away our rebate in 2005. It is an attempt to hide Labour’s record in office. It gave away that rebate in return for a review of CAP that did not take place, at a cost, as I said earlier, of £10 billion to British taxpayers. It would have been better if the hon. Gentleman had recognised the serious mistake that had been made by Tony Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in giving away our money.

In his amendment the hon. Gentleman talks about trying to make friends and secure allies, but he was the campaign manager for the right hon. Gentleman—something that is not often quoted in the right hon. Gentleman’s biographies—who attempted not to go to ECOFIN to build alliances with other Finance Ministers to help to get a satisfactory outcome for our budget rebate; the man who did not even turn up for the public signing of the Lisbon treaty, and who wanted to do it in the dark, which shows an inability to create alliances. We will take no lessons from the Labour party on the need to create alliances with other member states. As we have clearly demonstrated with the agreement that we have reached on how the future negotiations on this year’s budget will proceed, we can and do build alliances and successfully impact the course of policy development in the European Union.

[Kelvin Hopkins]

I do not really agree with the amendment, because it seems to suggest that the Prime Minister is some sort of militant Eurosceptic, which is far from the truth. I would like him to take a stronger line.

[Chris Heaton-Harris]

rose—

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[Mr Hoban]

My hon. Friend is spot on. It is absurd to try to re-write history and deny that it is because of the actions taken by the previous Government that we have a real challenge in curbing EU spending. It is because they were soft in their negotiations on the rebate and on the level of EU spending across the financial framework that we are spending more than we ought to be spending. It is not just the £10 billion that we have lost as a consequence of the rebate. They negotiated a spending ceiling for this year that is £11 billion higher than the Commissions proposals, so we could face an even bigger bill as a consequence of the weakness of the previous Government. To try to use this amendment to airbrush history lets the Opposition down and shows how unfit they are for office.

[Kelvin Hopkins]

The hon. Member for Daventry (Chris Heaton-Harris) suggests that this is tit-for-tat student politics, but the Government constantly refer to the 2005 budget settlement—which I agree was wrong—and then propose to do nothing about it.

[Mr Hoban]

Unlike the Opposition, who were prepared to sacrifice our rebate for some sort of illusory review of spending, we stand firm. It is one of our red lines. In the same way, we stand firm on the financial transaction tax. That is why we vetoed it. We have cut €500 million off the CAP budget this year, which is much more concrete than some review that cost us £10 billion.

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[Chris Leslie]

No. Some commitment appropriations are certainly being pencilled in—“We can’t undo the budget because of previous commitments”—but almost an equal number of appropriations are new programmes that the European Commission could vary and change. I am all for expenditure at European level and doing our part collectively to boost and stimulate economic growth, but there is not sufficient justification for some of the continued administrative back-office areas of expenditure that simply do not help at this time, especially when we have so many economic difficulties in the UK.

My question to the Minister is very simple: what exactly is the Government’s position? Are they in favour of a real-terms reduction in the budget or not? The Minister would not say. I urge his hon. Friends to try to pin down the Government on that, because we are at a crucial juncture. From reading the reports this week in The Guardian about a deal being done whereby we will not touch reform of the common agricultural policy, for example, I get the sense the Prime Minister likes an easy life with business as usual and wants to continue in that vein.

[Kelvin Hopkins]

I entirely agree that the Prime Minister wants an easy life as regards the CAP. On behalf of the European Scrutiny Committee, I recently attended a meeting in Brussels about CAP reform where I think I was the only voice calling for restraint; most of the others were calling for more spending on the CAP. What are we doing about it?

[Chris Leslie]

Although changes to that 40% chunk of the budget have been made, fundamental reforms must still be on the table. The Prime Minister should not wave the issue away so readily.

The Prime Minister and the Government must build some radical alliances, because the 2013 budget is decided by qualified majority voting. They must also strengthen their backbone on the seven-year spending review. This will be a key test for the Government. We know that they just want to look backwards, but it is important that the Minister takes some responsibility, because he is in the driving seat now. The Government must focus not only on the rebate but on ensuring that budgets are set at the right and prudent level. We believe that real-terms reductions can be achieved now and for the future, but the motion falls short of that. That is why we tabled our amendment, which I commend as the best way to strengthen the Government’s backbone.

Finance Bill

Kelvin Hopkins Excerpts

Monday 2nd July 2012 Commons Chamber

[Jacob Rees-Mogg]

This argument is not a moral one. We are not the House of Bishops. I am all in favour of the Lords Spiritual having a view on this, but I am not one of them. I did not go into the Church; I went into politics. Politics is about raising the revenue that is needed for the country to carry out its business, and it is not an issue of morality in terms of how we phrase the laws. That those laws are then obeyed is a matter of morality. I can probably quote paragraphs of the Catholic catechism on this, but you are looking fretful at that thought, Mr Deputy Speaker, so I shall move back to the golden age of the noble Baroness Thatcher, Lady of the Garter, Order of Merit.

In 1979, the top tax rate was 98%—83p in the pound on income tax and a 15p surcharge. [Interruption.] I hear Labour Members saying that that was excellent and a jolly good thing. It is rather splendid to know that I am not the only one with dinosaur-style views in this House; there are even greater dinosaurs on the Labour Benches. When those tax rates were reduced they came down first to 60% and then to 40%, to fury from hon. Members. I believe that the House was suspended when the noble Lord Lawson introduced the rate of 40p in the pound; I think the Scottish nationalists got up in a passion of anger, wishing for higher taxation to spread across the realm of the United Kingdom. What did that reduction do? It raised more money for Her Majesty’s Government, which meant that the Government could spend money on their priorities and pay down their debt. We had a golden economic scenario when the noble Lord Lawson was at the helm, because we believed in low tax rates and had the courage of our convictions.

[Kelvin Hopkins (Luton North) (Lab)]

I remember the noble Lord Lawson’s time as Chancellor and the real reason we boomed in that time was that he depreciated our currency by 35%.

[Jacob Rees-Mogg]

Without going anything other than briefly through a history of sterling in the 1980s, I seem to remember that it bottomed in 1985 at $1.10 and then started rising again. So, that was not the case throughout the noble Lord’s period in office.

I shall come back to the subject of the Laffer curve, but I must first take an intervention from the hon. Member for Clwyd South (Susan Elan Jones).

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[Jacob Rees-Mogg]

Thank you, Mr Deputy Speaker. One always feels ashamed not to answer a question directly, so I apologise to the hon. Lady for the fact that I shall have to give a later answer on that knotty point of value added tax.

I will stick with the Laffer curve and its history of increased revenue. We heard from the Opposition that when rates went down, the economy boomed and so, therefore, did the revenues raised. There are two answers to that. One reason that the economy boomed was that there was lower tax, so people had more of their own money in their pockets to spend on goods and services, leading to overall economic growth. Secondly, the amount paid by top taxpayers grew much faster than the rate of the economy overall. We are now in a situation where 27% of income tax is now paid by the top 1% of income tax payers—

[Kelvin Hopkins]

Not enough.

[Jacob Rees-Mogg]

In 1979, when the hon. Gentleman had a real socialist Government, that figure was about 8%. One can see that massive expansion in the burden of tax falling on the richest in society—the ones who can bear that burden—comes when the rate is lower. That is an excellent part of this Budget; perhaps the best part.

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[Jacob Rees-Mogg]

Mr Deputy Speaker, you will rule me out of order if I argue that raising the minimum wage would be extremely unwise, so I would not dare to say it. However, on the point of benefits for the worst off, I am all in favour of those. It is a thoroughly good thing to help people who are just in the earning bracket, but not to give benefits to people earning £70,000 a year, paid for out of their extraordinarily high taxes.

[Kelvin Hopkins]

Surely the biggest disincentive to less well-off people earning or trying to get work—many are trying to get work that is not available because there is mass unemployment—is the fact that all the benefits are means-tested. If we reduced the level of means-testing and had many more universal benefits paid for out of a much more progressive form of taxation, we would avoid that problem.

[Jacob Rees-Mogg]

There are enormously exciting benefit changes coming through and I look forward to speaking on those with enthusiasm, because I think they will make a substantial change to the welfare of the people of this country. But that is for another day. We must make sure that the tax system encourages work, gets people off benefits and helps them to be prosperous. Universal benefits have the grave disadvantage of wasting money on people who do not need it.

