Finance (No. 4) Bill

Mark Durkan Excerpts

Thursday 19th April 2012 Commons Chamber

[Ben Gummer]

The hon. Lady is entirely right. One of the terrifying things that comes out of all public opinion surveys is the lack of savings and even the lack of people expecting to save for their old age. I hope that the reforms brought in by the Minister responsible for pensions—the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb)—for auto-enrolment and encouraging savings will be the beginning of a fully funded pensions system.

However, that is for another debate. I am aware of the strictures regarding Committee time and the fact that other Members wish to speak. I would therefore like to make one final comment. Lord Turner’s 2005 report, which was commissioned by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), said that

“unless new government initiatives can make a major difference to behaviour, the present voluntary system of pension savings, combined with the present state system, is unlikely to deliver adequate pension provision.”

Moreover, he went on to say that the only means of achieving that would be through cross-party consensus. If we are to be serious about providing decent pensions, not only to people today, but to people in five, 10 and 15 years’ time—that includes people retiring this year and next year, who will be in their 80s and 90s when we will really be starting to pick up the bill—all parties must, between us, come to some sort of consensus about the difficult decisions that need to be made.

[Mark Durkan (Foyle) (SDLP)]

In that context, does the hon. Gentleman agree that if we are to encourage confidence among people out there that they can commit to planning and saving for their pensions, no Government should ever engage in an easy drive-by hit on pensioners?

[Ben Gummer]

The hon. Gentleman would be right, were the changes in the Bill modest to that degree. They represent a freeze for those who are already receiving the allowance, which will be merged into the basic rate allowance which will then move up towards it. In that regard, the taper could not be more gentle.

It is entirely right to say that the Government need to sketch out a very long-term plan for pensions, and I know that the Pensions Minister is beginning that process, but it will need the support, input and intellectual vigour of Members such as the hon. Member for Leeds West if it is to be a success in the long term. Otherwise, we and our successors will be unable to pay the bill, and pensioners will be freezing and starving as a result. The bill will be unaffordable and we will be fighting to pay it against a global economy in which we are unable to compete. That is a terrifying prospect, and I hope that we can begin to deal with it now by supporting the Government in what I hope is the first of many of the changes that need to be made in order to protect the living standards, the decency and the dignity of those people who have worked hard all the way through their lives.

Finance (No. 4) Bill

Mark Durkan Excerpts

Wednesday 18th April 2012 Commons Chamber

[Mark Durkan (Foyle) (SDLP)]

Does the hon. Gentleman also hope to have clarification from the Government of why, if the measure is about deficit reduction, they have refused to say that it will be reviewed or revised when the deficit is reduced? It will not necessarily be temporary, whereas the Chancellor was very clear that the 50p rate, while he adhered to it, would only be temporary.

[Mr Chope]

Absolutely. The hon. Gentleman makes a very good point. He may be of an age to recall what happened in the 1970s when we had the International Monetary Fund dictating to the then Labour Government what they should do to bridge the fiscal deficit that existed then. One of the measures that was introduced as a result was, in effect, an income tax surcharge which was retrospective for a year, but everybody who had been paying tax at a particular level had to pay a surcharge to help deficit reduction.

It would be possible for the Government to do something similar in this Budget to put a time limit on that, but the problem is that because of the enormity of the mess that the previous Administration made of things, we will not begin to reduce the debt until well on into the next five or seven years. In the meantime our debt will go beyond £1.5 trillion, so I am not sure that if we introduced a time limit, it could be an early time limit. It might have to be reviewed by Government in about 20 years. However, I take the hon. Gentleman’s point. Before he intervened, I was about to conclude my remarks as I know that many more colleagues wish to lay into the Opposition on their wholly misconceived amendment 1.

--- Later in debate ---

[Charlie Elphicke]

I will give the Committee an example. Let us say that I earn £150,000. Obviously, as a Member of Parliament, I do not, but let us assume that I did and that I did not feel like paying the 50p rate. What could I do? People’s response—the market response, if one likes—is to set up things such as personal service companies, and then we will not see the 50p tax rate again. They will shove money into their personal service companies and pay the small companies rate of taxation. They then sit tight and pay a very low dividend rate of taxation when they get the money out as and when they see fit. Alternatively, they do this trick where they loan themselves lots of money and pay an extraordinarily low beneficial loan rate of tax. I think that such behaviour is wrong. The Labour party ought to know about this not just because of Ken Livingstone but because others of them are up to it as well. They should come clean and be a bit clearer with the Committee about their understanding that people will avoid and forestall for good.

[Mark Durkan]

Is the hon. Gentleman trying to tell the Committee that none of those schemes or scams will happen under the 45% rate?

