(12 years, 6 months ago)
Commons ChamberI am sure that many of those executives are watching the debate, and that they will pay attention to what my hon. Friend has said.
I will finish by returning to where I started. We are proud of our financial sector; it is an asset. We need it to help create the jobs and growth that are so lacking at present. All we ask is that it better serve the real economy in this endeavour—and that it does so more responsibly. With that in mind, I urge all Members to support our motion.
The reason we have to have the austerity programme in place is to tackle the mess left by the Labour party when it was in government.
As I was saying, we are seeking to reform the sector to ensure that it can lend to businesses in the long term, but we have also taken decisive action to stimulate credit in the short term. That is why the Government secured an agreement with the UK’s largest banks to provide £190 billion of new lending to business in 2011. By the third quarter of last year, those banks had loaned more than £157 billion to UK businesses, which is 11% above their implied target. That includes £56 billion of lending to small and medium-sized enterprises—10% higher than at the same point in 2010.
I noted that during the rather long speech of the shadow Business Secretary, he talked about lending but put forward no ideas about how Labour would tackle it, yet we in government have taken action to get the banks lending to businesses and to make sure that there is a supply of creditors to SMEs.
I am grateful to the Minister for giving way. I have to say that many of the organisations that represent our SMEs will listen with incredulity to the Minister’s suggestion that credit conditions are somehow all fine and that all is well. The fact is that, according to the Bank of England’s latest figures, we have seen a net contraction in lending to SMEs in nine of the last 12 months. It is clearly still a problem. In fairness, the Government announced that they were going to provide some credit easing—admittedly when the Chancellor said so in his speech to the Conservative party conference, although I never quite understood what he was talking about—but so far we have seen absolutely no action. When will this credit easing system come into effect?
I had hoped that the hon. Gentleman would come up with some ideas, yet he took a rather lengthy intervention to demonstrate that Labour has no ideas about what to do. Let me set out some of the structural measures we are taking to tackle the supply of debt and equity finance to businesses, and SMEs in particular. We are continuing the enterprise capital funds, and we are simplifying and refocusing the venture capital trusts and enterprise investment scheme to encourage more equity investment in start-ups.
Will the Minister at least concede that this issue and the kind of perverse incentive structures we have heard about, with rewards for failure and excessive pay in the boardroom and the City, have grown over the past three decades under different Governments of different colours? Will he have the humility to accept that?
(13 years, 1 month ago)
Commons ChamberThe Finance Bill introduces the bank levy, a permanent tax on banks’ balance sheets that will raise more than £2.5 billion each year. Amendment 13 seeks to reintroduce the one-off bank payroll tax introduced in the previous Parliament, but that would be unnecessary and counterproductive. Amendment 31 seeks to introduce a financial transaction tax, but such a tax would need to be applied globally to prevent the relocation of financial services.
The Government have already set out far-reaching plans for banking reform on regulation, lending, remuneration and tax. That includes the introduction of the bank levy. Both amendments would also place an obligation on the Government to produce a report on how any additional revenues from each tax could be spent and we have already heard many ideas during the debate.
Before I talk about the amendments in detail, we should remind ourselves of the significant contribution to the economy and public finances made by banks operating in the UK. Many hundreds of thousands of jobs across the whole United Kingdom—not just here in London—depend on Britain being a competitive place for financial services. It has been said:
“While the success of the financial sectors in New York and Tokyo has been built largely on supplying large domestic economies, with a smaller domestic economy the success of London has increasingly depended on its global role…The Government recognises that it must ensure that the UK’s tax regime remains competitive”.
The hon. Member for Nottingham East (Chris Leslie) described such an approach as the last refuge of the scoundrel, but the “scoundrel” who made that statement was not me, my right hon. Friend the Chancellor, or the Prime Minister; it was the right hon. Member for Morley and Outwood (Ed Balls), when he was the Treasury Minister responsible for financial services. It is clear that in a short space of time, the Labour party has decided it is no longer important to be globally competitive. That is yet another nail in the coffin of the economic credibility of that party, which voted this morning to scrap the deal obtained by the previous Prime Minister at the G20 summit to increase resources for the IMF.
The financial crisis demonstrated that fundamental reform was needed and that is what the Government are delivering. The Government firmly believe that banks should make a fair contribution to the public finances. In particular, banks should make an additional contribution in respect of the potential risks they pose to the UK financial system and wider economy. Last year, we announced a permanent levy on bank balance sheets, which was implemented from the beginning of this year.
Let me make my point and then perhaps the hon. Gentleman can explain the position of his party when it was in government.
In opposition, we made it clear that the UK should introduce, unilaterally if necessary, such a levy, but just weeks before the general election, the previous Government told us that a bank levy would have to be
“coordinated internationally to avoid jeopardising the UK’s competitiveness.”
Where we and our coalition partners have sought to lead international debate, Labour would hang back and let others make up their mind for them.
The Minister is extremely fond of harking back to what the previous Government did, but he is in government now and has failed so far to give a single convincing reason to support his position of not adding a bank bonus tax to the levy. Reuters is predicting profits this year of about £51 billion in the sector and there is still an implicit taxpayer subsidy of the sector, so in that context why is it so unreasonable to support the amendment? It simply asks for a review, which is a very reasonable suggestion.