In the limited time that remains to me, I wish to deal with the issue that has caused most controversy: the freezing of the age-related allowance. This was a bold decision for the Government to take, but undoubtedly the right one. The ordinary threshold has been so raised that the age-related allowance, which used to be almost double the ordinary allowance, is now only marginally higher. The change is being made in the most sensible and calm way, by freezing the allowance so that nobody loses in cash terms. There will not be a cash loss to any existing pensioner. Over time the basic threshold will be raised so that everybody is better off.

It is a policy that has of course been momentarily unpopular. It has received a little publicity that is adverse, but as somebody once said, to govern is to choose. Government are at their best when they make tough choices and stick to them. We know that the economic situation of this country is deeply unsatisfactory. We know that we have a deficit that is out of control and a level of debt unseen out of wartime. In getting it right, the Government cannot throw money about like confetti. They must take the tough and bold decisions and yes, there may be consequences in the newspapers, but—

[Kelvin Hopkins]

The hon. Gentleman talks about the deficit. Things are getting worse, rather than better, because of the squeeze on the economy. If we made serious efforts to reduce the tax gap, which is estimated at £120 billion a year, we could solve that problem overnight. It is just a question of changing the law to make sure that people pay the taxes that they should pay.

[Jacob Rees-Mogg]

We have already discussed this. By and large people pay the taxes that they are supposed to pay, as Parliament has laid down. If they evade tax, the full force and might of the law can and should come down upon them.

I conclude on the crucial point of defending the Government on a decision that, though it has not been immediately well received, will be welcomed by the electorate, because the electorate admire Governments who govern effectively through the tough times. They do not admire Governments who are loose and lazy with their money. They admire ones who are willing to take the tough decisions. We should oppose all the amendments in the group and stick with the Budget as it was—a very fine and good Budget, in which the right decisions were made.

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[Mr Gauke]

HMRC’s analysis, which is a good piece of work, showed through two different mechanisms that the reality was that the amount being raised was somewhat less than had been predicted. The fact is that the behavioural response was much greater.

Let me say a word or two about that. To start with, HMRC estimates that as much as £18 billion worth of forestalling took place in 2009-10, of which about two thirds, up to £11.3 billion, has been estimated to unwind in 2010-11, but this forestalling was not factored into the original revenue calculations. Furthermore, HMRC estimates that between one third and one half of the behavioural effect comes from genuine reductions in income. We have heard this evening that this is all about tax avoidance, that tax avoidance increases when we increase the rate and that we can be sure we will get the benefit of it as we unwind, but the reality is that between one third and one half of this was simply the result of less economic activity, because people reduced their hours and participation in the UK labour market and moved elsewhere.

[Kelvin Hopkins]

The Minister has said it: the amount raised from the increase in tax declined because the economy went into relative decline as a result of the Government’s policies. The fact is, however, that all this is about the feebleness of our tax-collecting system—the laws governing it and HMRC, which has been shown to be soft on big companies, in particular, and soft on the rich when it comes to tax collection. Light-touch regulation: that is the poison.

[Mr Gauke]

I strongly disagree, but before I turn to tax avoidance let us remember that between one third and one half of the reduction is because of less participation in the labour market. It is not because of the decline in the economy; we are talking about people moving elsewhere, people retiring earlier and people working fewer hours because it is not worth their while, in their opinion, to work as hard as they would otherwise do. Let us not forget that when someone moves from this country to Switzerland, we miss not just the difference between 45p and 50p, but everything, the whole 50p, and not just that bit above £150,000, but the first £150,000. That is the consequence of a tax rate that drives people out of the country and does not attract them here.

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[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I will have to bring the Back-Bench speeches to an end at 19 minutes past, so there are three minutes left.

[Kelvin Hopkins]

I strongly support the brilliant speeches of my hon. Friends the Members for Kilmarnock and Loudoun (Cathy Jamieson) and for Bishop Auckland (Helen Goodman). There are clearly qualms on the Conservative Benches about this disastrous policy.

I had the privilege of being at the TUC general council 37 years ago as a staff member when the original policy was approved by the TUC general council. At that time, we had the social contract between the TUC and the Labour Government, which I think was a brilliant success. Harry Urwin, the deputy general secretary of the Transport and General Workers Union, argued the case against some trade unionists who were concerned about a tax allowance, which would tend to go to male workers, being given through a universal benefit largely to women for their children. It was a massively progressive policy and was the right thing to do. It was in line with the principles of universality established by Beveridge and many brilliant social scientists and theorists later on, such as Richard Titmuss. It was of enormous benefit to families and children.

The hon. Member for Mid Bedfordshire (Nadine Dorries), my nextdoor neighbour, talked about punishing children for the sins of their parents. If their parents, by accident or design, have large families, it is not the fault of the children. The money goes to the children, not to the parents. To punish the children for what their parents have done, by accident or design, is completely wrong.

The principle of universality is rightly carried through in the basic state pension, the winter fuel allowance and a number of other things. If we want to redistribute income, we do it through the taxation system, not with means-tested benefits. We talk about trying to get people back into work. If they receive means-tested benefits, they lose them when they get back into work. Sometimes it is cheaper to stay at home and claim benefits than to go to work. Universal benefits do not have that problem, because everything else comes as extra.

My hon. Friend the Member for Kilmarnock and Loudoun is right, our amendments are right and I hope that the House will carry them.

Green Economy

Kelvin Hopkins Excerpts

Thursday 28th June 2012 Commons Chamber

[Laura Sandys (South Thanet) (Con)]

I beg to move,

That this House urges the Government to promote the right fiscal and regulatory framework to accelerate green growth as an intrinsic part of the UK’s economic recovery strategy.

I want to thank the Backbench Business Committee for providing time for this important debate at this moment in the economic cycle, when we are considering the draft Energy Bill, which will reform the electricity market, and different issues relating to the renewables obligation and other fiscal measures. I also thank the Economic Secretary to the Treasury for agreeing to respond to the debate and so many colleagues on both sides of the House for signing the motion.

Few terms in today’s industrial dictionary are as loose and ill defined as the word “green.” People talk about “the green economy” and “green jobs.” The word—I mean no disrespect to the hon. Member for Brighton, Pavilion (Caroline Lucas)—places a set of philosophical values around policies that, I believe, are not about debating sandal economies. I strongly believe that the measures the Government have put in place are aimed at increasing productivity, improving output, supporting greater competitiveness and building a resilient economy that is both lean and keen for the future.

In my constituency, I have seen at close hand the construction of a multi-billion pound wind farm. It is much more about heavy engineering than traditional green jobs. Those working at the cutting edge of new energy sources, vibration technology, surface engineering and friction reduction will deliver the so-called green revolution, but those individuals hold degrees in mechanical engineering, not sustainability. The green deal will implement energy efficiency measures in homes and offices throughout the country thanks to skills that are as wide ranging as construction innovation, research in plastics and synthetic materials and, of course, practical installation. From heavy engineering and the white coats in our university laboratories to those who fit cavity wall insulation, all these jobs and all these opportunities comprise part of that wide term, “the green economy.”

Today, the green economy is no sideshow; it represents a significant part of the UK economy, with more jobs than in information and communications technology, finance and insurance, and the motor trade. With low-carbon and environmental goods and services growing by 4.6% in 2009-10, it is a growth sector. However, we also need to talk about our industrial and energy policy in an international context. Why are South Korea, China and other Asian countries placing renewable energy and energy efficiency at the core of their industrial growth strategies? They are not overburdened with Green party candidates, and in some cases, such as China, they do not even need to secure votes. They are trying to build what is absolutely essential to this country: a strong, sustainable and resilient economy in which energy consumption and fossil fuel inputs are considered vulnerabilities, not assets.

[Kelvin Hopkins (Luton North) (Lab)]

I note in the papers that have been provided for the debate that the Foreign Secretary has apparently been strongly converted to green energy, but that some of his Cabinet colleagues have not. Will the hon. Lady make every effort to get more people on the Foreign Secretary’s side in these matters?

[Laura Sandys]

I do not think that the Foreign Secretary has needed much persuasion or that there is any lack of will or determination in the Government. As I will continue to iterate, it is absolutely crucial that the policies we have put in place are sustained consistently into the future to attract the significant investment we need in the energy sector and the green economy.

