Finance (No. 2) Bill

Lord Harrington of Watford Excerpts

Tuesday 1st April 2014 Commons Chamber

[Richard Harrington (Watford) (Con)]

I want to probe the hon. Gentleman further on his answer to my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). Does it mean that he believes that the last Labour Government made a mistake by not raising the top tax rate to 50% for most of the 13 years that they were in power, and that they should indeed have done so?

[Chris Leslie]

I know that Government Members like to expunge history from their memory banks, but there was a global banking crisis—I know this is a shock to some of them—which, from 2008 onwards, caused significant fiscal impact, which reduced revenues into the Exchequer and meant that tax rates had to be reappraised. It was at that point that the 50p rate was felt necessary, as one of the measures of fairness that we needed to put in place. I am proud that that Government took that step. It was not universally popular, as I know from Government Members, but necessary in order to help to reduce the deficit, whereas the Government chose to raise VAT and pull the rug from underneath growth that was beginning to come through in 2010.

I want to continue to scrutinise some of the details in the Finance Bill, because it contains a number of troubling changes. On capital allowances, my hon. Friends intervened on the Chief Secretary, and I also asked whether he thought it was a mistake that when taking office the Government reduced capital allowances—investment allowances—for businesses from £100,000 to £25,000. Yes, they are going back up again, but yet again we see more chopping and changing, more inconsistency; temporary measures, not giving the stability to business that it needs to plan for the long term. The Chief Secretary says that it was not a mistake that they should go down and now they are going up, but that, I am afraid, is typical of Liberal Democrats who like to face both ways on these matters.

In chapter 2 we have the married couple’s tax allowance. The Chief Secretary is deep in conversation, but I want to give way to him in a moment specifically on the issue of the married couple’s tax allowance. [Interruption.] From a sedentary position, he says that he will not intervene, but this is a critical point because I am not quite clear on his view of the married couple’s tax allowance. The Chancellor was apparently in a little bit of doubt about it, but the pressures from Conservative Back Benchers were such that they needed this transferrable allowance, which will help only about a third of married couples because it is available only to couples where one person is in work but the other does not use all their tax-free allowance. There are a number of other ways in which that amount of money could have been allocated. He could have decided to do it through the personal allowance—I know he is keen on that policy—perhaps a 10p starting rate of tax. Does the Chief Secretary agree with the implementation of the married couple’s tax allowance? This is his opportunity to set out the Liberal Democrat attitude to these things. I will give way to him. The record will have to show that, for whatever reason, the Chief Secretary does not want to stand up and sing the praises of the married couple’s tax allowance in this particular agenda. Yet again, he is stifled by his capture by the Conservative party, unwilling to speak his true mind on these issues.

On the employment measures in the Bill, such as they are, yesterday the Chancellor was full of rhetoric about full employment, yet the Government have come forward with no new policies to deliver this. The number of young people out of work for 12 months or more has nearly doubled since the Chancellor and Chief Secretary came to office, and we have a record number of people who want to work full time but are being forced to work part time, a Work programme that is so spectacularly unsuccessful that people are more likely to go back to the jobcentre than find work, and only 5% of disabled people on the Work programme have found work through that programme. We clearly need compulsory starter jobs for the long-term unemployed to help them to repair their CVs and to get back into work and on to the ladder to a long, sustainable career.

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[Richard Harrington (Watford) (Con)]

Rather than try to compete with the shadow Chief Secretary’s negative attitude towards the Bill and his extended romp through it, I feel it is my role—my position is somewhat more humble than his—to stick to two or three brief points and ask the Government and him to think about them.

Although I applaud the Bill’s pension clauses, I think that two particular issues should be addressed in addition to what was said in the Budget statement. The first relates to the provision of advice and information to people who choose an alternative to the previous system whereby, for good and bad, the decision was handled by an insurance company through the annuity system. Something has been published about Government money being spent on helping to provide advice or information, but my fear is that that will turn out to be a call centre somewhere, with people who may be trained only in a limited way having to advise people on the biggest decision of their lives and finding it very difficult to do so.

