Kevin Brennan
Main Page: Kevin Brennan (Labour - Cardiff West)Enterprise Bill [Lords]
Kevin Brennan Excerpts
Kevin Brennan (Cardiff West) (Lab)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
New clause 8—Disposal of Crown’s shares in UK Green Investment Bank Company: purchaser’s obligations—
‘Before any sale of the Crown’s shares in the UK Green Investment Bank Company takes place each prospective purchaser must enter an enforceable undertaking to fully fund the Bank’s current five year business plan.”
This new clause would ensure that the Green Investment Bank is maintained as a single, functioning institution and can continue to invest in the UK’s low carbon economy at the same level as was planned prior to privatisation.
Amendment 17, in clause 37, page 54, line 44, at end insert—
“6B Report on remuneration of chair, non-executive directors and executive team
(1) For each year following a disposal of shares held by the Crown in a UK Green Investment Bank company the Secretary of State must lay before Parliament a report on the remuneration of the company’s chair, non-executive directors and executive team by the company.
(2) The report shall include a statement of the framework or broad policy for the remuneration of the above individuals.
(3) The report shall include the value of the following, where applicable, in respect of each individual—
(a) salary or fee,
(b) pension,
(c) other cash or non-cash benefits, including bonus or performance-related payments, and
(d) shareholdings in a UK Green Investment Bank company.”
This amendment would require, following a disposal of shares in a UK Green Investment Bank company, that the Secretary of State to report annually on the remuneration of the Chair, non-executive directors and Executive Team of the company.
Kevin Brennan
New clause 4 might be referred to as the “hokey-cokey clause” because it has been in, out, and shaken all about during the passage of the Bill. I am not exaggerating when I say that, because this new clause should still be in the Bill. You may not be aware of this, Mr Speaker, so I will read briefly from the record about what happened with this clause in Committee.
In Committee the Chair put the question that clause 32 stand part of the Bill, and hon. Members responded “Aye”. The Chair asked for votes to the contrary, and said, “I think the Ayes have it.” The Minister then moved that the clause should not stand part of the Bill, and I raised a point of order to the Chair to point out that the Committee had just voted that the clause should stand part of the Bill, and that the Minister could not then move that it should not. The Chair then said:
“For clarity, I will put the question again.”––[Official Report, Enterprise Public Bill Committee, 23 February 2016; c. 201.]
The clause was accepted in Committee, but the vote was taken a second time because the Chair, in a spirit of extraordinary generosity and to save the Minister’s blushes, allowed a second vote. First the clause was in, then it was out, and today we are suggesting that new clause 4 should again be included in the Bill. It is not really a new clause; it was clause 32 when we considered the Bill in Committee.
The Government are wary of new clause 4, or old clause 32, because they fear that the Green Investment Bank’s borrowing would, because of the position taken by the Office for National Statistics, remain on the Government’s books and be classed as public sector debt after privatisation. If there were any suggestion of statutory control of the Green Investment Bank’s purpose, the ONS would insist that it stayed on the books.
There is currently statutory control of the Green Investment Bank’s purpose, to ensure that it is green and not just like any other investment bank. The Green Investment Bank is supposed to be a different kind of entity; it is not supposed to be like the bank that the Secretary of State worked for when he earned £3 million a year, and which was fined £600,000 by the European Union for fiddling interest rates. It is not supposed to be that kind of institution; it is supposed to be completely different and focused on sustainable investment in green projects, not based on the unsustainable culture of greed that brought the world economy to its knees in 2008, with millions of hard-working families still suffering the consequences of that. If the Green Investment Bank is meant to be a new kind of institution, how do we ensure that it remains so if the Government strip it of its statutory purpose, which is to invest in green projects?
In Committee we asked whether the Government should allow that potential ruling by the ONS to drive completely in this important area of sustainable public policy, but the ONS point is a technical matter. If the Green Investment Bank remains on the books after privatisation, that does not reflect any problematic public debt. It may cosmetically spoil the look of the Chancellor’s forecasts on public debt, but it would not change the fundamental underlying substance of public finances. In other words, statutory protection for the Green Investment Bank’s purposes is to be removed by the Government because of an accounting convention that is inconvenient to their political narrative. It is spin over substance on stilts.
As we discussed in Committee, the Green Investment Bank is not getting the same treatment as the Asian Infrastructure Investment Bank. The Treasury is all too ready to allow UK borrowing to be part of financing that bank, and it was not worried at all that public debt will be part of its financing. However, it is extremely reluctant to allow the same treatment for the Green Investment Bank.
You will not be surprised to hear, Mr Speaker, that I praised the former coalition Government for introducing the Green Investment Bank. Policy in that area can be difficult to implement, because by its very nature it is new and innovative—in Committee I quoted the wise words, as ever, of Kermit the Frog who said, or sang or croaked, “It’s not easy being green”. That is true. It is not easy, and this is an innovative and effective piece of public policy, and I praise the former coalition Government for introducing it.
Andrew Gwynne (Denton and Reddish) (Lab)
Is one benefit of the Green Investment Bank that in large part it addressed some of the market failure that had gone before? We risk losing some of the benefits that it brought in terms of securing green investment. All that will happen—an unforeseen consequence, perhaps—is that taxpayers will have to pay more through a larger subsidy.
Kevin Brennan
I believe that the proposals on privatisation that the Government quickly brought forward following the election were seriously undercooked, if I can put it that way. The Green Investment Bank has only just started to turn a profit. We are glad that it is doing that, but it is a very small amount. When the Government said that they intended to privatise the bank, they prayed in aid the statutory obligation to invest in green projects that they now wish to remove from statute, because of what the ONS said about public debt and the Green Investment Bank being on the books. That proposal has been in trouble all along, and the way that the Government are scrabbling around for a solution shows that the original proposal was undercooked.
Mary Creagh (Wakefield) (Lab)
I praise my hon. Friend for tabling this new clause, and for the way that he scrutinised the Bill in Committee. Does he agree that things have moved on substantially since we met in Committee, with the Government’s publication last Thursday of the prospectus and the announcement that the sale was to proceed and will be a two-stage auction? It certainly looks as though the bank will be fully privatised, so all the debate and discussion that we had in Committee about whether the Government would keep a minority share in the bank, as recommended by the Environmental Audit Committee, seems to have been pretty much for the birds. The Minister probably knew that in Committee.
