Finance Bill (Second sitting)
Mark Garnier Excerpts(10 years, 1 month ago)
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Mark Garnier (Wyre Forest) (Con)
My hon. Friend has referred to specific personal changes that help, but is it not also the case that the Government have done a great deal to support very small businesses, of which many are microbusinesses or sole traders? The reduction in corporation tax and the non-domestic rate relief for those very small businesses will also help households, particularly those who are self-employed and who run small businesses.
Mr Gauke
My hon. Friend is absolutely right. The best way to ensure that we have rising living standards is to have strong economy, which ensures that we encourage businesses, attract investment to the UK and reward entrepreneurship. That is the Government’s approach, but whether it is that of the official Opposition remains to be seen.
As we are talking about income tax, it is worth pointing out that 3.8 million individuals have been removed from income tax altogether since 2010 as a consequence of increases in the personal allowance. The Government are committed to continuing to make work pay and have pledged to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament. The Government also believe that people working 30 hours a week on the national minimum wage should not pay income tax. That is why we are introducing a change so that the personal allowance will automatically increase to ensure that it does not fall below the equivalent of 30 hours a week on the national minimum wage.
This will be the first time in history that the personal allowance has not been indexed on the basis of price inflation, instead ensuring that individuals who earn up to 30 hours on the national minimum wage will not pay income tax in the future. Clause 3 changes the basis of indexation for the income tax personal allowance from the consumer prices index to ensure that it is always set at a level at least equivalent to 30 hours a week on the national minimum wage. The change will take effect once the personal allowance reaches £12,500. Individuals working 30 hours a week or fewer on the national minimum wage will therefore be taken out of income tax altogether.
Clause 4 sets out that, until the personal allowance reaches £12,500, the Chancellor will have a legal duty to consider the impact of any proposed increase to the personal allowance on an individual working 30 hours a week on the national minimum wage. The clause also sets out the requirement for the Chancellor to make a statement on the impact that this will have on those individuals when an increase to the personal allowance is made at a future fiscal event.
The changes to income tax thresholds in the Bill will mean that an individual can work at least 30 hours a week without paying income tax both in 2015-16 and next year. In 2010, an individual could work only 21 hours on the national minimum wage without paying income tax. In time, an individual working 30 hours on the national minimum wage will be brought back into income tax.
On clause 5, it is worth pointing out how much the personal allowance has increased in recent years. In 2010-11, it was just £6,475; now, it is £10,600. Following on from that record, in this Parliament, we have committed to delivering a high wage, low tax, low welfare society. That includes reducing taxes for the lower paid, and that is why we have committed to increasing the personal allowance from its current level of £10,600 to £12,500 by the end of the Parliament. Clause 5 increases the personal allowance from £10,600 in 2015-16 to £11,000 in 2016-17 and to £11,200 in 2017-18.
In total, 570,000 individuals will be taken out of income tax altogether by 2016-17. That will increase to more than 660,000 by 2017-18. The changes represent a tax cut for 29 million taxpayers who will see their typical income tax bill reduced by £905 by 2016-17. Taxpayers who are over 65 will also benefit. From 2016-17 onwards, the tax system will be simplified so that all taxpayers will be entitled to the same personal allowance; the remaining age-related allowance of £10,660 will be merged with the higher personal allowance of £11,000.
The clauses allow us to support those in work by enabling people to keep more of the money they earn by paying less income tax. We are helping the lowest paid by taking them out of income tax altogether and we are moving towards a high wage, low tax and low welfare society.
Tax Credits
Mark Garnier Excerpts(10 years, 1 month ago)
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Mark Garnier (Wyre Forest) (Con)
I am not going to pretend that it is easy to stand up and speak in favour of something that is, as the hon. Member for Feltham and Heston (Seema Malhotra) has said, going to be tough on families, but this is none the less the right thing to do. We have heard a great many estimates of how families are going to be affected, with a variety being produced by the Institute for Fiscal Studies. The one that I have seen gives a figure of £750.
This measure will affect families, but it is worth bearing in mind the fact that there are mitigating factors that will make a difference for those families. We have heard about the tax threshold increases, and it is also worth bearing it in mind that many of those families are also small and micro-business owners who have benefited from reliefs on business taxes and small business rate relief. The economy is also a lot better, with very low inflation rates at the moment.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
Would the hon. Gentleman like to reflect on the fact that someone working full time and earning £17,000 a year will lose close to £2,000 as a result of these measures? Why do the Government want to punish hard-working families in this way, at the same time as they are increasing the inheritance tax threshold? This is vindictive and nasty.
Mark Garnier
I am not sure I recognise the figure of £2,000 on a £17,000 income, and I do not accept that this Government are punishing hard-working people. I see a Government who are doing an enormous amount by reducing the threshold tax rates and by helping small businesses. We have seen more people come into work than there have ever been before. This Government have had a huge number of successes, so I do not recognise what the hon. Gentleman is describing.
There are two particular reasons why I support this measure, the first of which was highlighted by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), the former Chancellor, and my hon. Friend the Member for Croydon South (Chris Philp) in talking about the effect that tax credits have on employers. We do not know exactly the extent to which this has been the case, but without a shadow of a doubt some employers will have been not paying the right salary or pay, given that the Government are subsidising not necessarily those people on low incomes but the employers employing people on low incomes. We also know that if that did happen early on, it is much more difficult to unravel it now, which is why it is very important that we have the new national minimum living wage. It is there to ensure that wages do start going up, although I concede that this does not necessarily cover it all.