[Charlie Elphicke]

With the 45% rate, there is less utility and less maximisation of revenue from doing so. Of course, it is marginal, but the unacceptability of paying—paying, not avoiding—at 45% is less than it is at 50p. People resent 50p and think, “These people are trying to stuff me and take all my money away.” The 40p rate was well settled and people’s behaviour was sort of booked in. The judgment is that the most revenue will be raised halfway between the two because, on the one hand, people will think it acceptable—they will not go the extra mile to avoid it—and, on the other hand, they will not think they are being fleeced as they were under the so-called temporary 50p rate, which Labour is now saying was not temporary.

--- Later in debate ---

[Mark Durkan]

The Minister has said that the Chancellor wants to work on an evidence basis. He has previously told us that the Chancellor wants to pursue tax avoidance. Will he therefore accept amendment 76, which focuses on ensuring that the House is given the evidence relating to both tax avoidance and the effects of the additional rate of tax?

[Mr Gauke]

We have a report that produces evidence. I can also assure the hon. Gentleman that the Government have made clear their determination to reduce tax avoidance, and have taken a number of steps to do just that.

Amendment 1 has created some confusion. The Opposition Members who tabled it propose that the additional rate for 2013-14 should be left out altogether. Unlike the 45p rate proposed by the Government, the higher rate of 40% would apply to income over the higher-rate threshold. I understand that Labour sources have been briefing this afternoon that the amendment deliberately leaves the top rate undecided. It does not leave it undecided; it abolishes it. The Labour party has found itself in an extraordinary position.

We have heard astonishing suggestions that we should accept the “static” argument, although, to be fair to the hon. Member for Pontypridd, he has been somewhat hesitant about simply quoting the static numbers as if they were acceptable. We must take account of the behavioural impact, and as we have seen more evidence, it has become clear that it has been greater than was anticipated.

The effect of the 50p rate has been damaging not just to the Exchequer in failing to raise the money that was anticipated, but to competitiveness. There has been a 29% increase in Britain’s—[Interruption.]

--- Later in debate ---

[Owen Smith]

My hon. Friend is right. She is talking about the values and priorities that I mentioned at the beginning of my speech. What are our values? What priorities do we set, according to those values, in respect of fiscal and budgetary decisions? At the moment, it is hard to discern that this Government’s values involve anything other than protecting privilege at the expense of hard-working families and of the most vulnerable in our society.

[Mark Durkan]

The amendment represents an attempt to make the bank levy a more articulate tax by incorporating a payroll tax element into it. Would an attempt to ensure that bankers on excessive remuneration did not benefit unduly from the cut in income tax be consistent with the Government’s efforts to increase the levy because they want to ensure that banks do not benefit unduly from the reduction in corporation tax?

[Owen Smith]

That would be entirely consistent. The Minister knows that our amendment merely asks the Chancellor of the Exchequer to review the possibility of incorporating a bank payroll tax in the bank levy, and to publish a report within six months on how the additional revenue might be spent. We have suggested that we would spend it on creating 100,000 jobs for the unemployed youth of our country, 1 million of whom are still out of work today despite the recent small but welcome fall in unemployment. We would also spend the money on building 25,000 affordable homes, which are equally vital at a time when homelessness is rising at a rate that has not been seen for 25 years.

--- Later in debate ---

[Karen Bradley]

I entirely agree. Clearly 50% of nothing is not as much as 45% of something, It is important for us to tell the world that the UK is open for business, and to say “Bring your business to the UK”. That applies very much to the financial services sector.

We have already discussed how much money the banks might or might not pay towards reducing the deficit. What we are considering now is just the additional amount that they are paying as a result of the increase in the bank levy. They are, of course, paying an awful lot more to the Exchequer. I believe that the financial services sector contributes about £32 billion to our economy, and I think it important for us to retain and increase that amount of revenue. I firmly believe that we should have taxes that raise the maximum amount of revenue to be spent on our schools, hospitals and police officers, and that ideology should not determine how we set our tax rates.

The main point that I want to make about the bank levy is that it will raise the money irrespective of the amount of bonus paid. I remember when the previous Chancellor announced, in his 2009 pre-Budget report, that the banks would pay

“a special one-off levy of 50 per cent.”—[Official Report, 9 December 2009; Vol. 502, c. 367.]

At that time I was working in a large accounting practice, and was analysing the Budget. The biggest surprise came when the then Chancellor said that the Treasury expected the bonus tax to raise £500 million. Those of us who were in that firm at the time—it was one of the big four—were staggered that the Treasury should think that only £500 million-worth of bonuses would be paid, given that the tax meant that an equal amount would be paid to the Exchequer, and I think we have now seen that that did not happen.

The purpose of the levy was to drive behaviour. The point of it was that the banks would not pay the bonuses. The then Chancellor said that the Treasury expected a reduction in the level of bonuses that would be paid that year, but that simply did not occur: the bonuses were still paid. I personally believe that tax is a very blunt instrument for the purpose of driving behaviour, and that people will behave in the way in which they wish to behave, whether it involves charitable giving, buying pasties or paying bonuses. Tax is something that businesses “manage around”. They do not think of it as a behaviour driver, and it clearly did not drive behaviour in the way that the Treasury expected in that instance.