Kevin Brennan
I congratulate my hon. Friend on her election to the Chair of the Environmental Audit Committee. I am sure she will be as assiduous in scrutinising this proposal and other areas of Government policy as she was in Committee and on the Back Benches, along with my other hon. Friends. She is right to say that the publication of the Government’s intentions last week was interesting, and I hope that the Minister will answer her point about the Government’s intentions, and clarify whether they intend to maintain a stake in the Green Investment Bank after privatisation. When we probed the Minister on that in Committee, answer came there none. From the way that the proposals have been published, it would appear that the Government intend to fully privatise the bank, even though—as we discussed in Committee—it must be the worst possible time, given the current state of the market, to consider privatising this important public asset, if part of the purpose is to get good value for the taxpayer.
Mary Creagh
I will develop this point in my speech, but in Committee two weeks ago I mentioned the bear market, the slide in value of all bank shares since Christmas, and the softening of growth in China. Only this morning, Mark Carney and the Bank of England revealed the large amounts of liquidity that they are preparing to inject into the UK banking economy in the event of an exit from the European Union after the referendum, to avoid a complete meltdown and financial crisis such as the one that took place in 2007-08.
Kevin Brennan
My hon. Friend is right to point that out, and, by implication, to point out that the privatisation would of course occur after the referendum in the summer. The implications of a leave vote on the attempt to privatise the UK Green Investment Bank would be highly significant, as she points out.
Barry Gardiner (Brent North) (Lab)
I wholly support my hon. Friend’s remarks. What impact does he think it might have on the prospects for full privatisation of the Green Investment Bank were the official Opposition to indicate that they were minded to purchase back the bank into the public sector?
Kevin Brennan
My hon. Friend will understand that I am not going to speculate on that, given that it is not current party policy or under discussion. What I will say is that the Government have a duty, if they go ahead with a privatisation that we do not support, to be absolutely sure they get value for money for the taxpayer, as well as to give an absolute guarantee that they will protect the bank’s green purpose.
I have praised the Government for the introduction of the Green Investment Bank, but why would they do anything to place its central green mission in grave doubt? I remind the House that the bank was first proposed under the previous Labour Government. It was first mentioned as a proposal for development by the former Chancellor of the Exchequer, Alistair Darling, in one of his Budgets. It was developed in the Cabinet Office and the Department for Business, Innovation and Skills when I was a Minister in those Departments. It was introduced under the coalition Government, and it has made a good start. It has been able to participate in the financing of projects that would otherwise not have taken place and that make a real contribution to meeting our commitments under the Climate Change Act 2008.
I think we all agree, throughout the House, that the creation of the bank is a good news story. I do not see any dissent from that proposition from anyone in the Chamber. We have therefore come to a strange pass when even something we all agree is a good thing—good borrowing for sustainable purposes—is classified as bad for no other reason than that it appears on the Government’s books.
During the difficult years following the banking crash, in which we were sometimes in recession, a significant part of the UK economy’s growth came from the green economy. By some estimates, it accounts for 1 million jobs in the low-carbon sector and is worth more than £100 billion. It is disappointing that the Government are in danger, if they are not careful, of undermining one of the key drivers of that sector. If we could tap into our country’s wind, wave and tidal power, we could create thousands more high-quality, sustainable jobs for our economy as well as doing the right thing for the environment.
When the Government announced their privatisation plans last June, the Secretary of State assured the House in a written statement:
“This should bring a number of important benefits, giving GIB greater freedom to operate across a wider range of green sectors in accordance with its green purposes, which are enshrined in legislation.”—[Official Report, 25 June 2015; Vol. 597, c. 27WS.]
He emphasised that the green purposes of the GIB were protected by the legislation in which its duty to pursue them are enshrined. After that, something obviously went wrong with the Government’s proposals. They received advice from the ONS that led them to say instead that they intended to repeal the very legislative protection that the Secretary of State had prayed in aid on 25 June 2015 when he announced the decision to privatise the bank. By October, they were effectively saying that it did not really matter whether they repealed the statutory protection, as long as they made sure the bank did not appear on their books. In his letter of 15 October, when he announced his intention to repeal the relevant measures in the Enterprise and Regulatory Reform Act 2013, the Secretary of State offered no assurance that the bank’s green purposes would definitely be maintained.
We have been demanding assurances on how we can ensure that the bank maintains its green purpose when it is privatised and does not simply become yet another bank—albeit a very small bank, but one that could easily be gobbled up by somebody else in the marketplace. That is why Labour and other parties defeated the Government on this issue in the other place and introduced the special share that we are trying to reintroduce in new clause 4.
The Government say that the GIB can create the special share itself. In Committee, the Minister quoted a letter from the chairman of the bank, Lord Smith, to Lord Mandelson and Lord Teverson. She may well quote it again today; we will find out in a moment. In Committee, she said that she was confident that that approach would satisfy the ONS, but could not give us a guarantee. As I said then, we need an absolute assurance on that before we relinquish the legislative opportunity to future-proof the purposes of the GIB.
Since Committee stage, the bank has written to hon. Members, as is its right, outlining its plan to issue the special share envisaged in new clause 4 itself, rather than through the Bill, which is what we are proposing. Its reason for doing that is its belief that the ONS will then allow it to be classified as off the Government’s books. I asked the GIB whether it could guarantee that. Colin Faulkner, its director of government affairs, responded to me by email, writing:
“You’ll likely be aware that ONS doesn’t engage directly with arms length bodies like GIB. At the same time, however, we have been engaging closely with the Government over all matters relating to the sales process, and this is an issue where we’ve been as close as we can to Government throughout. We understand that Government has been engaging closely with ONS on this whole issue, including the special share structure which GIB is putting in place, and we understand that on the basis of those discussions the Government were sufficiently satisfied to allow the sales process to proceed.”
On that basis, if the Government say they are satisfied, they should be able to guarantee categorically, here on the Floor of the House, that their special share proposal will definitely be acceptable to the ONS. I hope the Minister will say that. If she wants to intervene and say that now, she can, but I hope she will at least be able to say it in her response. She is not indicating that she wishes to intervene.