Regulations were brought in by the Financial Services Authority for the smaller independent financial advisers who, for better or for worse, provided such a function for people retiring with small pension pots. A very open policy by Adair Turner and Hector Sants, part of the previous administration at the FSA, in the form of new regulations relating to the retail distribution review and the disclosure fees, has effectively eradicated the very low-level IFAs—those dealing with very small pension pots—simply because it was impossible for them to charge enough money to be able to give proper advice. I understand that, because it is just economics, but my fear is that no one or no company has adequately replaced that kind of advice, let alone in relation to what the Government are about to do.

I hope that the Exchequer Secretary and his colleagues will give that some attention. I know some money has been allocated, but for most people it is the most serious decision they will ever take, except possibly when buying a house. There must be a mechanism, whether private or Government-funded, to provide good advice. For wealthier people, there is a very sophisticated wealth management business—IFAs are very good, and I am sure that different firms around the country do an excellent job—but given that the average pension pot is probably about £20,000 to £25,000, it is a very important decision for people who have saved into it all their lives. A lot of thought must go into how such people are informed, although I accept that, for regulatory reasons, there is a big difference between information and advice.

[Mark Field]

My hon. Friend makes a very important point that is worth stressing. In the midst of more and more regulation, standardisation and almost a utilisation of all facets of the financial services industry, we are moving away from the very personalised advice that the sort of clients to whom he refers so desperately require.

[Richard Harrington]

I thank my hon. Friend, who characteristically makes a very good point. The problem is that to give the kind of detailed personalised advice that people want, the fee has to be at a certain level to reward professionals for doing the job, but smaller pension pots make that very difficult. That is nothing to do with regulation; it is simply about being able to charge the correct amount for their time. I hope that there will be alternative systems, although they may not perhaps give quite the bespoke advice that is available for people with larger pots. In other fields, such as accountancy, there are ways in which people can get good advice without having to spend the vast amounts of money available to those with larger pots.

My second point about changes in pensions legislation is just a thought. Many billions of pounds will become available that would have been dealt with directly in the insurance market through the annuity system. Have the Government given any thought to providing a facility involving national savings in which the Government or an organisation acting on their behalf deal with it on a managed fund basis? There is a similar system in Australia and New Zealand, where there is a kind of sovereign wealth fund that comes from people’s pensions pot, accrued together, with the necessary caveats about risk, a portfolio approach and all such matters. The Government thereby take advantage of the savings system, so that people can retire with a very good, solid and Government-guaranteed choice—of different types of products and risks—about what to do with their money. It would be very simple, with perhaps one or two choices; it obviously could not compete with the great panoply of schemes of the large fund management companies. It would be simple so that people could understand it, and I hope that it would provide a vehicle for funds that are safe and give a good return for the public, while also providing the Government with extra funds, as happens with National Savings & Investments.

On the Budget generally, which I support fully, my fear is that this country still lacks a business culture. Both this Government and the previous one quite rightly focused on small and medium-sized enterprises, businesses and apprenticeships, with different schemes and systems to try to help them. When I speak at schools in my constituency—as for all hon. Members, they are a regular feature in my diary—it is interesting to talk to young people about what they want in life, yet very few of the brighter ones seem to desire to go into a business environment. Those who do have such a desire tend to be interested in graduate schemes with larger multinational companies or the professions. There is nothing wrong with that—some of them, heaven forbid, want to be politicians—but these are the very people whose families often have small businesses in my constituency, and there are 1,600 businesses in Watford that employ between two and seven people. It seems to me that the establishment—schools, parents and everyone else—very much look for brighter young people to go into the professions and find alternatives to self-employment.

It is very hard to change that culture, but I want to commend the Government for what they have done to help small businesses and to help people to start up businesses. Wenta in Watford—the Exchequer Secretary may be familiar with it, because it is near his constituency —is an incubator for many start-up businesses. I saw several of them when I was there only a couple of weeks ago, including a small business started by James Morgenstern in which, in arrangement with Google, people who find an image of a building on Google Earth can then see a video of its interior. He started it in his bedroom and has now moved to an office at Wenta, and the business will expand.

To use James Morgenstern’s business as an example, his next big step is to have a first employee. I can speak with a little authority, because many years ago—I am probably about the same age as his parents or, depressingly, his grandparents—I was in that position. One starts a business and it is all great: one does everything oneself, being up 20 hours a day, and all that—it is a great pity that the shadow Chief Secretary is not in his seat at the moment, because he would be very interested in this, so perhaps I should brief him fully outside the Chamber—and the next step is to have a first employee.