[Mark Durkan]

Has the hon. Lady not just contradicted what she said a couple of minutes ago? She suggested then that if we entertained this idea, we would ensure that banks became financial refugees in all sorts of other places in the world.

[Karen Bradley]

I do not agree about the contradiction. If it is suggested to the banks that the rate of tax will be at a certain level and that there will be a bonus tax, that will discourage them from remaining in the UK but it will not stop them paying the bonuses, which is what the Treasury wanted the special one-off tax to do.

--- Later in debate ---

Alongside action to curb excessive risk taking and strengthen balance sheets, we are taking action to increase transparency and power for shareholders, including implementing the most comprehensive remuneration transparency and disclosure regime among the major jurisdictions; introducing ambitious reforms to the UK’s corporate governance regime to give shareholders the powers to hold directors accountable for remuneration decisions; and putting in place a wide range of policies to tackle the structural and tax distortions that are the source of unacceptable bonuses.

[Mark Durkan]

rose—

[Mr Hoban]

I am trying to deal with the point that the hon. Gentleman made. It is clear that the bank payroll tax had a negligible impact on bonuses paid, whereas this Government’s action has led to bonus pools falling year on year. For example, RBS’s bonus pool fell by 40% compared with the previous year’s, and Barclays’ bonus pool was down by 25% compared with that in 2010. Real changes in remuneration practice are coming through as a result of measures that this Government have championed.

[Mark Durkan]

I wanted to ask about a previous point that the Minister made. He said that he hoped there would be shareholder activity to help to restrain bank bonuses. Would putting a bank payroll tax window into the permanent bank levy that the Government are introducing not be an aid to shareholders’ interests, because it would mean that the level of bank bonuses affected the overall levy that the bank was paying?

[Mr Hoban]

I think shareholders are well aware that bonus pools affect banks’ profitability and the amount that they are able to pay to their shareholders by way of dividends. I am demonstrating that the reforms that we have introduced since we have been in office have been far more effective in curbing behaviour in bank boardrooms than the bank payroll tax.

Let me deal now with youth unemployment, which is highlighted in the Labour amendment. The Government have introduced a wide range of measures to tackle the problem. We have improved the support that is available to jobseekers. We have introduced a more flexible jobseeker’s allowance regime better to support a jobseeker in the search for work. In June last year, we launched the Work programme, providing specialist support over the next five years to help to support the longer-term unemployed and help the most vulnerable jobseekers to keep in touch with the labour market. Later this year, we will run a pilot to find the best way to introduce a programme of enterprise loans to help young people to set up and grow their own business. We are taking other actions to tackle the problem.

We are strongly of the view that it is right that banks should make a fair contribution that reflects the risks they pose to the UK financial system and the wider economy. That is why we introduced the permanent bank levy—a move that Labour Members chose to disregard when they were in government. We need to balance fairness and competiveness and raise the revenue that we need. The actions that we are taking demonstrate that we have a clear strategy in place to enable economic recovery and create jobs. The bank levy is the right course of action. I ask the hon. Member for Pontypridd to withdraw his amendment, and I move that clause 209 and schedule 33 stand part of the Bill.

Amendment of the Law

Mark Durkan Excerpts

Thursday 22nd March 2012 Commons Chamber

[Mark Durkan (Foyle) (SDLP)]

Unlike Government Members, I am not in a rush to gush about how much this Budget does for families or firms in my own or anybody else’s constituency. However, I am also not here to pretend that everything in this Budget is bad, as it contains measures that will help some sectors and areas. Moving on general anti-abuse rules to deal with tax avoidance is good in principle and welcome. Obviously, we have to see the exact detail to know whether the effects will match up to the stated intent. Similarly, tax simplification for small businesses is a good thing in principle, but again the devil will be in the detail, as it will be in respect of removing borderline anomalies. Many of us have been lobbied by our local chippies and others about removing some of those anomalies, but of course there is always the danger that we end up redrawing the margins in particular businesses or sectors.

The Budget makes new provisions for the carbon price floor. Coming from Northern Ireland, I am sorry that the Government have not seen fit to open a window to relieve the serious competitiveness and investment problems that will be caused to our generating industry, because, in the context of the single energy market in Ireland, the carbon price floor will, in effect, incentivise investment to go south of the border and not stay in the north.

There are other issues to address, such as fuel duty. Again, I regret that the Government have not done more to help firms and families, who have both been affected deeply by these problems. The Government have boasted greatly about the measures that they have taken to date to protect people from the price surge, but that surge protection is still needed and now is not the time to let it go on the assumption that the other tax changes that the Government have announced will somehow carry people through or forward.

Obviously, not least in the context of Northern Ireland, I support the further moves in relation to “above the line” research and development tax credits and the tax reliefs in the creative sector, not least in film and high-end television, where Northern Ireland has recently been doing well.