Mary Creagh
I wonder whether my hon. Friend has had the chance to look at annex C, which was presented to Parliament last Thursday, on the proposed disposal of shares in the bank. It states:
“As a key part of any sale discussions, potential investors will be asked to confirm their commitment to these values”—
that is, green values—
“and to set out how they propose to protect them. Bidders’ stated intentions will be taken into account in the overall assessment of bids.”
I wonder whether we will hear what percentage will be allocated to that in the bidding process. All bids will be marked against a schema. I, for one, would be curious to know what weight and relevance will be given to the protection of green purposes when the Government decide to sell.
Kevin Brennan
I think we would all be interested to know that. Perhaps the Minister will be as informative as she possibly can and tell the House about that in her response. We have a legislative opportunity here, because after privatisation anything could happen. What guarantee do we have that the bank will not simply be swallowed up by somebody else, and that all the guarantees given by the original investors will not evaporate?
Mary Creagh
Does my hon. Friend share my disappointment that, although the Government have bent over backwards with the ONS to create a special purpose vehicle—a special charity—with independently appointed people to protect the green purposes, they have refused to make any such moves on another matter we debated in Committee, which is the transparency of executive pay, on which the bank is a rare exemplar in the banking sector? I hope to speak about that shortly.
Kevin Brennan
I agree. My hon. Friend has been dogged in her pursuit of that both in Committee and in tabling her amendments on Report, and I look forward to her contribution on that subject.
Will the Minister guarantee that privatisation will not dilute the bank’s green purposes, or must we just keep our fingers crossed? The Government still need to adequately answer questions that were not answered properly in Committee. Am I right that the legislative lock on the green purposes is being repealed purely to get the bank off the Government’s books? If that is the principal reason, is it a good enough reason to give up the statutory guarantee, given what I said about the technical nature of the accounting issue that the ONS raised?
Will the Minister indicate the Government’s view of the stake they expect to retain in the bank, if any, following privatisation? I understand that it is a market transaction, but we need an idea of the kind of return they expect from the sale. As was mentioned earlier, market conditions are so poor that the Chancellor had to abandon the sell-off of Lloyds shares, but we need to know whether they really expect a significant return from the privatisation, given all the pain associated with the process and the record of poor value for money for the taxpayer in previous privatisations. I do not expect her to be able to be precise, but she will want to avoid the criticism the Government encountered over the lack of value achieved previously, so will she gives us an idea of what she expects the Government to get from privatisation?
Is the Minister concerned that these matters will provide further uncertainty for low-carbon investors, at a time of real concern about the Government’s retreat from investment in wind power? We have learned over many years that making policy in haste is not wise—it is certainly not wise to privatise in haste—and we might well repent at leisure if this innovative and effective piece of public policy is lost as a result of a lack of care and a rush to privatise. That is no way to make sustainable policy, particularly in an area where we are trying to create a sustainable future for the country, which is why we have tabled new clause 4.
Caroline Lucas (Brighton, Pavilion) (Green)
I am happy to be able to speak to my new clause 8, which I would like to press to a vote, but first I wish to associate myself with the shadow Minister’s case in favour of new clause 4, to which I have also put my name.
Essentially, the context of new clause 8 is my dismay at the Government’s determination to push through privatisation of the Green Investment Bank despite concerns expressed by the House of Lords, Members of this House, the Environmental Audit Committee and civil society. Through this and other actions, I fear that the Government have demonstrated that their desire to get the bank off their balance sheet is taking massive precedence over their interest in whether the bank is genuinely contributing to the green economy to the fullest extent possible.
Anna Soubry
This is a short answer—yes. The hon. Lady will have seen this letter and I hope she will have read it—upside down, inside out, backwards and everything else. It is well over two pages long and it could not be clearer as to the way the special share is going to be set up. I shall rely on the fact that it talks about the special shareholder and how difficult it would be to undo this device. That could be done only with the permission, in effect, of the special shareholder. This House can therefore be sure that this is the right way to achieve what we all want to achieve.
That is why it is important to pay tribute—some may say that this is a first, and indeed it may not be the last—to the Scottish Government and to the Scottish National party. I have seen the letter John Swinney has written on behalf of the Scottish Government, quite properly as he is the Deputy First Minister and has responsibility in Scotland for finance, the constitution and the economy. He, too, rightly and understandably, has raised his concerns about how we best protect the green credentials of the GIB. As a result, he, too, has contacted Lord Smith, and letters have been sent back and forth. In short, to the credit of the SNP, it takes the view—I will be corrected if I am wrong—that this device, which is up and running, with the work already having been started by the GIB to secure this special shareholding, means that everybody can be confident that this is the way to secure what we all want, but without the need for legislation, which could completely scupper this privatisation and selling off of the GIB.
Kevin Brennan
The Minister has said on many occasions that she is confident that introducing the special share in this way will work. Our case all along has been that we would like to hear her say to the House that she can guarantee, rather than just be “confident”, that the ONS will approve this approach. Can she now say, in terms, on the Floor of the House and on the record, that she can guarantee that?
Anna Soubry
I hope I am being parliamentary when I say that the hon. Gentleman is being a bit of a minx—I mean that in the nicest way. [Interruption.] He quite likes that, which is good, although I do not think he will like the next bit. I have already explained in Committee that we cannot give that guarantee, and he was a bit naughty, calling the ONS a bunch of boffins. I think he rather regretted it because the people in the ONS are not that; they are absolutely independent of government and will rightly come to their own conclusions. We are confident that if the measure goes into legislation, the ONS will not take this bank off the books, because it will not be properly in the private sector. If, however, we do it in the way that we are all suggesting—I include the chairman of the GIB in that—there is every chance in the world that this will then become a successful privatisation. It is confusing to work out what people’s real views are; the hon. Member for Wakefield (Mary Creagh) says that she does not object to the GIB being sold off, although she has raised her concerns. She is in favour of it in principle, but it is not certain whether others are.