Helen Goodman
How can employers take account of the tax credits, given that the tax credits are paid according to family circumstance and the wage is not?
Mark Garnier
Because employees will work for a wage that they can afford to work at, and if the Government are subsiding those household incomes the employers can take advantage of that. It is difficult—I completely concede that—to unravel this.
Richard Graham (Gloucester) (Con)
Conservative Members are clear that the macro picture is absolutely right and we have to reduce the welfare bill. Does my hon. Friend agree that the Government could do one specific thing that would help enormously? The BBC has withdrawn its online calculator for people who want to know how much they will be affected by this, and online forums suggest that different calculations are produced by different newspapers. Could the Government produce their own calculator so that our constituents can find out—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Mr Graham, you know you are pushing your luck. The hon. Gentleman has already given way twice and you are taking up your colleague’s time.
Mark Garnier
A very wise idea.
The second reason I am very supportive of these changes goes back to the old argument about reducing the deficit. Conservatives made it perfectly clear at the last election that we would seek to find £12 billion through benefit changes, and that was a manifesto pledge. We were elected with an increase in our number of Members of Parliament and a rise in the sitting MPs’ majorities. We have been asked by the country to deliver on our manifesto pledges, and this is part of that delivery.
We still have a budget deficit, and the tax credits system costs the taxpayer about £30 billion a year. The IFS this morning said that it expects these changes potentially to deliver £6 billion in savings. It is worth remembering that, as has been said, tax credits cost just £1.1 billion when they were first introduced, but that has now ballooned to the current level and that is simply not acceptable. It is also worth remembering that they ballooned in a period of so-called “high economic growth”. The then Chancellor, famous for many things but in particular for claiming to have ended boom and bust, was running a bizarre programme of increasing benefits at the same time as telling us that the economy was fine and growing steadily. Perhaps he knew something that he was not telling us, increasing benefits in anticipation of the collapse caused by the crisis—perhaps he knew it was coming. By 2010, 90% of families with children were receiving tax benefits. Do 90% of families actually need these tax credits, even after all those years of the Labour Government, when we would have thought that the families would be doing better? Apparently, they are not. These tax changes take us back to the real levels in 2007 and 2008.
I wish to finish by discussing one point. I was very struck, as were many Members, by the election whose result we saw on Saturday. I was particularly struck by the number of young people who were voting in that leadership election. They were voting in the name of voting against austerity. They were objecting to what they see as cuts being delivered to them today. In 20 or 30 years’ time, they will have to take responsibility for the mess that they find—we have to do something now. If we hand over the shop to them as we found it five years ago, austerity would not mean some managed cuts; it would mean devastating cuts that would be unbelievably painful. We have to take responsibility for the way things are now. I am not in the business of mortgaging the next generation’s future. I want to take responsibility for the problems we have today and not kick the can down the road. This is not austerity-heavy; it is common sense.
Finance Bill
Mark Garnier Excerpts(10 years, 1 month ago)
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Mark Garnier (Wyre Forest) (Con)
It is a pleasure to follow the hon. Member for Wirral South (Alison McGovern), who mentioned me several times in her speech. In the broadest sense, I agree entirely with what the Government are doing, but I have one or two reservations, to which she alluded.
It is worth looking back to why the bank levy was brought in and to what it was a response. It was, of course, a response to the bank bonus tax introduced by the previous Government, which was brought in, in turn, to try to get some money back for taxpayers from when the banks were bailed out. I think that it is the right thing to do. Banks should help to pay back the taxpayer, but the bonus tax was never going to work. The banks were always going to get around it one way or another. Many suggestions were put out by newspapers and banks, but the one that summed up the banks’ approach best for me was a Matt cartoon in The Daily Telegraph. A trader was pictured sitting in front of his boss in a bank; the boss turned around and said, “I’m afraid you are not going to get a bonus this year, but we are going to buy your tie off you for three million quid.” That was the sort of approach that the banks were going to take.
It was therefore right for the Government to bring in a levy that could not be got around. Of course that was the right thing to do, and the intention was to raise enough money from the levy to make up the shortfall that would follow from getting rid of the bonus tax, which was around £2.1 billion to £2.2 billion. The levy was an unavoidable tax. It started out at nine basis points, rising on nine occasions to 25 basis points. That resulted from the reduction of balance sheets and from the slight change in the shape of the deposits profile—moving away from the deposits profile that would attract the levy.
It is worth bearing in mind what Douglas Flint said when he came before the Treasury Select Committee in January 2011. I asked him for his view about the future of HSBC in the UK and whether it would keep its domicile. The hon. Member for Wirral South mentioned Standard Chartered and HSBC in her speech. Douglas Flint said that the domicile was reviewed once every three years and that 2011 would be the year in which that happened. When he came before us again in January 2012 and I asked him what he was going to do, he said he was going to defer it.
It became apparent that the shareholders at HSBC, one of the best and biggest banks in the world—and, indeed, one of the most stable—were very upset about paying quite a hefty levy, which only got bigger, on their international earnings. The same applied to Standard Chartered, which had very little earnings within the UK. None the less, in responding to shareholder pressure—the shareholders were asking, of course, for an opportunity to get more return for their money—those chief executives were saying, “Don’t worry; we will ride this out and the bank levy will eventually disappear at some point.”
After five years of that, the pressure from shareholders was becoming very intense. If Standard Chartered and HSBC had left the country, the bank levy would have had to rise from 24 basis points to more like 35 basis points in order to maintain the £2 billion or so in revenue. Paying 50 basis points would be a very significant taxation on deposit levels within banks. Inevitably, then, if Standard Chartered and HSBC had left, the whole bank levy would have spun out of control and eventually wound itself into a knot that would have been completely unsustainable. That is why the Government had to do something about it.