On corporation tax, we in Northern Ireland are faced with the highly competitive corporation tax rate on the other side of the border and we have been looking for reductions and modifications there. I have no argument in principle with moves to reduce corporation tax, but I wonder about the Government’s measures on the control of foreign companies and the full reform that is there. Previously, I have asked about the impact that that would have on the moves to restrict the incentives towards using tax havens, and I remain concerned that while the Government have perhaps redressed some of the concerns that have been raised about the possible loss to business and revenue in the UK, there will still be a loss to developing countries’ revenue, which they absolutely need, as a result of the measure.

The Government are making much, not just in the Budget but more widely, about what they are doing for business lending. We have all heard this before. All the measures that are made relying on quantitative easing and now credit easing depend on the banks. We are told about the £20 billion guarantee, so that some banks—those that opt into the scheme—might give businesses credit at 1% less than they would otherwise have given. If yet more billions are being spent just to make that marginal difference, one has to wonder whether that is the best way of gearing support towards growth and the economy. More direct uses of that money could yield a much readier growth impact.

On the tax side, we have the hit on pensioners, with the move in the allowance and more people being brought into taxation. At a time when we are again encouraging people to save towards pensions and we again have a reform and recasting of the pension system, for the Government to come along and make another tweak that appears to hit pension provision and pension plans sends the wrong signal. It gives people the idea that the Government engage in jiggery-pokery—that they encourage people to save pensions but that then when they do so they will be clobbered. It is just a bad and unnecessary measure at a time when we are trying to encourage people to save more for pensions. Other people whom we are asking to save for their pensions are middle-income earners: we are asking them to make strong provision for their pensions and to make provision for their children’s third-level education. Many of them are still being hit by the change to child benefit. That will hit some of those people’s capacity to save for their own pensions as well as to support their children.

The Chancellor has told us of the Adam Smith principles of tax being simple and predictable, supporting work and being fair, but the tax charges being introduced in relation to child benefit go completely against that. It is a very complicated and clumsy system that is going to cause problems, and not just for those families who are affected—it will cause serious problems for employers. It will not be long before employers’ bodies will be coming to Government and saying, “You have created a very serious problem here”—a much bigger problem than the 50p tax ever created for those firms in how they could incentivise rewards and repay people. The Chancellor also mentioned the £10 billion cut in welfare coming after the next election, which he has been framing as necessary if other cuts are to be sustained.

[Sheila Gilmore]

Will my hon. Friend comment on the initial speculation in today’s edition of The Times, which is hardly a bastion of left-wing politics, that those cuts might affect attendance allowance, means-tested disability living allowance or mean the taking away of carers’ allowance?

[Mark Durkan]

Of course, these cuts could affect anything. We were told when the Welfare Reform Bill went through Parliament that that was the final destination of welfare reform. Now it is clear from the Chancellor that it is simply a staging post for further cuts. We were told about the spoonful of sugar—the extra money going into making universal credit work in the transition period—but is it the Chancellor’s plan to remove some of that, and to pull back the extra investment that has gone into making universal credit work and more acceptable, or will other benefits such as those for people with disabilities be affected? We know that families with disabilities are already being squeezed. Are they going to suffer more?

In the light of people in the Chamber teasing others about what they will put in their next manifesto, will the Government parties tell us what they will be putting in their manifestos about the £10 billion-worth of further cuts in welfare? Who will be hit? There is no point in people asking one party what they are going to put in their manifesto unless others are going to follow through. The Government are saying that such cuts will be needed after the election; will they say during the election campaign where those cuts will be made?

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

May I follow up the very important point that my hon. Friend made about the reduction of £12 billion in welfare? Does he recall that last week when we had the debate on women’s rights in Westminster Hall a number of our friends from Northern Ireland outlined just how serious that problem was? Does he think they will be in receipt of cuts as well?

[Mark Durkan]

Absolutely; that is the fear that we must have. The Chancellor has put forth the signal that such cuts would be needed and would have to be factored into the next spending review. Although this House has discharged its duties on the Welfare Reform Bill, we must ask what the changes will be. Contrary to what the Chancellor has said about support for families, the Government's direction of travel in everything they do is putting more of a squeeze on families—both low-income families on benefits and middle-income families given the pressures that they are facing.

The Chancellor also used the Budget to frame questions about moving towards regional pay in the public sector. Speaking from the Opposition Benches, I want to say straightforwardly that I know that he is not the first Chancellor to toy with the idea of regional pay and tinkering with the framework. I have heard that from previous Chancellors and Prime Ministers, so I am not in denial. I was as opposed to it then as I am now. I was intrigued to hear the Chancellor say that he had submitted evidence to the independent pay review body, so I went to the Library to see what that evidence was and I have the “Dear pay review body chair” letter from the Chancellor. Some 11 pages of evidence were submitted. I am not saying that it is dodgy dossier stuff, but in the material that it sources it really is dubious dossier stuff. It shorthands academic studies, possibly doing a disservice to the academics who completed them, in saying that the evidence suggests that the quality of public services would directly benefit if public sector pay became more responsive to local labour markets. It claims that one study

“found that over one quarter of hospital targets were negatively associated with the public/private wage differential.”