Let me now deal with amendment 17, which was tabled by the hon. Member for Wakefield and the right hon. Member for Don Valley (Caroline Flint). Again, we firmly believe it is not required. The GIB is currently required to report to higher standards—the standards for quoted companies—which include the level of detail required by this amendment. That is appropriate because it is currently entirely publicly owned. Post-privatisation, there is no reason why the GIB should be singled out to report on its remuneration to Parliament, especially if it is not spending any public money. It is a matter for the board of a company and its shareholders to agree remuneration policy. I note that there was an exchange of letters between the hon. Lady and the GIB’s chair, Lord Smith, where she asked about future remuneration policy, and I am sure her Committee will publish the letter in full. If the Government retain a minority stake in the GIB—we have made it clear that our intention is to sell a majority of it—we could express views on this and other aspects of corporate policy. We could agree with other shareholders what level of reporting might be appropriate on this and other matters, but we do not consider that this matter should reside within legislation.
As I said, the GIB has been a terrifically successful venture. It is important to understand that it was set up in 2012 because of a market failure. Opposition Members certainly do not like to reminded of the perilous financial situation our country faced in 2010, and it certainly was not all the fault of the banks—it was also a pitiful failing of Government policy at the time. What the GIB has done is help investors in the market to better understand the risks of green investment, and this comes back to the point being advanced by the hon. Member for Brent North. We know that, since 2012, long-term debt markets have significantly improved, which suggests an improvement in market conditions. Frankly, we would not set up the Green Investment Bank today, because those market failures no longer exist. The Green Investment Bank has proved that an organisation can be green and profitable, and its success demonstrates that the market can deliver green, which must be a good thing.
I have dealt with the point about the Office for National Statistics, so I will not repeat myself. The hon. Members for Cardiff West (Kevin Brennan) and for Wakefield asked whether the Government will retain a minority stake in the Green Investment Bank. I have to say that our position has not changed since the Committee stage. I explained then that we intend to sell a majority of the Green Investment Bank. We may retain a minority, but we cannot commit to that. Our report to Parliament makes it clear that decisions on the size of stake in the Green Investment Bank to be sold will depend on the outcome of confidential commercial discussions with investors.
I pay tribute to the Secretary of State for his announcement last week that the Green Investment Bank is now available to be sold. Unfortunately, I can say no more than that, other than that we are confident that this sale will be successful and will be done at the time when the market is in the right place. Having said that, we will not sell the bank unless of course we know that we will get the right price. For some time now, we have had strong market interest in the Green Investment Bank, which has strong underlying assets that are less exposed to market volatility. The large infrastructure sales that have recently been made, such as that of City airport, have also been very successful, and that gives us confidence in this part of the markets.
Nobody—not even Scottish National party Members—has asked this question, but if they were to, it would be a good question, so I will pre-empt it and say that one reason why the Green Investment Bank has been so successful is that it has been primarily based in Edinburgh, which is an excellent place in which to do business, especially as it is still within a United Kingdom. I can see no good reason—again, this is something that we explored in Committee—why the Green Investment Bank would want to move away from Edinburgh. Why on earth would it? [Interruption.] If the hon. Member for Aberdeen South (Callum McCaig) wants to intervene, I am happy to give way. [Interruption.] No, he has changed his mind. That is probably because I reminded him about the price of oil, so we will move swiftly on.
The hon. Member for Cardiff West asked me whether the Government can guarantee that the Green Investment Bank will be off the balance sheet. I think that I have dealt with that. I said that we cannot give a cast iron guarantee about the ONS, but we have confidence, and I hope that that confidence will be shared by the whole House.
We do not need this new clause, because of the assurances that have been given by the noble Lord Smith in his extensive letter to all Members of the House. In that letter, he goes into quite considerable detail about the mechanisms that he is already putting in place to ensure the future green credentials of the Green Investment Bank. That is why we say that this new clause, which will be tested, should be resisted.
The hon. Member for Wakefield and the right hon. Member for Don Valley have quite rightly raised their concerns about the Green Investment Bank and tabled amendment 17. When the bank is sold, it will be a private sector company—this is an important point to put on the record—and, as such, it will be subject to normal company law. For a company the size of the Green Investment Bank, which is unquoted—that means that it is not listed on the stock exchange—the minimum requirement will be to report aggregate information in relation to total remuneration and specific information relating to the highest paid director. As I have said, it is currently required to report to higher standards—the standards for quoted companies—which include the level of detail required by this amendment. That is appropriate because it is currently entirely publicly owned.
I have given considerable praise to the Green Investment Bank—[Interruption.] I have just been handed a note, which will doubtless be a blessing to everybody who, in due course, has the great good fortune either to read this in Hansard or to be following these proceedings. I will, if I may, pay tribute again to the bank and to all those who work for it, especially the chairman, the noble Lord Smith.
Kevin Brennan
The Minister criticised me in Committee for referring to people who work in the Office for National Statistics as boffins. May I remind her that a boffin, according to Wikipedia and the Oxford English Dictionary, is a person engaged in technical research? In fact, the term originates from the war-winning researchers of world war two, so I do not think that I have anything to apologise for in describing them as boffins.
We have been looking for a guarantee that the mechanism that the Government are proposing would indeed satisfy the ONS. The Minister has confirmed on the Floor of the House today that she cannot offer that guarantee to us. We do not want to let this legislative opportunity pass by to ensure the green purposes of the Green Investment Bank. On that basis, I will be asking my right hon. and hon. Friends to join me in the Lobby as I seek to divide the House on new clause 4.
Question put, That the clause be read a Second time.
Madam Deputy Speaker (Mrs Eleanor Laing)
With this it will be convenient to discuss the following:
Amendment 18, in clause 41, page 56, line 18, at end insert—
“(1A) The restriction placed on public sector exit payments must be reviewed at regular intervals and, where necessary, be adjusted in line with inflation and earnings growth.”.
This amendment would ensure that the level that the restriction on public sector exit payments is set will be linked to inflation and earnings growth.
Amendment 15, page 57, line 10, at end insert
“, including payments relating to employees earning less than £27,000 per year”.
This amendment would provide that regulations may exempt from the public sector exit payment cap those earning less than £27,000.
Amendment 16, page 57, line 27, at end insert—
“(10A) Nothing in this section applies in relation to payments made by the bodies listed in NS1.”.