If we look internationally, we will see that the so-called tiger economies are combining economic policies, subsidies, industrial focus and energy efficiency solutions to build their stronger economies. It is that co-ordinated model that I propose to the Minister today. Globally, there will be a race for resources, including energy, water and food. Energy consumption will grow by 33% over the next 20 years, with 50% of that growth coming from China and India. Even the Governor of the Bank of England has acknowledged that we must be cautious about our exposure to fossil fuels and that they could be considered a risk to financial security. Any country that is serious about future economic competitiveness, not least this one, will ensure that it limits its reliance on fluctuating and politicised energy inputs. Energy security, domestic production and low-input process re-engineering are not, in my view, things that it would be nice to have; they are a total necessity.

In many ways that creates a challenge for politicians. We need to come clean with the public and the private sector. We cannot con them that energy prices will come down today, tomorrow or even any time soon. The increase in global consumption is so marked that even the great shale gas discoveries in the US will not have a long-term impact on global costs. From the domestic perspective, Ofgem has calculated that domestic energy prices will rise by 60% by 2016.

It is the Government who will need to take an important role in the development of a long-term, secure and resilient energy supply. Frankly, there are some of us in the Energy and Climate Change Committee who believe that, whatever energy solution we adopt in the next few years, the Government will have to stump up a lot more money than they thought to keep the lights on, but that is a debate for another day. We need to deliver a strong and sustainable energy sector that delivers as much value as possible to the energy consumer and jobs and economic growth at the same time. To do that, we must look at energies in similar terms, whether tax incentives on fossil fuels or subsidies for the renewables sector.

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[Kelvin Hopkins (Luton North) (Lab)]

I defer to the previous two speakers on their knowledge of energy matters, but I have some points I wish to make. I was interested in the suggestion from my near neighbour, the right hon. Member for Hitchin and Harpenden (Mr Lilley), who seems to be strongly in favour of getting rid of the EU’s restrictions on state aids. I completely agree. I am completely in favour of state aids, where appropriate, and we should not be constrained from applying them by the EU—but then my Eurosceptic views are, I think, fairly well known. My hon. Friend the Member for Southampton, Test (Dr Whitehead) made a thorough, erudite speech that I will read in detail with interest later.

My concern is about energy conservation. Massive investment in energy conservation has everything to commend itself, while investment in nuclear generation has nothing to commend itself. With energy conservation, every home, office, public building and factory in the country can save enormous amounts of energy, so rather than generating energy, we need to conserve it. It is cheaper, too, particularly for the less-well-off living in constituencies such as mine, where some people still do not have roof insulation—aerial photographs at night show the infrared glow from those homes. These are poor people who cannot afford to invest, so it is something that the Government have to attend to.

Investment in energy efficiency would be enormously cheaper than focusing simply on generation. The Association for the Conservation of Energy has produced a report in the past few months demonstrating that such investment would be as much as £1 trillion cheaper over time than investment in generation and would create hundreds of thousands of jobs. Many of those jobs, in home insulation, would not be high skilled, so a lot of unemployed people, particularly young people, in my constituency who do not have high skills would be ideally suited to working in the sector. We desperately need these sorts of jobs at every level.

Energy conservation would be labour-intensive, rather than capital-intensive, which is what nuclear investment is about. I have been informed this week that officials in the Department of Energy and Climate Change are doing a deal that will be massively beneficial to EDF. All the other energy companies have dropped out of the nuclear programme in Britain, leaving EDF the monopoly supplier. It is effectively owned by the French Government—they own 85%—and our DECC officials are so obsessively pro-nuclear that they are going to strike a deal that will effectively subsidise EDF to the tune of £5 billion. That money will go to EDF, a French company, and will be used to benefit French taxpayers, French consumers and, no doubt, the French nuclear industry as well. It will not benefit us at all. That £5 billion could be spent in many other ways, particularly on energy conservation.

The right hon. Member for Hitchin and Harpenden is right that we need a base provision of core generation for peak times, but if we invest heavily in green energy of every kind in order to maximise energy provision in other ways, we could reduce that core requirement to its very lowest level. Germany has already done it. I understand that it has invested gigantic amounts in all sorts of alternative energy, such that, on warm summer weekend days, they can effectively shut down their power stations and tick over on the alternative energy provision.

[Zac Goldsmith (Richmond Park) (Con)]

The hon. Gentleman is absolutely right about energy efficiency and nuclear power. I echo everything he has said. Will he join me in urging the Government to put more emphasis on energy efficiency in the proposed electricity market reforms, the original intention of which was to introduce the concept of “negawatts”, which would put energy saved on a par with energy generated and therefore revolutionise the energy market and fundamentally change the dynamic?

[Kelvin Hopkins]

I thank the hon. Gentleman for his informed intervention. The problem is that the energy companies have been far too influential in DECC and have been able to bend the arms of even our Secretaries of State, because the central core of government decided years ago that it wanted to keep the companies and nuclear power on side. Those companies make money out of selling energy, not conservation or solar power at a local level; they do not make a profit out of that kind of energy provision. Indeed, we must have strong Government intervention to achieve that. In Germany, they have done it; with their feed-in tariffs being brought in years ago, the Germans are effectively decades ahead of us. In just a decade or two, half of their energy will be provided by alternative means. We are talking about enormous proportions of energy, and we have to go for that.

It has been said so many times, but we have wind on our shores and we are surrounded by sea and tides. We are aware of a positive move towards using the Severn barrage, that will produce enormous amounts of our energy, but there are other forms of generation, too, which could be flexible and provide us with base load, such as generation by burning organic waste, or anaerobic digestion. Unlike with wind and sun, we can turn that on and off. If we invested heavily in anaerobic digestion, so that all the organic waste was used to produce methane, which could be used either directly or to generate electricity, it would provide a massive contribution to the core base load of our electricity and energy provision. We have to go in this direction. We have to resist the power and controls of the energy companies and go for an alternative energy and green energy society.

I congratulate the hon. Member for South Thanet (Laura Sandys) on securing this important debate. If we do not move in this direction, we will be in serious economic trouble as well as environmental trouble.

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[Caroline Nokes]

I thank my hon. Friend for that comment. He makes exactly the point I was moving on to.

Last year, the Environmental Audit Committee went to visit the Sustainable Building Centre in Leamington Spa, where we learned that if everyone in the UK with gas or oil central heating installed a high-efficiency condensing boiler, we would save more than 6.5 million tonnes of CO₂ every year—and that is only one aspect.

[Kelvin Hopkins]

The hon. Lady makes a good point, but a 20% VAT charge is still made, when it could be only 5% VAT. That would be one simple subsidy to encourage people to invest in better and more efficient boilers.

[Caroline Nokes]

I thank the hon. Gentleman for that, but my point is that if home developers were obliged to pay into a central fund, we could start to ensure that people in social housing and those on the lowest incomes do not merely think about cheaper energy-efficient measures, but have a grant to enable them to achieve that. The hon. Gentleman mentioned insulation earlier, but improvement is possible from double glazing, too.

Particularly at a time when my constituency and parts of the south-east are under water stress, we must start to look at finding better ways to use our water. We need to be more efficient through rain water harvesting, using grey water and taking simple measures to improve sanitaryware systems, so that the cistern from the lavatory uses less water. All these measures could be done very cheaply indeed.

According to the Energy Saving Trust, each person in the average UK home currently uses 150 litres of water a day. Level 6 of the code for sustainable homes seeks to reduce that usage to just 80 litres—but, significantly, that applies to new-build properties. As I have already said, however, they are a tiny proportion of our housing stock, and far greater savings—both in litres per day and cost to the consumer—can be achieved through working on older properties.

Independent research has indicated that by shifting the focus on to the existing housing stock of 25 million homes, rather than on the already energy-efficient new-build sector, great efficiencies and more value for money can be delivered for the nation as a whole. That scheme would mean that existing home owners would see reduced energy bills, social housing associations would benefit from reduced maintenance costs and local employment would receive a boost, thanks to the number of trades people needed to carry out the work. New home buyers would be spared additional costs, which would in turn help to ensure the viability of many development projects—a critical factor for the UK economy given the already chronic under-building due to economic constraints.

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[Mr William Bain (Glasgow North East) (Lab)]

I congratulate the hon. Member for South Thanet (Laura Sandys) on securing this timely and important debate, and the Backbench Business Committee on granting it.