It said that another study

“found that a 10 per cent increase in wages outside of the nursing sector was associated with a 7.4 percent increase in mortality rates from heart attacks.”

When that is the quality of evidence that the Government are submitting to the pay review body, we need to examine it further.

--- Later in debate ---

[Mr Gyimah]

It is precisely because plan A is working that in this Budget we can afford to lift 2 million people out of tax—2 million people who were penalised by the 10p tax introduced by the last Labour Government. Because plan A is working, 24 million of the 30 million workers in the UK can get a tax cut—a very important tax cut in very difficult times. The hon. Member for Birmingham, Erdington (Jack Dromey) said that he would compare his record with our record any day. I say to him that we are lifting 2 million of the poorest people out of tax, while the previous Labour Government penalised them. Our record certainly stands up to scrutiny on that.

Labour has now quietly dropped its plan B, and is instead opportunistically opposing our measure on the 50p tax rate. However, Labour does not say that it would reinstate that rate if it were elected to office tomorrow. It is also saying it would somehow give child benefit to higher rate tax payers.

[Mark Durkan]

If the need for deficit reduction was the justification for the temporary nature of the 50p tax rate and the withdrawal of child benefit, why has the 50p tax rate remained a temporary measure while the withdrawal of child benefit will be permanent?

[Mr Gyimah]

All three main parties agreed that the 50p tax rate was to be a temporary measure. Also, we must ensure that any tax that is imposed actually raises the required revenue for the Government coffers. If it does not do so, it would be irresponsible of a Government to carry on with that tax just because it is good politics. It is right for the Government to set that tax at a rate that discourages avoidance and encourages people to pay.

Fairness must not be the only test of this Budget. Economic growth is also very important. In truth, the Chancellor has very limited room for manoeuvre, and it is good that we have nevertheless done quite a lot for hard-working people, giving back to them more of their hard-earned cash. However, only economic growth will lift the prosperity of all of us. Today, we focus on who are the winners and losers from this Budget, but growth is the most important theme.

I was therefore encouraged to hear the Business Secretary talk about access to finance from the banks. My party colleagues and I know that more borrowing, spending and debt is not the way to get economic growth and to create jobs. We believe that the way to achieve that is through encouraging a spirit of enterprise and adventure, but we cannot encourage that unless we ensure that finance gets into the real economy.

One of the biggest challenges we face in coming out of the 2008 financial crisis is the concentration in our banking system. Some 90% of small business lending is concentrated among five banks. No matter what they say, that means that there is little price competition and it is important that the Government do a lot to ensure that we can get money into the real economy. That is why I welcome credit easing, because by using the Government’s balance sheet to enable banks to borrow and lend to businesses, we enable a situation whereby even if a business had a 1% interest rate discount, it could refresh loans that may otherwise not be refreshed.

Financial Services Bill

Mark Durkan Excerpts

Monday 6th February 2012 Commons Chamber

[Mr Osborne]

The right hon. Gentleman keeps saying there were two people, but there were three principals in the tripartite committee. It was chaired by the Chancellor of the day—the Chancellor whom he advised—but as I understand it, that Chancellor never convened the tripartite regime at the principal level. [Interruption.] I can tell the shadow Chancellor that under the tripartite regime now—that is still the current arrangement—there are meetings on at least a monthly basis with myself, the Governor of the Bank, the chairman of the FSA and so on. In the tripartite system that the shadow Chancellor saw at first hand, the principals, including the Chancellor of the day, never in 10 years—we are not talking about 10 weeks or 10 months—convened a meeting of the principals. The fact that he says that it was entirely the job of the Governor of the Bank of England or the chairman of the FSA to call a meeting, when the chair was the Chancellor, who could have called a meeting at any time he wanted, is very revealing about what went wrong.

[Mark Durkan (Foyle) (SDLP)]

Is the power to direct, to which the Chancellor has referred, contingent on the Governor of the Bank of England formally advising the Chancellor of a material risk, or could the Chancellor exercise that power to direct on the basis of his own concerns, which may have been conveyed to him from the industry, Parliament or any other intelligence? The Bank might be loth to advise the Chancellor formally in that way if doing so would trigger the power to direct, because it might want to avoid that, and the wider concerns that it might raise. Once the Bank has had the “Shall we tell the Chancellor?” discussion, what should the Treasury representative do during that discussion and after it?