Before I move on, it is worth looking at what the banks were getting as a result of paying the levy. The first thing—in justifying the levy to shareholders this is an important point—is that the banks were paying back the taxpayer who had bailed them out with a lot of money. The taxpayer required some sort of levy to get some of the revenue back. The second important point is that the bank levy could almost be seen as a type of insurance premium charged against the banks for having what is known as “the implicit guarantee”—the guarantee that, should the banks fall over as two of them did in 2007-08, the Government would stand behind them and pick them up.
However, the provisions of the Financial Sector (Banking Reform) Act 2013 were introduced in order to try to get to the stage where the banks would no longer need to be supported in the event of a collapse—that there would be an elegant collapse; there would be bail-in bonds and ring-fences around the important parts of the banks, so that never again would the Government step behind the banks. The banks would be allowed to collapse without causing contagion through the banking system. That is an incredibly important change.
The argument about the bank levy being an insurance premium would eventually diminish to nothing with the finalisation of the fairly expensive Banking Reform Act in 2019. As for paying money back to the taxpayer, we are in the process of doing so by means of the sales of RBS, Lloyds, Northern Rock Asset Management, and the various other assets that were bought. At some point, we shall be able to draw up a final P&L to establish whether we—the UK taxpayers who bailed those banks out—have got our money back.
European Union (Finance) Bill
Mark Garnier Excerpts(10 years, 4 months ago)
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Mr Gauke
Yes, we would resist such a move. It would be a fundamental change to the nature of our relationship with the European Union, and one that would go in entirely the wrong direction for the United Kingdom. There were calls in the negotiations for such a step to be taken. There were calls, for example, for a financial transaction tax to be introduced to finance EU spending. We resisted that. The Prime Minister was very clear in ruling it out from any deal.
Mark Garnier (Wyre Forest) (Con)
My hon. Friend talks about the financial transaction tax, but the City is an incredibly important contributor to the UK economy and it has a significant turnover. Will he assure us that the Government will not allow the European Union to attack the City from a different direction as it looks for alternative sources of revenue from the jewel in our economic crown?
Mr Gauke
I certainly give that assurance. There was a strong push for a financial transaction tax, which would have had a particular impact on the United Kingdom, given that we have the pre-eminent financial centre not just in the European Union, but in the world. That could have been damaging for the City of London. We resisted it and we will continue to take that approach.
To make a broader point—although I will not go too far down this route, Mr Streeter—it would be more helpful if there was an acceptance in the European Union that the City of London is a jewel in the crown, to use my hon. Friend’s phrase, not just of the United Kingdom, but of Europe as a whole. We should have the pre-eminent financial centre in the United Kingdom, and trying to damage it would be disadvantageous to all within the European Union.
Mr Gauke
We have consistently argued the case for money being spent more wisely and for greater European Union public spending restraint. We have already made progress with that argument—we made progress in 2013 and the Bill relates to the negotiation, although it is on the revenue rather than the expenditure side. We will consistently argue that case.
Mark Garnier
I am grateful to the Minister for giving way—he is giving us a lot of his time. He mentions fiscal prudence and spending taxpayers’ money wisely. Two things that epitomise the wastefulness of the European Union are the Strasbourg circus—the waste of money moving the whole Parliament to Strasbourg—and the fact that the accounts have not been signed off for some two decades. The Prime Minister is working very hard to achieve fiscal prudence, but does the Minister agree that the mood around the whole EU is behind him in dealing with that? The problem is not unique to the UK. The Prime Minister has the wind in his sails and support from the rest of the EU to deal with those problems.
Mr Gauke
My hon. Friend makes an important point. I would perhaps go further: it is not just member states that recognise that things need to change and that there needs to be better value for money. Vice-President Georgieva, who has responsibility for the budget, also recognises the need to ensure that money is spent in a better way. The Prime Minister has consistently set out the fact that there are two sensible objectives: to cut the whole budget and to protect the rebate. We will continue to make that case.
Alex Salmond
It is a great pleasure to follow what must be the briefest speech I have ever heard from the hon. Member for Stone (Sir William Cash) on this subject—it is wonderful to see him able once again to stand in his place today.
Let me turn to the question of EU finance and agriculture. I know that agriculture is not a subject that much concerns the Conservative party; the Tory party these days is much more likely to be concerned with asset stripping, rather than agricultural production, and with financial derivatives, rather than agricultural crops—that is what gets its pulse moving.
I was concerned when the hon. Member for Worsley and Eccles South (Barbara Keeley) said that far too much of the European Union budget was consumed by the common agricultural policy. The fundamental reason for that—we did not hear this simple point from the Government Benches—is that the common agricultural policy is one of the few policies that financially is effectively under the competence of the European Union. If the European Union had competence over health, for example—I doubt that there is much support for that, from me or anyone else in the House—its agricultural budget would be totally dwarfed by what it spent on health. The dominance of the agricultural budget is a factor of its being one of the European Union’s relatively few common policies.
Of course, it is possible to argue that there should not be direct farm payments. Indeed, that was the argument that the right hon. Member for North Shropshire (Mr Paterson) took into the CAP negotiations. He started from the position that the UK Government, without much opposition from Members from rural constituencies in the Conservative interest, thought that there should not be direct farm payments, and he found himself in a minority of one in the negotiations; his position was not supported by any other member state. It was therefore decided that we were to continue with farm payments. Therefore, if we have a common agricultural policy, and it is a substantial part of the European Union’s budget, it is reasonably important to ensure that our share of the agricultural budget as component nations in these islands is fair and competitive, because our agricultural production has to compete in that common market with that in other member states.