The OECD has estimated that this year in the UK total economic demand will be only a tenth of that in Japan or the United States. The fiscal stance adopted by the Chancellor towards the economy as a whole, and particularly towards the green sector, is disappointing, given that our green economy accounts for 7% of gross domestic product and is the sixth largest in the world. It sustains 900,000 jobs and is growing at a rate of 4.7% a year, whereas, as the Office for National Statistics established this morning, the economy as a whole has shrunk by 0.2% since the comprehensive spending review in autumn 2010, although the Office for Budget Responsibility had predicted that in the six quarters following June 2010’s emergency Budget, the economy would grow at 3.7%. It seems that the green economy is one of few areas in which there is any growth at all.

China and South Korea are investing hugely in the low-carbon sector, which, it is estimated, will be worth $2.2 trillion by 2020. China’s share of the low-carbon economy is set to rise to 24% by that year. The Chancellor’s lack of foresight risks leaving the UK in the economic slow lane. It is extraordinary that it is not only the Governor of the Bank of England who now writes letters to the Chancellor about the state of the economy but, we have learned, the Secretary of State for Environment, Food and Rural Affairs, the Secretary of State for Energy and Climate Change and, perhaps most surprisingly, the Foreign Secretary. Perhaps there is only 24 hours to save the green economy, based on their concern that Government policy is simply not going far enough to generate growth in an innovative sector that, after the financial crash of 2008, provides an opportunity to rebalance a growth model that many people believe has failed.

This morning, Paul Krugman and Richard Leyard set out in the Financial Times how we have become mired in the slowest climb out of a slump since the 1870s, largely because of a lack of productive economic output. We face endemic long-term unemployment and mass underemployment, with 2 million people forced into part-time or temporary work because not enough full-time jobs are being generated in the economy. Investment in the green sector is the key to ending that trend. Krugman and Leyard conclude in their powerful piece:

“Companies will only invest when they can foresee enough customers with enough income to spend. Austerity discourages investment.”

[Kelvin Hopkins]

I support everything that my hon. Friend is saying, but is he aware that in a survey recently reported by the CBI, 94% of employers wanted, above all, markets so that they could sell their goods? They were not concerned about regulation and all the other things that the Tories talk about.

[Mr Bain]

For many months, my hon. Friend has identified the real problem—a jobs and demand crisis, which is what fiscal policy and investment in the green sector must address.

Lack of confidence means that private sector surpluses amounted to £99 billion last year, and £700 billion of private-sector assets are not in productive use in the economy. In the first three months of this year, global green investment fell to the lowest level for three years, according to Bloomberg New Energy Finance. It is clear that Governments have to act quickly if they are not to find themselves in a classic example of what Keynes called the paradox of thrift, in which the pressure to save overwhelms the need to invest and grow.

Although they are somewhat more reticent in their self-promotion, it is worth remembering that this is the Government who asserted that they were “the greenest Government ever”. Regrettably, this year’s Budget did little to redress the lack of green investment. The principal failure was the failure to improve the capital and borrowing powers of the green investment bank. As a concept, the bank is quite unique. It draws support from the CBI and the New Economics Foundation. Before the Budget, James Meadway, senior economist at the New Economics Foundation, called on the Chancellor to bolster proposals for the green investment bank with higher capitalisation and earlier borrowing powers.

Ernst and Young estimates that £4 billion to £6 billion of public capital is necessary over the course of this Parliament for the bank to be effective in tackling the investment barriers in offshore wind, carbon capture and storage, and associated infrastructure. Lord Stern, a leading climate change economist, notes that that is not state aid or subsidy, as the institution is needed because of market failures in finance, particularly those associated with risk and policy risk. However, the green investment bank will not have borrowing powers until April 2017, which casts huge doubt on its ability to raise the £200 billion estimated to be necessary to meet the UK’s CO₂ reduction targets by 2020. While immediate borrowing powers are essential, so is timing. As the Environmental Audit Committee reported in March last year, investors may put off investment while there is uncertainty about how the bank will operate. A bank that is slow in building its balance sheet may not meet our emissions and renewable energy targets by 2020.

The London School of Economics recently issued a report showing the link between the effects of the current crisis of demand and the flailing prospects of the green economy in the UK. In its recent report on green investment and innovation, the LSE argues:

“Investment has slumped mainly because households, businesses, and banks are nervous about future demand and have responded by forgoing more risky investment in physical capital.”

That is the crisis that must be addressed now. The LSE also points out that the Government

“can still steer spending and investment through a mix of policies including pricing, regulation and institutional reform”

that need not cost more money now.

Consensus on this issue comes from a surprising source—the Foreign Secretary, who said in his letter of 19 March to the Chancellor that

“we could get more mileage from this without additional commitment of expenditure or fiscal risk.”

Uncertain economic times need not mean an uncertain approach to the transition to a green economy.

Sir David King, as the hon. Member for Brighton, Pavilion (Caroline Lucas) discussed in her speech, has argued that the quantitative easing programme could also be aimed at the green economy. In an article published in The Guardian this Tuesday, he wrote:

“This laissez-faire attitude that is gospel at the Treasury is not the right one at the moment. We do not have time to play about with this—we need to move quickly to get out of the financial crisis and the resource crisis”,

and he suggests that preference could be given to projects that promote environmentally responsible and sustainable development, modernising infrastructure and marking a shift away from the present high-carbon, resource-intensive economy.

In opposition, the Chancellor highlighted the need to

“bring to an end the stale argument that we have to choose between economic growth and the environment.”

In government he has so far, sadly, forsaken both, but this is the season for Treasury U-turns. The motion and this debate give him the opportunity to get serious and to generate real green growth and green jobs, so let us have the largest U-turn yet—a fully capitalised and properly borrowing green investment bank and proper levels of investment in the green economy.

Oral Answers to Questions

Kelvin Hopkins Excerpts

Tuesday 26th June 2012 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point, and that is why we are taking action through the “Plan for Growth”. We want the Commission to publish an annual audit of the cumulative cost of all planned EU regulations, but assessments are not enough in themselves, which is why as a consequence of lobbying by this Government the EU has introduced an exemption for micro-businesses and is looking at lifting the burden of regulation on the small and medium-sized businesses that are key drivers of growth in our economy.

[Kelvin Hopkins (Luton North) (Lab)]

I am sure I am not alone in believing that what regulation we do have should be made by this Parliament and not by the Commission in Brussels. However, I am sure that the Minister will be aware of the survey reported by the CBI that shows that 94% of businesses are concerned above all about demand and the ability to sell their goods and services. Is that not the problem with Government economic policy?

[Mr Hoban]

What we need are measures to tackle some of the structural problems in the economy that we inherited from the previous Government and to tackle issues to do with education, transport infrastructure and the complexity of the tax system. Those are the reforms we need to ensure that the economy grows.

Oral Answers to Questions

Kelvin Hopkins Excerpts

Tuesday 24th April 2012 Commons Chamber

[Mr Osborne]

I only have the figures for the Treasury, but of course other Departments were also embarked on that Labour scheme. The Treasury spent £5 million on the civil servants required for the euro preparations unit, and that for example would pay for 17 nurses and five consultants. I guess, given that the Labour leader is committed to joining the euro, the unit would be re-established.

[Kelvin Hopkins (Luton North) (Lab)]

The Chancellor will have seen that the euro fell significantly deeper into crisis yesterday. Is the Treasury making contingency plans for the abandonment of the euro and the creation of national currencies?

[Mr Osborne]

As I have said previously in the House, the Treasury does make contingency plans for whatever the world economy and, indeed, the European economy throw at it, but I will not spell them out in detail.

Section 5 of the European Communities (Amendment) Act 1993

Kelvin Hopkins Excerpts

Tuesday 24th April 2012 Commons Chamber

[Mr Hoban]

We are required to endeavour to achieve the Maastricht criteria. A very different regime is in place for the UK because of the opt-out that John Major negotiated under the Maastricht treaty. We have been clear, as the economic governance package has developed in recent years, on preserving that opt-out and the different treatment for the UK as compared with other European member states. One achievement is that we are not subject, for example, to the sanctions regime to which other member states are subject.

We jealously protect our particular position in the process, as I am sure hon. Members on both sides of the House would want us to do. Clearly, were we to follow the Leader of the Opposition’s policy—he wants us to join the eurozone at some point—we would have to give up those safeguards and protections. That is not a policy that this Government or the Conservative party would support.