This amendment would exclude employees of companies listed in NS1 operated by the private sector from the scope of the proposed cap on exit payments.
Government amendments 3 to 9.
Kevin Brennan
I am happy to confirm that the Opposition will be supporting amendment 18, tabled by the Scottish National party, which we discussed in Committee.
This is the bit of the Enterprise Bill that has nothing to do with enterprise; it is largely about spin, to be perfectly honest. Let me make it clear, as I did in Committee, that Her Majesty’s official Opposition agree that excessive exit payments in the public sector should not be paid, and that any abuses in that regard should be ended. The problem with the Government’s approach is that they are attempting to govern by headline in a very complex area, and in so doing they are creating the sorts of anomalies and unfairnesses that I am sure we will hear about during this debate. Including a headline-grabbing figure—in this case £95,000—on the face of the Bill is, frankly, the worst kind of utterly vacuous government, and it is exactly the sort of rigid legislating that good civil servants advise against, and that bad Ministers promote.
The inclusion of that figure in the Bill is really about allowing the Secretary of State for Business, Innovation and Skills to have his tabloid headline about fat cats, which was one of the odious remarks he made on Second Reading. That was an insult to thousands of decent, hard-working people across this country, many of whom have never been paid anywhere near £30,000 a year, let alone the £3 million a year that the Secretary of State used to get when he worked for an investment bank. [Interruption.] That has a lot to do with it, because of the language he used.
If I was to accuse the Secretary of State of being a fat cat—I am not going to do that, Madam Deputy Speaker—the Minister would be huffing and puffing in her usual way, muttering “Outrageous” and “Disgraceful” from a sedentary position. She and the Secretary of State like to dish it out, but they do not like to take it when it comes back their way. She was quite content to sit there on Second Reading and cheer the Secretary of State on as he traduced public servants, including long-serving local librarians and even privatised nuclear decommissioning workers, and described them as fat cats. I wonder how they felt about the Secretary of State using that language. Actually, I know exactly how they felt, because they wrote to us in their droves to express their anger at his insulting rhetoric, and that evidence—there was a lot of it—was officially submitted to the Committee.
Amendment 15, tabled by the Opposition, seeks to protect those workers who earn less than £27,000 a year from the proposed exit payments cap—yes, those who earn less than £27,000 a year are the Secretary of State’s so-called fat cats.
Louise Haigh (Sheffield, Heeley) (Lab)
I was present on Second Reading when the Secretary of State described long-serving public servants on low and average pay as fat cats. At the end of that debate, the Minister said at the Dispatch Box that the exit payments cap would not apply to civil servants earning less than £27,000. I hope that she will forgive us if we do not take her word for it, and that she will therefore accept our amendment today to ensure that the promise is in law.
Kevin Brennan
There was a time when what Ministers said on the Floor of the House could be accepted, and I am prepared to accept that the Minister is sincere in what she has said. In fact, I am not sure that she said quite what my hon. Friend says she said. I think that she actually said that it could affect a small number of people on £25,000. However, I think that my hon. Friend is echoing what one of the Minister’s Treasury colleagues had said earlier. If I am not mistaken, the current Minister for Employment, the right hon. Member for Witham (Priti Patel), when referring to what would be in the Conservative party’s manifesto, said that the proposal would not affect anybody earning less than £27,000 a year. We have therefore taken her words, given as a promise from a Minister of the Crown, and put them into an amendment in order to hold the Government to their word. The fact that this Minister was not prepared to repeat that in those terms when she spoke on Second Reading can perhaps be explained by the Government’s refusal to support our very reasonable amendment.
Richard Fuller
Following the hon. Gentleman’s deliberations in Committee, and from his own analysis—obviously we are looking in the round at public expenditure on exit payments—can he advise the House on what proportion of that expenditure in, say, the last five years was for people earning less than £27,000, and what proportion was for people earning over £100,000?
Kevin Brennan
I do not have that figure to hand, but we did probe the Government to try to get some idea of what calculations they had made of the impact on people earning less than £27,000 a year. I am afraid we have not been able to elicit a great deal of information from them on that subject, other than that they think it would be rare for those people to be affected. If it is that rare—I will come to this in a moment—why do the Government not accept our amendment, because it will not actually cost them much?
Richard Fuller
The hon. Gentleman makes a fair point. In the absence of data, he has his good judgment and his reasonableness, following his many years in government before 2010. Do his instincts not say that the majority of people will be earning in excess of £100,000? That really is the target of what the Government propose, is it not?
Kevin Brennan
That is what the Government say the target is. As the hon. Gentleman knows, I respect him greatly for his independence of mind and thought, and for his intellect on these matters. As I said at the outset, if abuses are going on in relation to public sector exit payments, we are perfectly willing to say they should be stopped, but we need to look at what the clause actually does. It picks the figure of £95,000 to generate a headline saying that the Bill will stop fat-cat public sector exit payments of more than £100,000. However, what it does not elucidate very well is that that £95,000 is not just a cash lump sum, but includes the so-called strain payments that are paid into workers’ pension funds when they are forced into redundancy before retirement age. That is money they will never get in their pockets—they are not walking away with £95,000. They are not fat cats earning more than £100,000, and some are on relatively modest incomes. The Bill will also capture many people in the private sector, which the Government were also not keen to elucidate on.
Chris Stephens (Glasgow South West) (SNP)
Will the shadow Minister confirm that the employees affected, who will be earning less than £25,000 a year, will be predominantly women? This being International Women’s Day, perhaps the Government should think again.
Kevin Brennan
The hon. Gentleman is absolutely right. Clearly, large numbers of public sector workers, who have often given long service, might have to take redundancy—not surprisingly at a time of severe cuts in, for example, local government. The provisions in the local government pension fund require those strain payments to be made, and those will count towards the £95,000 exit payment.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
My intervention very much complements that of the hon. Member for Glasgow South West (Chris Stephens). One of the big concerns about the change, which I am sure my hon. Friend shares, is that the consultation was so inadequate. The Government have also failed to undertake any public sector equality duty review, as required under the Equality Act 2010. The changes could therefore have many unintended consequences, but the Government are not taking the time to explore them.
Kevin Brennan
Yes. I will briefly touch on the inadequacy of the consultation later.