Does the Minister really think that the share allocated to UK agriculture, and to Scottish agriculture in particular, can be counted as a considerable achievement, as he claimed in his opening remarks? Let us remind ourselves of some of the facts. Under pillar one of the CAP budget, it was agreed that the lowest that any member state should receive in support was €196 per hectare. It was agreed in negotiations that each country in the original 15 would work to that minimum. Scotland receives substantially less than that—just over half of that payment per hectare. That is going to cost Scottish agriculture about £1 billion in the period to 2019.
Mark Garnier
The right hon. Gentleman said from a sedentary position during the Minister’s speech that that was because Scottish farms are the biggest in the UK. It would be helpful if he could give a little flavour of the size of Scottish farms compared with English, Welsh and Irish farms, and how the numbers break down.
Alex Salmond
I was going to move on to that very point, because the Minister’s reply to my intervention inspired me to go to the Library in search of some figures. I will answer that point in a moment.
Let me move on to pillar two, the second major aspect of agricultural support. I have been doing some comparisons and looked at what would have happened if in negotiations Scotland had achieved from pillar two the same amount of agricultural support as the Republic of Ireland, which in many ways is a comparable country with regard to land area and agriculture as a share of the overall economy. The answer is that Ireland has achieved a budget four times the size of Scotland’s budget under pillar two—€2.19 billion compared with €478 million—in the years to 2019.
Given that it has been decided that the common agricultural policy should continue and that farm payments should continue to be made, how will it be possible for Scottish agriculture to compete effectively when it gets such a dramatically lower share than the minimum allocated to any other EU country? Far from getting an excellent deal on pillar two to compensate for the poor deal on pillar one, Scotland gets a miserable share in comparison with comparable countries.
Productivity
Mark Garnier Excerpts(10 years, 4 months ago)
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Chris Leslie
That is why I think it is so appalling that the Chancellor could not be bothered to mention it in the Budget speech in March. It should be at the top of the agenda of all Treasury teams and all Departments—
Chris Leslie
I will give way in a moment to the hon. Gentleman, who will, I know, have plenty to contribute on the subject.
Our economic prosperity depends on maximising the output from the efforts of working people and the resources available to business. The amount of output per hour worked is a useful way for us to measure whether our economy is advancing and adding value, or whether we are just treading water. Creating a more productive economy means creating a virtuous circle of higher growth, higher living standards and, as a consequence, more effective deficit reduction. When working people can produce more and they have the tools and the skills to create output more efficiently, employers can afford to pay them more, tax revenues become more buoyant and our GDP can grow in a more sustainable way.
Chris Leslie
I will give way to my hon. Friend after I have given way to the hon. Member for Wyre Forest (Mark Garnier).
Mark Garnier
The shadow Chancellor is absolutely right: productivity is incredibly important. The Treasury Committee and The Economist have been banging on ad nauseam about it, certainly during my five years as a Member of Parliament. Why has he picked up on it only in the past six months?
Royal Bank of Scotland
Mark Garnier Excerpts(10 years, 4 months ago)
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Harriett Baldwin
What can I say? It is extraordinary. I do not suppose we heard that kind of rant when the former Member for Kirkcaldy and Cowdenbeath was intervening in the banking sector. Perhaps the hon. Gentleman has not noticed that, in the single vote on legislation on Second Reading we have had in this Parliament, the Government won by a majority of 491. [Interruption.]
Mark Garnier (Wyre Forest) (Con)
When the hon. Member for Bolsover (Mr Skinner) has finished, may I welcome the Minister to her place? She brings with her a great wealth of experience from the City. Part of that wealth of experience is a full knowledge of the sunk cost fallacy. Does she agree that it is completely ludicrous to say that an investment decision made in 2015 should be based solely on the information known in 2008, and that that view betrays a staggering lack of knowledge about the investment process among those opposed to selling the stake in RBS at potentially a loss?
Harriett Baldwin
I thank my hon. Friend and constituency neighbour for his question, which shows his depth of knowledge. He is right. In my years of managing portfolios, what I paid for investments in the first place was a fact, but managers also have to factor in the future. None of us has a crystal ball. My hon. Friend’s words are wisely taken.
The Economy
Mark Garnier Excerpts(10 years, 5 months ago)
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Chris Leslie
We have heard those arguments. I was asking the Government whether they plan to cut the top rate of tax of earnings of £150,000 from 45p, and perhaps down to 40p, and there is silence from the Government Benches and from the Chancellor. Perhaps he will come to that later in his speech.
The Queen’s Speech was high on rhetoric but was in reality the usual combination of diversion and distraction. As ever with this Chancellor, there is more than meets the eye. All the rhetoric is just the tip of a Tory iceberg, with 90% of their real agenda hidden below the surface, still invisible from public view. That agenda will not even be partly revealed until the emergency Budget on 8 July. Until then, serious questions remain unanswered about what drives the Government, and in what direction.
The trajectory of overall cuts set out in the March Budget goes beyond what is needed to eradicate the deficit by the end of the Parliament. According to the Institute for Fiscal Studies, the Queen’s Speech still leaves us totally in the dark about more than 85% of the Chancellor’s planned £12 billion of welfare cuts. Just this morning, the IFS criticised the Government for giving a
“misleading impression of what departmental spending in many areas will look like”.