[Kelvin Hopkins (Luton North) (Lab)]

Setting aside my views on the Budget, which are probably not printable, is not talking about the stability and growth pact at this time simply building castles in the air? We have neither stability nor growth in any part of Europe at the moment. It might be that we are waiting for things to turn, but even in Britain we face savage deflation if we do not change our policies.

[Mr Hoban]

Europe needs to tackle its fiscal deficit and put in place the policies that will lead to economic growth. One reason for such uncertainty in the eurozone is that a series of imbalances have built up in different European economies. It is important that we tackle them and set out a very clear course for growth. I shall come later in my remarks to some of the actions that the UK Government have led to ensure that the EU spends more time talking about growth and finding ways in which we can accelerate economic progress in the European economies.

Let me mention some of the measures we are taking at home that were set out in the Budget. We are committed to creating the most competitive tax system in the G20. We are cutting the rate of corporation tax to 22% by 2014, which will be the lowest rate in the G7 and the fourth lowest in the G20. [Interruption.] The hon. Member for Nottingham East (Chris Leslie) pre-empts my remarks, because I was about to say that we will remove the ineffective and uncompetitive top rate of tax.

I should say to the hon. Gentleman that I talk to businesses that wish to grow and businesses that want to locate here in the UK. They commend the Government for the corporate tax reforms in which we have engaged. In Treasury questions earlier, my right hon. Friend the Chancellor referred to remarks made by the chief executive of GlaxoSmithKline, who responded positively to the tax changes that we introduced. He is not alone—other businesses are moving to the UK as a consequence of our corporate tax arrangements.

Clearly, when we are trying to attract international business men to work here in the UK, and if we want to retain high-paid, talented business leaders here, the 50p tax rate is an issue. It is an outlying issue in G7 countries and affects location decisions for businesses. Cutting the top rate of tax is therefore the right thing to do. We set out the cost—£100 million—in the Red Book and highlighted measures that would raise five times that amount from the very wealthiest in society.

That was a difficult decision, but I believe it was the right one if we want the economy in this country to grow. As was mentioned earlier, one consequence of the higher rate that the previous Government introduced—they did not bother to introduce it in the first 12 years they were in office—was that 20,000 people moved from the UK to Switzerland. That demonstrates the negative impact of a 50p rate. If we want to be competitive, we need a competitive tax regime for both personal and corporate taxes.

[Kelvin Hopkins]

I do not believe that nonsense about people moving because of the top rate of tax. In France, the socialist opposition have suggested a top tax rate of 75% and said that if people move away because of it, plenty of other people who are just as talented will be prepared to take their jobs because they will still earn a lot of money.

[Mr Hoban]

To be fair to the hon. Gentleman, I suspect he is one of the few Opposition Members who supported the 50p rate throughout the period of the Labour Government, and is not one of the late converts that many of his hon. Friends have become.

As I have said, it is important that we create the right competitive conditions for business to flourish, and this Government will continue to invest in our nation’s future. We have announced that we will take forward many of Alan Cook’s recommendations on roads and develop a national roads strategy; we have confirmed investment to provide ultrafast broadband to 10 cities across the UK, with a second wave of cities to be identified in future; and we will continue to support the establishment of a new pension infrastructure platform to unlock an initial £2 billion of investment by as early as 2013.

However, a return to prosperity in the UK depends not only on what is happening here, but on what happens beyond our shores.

[Mr Hoban]

My hon. Friend needs to recognise that, in several countries that have a programme in place, there is a requirement to make structural reforms. A number of member states are already embracing structural reforms, tackling issues such as restrictions on the labour market and looking at ways to tackle the burden of regulation. We are seeing the structural reform that goes hand in hand with fiscal consolidation to create a stable and sustainable platform for economic growth. Here in the UK, we are undergoing fiscal consolidation, but at the same time we are engaging in supply-side reforms to help stimulate growth in the economy. I do not see the two as mutually exclusive. Indeed, they need to go hand in hand if we are to deliver growth.

[Kelvin Hopkins]

I shall reserve most of my remarks for later when I hope to have the chance to speak. However, I must say that supply-side reforms are all very well, but if there is no demand in the economy, it will not grow but contract.

[Mr Hoban]

It has been demonstrated time and again in a host of different economies that supply-side reforms are vital, because they reduce some of the costs on businesses and enable them to invest and improve productivity, and in that way they stimulate demand and growth.

Hon. Members are right to focus on events beyond our shores. As the Office for Budget Responsibility said in its March report,

“the situation in the Euro area remains a major risk”

to the UK’s economic forecast. More than 40% of our exports are to the euro area, and recent events in the markets remind us that euro area countries need to make painful adjustments to their public finances and external deficits. It is a difficult path that they have to walk, although new Governments in the likes of Ireland, Portugal, Spain and Italy are walking it. That is the logic of the single currency to which they are all committed, and progress is being made.

The European Central Bank’s monetary loosening has helped to stabilise the banking system, and the trillion dollars pumped in through the long-term refinancing operation has been helpful. There has been progress in stabilising Greece, and—as I have said—a number of countries have announced important economic reforms.

As well as these measures, important longer-term reforms have been made since we last debated the convergence programme. Those reforms include a stronger, more effective stability and growth pact following agreement of the “six pack” in December 2011. A new macroeconomic imbalances procedure will provide an assessment of potential economic risks across Europe, with sanctions for euro area countries that fail to take action. Importantly, the Commission has put forward proposals to improve co-ordination of budgetary processes between euro area countries.

The treaty on stability, co-ordination and governance—the fiscal compact—was signed in March by 25 member states and it also has the potential to embed stronger rules on fiscal discipline. Together, these reforms represent a stronger, reinforced system of economic governance for the EU and the euro area in particular. While many of these stronger measures may not be right for the UK, they can support stability in the single currency area.

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[Chris Leslie]

That is an interesting question. Obviously, I believe in the rule of law, and there is a legal obligation on Her Majesty’s Government to abide by the treaties. This is where we come back to the question that my hon. Friend the Member for Vauxhall asked earlier. She asked the Minister what the consequences would be if the motion were not passed by the House today. That is the key question that all hon. Members should be pressing the Minister on when he winds up the debate. I will give way to him now if he can answer it. What would be the consequences for us if we did not vote in favour of the motion today? I am happy to give way to him. For the reasons that I have suggested, the Government’s poor assessment of the economy does not inspire me to vote for the motion. I do not see why we would want to support their woeful assessment. The Minister is not giving us a reason for voting for it.

[Kelvin Hopkins]

rose—

[Chris Leslie]

Perhaps my hon. Friend can help.

[Kelvin Hopkins]

I entirely agree with not submitting the report to the European Union, but is not the growth situation even worse than my hon. Friend suggests? Even as we speak, the eurozone is plunging into a deeper crisis. Because of the weakness of the euro, the pound is unfortunately strengthening against the euro, which is going to make it harder for our manufacturers to export. The Chief Secretary to the Treasury said yesterday that we needed to make even more cuts than those already planned. So far, we have experienced only about a quarter of the planned public expenditure cuts. Is not the situation far worse than my hon. Friend suggests?

[Chris Leslie]

We have a blinkered and, in many ways, deluded approach to austerity—or über-austerity, as some might characterise it—which is hurting not only in the eurozone but here as well. What angers many people is that the Government’s approach to helping the eurozone out of its difficulties is to throw money at it. Technically, that money is going to the International Monetary Fund, but everyone knows that it is all about eurozone bail-out funds. We are giving a further £10 billion loan, even though the Americans and the Canadians are all saying that we should stand firm and negotiate with the wealthy eurozone countries, including Germany, and make them dip deeper into their own pockets. If they do not do that, and if Britain, China, America and others provide the money, those eurozone countries will not do the deep, serious thinking that they need to do, and they will not take the consequences of their situation within the single currency. They will not put up a proper firewall, as they ought to do; they will not build what has been characterised as the “big bazooka”.

That is why we have consistently expressed our scepticism about the Chancellor’s decision to cave in and give extra resources—British taxpayers’ money—to the IMF, which we all know is going to be used for that particular purpose. We like the IMF for its work with other countries in the developing world, and of course we want a strong IMF, but we should not be letting those wealthy eurozone countries off the hook. They need to confront those issues.

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[Kelvin Hopkins (Luton North) (Lab)]

Let me say first that the Minister is heroic to take this brief, which is—to understate the matter—a difficult one. I do not envy him his job of having to try to sell it.