I am very pleased that the measures taken by this Government have helped somebody to take that step. There have been different schemes relating to national insurance, and in particular schemes that have made it very reasonable for small companies to take on apprentices, who are given a tailor-made programme. To get to employees Nos. 1, 2 and 3—after employing only oneself—is the biggest step for a small business. From the point of view of the economy, in reducing expenditure on welfare, while people benefit from earning money themselves and eventually pay tax, that step is most critical. Many of the measures in this Budget and in previous Budgets will help with that.

In the end, most people set up businesses for one reason. It may be a noble reason or a selfish reason, depending on one’s perspective, but people set up businesses to make money for themselves and their family. When I speak to students in my constituency, I always commend those who want to be teachers, social workers and doctors because when they graduate, they will give their lives to help other people in society. However, to those people who put their hands up and say that they want to become rich, live in a big house and get a Ferrari—there are a few of them—I say that, provided that they pay their taxes and employ people, they will benefit society just as much as the first group of people. I really believe that. I believe in everything that the Government have done in the Budget and in the Finance Bill to help people to do that.

The tax cut for millionaires is a mantra for the shadow Chief Secretary. I am sure he is having his cup of tea and saying the same thing to anyone around the table who cares to ask. However, I do not believe that what he says holds water, because we want people to become millionaires. I want my constituents to want to become millionaires. By the way, on the first million, they will pay about half a million in tax and will hopefully spend another 200 grand on the Ferrari. Can we please let people become millionaires? The Government should help people to generate wealth and a lot of tax to support the people in this country who really need help.

[Mr John Redwood (Wokingham) (Con)]

Are not people who set up businesses performing a public service in their own right? They are not just given a million pounds because they want a million pounds. They have to open a chemist shop and provide pharmaceuticals to people or whatever. Is that not as much of a public service as anything else?

[Richard Harrington]

My right hon. Friend makes a valid point. That is another benefit. That is another way in which setting up a business is a public service.

Many of the things that the Government are doing involve not only the Treasury, but other Departments. I mentioned the pension changes, which relate to the Department for Work and Pensions. There are also changes in skills and education. The new university technical college in Watford completed on its property in Colonial way today. That has been put together by David Meller of the Meller Education Trust, who has several projects in the area, and myself. It will provide pre-apprenticeship education for businesses in the area that have jobs and that want trained people.

The UTC is sponsored by the Hilton hotel group, which is based in Watford. In fact, it runs the world from Watford. Everyone in Watford thinks that they run the world from there, but Hilton actually does. For the sake of clarity, people should understand that that excludes the United States, the rest of the world being a region of the United States in many people’s perception. The important point is that such firms are thinking, “If we want skilled employees to build up our business, we need them to be trained from quite an early age.” Hilton and Twin Technology, which is an IT company, are the two main sponsors of the UTC. They helping to design the courses because they are prepared to guarantee that there will be work experience and apprenticeships for people who come through the college. The Government have helped to facilitate that through the Budget and the Finance Bill.

In the dream world of the Opposition, they say, “Hey, everybody should get a job and it is guaranteed for a year.” No one has explained to me where those jobs will come from. I saw people working in the park as a result of the last Government’s attempt at that. People were taken on for a year to help the park keeper, but the job disappeared because it was not really a job. I am pleased that this Government have done their best to avoid that trap.

[Stephen Doughty]

The hon. Gentleman is giving a slightly confusing impression of such schemes. I have met small businesses in my constituency that have benefited from taking on workers through the Jobs Growth Wales scheme, which they would not otherwise have done. The scheme therefore benefits the business and the person who is in a job, getting experience and developing themselves. There would otherwise have been a lost opportunity.

[Richard Harrington]

I respect the hon. Gentleman’s view. I described my experience of the last scheme and he has spoken of his personal experience. I am in favour of that kind of scheme. When I was very young and starting out in business, I was able to take on one person under the old youth training scheme, which was much maligned by the Labour Government afterwards. I paid her £30 a week and the Government made up the balance. It was a very simple scheme and not as sophisticated as the schemes that we have today. That person is still in employment, although I am no longer anything to do with the company. She was 17 at the time and is now 40. That shows how old I am, but it also shows that such schemes can work for people. In my experience, the jobs that were provided under the last scheme would not otherwise have existed. It did not subsidise a job that would have been there anyway. However, I am perfectly happy to accept his point and his experience.