Frankly, there is growing disbelief across the country that the Chancellor can protect those in greatest need while keeping his promises to the electorate on child benefit and disability benefits. My hon. Friends will not have failed to spot during Prime Minister’s Question Time yesterday how the Prime Minister, when challenged by my right hon. Friend the Member for East Ham (Stephen Timms) on the question of disability benefits, digressed into all sorts of reminiscences about the campaign trail and how much fun it was going to various meetings. The Prime Minister promised that
“the most disabled should always be protected”
and I will be looking to the Chancellor and the Secretary of State for Work and Pensions to keep the Prime Minister’s promises. The Government might have secured a majority, but they did not secure a mandate for specific cuts to departments or services because those were never explained or set out before the election. Nor have we ever had an explanation of how they will pay for their multi-billion pound pledges on tax and services or, crucially, for the NHS.
The Opposition agree with yesterday’s OECD assessment that a fair approach is the right one to take—sensible savings and protection for those on middle and lower incomes. Cuts that decimate public services would be too big a price to pay, especially as they may even result in higher costs in the longer term. We also heard how 8,000 nurse training places were cut in 2010. The use of agency nurses then proliferated to fill the gap. Is it any wonder, therefore, that NHS trusts now face a deficit of about £2 billion? Part of the reason the deficit is so big is that productivity has been so poor. Britain has the second lowest productivity in the G7, and output per worker is still lower than in 2010. This should have been at the top of the Chancellor’s agenda throughout the last Parliament, but he did not even mention it in his last Budget speech. For the Tories, it seems that productivity just springs magically if the Government just get out of the way, unrelated to any fiscal or policy choices that they make.
Mark Garnier (Wyre Forest) (Con)
The shadow Chancellor will know that many pundits have been looking at that productivity puzzle. The Treasury Committee has examined it for the past five years. If the Governor of the Bank of England, economists and everyone else does not understand that productivity conundrum, will he share with us where he thinks the lack of productivity comes from?
Chris Leslie
I will come to that in a moment. The hon. Gentleman must also be staggered that the Chancellor did not even mention it in his Budget speech. That was an omission that the Chancellor needs to correct. We take a different view of where productivity comes from because, for us, it depends in part on having decent infrastructure and public services—motorways that flow freely and trains that commuters can actually get on, tax offices answering business queries efficiently rather than keeping companies’ staff waiting on hold, employees who are off sick able to get treated swiftly in a decent NHS, an education system that supports a work force and provides training in high-quality skills. Each of these is crucial for our future economic productivity, and each depends on the Chancellor making the right fiscal choices for this Parliament.
Mark Garnier
The subject of debt is incredibly important, but debt is not just national; there is household debt as well. Does the Chancellor agree that the £1 trillion rise in household debt between 1997 and 2008, taking it up to £1.47 trillion, was one of the most pernicious acts of the Labour Government? It damaged households immeasurably and is the biggest crisis that we have to deal with.
Mr Osborne
My hon. Friend is absolutely right. There was no institution looking at overall debt levels in our country.
Finance (No. 2) Bill
Mark Garnier Excerpts(10 years, 7 months ago)
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Geraint Davies (Swansea West) (Lab/Co-op)
It is a great pleasure and privilege to follow my hon. Friend the Member for Edmonton (Mr Love), who has been a distinguished Member of the House, particularly through his service on the Treasury Committee, which has added enormous insights into the deliberations of successive Governments. It is a great joy to follow my good friend and colleague.
I just want to make a few remarks. The budgetary process in the immediate run-up to the election has been very much a political stunt. The first thing to deal with is the illusion—or delusion—that there has been economic success and turnaround under the Conservatives. That is simply not the case; it is simply not borne out by the facts. The national debt is about £1.4 trillion—up 44%. Reference is made to the deficit and how much the debt is going up, but of course the current Government have borrowed more in five years than Labour did in 13 years—and we had to bail out the banks. The Government have lost the triple A rating. As I pointed out earlier, the number of people earning more than £20,000 is down by 800,000. There is a reliance on a fudging of the facts; this is a “fudge it” Budget, to make up for the fact that we have more and more low-paid people who cannot make a contribution towards the revenues in a sustainable way. Meanwhile, the Government continuously put up the tax threshold and say, “Who’s going to disagree with that?”, knowing everyone is scared to disagree. But that is the management of irresponsibility, because the money simply is not coming in to pay the bills.
So what we need is not a spat about tax and spend, but a serious consideration of how we generate productivity and growth, in order to have higher wages and a more sustainable plan for the future. Obviously, part of that was the debate about tuition fees and about enabling people to go, without fear, to university, so that we could get higher productivity and the students would not be hobbled by massive debt throughout their lives. Such debt can mean that they cannot get a credit rating and cannot get a house, and are scared of moving into a higher pay bracket because it pushes up their repayments.
Sadly, the Tories are creating a two-nation Britain. One nation will be the better off, who, lucky for them, own their own house, can get their sons and daughters into university and pass on money for them to put down a deposit on a property. There are others who may be equally or even more capable of going to university and of boosting the productivity in our collective economy but who are being stopped from getting houses in the future. We are at a turning point now. The party that gets elected will determine whether we have a more unequal or a less unequal future. I very much want us all to pull together as one nation to invest in the future.