The hon. Gentleman should be patient. I am just warming to my topic. I have much more to say about the bank levy and about amendment 31 on the Robin Hood tax. There is an issue about the need to reform the banking sector and the coalition Government decided to look at the structure of banking, which the previous Government failed to do. We want to tackle issues around the resolvability of banks and to look at how we can make the banking system much more stable. The measures we are taking forward will tackle some of the issues.
My hon. Friend points out some of the behavioural impacts of the tax. A Labour Member pointed out earlier the reduction in the proportion of remuneration from bonuses and the increased amount from salaries. That is the kind of behavioural change that happens. Those responses are important. Banks and bankers respond to such changes, but the world has moved on. Unlike when the payroll tax applied, the top rate of income tax is now 50p in the pound. The previous Government told us that they would apply the bonus tax only until changes in remuneration practices were in place, and this Government have taken firm action in that regard.
The Financial Services Authority revised remuneration code of practice sets out detailed rules for pay for firms in the financial services sector. The code ensures that bonuses paid to significant risk-takers are deferred over a number of years and are linked to the performance of the employee and the firm. In addition, significant portions of any bonus will be paid in shares or securities. Those revised rules came into force on 1 January 2011. Let us not forget that under the previous Government, bankers could walk away with the cash in their pocket as soon as the bonus was declared. The rules on bonuses have been toughened up: bonuses are deferred and are paid in shares. The previous Government let the bonus culture rip and taxpayers paid the consequences.
At times, I wonder what Opposition Members read; we were clear from the outset that we wanted to toughen up the rules on remuneration. [Interruption.] We were very clear about what we wanted to do. The Opposition should hang their heads in shame about the bonus culture they allowed to perpetuate when they were in government. I remind them that Labour gave Fred Goodwin a knighthood for his services to banking.
We do not need a bank payroll tax. We have demonstrated that the bank levy we have introduced will ensure that banks pay a fair share in relation to the risk they pose to the wider economy. The right actions have been taken.
Amendment 31 was tabled by the hon. Member for Hayes and Harlington (John McDonnell). He is right to highlight the importance of funding international development, on which there is cross-party consensus. The Government agree that we should move to ensure that 0.7% of gross national income should be for aid. The hon. Gentleman is also right to highlight the importance of achieving the millennium development goals. He mentioned talking about education in a school in his constituency. On Friday, I met a group of pupils from Portchester community school who were very much behind the “Send my sister to school” campaign. These are important issues, but we need some discussion about whether the financial transaction tax model offers a stable and efficient mechanism to raise revenue. Such taxes remain the subject of ongoing debate at international level, and the UK continues to take an active role in the discussions.
(13 years, 9 months ago)
Commons Chamber8. What steps he is taking to review the regulation of credit rating agencies.
The coalition Government support greater regulation of credit rating agencies. The credit rating agency regulation came into force in the EU, including in the UK, on 7 December 2009. The UK authorities continue to be active in both the EU and G20 processes, including in negotiations on amending the credit rating agency regulation and in examining ways to reduce our reliance on credit ratings for regulatory and official purposes.
These obviously follow on from the proposals of Jacques de Larosière. One problem that has been identified with the rating agencies is the conflict of interest issue. I think that we should move to a “buyer pays” model. The other issue is a lack of competition in the credit ratings market. Michel Barnier, the EU Commissioner, has floated the idea of having an EU credit rating agency, which I think is a thoroughly good idea. Does the Minister agree?
Of course there are areas where more work needs to be done, and the hon. Gentleman is right that Michel Barnier has made further proposals, in a consultation paper that he published earlier this year. They included looking at the business models for credit rating agencies. However, I question whether taxpayers in Europe would feel it right that their money should be going to fund credit rating agencies.
(14 years, 2 months ago)
Commons ChamberFirst, the deficit pre-November 2008 was primarily in some respects caused by increased spending to which those who are now in the Conservative Government were then committed. Conservative Members are continuing to promote the view that somehow there was no global credit crunch, and that the bankers, many of whom they are very friendly with, had nothing to do with it—but the general public do not buy that.
Conservative Members will have to accept that, but the real question that I want answered—I note that a Minister is still here—is: what comfort can he give to the people who live in places such as the Tulse Hill estate in my constituency that they will not have to pay the price? What measures will he take to help them to get back into work? What will he do to give them extra training and experience? Why on earth is he cutting programmes such as the future jobs fund, which I have seen working in my constituency, helping to get people back into work? The Government say that the future jobs fund is ineffective and a waste of money, but they do not have figures on which to base that assertion. The Red Book makes no provision for funding any programme to get young people back into work or into training that will replace what the Government are abolishing.
Perhaps the hon. Gentleman will think back to the package of cuts that was announced last month. Some £500 million of the £6.2 billion of cuts was recycled into extra training and more apprenticeships; that is where this party’s commitment to growth comes from.
I am not going to say that I do not welcome things such as apprenticeships, because we need those programmes, but at the same time as the Government are putting in place 10,000 apprenticeships, they are slashing a programme that could place hundreds of thousands of people in work. I do not understand their approach; ultimately, my constituents want to know what is happening.