There are two good reasons for not sending the Budget report to the European Union. One reason, on which the Opposition agree, is that it is not a good Budget. The other reason, on which many of us on both sides of the House agree, is this: why should we send our Budget report to the European Union? If the EU wanted a copy, it could buy a copy. It is not a problem.

[Mr Nuttall]

The EU could just look it up for free on the internet.

[Kelvin Hopkins]

I am not as skilled as the hon. Gentleman in using the internet. Old-fashioned though it may be, I go to shops and buy books, I am afraid.

As for the Budget, the reality is that it will not solve our economic problems. Our problems are not really about the deficit; they are to do with unemployment. Looking back, another time when we had an enormous public debt and enormous deficits was the second world war, after which the then Labour Government ran a full-employment economy, which was the way they overcame our problems. If our Budget was directed towards creating employment, we too would solve many of our problems. The important thing is to generate directly in labour-intensive areas, which are not expensive. We are talking about relatively low-paid workers in the public services or the construction sector—labour-intensive sectors with low import content, which are just the sort of sectors where we want to be generating. However, public services and construction are the very sectors we are cutting.

If we had a massive Government-driven house building programme, along with the creation of more public service jobs, we would bring down unemployment and people would be paying taxes rather than living on benefits, and over time the deficit would solve itself. That is what the Labour Government did after 1945. We were living in Keynesian times then, and I think that Keynes was absolutely right. I like to think that if he were here now, he would be saying what I am saying, albeit possibly in a more sophisticated way.

[Richard Drax]

Perhaps the hon. Gentleman could say where all those homes would be built. I believe the last Government had a target of some 1.8 million, but I recall that something like half were on a floodplain. Where are we going to build all those homes?

[Kelvin Hopkins]

That is a problem for Ministers and local authorities, but it has been estimated that we need another 4.5 million homes over the next few years if we are going to house our people. However, I will not go into that now, because I want to talk about the European Union.

I do not agree with the Budget—I think we ought to have a different one—but even if it were a good Budget, I nevertheless do not think that we should necessarily be required formally to send it to the European Union. I say that because the motion before us refers to the European Communities (Amendment) Act 1993—the Maastricht Act—which, I am pleased to say, my party voted against. Indeed, some Government Members voted against it as well. It is the Act that requires us to send the report to the European Union. Personally, I do not feel bound by that, because my party voted against it, and I do not think it is sensible anyway.

However, let us return to the stability and growth pact, which, as I have suggested, is like building castles in the air. What stability? What growth? We have grotesque instability at the moment—terrifying instability, in fact—and absolutely no growth. Indeed, even the powerhouse economy of Germany has serious problems. There is talk of convergence, but who do we want to converge with? Greece? Portugal? Some of the countries that are actually contracting, with mass unemployment? In Spain there is even talk of unemployment rising to 6 million, which, as a proportion of the population, is the equivalent of 9 million in Britain. This is absolutely insane. I do not want to be “disable-ist” about this, but anybody running that economy must want their head examined, quite frankly.

[Mr Cash]

Given the hon. Gentleman’s important comment about the convergence criteria, does he accept that it is absolutely clear that what was thought would happen in 1993, when the Maastricht treaty went through, has gone completely off the wall, as we predicted at the time and as everybody now knows? The Prime Minister said recently that he thought there ought to have been a referendum on that treaty. Does the hon. Gentleman not agree, therefore, that there is a powerful case for having a referendum on the current situation with the euro and the eurozone?

[Kelvin Hopkins]

Indeed, and I think many of the peoples of the European countries that are now suffering would like a referendum as well. What I find difficult to understand is why so many people in the countries facing difficulties still support the euro. I do not know why, because supporting membership of the euro is almost like having a death wish. If only there were some courageous politicians who could say, “The way out of our problems is to recreate our own currency, depreciate it against the countries we’re competing with and reflate behind that barrier,” those countries would start to solve their problems. However, they cannot do it because they are tied into the euro.

We have collective deflation, right across the entire European Union, and although this country is perhaps tinkering round the edges compared with some other countries, that is entirely the wrong way to go. One thing that is causing us problems at the moment is that the eurozone is in such trouble that the euro is now weakening, which, by contrast, is strengthening sterling and making life more difficult for our manufacturers. That is causing problems in many ways. However, if there were a sensible, managed deconstruction of the euro, with the re-creation of national currencies in many, or possibly all, of those countries, thereby allowing them to reflate their economies, they would benefit, as would we, and the whole European Union would then start to work properly—as a group of democratic, independent nations co-operating voluntarily for mutual benefit, rather than something driven by people in central banks or people in Brussels in the Commission.

[Kate Hoey]

I wonder whether my hon. Friend could give me an answer to the question I asked the Minister, to which he did not give me an answer. What are the repercussions for our country if we vote this motion down this evening, as I hope we will?

[Kelvin Hopkins]

I hope we do too. As for the repercussions, will we be taken to the European Court of Justice? I suppose that is what happens; however, I think the European Union has other things on its mind rather than punishing us for not sending the Red Book across to Brussels. It has more problems than it can deal with at the moment, and it will not be taking us to court simply for refusing to send across our Budget book, which it can buy in the shops anyway.

[Jacob Rees-Mogg (North East Somerset) (Con)]

I apologise for not being here for the whole of the debate, but I was in the Finance Public Bill Committee. Does my honourable friend in European matters not agree that the Government have behaved much, much better this year, by allowing the debate in Parliament to take place before the book is sent to Brussels, and that we should encourage the Government in this reformed behaviour?

[Kelvin Hopkins]

Indeed. I think we ought to debate many more of these things on the Floor of the House. I would like to think that many more colleagues, from all parties, would take part in these debates and appreciate some of the things that some of us, on both sides, have been saying about the nonsense of the European Union at the moment.

I have been speaking for rather too long, so I ought to stop. There are two extremely good reasons for not sending the Budget report to Brussels. I hope that many Members will agree with that and vote against the motion this evening.

IMF

Kelvin Hopkins Excerpts

Monday 23rd April 2012 Commons Chamber

[Mr Osborne]

I do not agree with my right hon. Friend on this point, because if the IMF said it was never going to support a loan or undertake a programme with a eurozone country, it would, first, be walking away from one of the largest economic areas in the world. Secondly, all those eurozone countries would presumably then cease to be members of the IMF, because there would be no interest in it for them. So France, Germany and other countries would then withdraw from the IMF, and I do not think that that is what we want to see happen in the IMF. The IMF needs to support all countries that get into difficulty, provided the conditions are met and the rigour is applied to those programmes.

[Kelvin Hopkins (Luton North) (Lab)]

The IMF was designed for a world of separate national currencies with exchange controls and properly managed national economies. Is it not time to look again at re-creating that sensible world, because it actually worked, starting with the re-creation of national currencies in Europe?

[Mr Osborne]

The hon. Gentleman has, for all the time I have been in the House, consistently argued against British membership of the euro and consistently raised questions about the viability of the euro. I completely respect him for that, but to say that the IMF cannot get involved in the eurozone’s problems would be just a remarkable abnegation of the IMF’s commitment to deal with the world’s economic problems. The eurozone is at the centre of the world’s current economic problems because those involved have not been able to convince the markets that they can deal with their debts in the way that we have been able to. So I do not think it would be sensible for the IMF to just say, “There is a very important part of the world, which is at the epicentre of the world’s economic problems, but we are not going to get involved there.”

Financial Services Bill

Kelvin Hopkins Excerpts

Monday 23rd April 2012 Commons Chamber

[Mr Mudie]

I accept that point, which has been made clear all the way through, but that is negative language rather than positive. Instead of telling the FPC, “In carrying out your duties, you mustn’t adversely affect growth”, I would rather put it to work with the MPC on ensuring that we have a buoyant economy with steady, acceptable growth and employment levels. At the moment, apart from the negative words that the hon. Gentleman quotes, all we have is the requirement of financial stability.

The hon. Gentleman was with a number of colleagues here on the Treasury Committee. We go through accountability with the MPC. It is bad enough trying to get the Governor of the Bank of England to be accountable even when he has a named target; what would he be like, or what would a future Governor be like, when he came before the Committee to which he was accountable and only had to defend his actions on the grounds of financial stability, which cannot be defined? It is a case of the emperor’s new clothes. There really should be a joint mandate, with a definition of financial stability and an acceptance of the Government’s picture of growth and employment.