The Conservatives have this massively political Budget profile, which has been described as a “rollercoaster”. Deep and savage cuts were going to take us back to the 1930s, but because that was pointed out by the BBC, the Office for Budget Responsibility and the Institute for Fiscal Studies, an adjustment was made. Bank shares were sold off and oil prices went down so that the public service time machine was moved back only to the year 2000. None the less, we all saw the Tories in their true oils. They were happy to make those savage cuts until the BBC highlighted what they were doing. Then they said, “Oh no, we’re not going to do that.” But there will still be savage cuts until the final year of the next Parliament, 2019-2020, when there will be a sudden acceleration in public spending—the biggest spending increase for 10 years—presumably to try to get Boris Johnson elected as the next Tory Prime Minister. That is probably what will happen in the unfortunate event of the Tories getting in again in some strange alliance with the UK Independence party, which would be a disaster for Britain.
We must strike a balance between trying to achieve economic growth and having to balance the books, instead of scrabbling around trying to decide which poor people to clobber. As my hon. Friend the Member for Edmonton pointed out, welfare cuts such as the bedroom tax raised only £400 million, which is small change compared with the numbers that we are talking about. Two thirds of the people hit by that tax are disabled. The cuts to tax credits are hitting people with children who are trying to work. It is ridiculous to try to squeeze more and more out of the poorest to make ends meet. Clearly, it is right that the richest pay more, whether those with more than £2 million pay the mansion tax—
Geraint Davies
They need to pay lots more, not a bit more. Of course some of the very rich are paying more, but that is because they are getting richer and richer on massive pay awards. They are earning so much more than anyone else, and the situation is getting out of control
Future Government Spending
Mark Garnier Excerpts(10 years, 8 months ago)
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Chris Leslie
That was a good try, but the hon. Gentleman knows very well that we do not have unfunded spending commitments. Our manifesto will be fully costed and fully funded. He does not need to take my word for it: we would be more than happy to let the OBR audit all of the proposals in our manifesto and to undertake to validate that they are, indeed, fully costed. I wonder if any Government Members would like to support the idea that all the political parties should have their manifestos fully costed by the OBR. Can I see a show of hands?
Chris Leslie
There is one individual: the hon. Gentleman is an independent champion on Treasury matters. I wonder whether he would like to at least say that there is a strong case for letting the OBR cut through this political nonsense and make sure that we have proper independent validation of spending commitments. Does he agree with that?
Mark Garnier
I do—absolutely. In the early part of this Parliament the Treasury Committee looked at exactly that point and there was a big and heated debate about it. Conservative members were in favour of it, but Labour members were not, and they were led by the shadow Business Secretary, the hon. Member for Streatham (Mr Umunna), who was dead against it. What does the shadow Minister have to say about that?
Mr Gauke
My hon. Friend is absolutely right. The problem with the 50p policy is that it is not an effective way to raise revenue. Our record is very clear: we have been very effective at getting more money out of the wealthy. As we see from the IFS analysis today, the wealthiest have made the biggest contribution. What we are left with is a symbolic gesture, not a tax policy.
Mark Garnier
Does my hon. Friend not agree that it is quite remarkable that the Labour party has not yet come out categorically and refused to raise taxes through a jobs tax? Is it not worth remembering while we are debating a possible jobs tax—or not, depending on what they want to do—that there has never been a Labour Government who have not failed to increase unemployment?
Mr Gauke
My hon. Friend is absolutely right. It is right that we highlight that point. They do not like our spending plans, but what are they going to do? Are they willing to borrow more? Are they willing to tax more? It must be one or the other or both. Which is it to be: a borrowing bombshell or a tax bombshell?
David Morris (Morecambe and Lunesdale) (Con)
It has been a pleasure to speak twice this week under your guidance, Mr Deputy Speaker. If this is to be my last speech in this Parliament with you in the Chair, may I say that I have had an absolutely great time under your guidance as Deputy Speaker? However, I do hope to come back, and to see you there again and we could have another life of five years together.
Today’s issue is a serious one, but I would like this speech to be in the right vein; it should deal with what this means to those watching our debate today. We are bandying figures about all over the place, but what do they actually mean to people? I can talk only about my experiences over the past five years. I was a newly elected MP and we were going through the Lobby making decisions that we knew were going to affect people’s lives. But we had to take these decisions to get the country on the right track. Over my five years as a first-term MP—after the election I hope to be in a second term, but I do not count my chickens—I have wanted to see what has happened in my community. The first thing I remember talking about was a road in my community. I am glad to say that that road, which took 70 years to build, came to fruition with my guidance and under the coalition Government. Costing £123 million, the road will join up the M6 with the port at Heysham and will increase the prosperity in the area tenfold. For every £1 spent on the road, £10 will be put back into the local economy.
We are considering building a new power station. My constituency already has two nuclear power stations, which account for 2,000 jobs in the area. Thankfully, again under this coalition Government, we have a footprint for a third nuclear power station, which will be completed in the next five to 10 years, creating a further 2,000 new jobs.
Let me turn now to schools. Without wanting to be overtly political, schools that were closed down under the previous Government have reopened under the coalition. In my constituency, a school was closed down and has now reopened. Sadly, another school, Skerton, has closed, but I am fighting to get it reopened as a free school. We can find the money to carry out all this work at a time when austerity is at its worst.
Sea wall defences have been built in my constituency, at a cost of more than £10 million. A mandate went out just before the last general election in which five out of the 10 categories of coastal protection were wiped away. Thankfully, we have put two of them back, and we have saved an area off Sunderland Point.