Amendment 15 is about workers earning less than £27,000 a year. As I mentioned, it was the right hon. Member for Witham (Priti Patel), when she was at the Treasury, who said a year ago:
“those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants.”
She was commenting on the Government’s plans to create the public sector exit payment cap.
Chris Philp (Croydon South) (Con)
Did the Minister for Small Business, Industry and Enterprise not take the Committee through a number of worked examples demonstrating that the Bill would not have the adverse effect on pensions that is suggested? For example, a prison officer earning £28,000 a year with 34 years’ experience could still retire at as young as 52 without being affected. Does that not illustrate that the hon. Gentleman’s concerns are not terribly well founded?
Kevin Brennan
I recommend that the hon. Gentleman read more deeply into the report of the Committee stage. I commend to him the worked example I gave of somebody on a salary of £25,000 who had given long service in local government and who would be affected.
Obviously, the right hon. Member for Witham did not think at the time that these people were fat cats; she thought they should be protected, and we need to understand why that is not happening in the Bill. Why was a lower earnings floor not included, given that the Conservatives promised they would pursue only—again, I quote from their manifesto—the “best paid” workers? Of course, once the election was over, the Government ignored that.
Problems emerged because the consultation was so poorly conducted, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said. Usually, a full consultation takes 12 weeks; the Government did this consultation over four weeks in the summer—it began on 31 July 2015 and concluded on 27 August. If the Government were serious in their rhetoric that the Bill would affect only the best paid, it would be very straightforward to include a provision to exclude those on £27,000 or less. In fact, what the Minister for Small Business, Industry and Enterprise said on Second Reading, which was alluded to earlier, was:
“What we do know is that there is a very small number of workers”—
that is the figure she gave—
“in the public sector on about £25,000 who could be caught by this…But those are extremely rare conditions.”—[Official Report, 2 February 2016; Vol. 605, c. 886.]
What we want to know, therefore—I think this is what the hon. Member for Bedford (Richard Fuller) wanted to know—is how rare those conditions are. If they are that rare, why not exempt the lower paid?
Catherine McKinnell
My hon. Friend briefly mentioned the dates of the consultation—between July and August. Does it not occur to him that if the Government were genuinely keen to hear back from people potentially affected by, or interested in, this change, they would not have introduced the consultation for such a short time over the summer holidays?
Kevin Brennan
My only assumption is that they think fat cats should not have holidays. That is probably why they thought it did not matter that there was only a four-week consultation. That is what they think of the people they were supposed to be consulting. The rhetoric used by the Government is shameful; the contemptuous, short nature of the consultation is shameful; and the way in which the policy has been introduced overall can only be described as shameful.
We are concerned about the Government’s reluctance to make the necessary exemptions to ensure that the unfortunate few—that is what the Government tell us they are: a few—are not disproportionately affected. If the low paid and average paid are affected only in rare circumstances, excluding them from the cap will not result in the Government losing a great deal of money, so what is the problem in exempting them?
Richard Fuller
I am listening intently to the hon. Gentleman. I was in the Committee, and I am wondering whether there may be a flaw in his argument—no pun intended. If we put the floor in at £27,000, what about the person at £28,000? How would we distinguish between the different groups? Is it not better to set a limit to the payment that is made and to be blind on the income that someone gets up to that limit?
Kevin Brennan
I understand the point the hon. Gentleman is making. That would be all right if it was truly a payment that people were going to get in their pocket. The reason these people are captured, however, is that the figure includes the so-called strain payments that are made into the pension fund if they are made redundant before their normal retirement age. That is the unfairness, and that is the reason why, I presume, that the former Treasury Minister said that no one on under £27,000 should be affected. The Opposition have simply taken what the Government originally said their intention was, as elucidated by a Minister of Her Majesty’s Treasury, and put it in our amendment to test why the Government are not acting on what was said.
On Report in the Lords, Baroness Neville-Rolfe indicated that a drop of £500 would not be disproportionate for someone previously entitled to a pension of £12,500—the implication is that there could be a fall in the pension paid ultimately. All I would say is that a 4% drop in income for somebody on a relatively small income—it is lower, after all, than what one would receive on the minimum wage—would be highly significant on that low income. To say that a 4% cut is not significant is hugely out of touch with the reality of many people’s lives.
The Government’s case is that a leaving payment of £95,000 or above is a large amount for any employee, but they are perpetrating the myth that people will actually receive that money. Employees on low to average incomes will never see a large amount, because the payment includes compensation paid to the pension scheme. In fact, some of them will never even receive their pension, so they will never see that money in any way, shape or form.
The cap includes strain payments, and the pension shortfall is adjusted at the time of redundancy. Strain payments could make up a considerable amount of the £95,000. If so, long-serving, loyal workers could finish work with a significant shortfall in the amount that should have been allocated to them to deal with redundancy, unemployment and uncertainty. They will be left with little in their redundancy payment to pay for annuities to provide long-term security. I do not think that was the Government’s original intention, but the fact that they have refused to respond to the concern makes me wonder whether I am right about that.
We have been told that the Chancellor has withdrawn his pensions proposals, which would have raised £10 billion to pay down the deficit. In other words, he has moved swiftly so as not to offend better-off pensioners who might have been hit by the proposals. Why, then, will the Government not turn their hand to those who earn less than £27,000 a year, whose redundancy and access to a pension are threatened by the exit payment cap? The Chancellor has famously said that we are all in this together and that those with the broadest shoulders should bear the biggest burden, so the Government have a chance to prove that by supporting our amendment 15, which is, after all, based on their own words.
Amendment 16 would exclude from the provision employees of the companies listed in new schedule 1, which are operated by the private sector. Those who would be affected are principally employees of companies across the nuclear estate and elsewhere in the private sector, such as Magnox. Why are they affected by a measure that the Secretary of State told us on Second Reading is designed to hit “public sector fat cats”? According to the Secretary of State, Magnox workers who work in the private sector are “public sector fat cats”.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
When companies such as Magnox were privatised, workers such as those at Trawsfynydd in Dwyfor Meirionnydd lost access to their public sector pension scheme, but they are now going to be included in a cap on public sector redundancy payments. Does the shadow Secretary of State agree that the Treasury is trying to have its cake and eat it at the expense of those workers?