[Mr Osborne]

As I have said, when the Bill is passed, the statutory responsibility will be on the Bank of England to inform the Government if there is a material risk that public funds might be used. We are trying to get away from a system in which it is the Treasury’s responsibility to try to regulate the financial system on a day-to-day basis in peacetime. We are giving the responsibility and clear accountability to the Bank of England so that it will trigger the arrangement by informing us of a material risk. As is set out in the legislation, twice-yearly meetings between the Chancellor and the Governor to discuss these things are required, although there could also be further meetings. Once the Bank has informed the Treasury of a material risk, which it will have a statutory responsibility to do, there will be a power of direction. I should just say, for the sake of completeness, that if we wish to keep the details of the use of this power confidential, I or my successors would have to inform, on a confidential basis, the Chairs of the Treasury Committee and the Public Accounts Committee, so that representatives of Parliament were informed.

The fourth and final flaw in the system that we are trying to address is that customers and consumers too often get a raw deal from the regulation of financial services. The disappearance from the high street of names such as HBOS and Bradford & Bingley has inevitably reduced competition in an industry that was becoming more and more consolidated even before the crash. The existing regulator’s dual prudential and consumer remit means that it cannot give consumer interests its undivided attention. In response to the Vickers commission and the Joint Committee, the new authority will have an explicit responsibility to promote competition. We have listened to the Joint Committee and announced that we will also bring the regulation of consumer credit into the authority’s remit so that, for the first time, the regulation of all retail financial services will be under one roof, and things like payday loans will be subject to tougher regulation.

--- Later in debate ---

[Mark Durkan (Foyle) (SDLP)]

Like the hon. Member for North East Cambridgeshire (Stephen Barclay), I shall address areas in which we need to proof and improve the Bill before it goes to another place.

I first want to express support for the hon. Member for Walthamstow (Stella Creasy) in respect of consumer credit protection. Not only lenders of consumer credit should be under the FCA, but debt collectors, brokers, retail services that sell insurance products and those offering debt management services.

Similarly, I support the hon. Member for Rutherglen and Hamilton West (Tom Greatrex). Contrary to suggestions made earlier in the debate that the Bill is about putting Parliament back in charge, it is notable that inquiries and investigations under part 5 go to the Treasury. There is no reference whatever to Parliament in that measure, unlike in section 14 of the Financial Services and Markets Act 2000, which clearly states that any such report will be laid before Parliament.

The Financial Secretary no doubt anticipated that I would mention credit unions in Northern Ireland, because their regulatory status will change in the wider context of the changes heralded by the Bill. He was good enough to receive a pick-up band of Northern Ireland MPs last week to discuss our outstanding concerns on the detail. I can assure him that we are pursuing those. We have not yet eliminated him from our inquiries, but we are making the necessary representations to the FSA and will make them to its successor, the FCA.

I wanted to talk not just about the implications of the Bill in terms of the lessons of the banking collapse, but about other provisions. The launch of auto-enrolment means that millions more people will save for a pension through the capital markets, including many low-paid workers. In recent months, we have seen that pension savers’ interests are not always put first by the industry. The spotlight has been turned on to excessive and untransparent charges, and conflicts of interests.

The fund management industry’s duties to savers are poorly understood and observed. The Law Commission has confirmed that when firms manage other people’s money or give financial advice, they have strict fiduciary duties to act in their clients’ interests—both individuals and institutions, such as pension funds, that represent large numbers of underlying savers. That fact is, of course, not generally accepted or reflected within the industry. In addition, as we have heard, because those are common law duties, they do not form part of the FSA’s regulatory approach. An explicit reference to fiduciary duty in the Bill would give the FSA a powerful tool to ensure that consumers’ interests are protected.

Examples of where consumers have suffered from those duties not being observed include unauthorised profits, and recent research shows that some fund managers made significant profits from lending out clients’ shares with only two thirds of the income from those activities returned to the fund. Of course, under fiduciary duties, any such profit should go back to the underlying investor. Another example is in relation to the exercise of shareholder rights. Asset managers, acting on behalf of pension savers, should exercise their voting rights at major companies in the best interests of the savers, without regard to the interests of the firm, but we have anecdotal evidence of fund managers being told by superiors to wave through excessive executive pay to avoid upsetting potential clients. So the interests of the business are placed ahead of the savers whose money is at stake.

[David Mowat]

I agree with the hon. Gentleman’s point about the market failure that we have seen in the pension and fund industry in the last decade or so, which is close to being a scandal. He is right that the Bill does not include a fiduciary duty, but it would give the FCA a competition requirement that, if applied properly, would prevent the market failure and the non-transparent charges that are the core of the issue.

[Mark Durkan]

The hon. Gentleman has more confidence in the extensive effect that he expects from the competition requirement. I believe that that should be complemented by this other insertion in the Bill.

During pre-legislative scrutiny—about which we heard earlier—the Joint Committee heard that the Bill was unbalanced. On the one hand, it enshrines the principle that consumers are responsible for their decisions, but on the other it does not place any equivalent responsibility on firms. The Joint Committee recommended that the Bill should

“place a clear responsibility on firms to act honestly, fairly and professionally in the best interests of their customers.”