Mark Garnier
My hon. Friend has talked a great deal about how much money the Government have put into his area. Does he also not recognise that private sector investment, such as the £140 million of private sector investment that will be put into the Wyre Forest in the future—
Bankers’ Bonuses and the Banking Industry
Mark Garnier Excerpts(10 years, 8 months ago)
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Cathy Jamieson
I thank the hon. Gentleman for giving some clarity. He is absolutely right that regulation is part of the process, but we also need a culture change and an attitudinal change. He is correct to identify the lack of prosecutions. Although that is not mentioned specifically in the motion, I recommend that he reads Labour’s document, which takes account of that point. Our agenda is not entirely punitive, because it is driven by economic imperatives. We all know that the performance of the banking sector is vital to the health of Britain’s economy. It employs more than 1 million people, each of whom has an important role to play in advising businesses and consumers, and helping them to manage their money, invest wisely and plan for the future. Without the banks, consumers would be unable to save and borrow. Businesses would not have access to the patient finance that they need if they are to grow and to create high-quality, well-paid jobs.
Too often in recent years, many banks have fallen short of the very high standards that we expect of them; that is a view shared across the House. In many instances, they have not acted with trust and they have not acted fairly. At times, they have acted recklessly and unethically. Instead of helping their customers, they have exploited them.
Banks and their employees operate in a high-skilled environment, dealing with sophisticated financial instruments that are often beyond the ken of the average consumer and small business owner. Rather than using that knowledge to guide and advise consumers, they have, in some instances, abused that knowledge to exploit them. In investment, consumer and business banking, banks have betrayed the trust of customers and undermined the integrity of the industry. In doing so, they have totted up some truly colossal sums in fines.
Indeed, 2014 was a record year for fines in the City of London, culminating in the £1.1 billion fine levied by the Financial Conduct Authority on five banks, including HSBC and the Royal Bank of Scotland, for their part in the forex fixing scandal. In recent times, four UK banks—Barclays, HSBC, RBS and Lloyds—have also paid £1.5 billion in compensation for mis-selling interest rate hedging products. Other recent scandals include LIBOR fixing and the mis-selling of payment protection insurance.
Mark Garnier (Wyre Forest) (Con)
I am grateful to the hon. Lady for giving way; she is making an intelligent speech. With regard to the recent fines, is it not fair to say that in the vast majority of cases the actions that led to those fines were perpetrated under the old regulator, the Financial Services Authority, and that the bringing to justice, meaning the fining, has been done under the new regulatory regime? Does that not reinforce how bad the old system was and how good the new one is?
Cathy Jamieson
I thank the hon. Gentleman for what I think was a bit of a compliment about me making an intelligent speech. Of course, he then proceeded to make a party political point by trying to shift the emphasis back on to what happened before, and I understand why he would seek to do so. It is important to acknowledge that there have been changes, but there is no evidence yet to suggest that all the behaviours that led to wrong decisions being taken have changed, so we still need to keep an eye on that.
Cathy Jamieson
My hon. Friend makes a useful point. I am confident that he has read the paper we published on that, which highlights the need to ensure that finance gets to small and medium-sized enterprises, in particular, and the important role that a proper British investment bank can play.
Earlier this month we saw a new and startling example of impropriety, with the allegations that HSBC’s Swiss subsidiary actively advised customers on how to avoid, and indeed evade, tax. I want to emphasis again that all those activities are symptoms of a wider culture that has seeped from investment to retail banking. That culture has been characterised by short-termism and the pursuit of profit at the expense of all else—in many cases, at the expense of the banks’ own customers and the wider economy. That culture led to banks exploiting their consumers and ripping off the taxpayer.
That culture has also caused banks to lose sight of what should be their core function. The role of our high street banks is, or should be, twofold: they must serve the needs of consumers, providing basic borrowing and saving facilities and loans for mortgages to buy homes; and they must provide finance to businesses, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) suggested, enabling them to start up, grow and create well-paid and secure jobs. However, lending to business has fallen by over £55 billion since 2010, despite an array of Government schemes, such as Project Merlin and the funding for lending scheme, all of which have to varying degrees failed to deliver. Despite that, however, and despite all the scandals, the banks have continued to pay lavish bonuses to a small cohort of senior employees.
Mark Garnier
The hon. Lady is being very generous in giving way. She says that business lending is not quite what it was in the old days, but is it not fair to say that business lending in the old days was incredibly irrational and irresponsible, and that that led to the financial crisis that brought the banks down? We want the banks to lend, but we do not want them to lend irresponsibly and create another crisis.
Cathy Jamieson
I do not think that anyone is suggesting that we want irresponsible lending. We want those businesses that are valuable, sustainable and want to grow—I am sure that the hon. Gentleman has heard from them in his constituency, as I have in mine—to be able to access finance. That is the important point.
Cathy Jamieson
I was planning to say something about the cap later, but my hon. Friend has made her point with words that I would have difficulty bettering.
Let me return to banks paying lavish bonuses. The public are understandably still questioning why, with wage stagnation and the cost of living crisis that they are all facing, senior bankers have continued to reward themselves in that way. Let us look at the figures. Last year, bonuses at Barclays were up 10% to £2.4 billion and those at Lloyds were up 8% to £395 million. The Royal Bank of Scotland, 79% of which is owned by the taxpayer, announced a bonus pool of £577 million. Some may say that that is all well and good, because it is just senior bankers enjoying the hard-earned fruits of their labour, but that is more difficult to justify in the light of recent scandals and given that two of the UK’s four largest banks—Barclays and RBS—have experienced drastic falls in profits. Earlier this week, with impeccable timing, of course, HSBC announced its bonus pool for the year, awarding its chief executive, Stuart Gulliver, £7.6 million—I repeat, £7.6 million—and paying 330 of its top employees in excess of €1 million, despite the revelations of recent weeks and a 17% fall in profits.