Kevin Brennan
I thank the hon. Lady for promoting me temporarily. I agree with her, and I know that she has been campaigning on that issue, as has my hon. Friend the Member for Ynys Môn (Albert Owen), who we may hear from later. She is absolutely right. The employees of these companies would never have imagined for one second that they would be hit by the Government’s proposals and the Conservative manifesto commitment to cap public sector exit payments. We raised the issue in Committee, but the Minister refused to guarantee that they would be excluded from the exit payment cap.
The companies listed are in a unique position. They are mostly engaged in managing the safe closure of nuclear facilities, which is a task of huge national importance. By its very nature, it involves working towards a specific end date, at which point the employees will effectively make themselves redundant, provided that they have done a good job. That is what they are doing: they are working to make themselves redundant.
Sue Hayman (Workington) (Lab)
Does my hon. Friend agree that it is completely inconsistent to include employees of companies operated by the private sector? My constituents who work at Sellafield are very worried about the proposed redundancy cap. I am concerned that it will lead to highly skilled, experienced workers leaving the industry, which would undermine our ability to deliver the safe decommissioning of our nuclear facilities.
Kevin Brennan
I agree. My hon. Friend will have noticed that Sellafield Ltd is included in new schedule 1, for the very reason she has highlighted.
As I said, the workers in question are working towards making themselves redundant. They accept that their work is a task and finish activity of national importance. In order to get somebody with the necessary skills to commit to that kind of proposition in their early or mid-30s, we need to ensure that they know that they will be provided for if they successfully complete their task by the time they reach their mid to late 50s, when they might find it extremely difficult to find re-employment, given their very specific skills.
If the companies listed cannot afford the packages necessary to compensate someone for the loss of their role when their task has been completed, they will find it extremely difficult to prevent highly skilled workers, who are mobile in the earlier parts of their careers, from leaving. That in itself will drive up costs for the nuclear decommissioning industry and exacerbate an already difficult skills shortage in the sector.
Legislating now to override the long-standing arrangements in the nuclear industry, as the Government are doing, when employers have kept their end of the bargain faithfully, is, to be frank, unconscionable. How can it be right that workers who have stayed with a company to deliver successfully the safe decommissioning of a site see the Government renege on their promised redundancy compensation when it is due to be paid?
Catherine McKinnell
My hon. Friend’s argument is powerful, and I am genuinely at a loss as to why the Government do not take heed of it. The proposal will not only cost individuals in the long term; it is also a betrayal of trust and will only benefit, to a small degree, the company involved. It will not actually benefit the Government, so I do not understand why they do not take action to right what is clearly a wrong.
Kevin Brennan
Exactly. The Treasury’s justification is that, even though the companies have been privatised, the workers are still deemed by the Office for National Statistics to be on the Treasury books, because of the nature of their work. It is understandable that their work needs to be underwritten by Government, because they are decommissioning nuclear sites and no one can get an insurance policy for that.
That technical, statistical designation, however, does not mean that applying the cap to those workers is fair or that it necessarily represents value for money for taxpayers in the long term. There is no proof that taxpayers will receive any benefit, as the private operators of the companies often receive higher incentive payments in their contracts as a result of this kind of change. Unless the Government decide to act, employees in the sector will note that the Treasury has excluded them from the public sector when it comes to pension provision and other issues, but considers them within the scope of the capped exit payments.
Catherine McKinnell
If the Government fail to take heed of this issue and that of the pensions of women who were born in the 1950s, I think that the mantra for the 2020 election will be, “You cannot trust the Tories on pensions.”
Kevin Brennan
My hon. Friend is absolutely right. I hope that the Government will have a last-minute change of heart. Why is a privatised banker not given the fat cat treatment under these provisions?
Kevin Brennan
I will in a moment, but first I will repeat my question, just in case Members did not hear it: why is a fat cat banker not being given the same treatment as nuclear decommissioning workers?
Chris Philp
The shadow Minister well knows that the Government have capped the pension contributions of higher earners at £44,000 a year, and that those on the highest incomes of more than £200,000 have had their contributions capped at £10,000 a year. The Government have taken a lot of action in this area, as the shadow Minister well knows.
Kevin Brennan
What the hon. Gentleman may not realise is that the workers of the banks that have been taken into public ownership will be specifically excluded from the exit payments cap under the Government’s plans. That might change his mind, so he might like to join us in the Lobby later. Yet again, it seems to be “Up with the bankers and down with the workers.” What a shocking value-free zone this policy is, if the Government stick to it.
Chris Stephens
Will the shadow Minister confirm that on Second Reading, the Secretary of State used the term “public sector fat cats” in his closing remarks in support of the Bill? Is that not in contrast to the workers whom the shadow Minister is talking about, who work in a physically taxing environment for many years?
Kevin Brennan
The hon. Gentleman is absolutely right. I know that it is difficult to believe—presumably, that is why the hon. Gentleman had to check before making his intervention—but the Secretary of State actually said that the measure was intended to hit fat cats in the public sector, which therefore includes everybody affected by it.
This confirms the understandable anger that is out there. My hon. Friend the Member for Ynys Môn might add examples of workers from his constituency. Agreements have been made and guarantees have been given. We were told that the provision was to hit public sector fat cats, not employees in the private sector. We have tabled the new schedule, which would exempt the companies listed from the Bill. If the Minister has another way of doing it, as I said to her in Committee, I would be interested to hear it. In Committee she was not able to offer any comfort whatever to the workers of the companies listed in new schedule 1. Her response was disappointing, given the weight of evidence submitted to the Committee and the strength of feeling among hon. Members and their constituents. Workers have made their plans and taken life decisions on the basis of promises that were made to them. As far as we can surmise from the limited information that the Minister is prepared to provide about the Government’s intentions, the Government are going to take action that will affect those workers.
In Committee, the Minister rehearsed arguments about all sorts of scares that may have been put about by mythical people whom she was not prepared to name, but going by the evidence submitted to us, the workers in question will be affected to quite a large extent. We represented the workers’ arguments in Committee and made their case on their behalf, but all we got from the Minister was a response to issues that had not been raised in the workers’ letters or, indeed, by us, and a vague reference to secondary legislation at some later date that will name some as yet unknown entities that may be excluded from the cap. In other words, all we got was an empty sheet of paper. I am afraid that that is not good enough.