[Mr Kevan Jones]

I do not think that the hon. Gentleman has looked very closely at what we did in government. The scheme that my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) referred to is more akin to the scheme that the last Labour Government had. The alternative is that people are sat at home doing nothing. I agree with the hon. Gentleman that if people do not get a work ethic early on, but have two or three years sat on the dole, it is even harder for them ever to get into work.

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[Richard Harrington]

The hon. Gentleman is absolutely right. There is a consensus that it is not acceptable if people who are on jobseeker’s allowance do not have to do anything towards getting a job. We can deal with that either by the Government providing a job through a direct subsidy, as the Opposition suggest, or through the current system.

[Mr Jones]

Will the hon. Gentleman give way?

[Richard Harrington]

If the hon. Gentleman will bear with me, I will make a bit of progress first.

The system means that people are effectively signing an employment contract when they sign on—I have seen such contracts, and the purpose is to get people looking for work. It is a programme of looking for work and taking up initiatives that have been derided by the Opposition, such as the work experience programme, the Work programme and other things. But I have seen the system work. It provides a lot of jobs in my constituency. However, the principle of what the hon. Gentleman says, which is that people should not be allowed to rot and do nothing while on jobseeker’s allowance, is right.

The hon. Member for Houghton and Sunderland South (Bridget Phillipson) made a good point that was pertinent to her constituency, and she has met people who have applied for hundreds of jobs and been unsuccessful. I accept that and have heard of similar cases. I cannot compare my constituency with that of my hon. Friend the Member for Cities of London and Westminster (Mark Field), or with Kensington and Chelsea, but in Watford—as the shadow Chief Secretary to the Treasury, who is not here, would know as he is a frequent visitor, for which I am grateful—jobs are available. I am not saying there are jobs everywhere, and it is difficult for anyone to get a job, but I accept that in the hon. Lady’s constituency things are completely different.

[Sheila Gilmore]

Is the hon. Gentleman concerned that the number of unemployed people remains relentlessly high, despite the talk about there being lots of jobs? Surely we must try to address that because 2.3 million people are still unemployed. That is a serious situation for all those people.

[Richard Harrington]

I agree with the hon. Lady, but in my constituency the number of those on jobseeker’s allowance has come down from about 3,600 to, I think, 1,700. I have met a lot of those 1,700 people and chatted to them.

[Sheila Gilmore]

Over the past couple of years in particular the number of people on jobseeker’s allowance has dropped, but the number of unemployed people has not. Only 58% of those who are unemployed are now in receipt of jobseeker’s allowance. The two figures are considerably out of synch.

[Richard Harrington]

I spend a lot of time at Jobcentre Plus—if the hon. Lady and her colleagues have their way, I am sure I will be spending a lot more time there after May next year—but I do that for a serious reason, which is to talk to people on jobseeker’s allowance. I have heard the Opposition speak about these matters, and one cannot argue with the Office for National Statistics and statistics such as that. However, I wanted to try to get to the bottom of the issue and—I am genuinely not trying to make a party-political point—that has not been my experience in my constituency.

[Bridget Phillipson]

rose—

[Richard Harrington]

If the hon. Lady will excuse me, I have taken enough of Madam Deputy Speaker’s time.

I conclude by referring again to the shadow Chief Secretary to the Treasury, who is not here. He painted a picture of the problem with millionaires getting pay rises and everybody else being increasingly impoverished. Next time he is in my constituency—as I said, he is a regular visitor to Watford—I would very much like to meet him and show him around because real unemployment has halved. Youth unemployment has dropped to pre-recession levels and is falling, and more than 400 new businesses have opened in the past year. I would like him to come with me to Watford high street and meet Alex and Isabella, whom I met last week. They have just opened an independent coffee shop there. Neither of them has any experience in business, but they are operating on the high street, along with other businesses. Those businesses are real, those jobs are real, and with the Budget and the Finance Bill I believe the Government have done everything possible to help the economy so that the experience of Watford high street becomes not the exception but the reality for many people.