It would be remiss of me not to refer to the role that the Government have played in all this. As well as the failure of their schemes to galvanise lending, they have failed—this point was made my hon. Friend the Member for Denton and Reddish—to implement all the reforms recommended by the Independent Commission on Banking and the Parliamentary Commission on Banking Standards. They ignored Labour’s pleas for action to regulate benchmarks when the LIBOR scandal first came to light, and they have actively aided and abetted bankers’ efforts to safeguard their bonuses. As my hon. Friend the Member for Clwyd South (Susan Elan Jones) pointed out, the Chancellor launched an ill-fated and misguided legal challenge to the EU bonus cap, which limits bonuses to 100% of fixed pay or 200% with shareholder approval, which still seems fairly generous.
Mark Garnier
What troubles me about a lot of what the hon. Lady is saying is that she is confusing how much bankers have been paid with how one goes about paying them. While many of us would agree that having pay packages of millions of pounds is an issue in itself, it is not to do with bonuses. She will probably propose in due course that bonuses should be clawed back over a period of 10 years, which I recommended as a member of the Parliamentary Commission on Banking Standards, so I agree with her entirely about that. However, capping bonuses reduces the amount of money that can be clawed back. In fact, if one pays a banker £1, 90p should be paid as a bonus, because then there will be more to claw back and therefore more sway over that banker to encourage them to behave better.
Cathy Jamieson
I thank the hon. Gentleman for that intervention. I know that he made those points during the work that he did. I am glad to hear that he agrees with us on some of this, and I will deal with a number of his points later.
We still have to look at the actions of this Government in taking on the legal challenge to the EU bonus cap, however. I am sure that the hon. Gentleman does not suggest for a moment that that was a sensible thing to do. I do not think that the public saw it in that way—
Cathy Jamieson
I am not going to give way because I am making important and serious points about the future of our young people. I have been very generous in giving way and I want to finish this point. Our bank bonus tax not only will offer a lifeline for thousands of young people, helping them to earn, learn, and get a foot on the career ladder, but will help the economy and mean that the banks give something back to society.
In addition to that and our wider programme of reform, we will extend the deferral and clawback period for bonuses, ensuring that rewards are paid out proportionately and can be recouped when evidence of reckless or inappropriate behaviour is revealed further down the line. As I said, the financial crisis and recent scandals have shown that risky decisions can take up to a decade to have an impact. The next Labour Government will therefore ensure that if bankers have been shown to have acted inappropriately or made reckless decisions, banks will be able to claw back any bonuses awarded. We will act on the recommendations of the Parliamentary Commission on Banking Standards by extending the period for the clawback of bank bonuses that have already been paid to at least 10 years. We will also extend deferral periods for senior managers to at least 10 years, which will help to deter the rash and short-sighted behaviour that we have seen in the past, and to encourage banks and their employers to have a view of the long term.
Cathy Jamieson
I will give way to the hon. Gentleman once more, given his role on the Parliamentary Commission.
Mark Garnier
I am extremely grateful to the hon. Lady; she really is being incredibly generous. Capping bonuses and targeting the bonus with a tax in itself will inevitably drive banks’ behaviour towards the perverse outcomes that none of us in the Chamber wants. If we tax bonuses, the banks will change them into something else. They cannot wriggle out of a balance sheet tax, which this Government have imposed, but they will be able to wriggle out of a bonus tax, and we cannot avoid that.
Cathy Jamieson
I believe that the hon. Gentleman is trying to be helpful by making points that I know have been made before, but I refer him to the previous occasion on which a bankers bonus tax was implemented, when a number of anti-avoidance measures were put in place to deal with such a problem. We do not want any unintended consequences.
I am trying to signal our intent. When we are in government, we intend to make the tax work to change the culture and practice in banking, as well as to ensure that we help our young people. I am sure that any folks listening to my speech who are thinking about devising ways of not paying up or not making a fair contribution will hear the intent in what I am saying and therefore not pursue such a course.
I remind hon. Members who have not already read our “Plan for Banking Reform”, which was published last week, that it sets out a series of wide-ranging reforms to the banking sector. It builds on much of the work done by the commissions and is informed by speaking to people in the industry. It focuses on the four key areas of stability, competition, access to finance, and culture and pay. The one-off tax on bankers bonuses is just one part of the reform process, but it is an important part.
Last week, I hosted a jobs fair in my constituency, as have many hon. Members on both sides of the House. I saw at first hand how much the young unemployed people who came along want to work and to contribute to society. I met people who have been out of work over a fairly lengthy period and are desperate for the opportunity to get back into employment and to contribute to society. They want decent jobs with decent pay; they do not want the instability of being on zero-hours contracts or of working for umbrella companies that are more interested in avoiding paying their taxes than in paying their way in society. We need to ensure that such young people and the long-term unemployed—not just in my constituency, but right across the UK—get the help that they need. These young people need to make the first step on to the careers ladder, and the long-term unemployed need help to get back into real jobs. It is absolutely vital that such support is given to not only our young people, but the long-term unemployed, who are almost at risk of being frozen out of the jobs market.
As I said, Labour’s programme of banking reform is driven by economic imperatives. The motion sets out that banks should make a social contribution as well as an economic one, and that the bonuses they pay should be a reward for exceptional performance, not a compensation for failure. I believe that those are vital steps along the road to restoring fairness, stability and trust to the sector so that banks serve the needs of the wider economy. I hope that the Government see fit on this occasion to support our motion.