We in the House need to know what the Government’s intentions are, and we need to be able to tell constituents who have written to us, and who are directly affected, whether they will be hit by the exit payment cap. Those hard-working people are the definition of strivers. They are the beating heart of this country. Their letters reveal that they are not swivel-eyed lefty loonies or fat cats but ordinary working people, many whom live in the constituencies of Conservative Members.
Ministers have put things in the Bill that are meant to get them a headline in the Daily Mail and The Sun. That is fundamentally why the proposal is so flawed. The reality, when we lift the stone and look underneath, is that it will affect all sorts of people whom the Government did not indicate that they intended to hit. Hard-working people are being betrayed by their Government. They would have made very different assumptions about what this policy meant when they read the Daily Mail headline or even the Conservative party manifesto. That is why, if the Government will not stand up for those workers, we will.
Sir Gerald Howarth (Aldershot) (Con)
I am pleased to follow the shadow Minister, the hon. Member for Cardiff West (Kevin Brennan). I have constituents who work at the Atomic Weapons Establishment in Aldermaston, at the Defence Science Technology Laboratories in Porton Down and elsewhere, so I have an enormously high regard for those extraordinary public servants who contribute so much to the security of our country. I therefore have some sympathy with new schedule 1.
It is easy for the newspapers to produce graphic headlines such as “Civil service pen-pushers get massive pay-offs”, but I am talking about slightly different people. They are not ordinary people in the sense the shadow Minister was talking about; they are really rather special. They work at the forefront of technology to ensure that the nation remains safe and that our realm remains secure. I know from talking to my constituents that people at the AWE, which has been privatised, are very unhappy indeed. The AWE is a unique and important facility. It is the only place capable of designing and producing the successor to our Trident nuclear missile system, and indeed of maintaining Trident until its successor comes into force. I am told that morale at the AWE is at rock bottom. To remove the last major benefit of working there—pay has been historically low because of the decent benefits—risks the nuclear deterrent, in some people’s opinion.
These people are not the only ones to be affected. A constituent of mine who works at DSTL came to see me at my surgery on Saturday. He is a leading scientist, and he brought with him examples of ceramic armour that he had personally developed for the protection of our troops. I do not know how many Members in the Chamber have been to see any of our defence science laboratories. I represent Farnborough, the home of the former Royal Aircraft Establishment, which is now the headquarters of QinetiQ. I have met some of its employees, who used to work in some pretty shabby conditions—no wall-to-wall carpeting, rubber plants or anything of the sort—although they have rather fine offices now in Farnborough, and I have been struck by the fact that they could get a lot more money in the private sector. When I asked them, “Why do you work here?” they replied, “Because we want to give something back to our country.” Those scientists show an extraordinary sense of patriotism, dedication and loyal commitment to our country; in my view, they contribute disproportionately to the defence of the realm.
My constituent told me on Saturday that for decades he had been
“Paying my taxes…Saving hard…Avoiding debt…Obeying the law”
and, of course, “Working hard” to develop these life-saving technologies for members of our armed forces. He went on to say:
“in spite of this…I have received below inflation pay rises since 2004…My pension contributions have doubled…My retirement age has increased from 60 to 67...My redundancy terms & conditions have been degraded significantly…My pay is now 20% lower than MOD colleagues outside of Dstl”.
He drew my attention to the 2015 review of the MOD’s science and technology capability by Sir Mark Walport, the Government’s chief scientific adviser, who said:
“We understand that staff retention is difficult in the mid-career stage. We were surprised that Dstl are able to retain staff (let alone good staff) given the comparative low-pay offered.”
Conditions have not improved owing to the austerity measures that we have had to take, which I understand, but that did not stop the chief executive of DSTL receiving a 30% remuneration increase. In those circumstances, it is understandable that these people do not feel that they have been treated as well as they should have been. The other point about them is that, as Crown servants and the kind of people they are, they do not go around protesting; they come to our surgeries or write us a private letter. They will not write to the national newspapers or stand outside with a placard, because they just want to get on with their jobs. I say to my right hon. Friend the Minister that there is a risk that we may be taking for granted people whose contribution to our national security is, as I said, rather significant.
Anna Soubry
No, there may be reasons. There is no need to interrupt.
Now is not the time to do what some hon. Members propose. There are other ways of doing it, if it is the right thing to do. It is right, however, that we be true to our clear manifesto commitment to set the cap at £95,000.
Mr Deputy Speaker
Mr Brennan, I think it is for me to decide. I am sure it was going to be about time, and I am sure we are all aware of the time and what time the debate has to end.
Anna Soubry
I was bobbing up and down like a November the fifth apple, Mr Deputy Speaker. In any event, I do not know what all the fuss is about, because I am concluding my comments.
I believe that all points have been made, and based on everything I have said, I urge hon. Members to support the Government’s new clauses and to reject all the other amendments; they are not necessary.
Kevin Brennan
I respect your ruling, Mr Deputy Speaker, that my point of order, which I did not make, was out of order.
Mr Deputy Speaker
Order. It was going to be about time, but it is not for me to tell you how much time is left, as you know better than I do.
Kevin Brennan
Thank you, Mr Deputy Speaker. I simply note that the Minister was unwilling to give way because of time.
On the comments by the former Treasury Minister, now the Minister for Employment, the right hon. Member for Witham (Priti Patel), I thank the Minister today for confirming to the House that we cannot believe a word Ministers say. I thank her for putting that officially on the record.
Kevin Brennan
Would the Minister like me to give way? I am happy to do so, if it is in order, Mr Deputy Speaker.
Mr Deputy Speaker
Minister, are you commenting from a sedentary position, or would you like to make a point of order?
Kevin Brennan
It was not in a newspaper that the policy was announced. As I said, we cannot believe a word Ministers say.
Let me say simply that, as in Committee, the Minister has confirmed nothing at all that will give any comfort to these workers. I am therefore going to ask my hon. Friends, and other hon. Members if they support these workers, to support us in the Division on new schedule 1.
Question put, That the schedule be read a Second time.