Meanwhile, the Financial Services Consumer Panel recommended that this should take the form of an explicit fiduciary duty to clients.

In response, the Government have inserted a new principle to which the FCA must have regard, which is that

“those providing regulated financial services should be expected to provide consumers with a level of care that is appropriate”,

having regard to the risks involved and consumer capabilities. But that new wording does not provide a high enough level of protection for customers. It clearly lacks clarity on what might constitute an appropriate level of care and stops short of confirming that those managing other people’s money owe fiduciary duties. We need an explicit clarification in the Bill.

Another area in which the Bill is remiss is the whole principle of stewardship. In the aftermath of the financial crisis, it was widely recognised that major institutional investors had behaved as absentee landlords, not doing enough to challenge risky behaviour at the banks that they owned. This had direct consequences for many of the pension savers whose money those shareholders invested. According to the OECD, in the year after the crisis pension funds lost an estimated 17% of their value.

After the crisis, we had the Walker review, and the Financial Reporting Council established the UK stewardship code, designed to encourage investors to behave as active owners of the companies in which they invest. This agenda is increasingly recognised by both the Government and the Opposition in all the recent, highly publicised arguments about executive pay and what can be done to curb it. Both leading parties in this House have placed great emphasis on more shareholder responsibility. But to date the FSA has treated this as a fairly marginal issue, appearing not to regard it as a consumer issue. It is not clear that it will be regarded any differently by the FCA.

There is no mention of stewardship in the Bill, although it is clearly relevant to the objectives of the PRA and the FCA. In particular, there is a danger that stewardship will continue to fall through the cracks in the new regulatory architecture. The PRA is likely to take little interest, because the ordinary asset managers of the firms in question are FCA-regulated, yet there is little reason to assume that the FCA will accord the issue any higher priority than the FSA does at present.

The proposed duty of co-ordination mentioned earlier by the hon. Member for Cities of London and Westminster (Mark Field) will do little to resolve that issue, because it will focus purely on reducing the burden of regulation on dual-regulated firms, rather than on preventing gaps in regulation between the new authorities. That measure will deal with an overlap as it affects the business; it will not deal with the gaps affecting consumers. Again, there is a hole in the legislation as far as consumer protection is concerned.

[Several hon. Members]

rose—

Tax Avoidance (Public Servants)

Mark Durkan Excerpts

Thursday 2nd February 2012 Commons Chamber

[Danny Alexander]

My right hon. Friend is absolutely right that we need to be robust about these matters. Frankly, I think this Government have been a great deal more robust on tax avoidance and tax evasion than our immediate predecessor. I certainly agree with the principle that he annunciates, which is that we need to ensure that everyone pays their fair share of tax and that arrangements are not put in place that are in breach of the guidelines that I set out earlier, which specifically say that arrangements to avoid tax for individuals should not be put in place.

[Mark Durkan (Foyle) (SDLP)]

Can we really have any remedy to such scandalous devices without restitution? Will any review by Revenue and Customs have an eye to possible recovery?

[Danny Alexander]

As I said, the arrangement has been ended by the Student Loans Company in this case, as my right hon. Friend the Minister for Universities and Science has said. The review that I have undertaken is looking at the degree to which such practices are prevalent across the rest of Government. I have not given any consideration to the question of restitution, but I shall certainly do so in the light of the hon. Gentleman’s question.

Oral Answers to Questions

Mark Durkan Excerpts

Tuesday 24th January 2012 Commons Chamber

[Danny Alexander]

I am certainly not going to attempt to take responsibility for things the Chancellor and the Prime Minister said in opposition, but I can take responsibility for what the coalition Government are doing. The announcements made yesterday by the Business Secretary on tackling executive pay went far further than anything the hon. Gentleman’s party did during 13 years in government. That alone should give him pause for thought.

[Mark Durkan (Foyle) (SDLP)]

Giving more powers to shareholders sounds welcome, but we know that their existing powers on executive pay have not been readily used. Should institutional investors not be made more accountable to the millions of ordinary savers whose money is at stake, and does the Chief Secretary believe that the Chancellor would be ready to exercise his reserve powers to make them disclose to their savers how they vote?

[Danny Alexander]

One of the striking things about how the climate of opinion on this subject is changing in recent times has been the change in attitude of institutional investors. The comments of Otto Thoresen, the head of the Association of British Insurers, for example, to the banks in this remuneration round suggests that such investors are interested in and seized of the importance of ensuring that proper levels of remuneration are paid, not unfair rewards for failure.

Royal Bank of Scotland (FSA Report)

Mark Durkan Excerpts

Monday 12th December 2011 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point, because there was a culture, as documented in the report, that meant that directors on the board of RBS did not challenge the CEO sufficiently robustly. That needs to change. We also need to ensure that the incentive arrangements for directors are robust. Under the previous regime, bonuses could be paid out in cash straight away. Over the past couple of years, tougher rules have been put in place to defer bonuses, to make sure that they are paid in shares and to claw back bonuses where there has been failure. That is a tough regime in place and it should make sure that the incentives of directors are in line with those of shareholders.