[Kelvin Hopkins (Luton North) (Lab)]

I agree with very much of what my hon. Friend says. When the Bank of England was given its independence—so-called—I thought that if it started to fly in the face of what was obviously sensible for the economy, a Government might choose to take that independence back to the Treasury and into the hands of the Chancellor. If the Bank is not sensible in respect of managing the economy as a whole, is it not possible that a Government might choose to take back that independence and operate policy from the Treasury?

[Mr Mudie]

One can see many scenarios. I have seen many political philanthropists since I have been a Member of Parliament. I worry because they come to the House as politicians, but seem not to want to do anything or take any responsibility. They have offloaded power to quangos and agencies, and gave independence to the Bank. The real question is why are the Chancellor and the Treasury sitting back and watching their ground—sensitive economic ground—being given away to a quango, an unelected bunch of people? Under the Bill, those people can take the remit and the guidance on it, which the Treasury sets, and say to the Treasury, “We don’t agree with you,” and that is that. That is the situation we are reaching on accountability and responsibility despite the worry about giving away powers.

On amendment 23, some hon. Members were hard on my hon. Friend the Member for Nottingham East, although it is not as if he cannot defend himself. The Government’s original proposition, which was put out for consultation, included macro-prudential tools, which, as hon. Members have said, are highly sensitive and powerful. One aspect of the proposal they have given up because of its sensitivity—I am going by what has been in the papers in the past few days—is the ability to interfere in the mortgage market on loan-to-value and similar matters. What happens if the unelected Financial Policy Committee starts leaning against the wind in a way that affects large numbers of people, and there is no way of talking to it or affecting its position?

The Government’s original proposal was that decisions on macro-prudential tools would go upstairs to the Committee Corridor as statutory instruments—secondary legislation—for a 90-minute debate on a measure that would not be amendable. All hon. Members know what happens upstairs. The Minister talks for an hour, the shadow Minister talks for 25 minutes and we all go home, with the measure voted through by the Government majority. That happens with Governments of all parties. The way secondary legislation is dealt with in Parliament is an absolute disgrace. We can excuse a lot of it, but matters as important as the ones we are discussing, it is scandalous.

To be fair to the Chancellor, I raised the proposal with him when he first introduced it and asked him to look at it again because of its undemocratic nature. I am pleased that the line has softened, but there is more talking and work to be done. If hon. Members are asked to give away powers that affect our constituents so directly, it is important for us to be absolutely sure that we have had the opportunity to at least have our say in the strongest possible terms and ones that might allow the regulator to think about what has been said, although it is not for us to take its take its job.

A Government Member attacked my hon. Friend the Member for Nottingham East and asked him whether he would interfere with a regulator. We had that situation when the Treasury Committee discussed the retail distribution review with the chief executive of the FSA. We said to him, “This Committee feels strongly about this matter. We’ve had a lot of press about it and a lot of pressure, and we’d like you to think again.” He replied, “No, we won’t think again, unless you give me evidence.” The Treasury Select Committee giving evidence to the chief executive of the FSA—what arrogance! My hon. Friend the Member for Nottingham East is doing the Government a favour. They might not agree with the detail of the amendment, but the spirit is that we give the House every opportunity to comment on, think about and be aware of the powers we give to individuals that might affect our constituents.

--- Later in debate ---

[Guy Opperman]

It is a pleasure to speak in this debate, albeit briefly. Like Mark Antony in “Julius Caesar”, I come to praise the Bill, not to criticise it. I accept that the Government are all honourable men and women, but so, it might be reasoned, are the members of the Treasury Committee, who are also honourable men and women, advancing a slightly contrary view.

I support the fundamental ethos of clause 1 and welcome the review of the performance of the Bank of England. I certainly do not support Opposition amendment 28, which would remove clause 5; that would be entirely wrong in the present circumstances. I speak as a critical friend of the present system and as the secretary of the all-party group on the Arch Cru Investment Scheme, which is seeking to recover compensation for the thousands of men and women in this country who have lost their lifetime savings. What happened to them is manifestly wrong, and anything that this House can do to strengthen the regulatory system to prevent such disasters, I welcome wholeheartedly.

I speak also as an MP who, almost every week, has a constituent come to me saying that they are unable to obtain bank lending and finance. That is because of the lack of competition in the present banking structure—an issue that is raised regularly. I urge the House to embrace greater competition and to open up the market to competitors to the existing large banks, which will be in a position to provide the bank finance sought by businesses up and down the country.

The other end of the telescope must also be addressed. At present, we have the large banks, but there are no small banks. Germany and America have local banking structures that work tremendously positively: individuals can set up local banks, which provide for a community purpose above all else, which is manifestly a good thing. That is why I support wholeheartedly the competition objectives set out in new section 1E of the Financial Services and Markets Act 2000, inserted by clause 5, which states that there should be an emphasis on

“the ease with which new entrants can enter the market, and…how far competition is encouraging innovation.”

I have met the chairman of Metro bank, which is that remarkable thing: a bank set up to exist at the weekend. It opens on weekends and at 8 o’clock in the morning. Imagine what could be done if we had that at the local level.

I am grateful for what Hector Sants, the present chief executive of the FSA, told me in a letter dated 12 March:

“We are conscious of the balance to be struck between ensuring high standards at the gateway, and the importance of allowing innovation and appropriate levels of access for new firms.”

The letter continues:

“there has been public debate about the potential advantages of new entrants in the area of small, regional banks focused on servicing the SME sector. In such cases we will be proportionate in our approach and would invite all firms with a viable business model and appropriate levels of resources to a pre-application meeting to help guide them through the application process”.

The Bill will, I suggest and sincerely hope, make it easer to establish local banks, which can only be a good thing.

[Kelvin Hopkins]

I rise to express my strong support for the amendments in the name of my hon. Friend the Member for Hayes and Harlington (John McDonnell).

There are two components of the argument: the first is the relationship between the Governor of the Bank of England and the Government, but the second is the relationship between this House of Parliament and the Government. On both, I strongly believe my hon. Friend has a point. Like him, I was unhappy about the decision to hand power over monetary policy to the Bank of England and give it independence. All aspects of macro-economic management ought to be matters for Ministers accountable to Parliament. I maintain that view and, in a sense, recent events have proved that my hon. Friend and I were right. I thought at the time that if the Governor of the Bank of England or the Monetary Policy Committee chose to be hawkish on interest rates when we had a recession on our hands, there could be a serious conflict between the Bank and Government. Fortunately, the Bank has been sensible in managing monetary policy and that clash did not occur, but it could have happened in 2008. Had the Bank been governed by a hawkish Governor, we could have seen a serious clash and those powers no doubt taken away. I was comforted by the thought that if the Bank of England got out of control, we could easily take back powers. It is not the same with the European Central Bank, where powers have been given away and cannot be taken back.

In relations between Parliament and Government, pre-appointment hearings have been shown to be a success. I have been involved in not just the two most recent pre-appointment hearings, but in developing the arguments in favour of pre-appointment hearings as a member of the Public Administration Committee for the past 10 years. Brilliant work was done by Tony Wright, who made a real impact on our constitution. Pre-appointment hearings are first class. They are not just an experiment; they are here to stay. I would like the Governor of the Bank of England to be subject to a rigorous pre-appointment hearing so that we know that they will serve the economy and relate to the House, and not just be a law unto themselves. I have probably run out of time. I know the Minister needs to speak, but I have made my point.

[Mr Hoban]

This has been a thoughtful and constructive debate covering the wide range of issues in this group of amendments. I shall organise my remarks in two parts. I shall deal first with issues relating to the Bank of England and the Financial Policy Committee, and secondly with the Prudential Regulation Authority and the Financial Conduct Authority.

I begin by speaking to Government amendment 12. This change was prompted by an amendment proposed in Committee by the hon. Member for Nottingham East (Chris Leslie), on the wording used to ensure that the view of the Treasury member of the FPC cannot be taken into account in determining whether the FPC has reached a decision by consensus. Although the substance of the provision, which is consistent with the general principle that the Treasury member of the FPC should not have a vote, was endorsed by the Committee, some members of the Committee thought that the wording was ambiguous. Some, including the hon. Member for Foyle (Mark Durkan), felt that the current wording could imply that the Treasury is not even allowed to exercise influence through debate or discussion.