[Mark Durkan (Foyle) (SDLP)]

What are the issues inhibiting the Minister from making a clear commitment to strengthen legal powers so that action can be brought against directors of failed banks?

[Mr Hoban]

I understand the frustration expressed in the hon. Gentleman’s question. We need to look carefully at the proposals in Lord Turner’s report and we will have the opportunity to legislate in the Financial Services Bill, if appropriate, but the hon. Gentleman would not want me to engage in a knee-jerk response to a report that was only published first thing this morning. I want to ensure that we have the right measures in place, whether through company law or regulation, to ensure that we have good-quality people running such organisations.

Autumn Statement

Mark Durkan Excerpts

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

I am very happy to look at ideas to enhance the business growth fund, which is principally operated by the banks, under which they have committed to invest in the equity of small companies. We have already announced the seed enterprise investment scheme, which will help angel investments in companies. I am glad that my hon. Friend supports the commitment that we made to the new crossing at the lower Thames.

[Mark Durkan (Foyle) (SDLP)]

The Chancellor has proclaimed support for business and jobs in the present climate. He also puts at a premium innovation, productivity and exports. Do his plans therefore extend to assisting firms in the sterling zone—I am talking particularly about the areas of medical devices, life sciences and sustainable technologies—that are finding the flow and scale of orders from eurozone countries compromised and the reliability of payments damaged because of austerity measures in those countries?

[Mr Osborne]

I am not sure that I agree with the hon. Gentleman that austerity measures are to blame, but I certainly agree that that is a real problem. Of course one of the consequences of the ongoing eurozone crisis has been an increase in bank funding costs across the European continent. The further disruption to the financial system is having an impact on exports to the eurozone, which is one of the reasons that this crisis is having a chilling effect on the British economy. Later today, I will be going to another meeting of European Finance Ministers in Brussels to try to get a better resolution of the problems.

Fuel Prices

Mark Durkan Excerpts

Tuesday 15th November 2011 Commons Chamber

[Sammy Wilson]

That just illustrates the inflationary impact of the situation, not just on individual families but throughout the economy, and the Government ought to bear it in mind as they ask themselves, “What shall we do to regenerate the economy?”

Various reasons why it is difficult to do something have been given. The first, which we have heard from Government Members, is that if we try to reduce VAT Europe will intervene. That is another reason for renegotiating our position on Europe—but leaving that aside, I note that 75% of the tax is not VAT but fuel duty, so even if there is a problem with Europe, the Government have another way of dealing with the problem.

The second reason that has been given has involved asking, “What about deficit reduction?”, but there does not seem to have been any difficulty with deficit reduction when it has come to bailing out the euro, with £12.5 billion having already been pumped into it and the Government talking about more money going to the International Monetary Fund. Indeed, as Government Members have said, the measure could almost be self-financing anyway: if, for example, it led to a rise in demand, there would be more duty; if it cut costs, more corporation tax would be paid.

[Mark Durkan (Foyle) (SDLP)]

Does the hon. Gentleman recall that previously, whenever the Scottish National party or Plaid Cymru moved their various motions, Labour voted them down and the Tories abstained, and then the Tories voted them down and Labour abstained? Does he believe that there must be something particularly volatile in fuel prices on the road to Damascus to bring about such changes in outlook?

[Sammy Wilson]

I believe in Damascus road experiences, and if they help the consumer that is a good thing, so I look forward to that. I hope that the Government will have a Damascus road experience on this issue. Consumers would be pleased if they did.

In opposition, the Conservatives made promises. Now that they are in government they hold in their hands the levers to help consumers, and from this debate will come the expectation that promises made in the past will be delivered by those who hold the levers and have the ability to use them in the present.

Public Service Pensions

Mark Durkan Excerpts

Wednesday 2nd November 2011 Commons Chamber

[Mr Speaker]

Well, that is a first—not the fact that the question has been answered, but the fact that a Member has been self-denying to the extent that he sits down when his question has already been dealt with. That is an interesting precedent.

[Mark Durkan (Foyle) (SDLP)]

Has the Chief Secretary taken into account the particular responsibilities of devolved Administrations and the rights of their public sector workers—many of them low paid, and all of them tax-paying—and do the terms of today’s offer differ from the previous terms about which he wrote to those Administrations?

[Danny Alexander]

The hon. Gentleman makes a very important point. These matters have been discussed regularly at the Finance Ministers quadrilaterals, which bring the Finance Ministers of the devolved Administrations and me together, so people have been kept informed. The tradition has been that the devolved pension schemes follow by analogy the agreements reached at a UK level. I will write to the devolved Finance Ministers to set out what I have announced today, so they can take that into account in their own decisions on these matters.