I therefore committed to look again at the wording to see whether it could be made clearer. Amendment 12 amends the provision to make it clear that in determining whether the FPC has reached consensus, the chair should disregard “any view expressed” by the Treasury member. This does not mean that the Treasury member cannot influence the discussion and debate, but in determining consensus, that voice should not be taken into account.

The main focus of the debate has been accountability and transparency. That is absolutely right. Hon. Members are right to highlight the fact that as a consequence of the Bill, the Bank of England takes on more power and responsibility, partly because the PRA becomes part of the Bank family, and through the creation of the FPC. It is right that we strengthen the transparency and accountability of the Bank as a consequence of the reforms before us. The debate about macro-prudential tools was a helpful way of characterising that debate and talking about some of the proposals that we have made. We are committed to ensuring the ex ante approval of those macro-prudential tools by this place and the other place. Hon. Members are right to call for a review of the use of those tools and a retrospective review of the Bank’s performance. That is important too.

Let me deal first with the ex ante side of the equation. Amendment 22 talks about economic growth being part of the FPC’s objective. The Government are clear that the FPC’s principal aim should be to make the financial system safer and more stable. We do not seek the stability of the graveyard. The FPC should not be able to pursue stability to the point where the financial sector can no longer support the real economy. This means that the FPC should not be able to take action that would seriously damage the ability of the financial sector to contribute to growth in the medium to long term and the FPC should consider whether the costs of the action that it proposes would be disproportionate to its benefits. The Bill as drafted already ensures this.

Finance (No. 4) Bill

Kelvin Hopkins Excerpts

Thursday 19th April 2012 Commons Chamber

[Rachel Reeves]

I return to my earlier point: if inflation was 10% and pensioners got a £10 increase in their pension, would Government Members celebrate and say that that was huge largesse for pensioners? It is not; it just keeps pace with the cost of living. The increase in VAT, and the increases in gas and electricity prices, which the Government have done nothing to tackle, and the rise in petrol prices, mean that the cost of living for pensioners and other families has increased enormously because of the Government’s choices.

There is a further hit to pensioners’ incomes, buried in the detail of the Budget documents. This year, an estimated 300,000 pensioners stand to lose their savings credit, while others stand to lose as much as £276 a year as a result of reduced rates of savings credit. Under the Chancellor’s latest plans, the savings credit will be abolished completely, costing more than 100,000 new pensioners as much as £897 a year: another stealth tax that the Chancellor tried to slip past pensioners; another slice taken from the constrained budgets of ordinary families.

[Kelvin Hopkins (Luton North) (Lab)]

I support my hon. Friend’s comments. Rather than speculate about what the next Labour Government will do after the next election—I like to think that Government Members have already conceded defeat—what about the Government’s backing off now and reversing the dreadful decision?

[Rachel Reeves]

I thank my hon. Friend and congratulate him on hosting the National Pensioners Convention in Parliament today. It came to make the very point that my hon. Friend just made, and that pensioners made to us in the Committee Room earlier. Some Government Members would do well to listen to some of the pensioners in their constituencies.

It adds insult to injury for the Prime Minister and other Government Members to tell pensioners that they should be grateful for a rise in the basic state pension that merely matches the rate of inflation. It is not a rise—it simply keeps things level. If Government Members do not know the difference, they should get out into the real world, where the costs of food and fuel are going up and it is getting harder and harder to make ends meet.

--- Later in debate ---

[Ben Gummer]

The hon. Lady asks about the party manifesto. I had hoped to discuss the broader issues and great challenges facing us. Manifestos are, by their nature, broad brush, and this is such a tiny change to the tax system in the grand scheme of what the Treasury has to deal with. It is entirely right that the Government are, bravely, addressing it now. In all honesty, would either party go down to such detail in any future manifesto? It is entirely right that the Government are saying, “This is an anomaly. It is incorrect and unfair, and what is more, it is one of the many anomalies that are unaffordable in the long term.”

[Kelvin Hopkins]

I hear time and again the Government saying that things are unaffordable and raising spectres of vast pensions bills in the future. This is a simple matter of transferring money from one group of people to another—namely, from the rich to the less rich. Were the abolition of the 83p rate by Mrs Thatcher and Geoffrey Howe and of the 60p rate by Nigel Lawson and getting rid of the 15% surcharge on unearned income all anomalies?

[Ben Gummer]

I profoundly respect the hon. Gentleman. He is a torchbearer for a former age in the Labour party, and he should raise that point with his own Front-Bench team. We are clearly not going to agree on it. However, at some point, someone needs to face up to the fact that we will almost double spending on old-age pensions between now and 2040. I shall put that in context: the number of people retiring this year who will be alive in 2041 will be more significant than now. I cannot give the precise figure, but hundreds of thousands of people retiring in the next few years will be alive in 20 or 30 years. We are not only dealing with an intergenerational problem, with a problem between this generation and a generation in two or three generations’ time or with a problem between people in their 20s and those in their 60s or 70s; we are dealing with a problem of those retiring now and to whom we must promise pensions and a decent standard of living in 30 years’ time. The ability to afford that is at the crux of the Government’s reforms, and this proposal is just the start of it.

--- Later in debate ---

Under the previous Government’s plans, which we inherited, the basic state pension would have increased not by inflation but by earnings, which this year was only 2.8%. That would have been an increase of only £2.85 a week. This means that the basic state pension is £170 a year higher in 2012 than it would have been under the plans of the previous Government. It is all very well saying that it is inflation; that was not how the previous Government were going to calculate it. It would have been by earnings, and on this occasion that would have been lower.

[Kelvin Hopkins]

The Minister may be too young to remember, but the Conservative Government under Mrs Thatcher abolished the Rooker-Wise amendment. The basic state pension would have been much higher now had that amendment been kept in place. What about raising the basic state pension in steps to where the pension would have been had the Rooker-Wise amendment never been abolished?

[Mr Gauke]

The Rooker-Wise amendment related to tax thresholds. As for indexation, we are using the higher of earnings or inflation or 2.5%. The plans we inherited were just earnings. That is an important point.

Despite difficult economic conditions, the Government continue to protect benefits for pensioners, including winter fuel payments, free bus passes and free prescriptions, to name but a few. Many pensioners are also benefiting from the Government’s decision to make funding available to local authorities to freeze council tax, and we also have the Warm Homes discount. The Institute for Fiscal Studies has submitted evidence to the Treasury Committee showing that pensioners are the group least affected by the tax and benefit changes implemented by the Government. It has given evidence that pensioners have benefited the most from the distributional impact of tax and benefit changes for some years. I assure the House that the Government are supporting, and will continue to support, pensioners.

--- Later in debate ---

[Mr Chope]

I see the hon. Lady on the Opposition Front Bench agrees with me about that.

Perhaps it is appropriate to start by reminding the Committee of what our right hon. Friend the Prime Minister said on 26 May 2009. He said that he had accepted, as Conservative party policy, that

“The House of Commons should have more control over its own timetable, so there’s time for proper scrutiny and debate.”

He said that

“there should be much less whipping during the committee stages of a Bill,”

because

“that’s when you really need proper, impartial, effective scrutiny—not partisan point-scoring and posturing.”

It is against that background that I enter into this debate with confidence.

The Government’s proposals will, by their own admission, result in more complexity and less simplicity, which is completely at odds with their avowed intent on tax policy. The administrative costs alone will exceed £100 million, and 650 extra staff will have to be taken on to administer what is effectively the removal of child benefit from 1.2 million families.

[Kelvin Hopkins]

I agree with the hon. Gentleman entirely. I recall when child benefit was first introduced in the 1970s, and I have to point out to those on the Government Front Bench that, throughout the Thatcher and Major Governments, no attempt was made to get rid of that universal benefit. We should stick with universality in this case.

[Mr Chope]

The hon. Gentleman is absolutely right. Even during the International Monetary Fund crisis in the mid-1970s, things never got so tough that the Government of the day felt the need to interfere with child benefit. It was a reflection of the fact that families with children had higher costs than those without.

The proposals will create all sorts of perverse incentives, and the people who want to try to avoid the measures will have a field day. This has been well covered by the Treasury Select Committee’s recent report, as well as by the Chartered Institute of Taxation and other expert bodies. The fundamental issue is the proposals’ lack of fairness, as between one family and another.