Budget Resolutions and Economic Situation

Debate between Mark Hoban and David Rutley

Wednesday 18th March 2015 Commons Chamber

[Mr Hoban]

I am surprised by what the hon. Gentleman says, because he is a member of the Treasury Committee and has looked at these things very carefully. He will have seen what happened in the eurozone in the first half of this Parliament. The headwinds from the eurozone—the OBR confirmed this—had a negative impact on the UK economy. We cannot ignore the impact of turmoil abroad on the strength of the UK economy. It is surprising that a respected Member fails to recognise the lessons of what has happened over the course of this Parliament.

[David Rutley]

I congratulate my hon. Friend on the powerful speech he is making. Does he also recall that the OBR spelled out very clearly, a year or so after 2010, that it had underestimated the real impact of Labour’s recession?

[Mr Hoban]

My hon. Friend is absolutely right. The problem for Labour Members is that when they are confronted with the facts, they hide. That is the problem they will all face in the course of the next 50 days. They have clearly not developed economic credibility, because their plans and message are confused. They have no idea how they would deal with the economy. All we know about Labour is that it will spend more and borrow more and tax more, the way all Labour Governments have behaved in office.

The final reason we should be moving towards a surplus and reducing the national debt is that if we continue to lock in debt at high rates, we are reducing the capacity of future Governments to withstand future economic shocks. One of the challenges we faced in this Parliament was that the high levels of debt racked up by the previous Government made it increasingly hard to put in place the measures to turn the economy around.

We cannot simply pretend to ignore, or rack up, unfunded spending cuts. We need to work hard to tackle the deficit to ensure debt falls as a proportion of national income, as it will at the end of this Parliament, to get the right messages across. Let us be responsible about how much we spend. Let us be responsible on taxation and spending. Running a surplus in the good times will help the economy when difficult times lie ahead.

Budget Resolutions and Economic Situation

Debate between Mark Hoban and David Rutley

Wednesday 19th March 2014 Commons Chamber

[Mr Mark Hoban (Fareham) (Con)]

It is a pleasure to follow the right hon. Member for Newcastle upon Tyne East (Mr Brown). As someone who was born and brought up in the north-east, I too understand the deep-seated challenges that the region faces, and I hope that the emphasis in the Budget on rebuilding the manufacturing sector and investing in high levels of skills will make some progress towards tackling those problems.

The Chancellor is absolutely right to highlight the progress that has been made since we came to office in 2010, but also the further progress that we need to make. Our job is not done, and that is why the reforms announced by the Chancellor today, which refer to the need to strengthen the roles of the makers, the doers and the savers, are vital if we are to secure the future of our economy in a competitive world.

I want to highlight some of the progress that we have made. Not much has been said about the unemployment figures that have been published today. We have seen a fall in the unemployment numbers, according to both the claimant count and the labour force survey. We have also seen a big increase in the number of people in work. Record numbers of women are in work. Often the Opposition’s criticism is that these jobs are temporary or part time, but the reality is that employment increased by nearly 460,000 last year, and 430,000 of those jobs are full time. During the last year, we have seen a contraction in the number of temporary jobs in the economy, and therefore a significant increase in the number of permanent jobs in the economy.

[David Rutley (Macclesfield) (Con)]

It is appropriate to recognise the important work that my hon. Friend made as a Minister in helping to move this agenda forward, which was a real contribution. On the important point that he has raised, does he recognise that there is also an increase in the number of full-time self-employed people, who have made a conscious decision that they want to have a real say in the future of their own employment?

[Mr Hoban]

My hon. Friend is absolutely right. The number of people who want to take control over their own lives and employment, and who want the security that comes from self-employment, is significant, and the number of schemes that we have introduced to help young people find self-employment as a route out of poverty and unemployment have been a huge benefit to those who want to set up their own businesses.

The dynamism that we have seen in the private sector, which has led to this increase in employment, has been coupled with welfare reform—a key part of our long-term economic plan. Welfare reform has sharpened the incentive to work, and we expect more of those who are out of work, too. We have brought forward the point when we work with lone parents before their youngest child starts school, so that they are better prepared to start work rather than remain on benefit. For far too long, people who have been out of work through illness have been written off by the system and expected to live on benefits for the rest of their working life. We have been working with them to ensure that they get into employment so that they can look after themselves and their families, and achieve the dignity that we so often take for granted.

The recovery in employment is a product of a strong and dynamic private sector. I welcome the measures that the Chancellor has announced today to encourage business investment and to double the annual investment allowance to £500,000. That will encourage businesses in my constituency that are strong, growing, dynamic manufacturing businesses to invest more in capital equipment. They are aided by the reduction in corporation tax. We should not forget the importance that that has in sending a signal to businesses overseas that the UK is open for business and a place where they should do business. The reduction in corporation tax is mirrored by measures around the employment allowance and scrapping national insurance for young workers under the age of 21. These tax changes, along with cuts to red tape, the investment in skills and the reform of training, are part of our long-term plan to sustain the economy and job creation.

I want to spend a few minutes on the savings measures announced in the Budget. Since they took office, this Government have made radical reforms to pensions and savings. They ended compulsory annuitisation and we are seeing the successful roll-out of auto-enrolment, which will give many people their first chance to build up a pension pot for their retirement. In the next Parliament, we will be launching a single-tier pension, which will mean that people will retire on a pension above the level of means-tested benefits. We have seen the launch of the Money Advice Service and strengthened consumer protection through greater powers for the Financial Conduct Authority. They are important steps that will help reform the savings landscape, and as the Chancellor said they also create a fresh platform for radical reform of pension savings.

When compulsory annuitisation was scrapped, people could take full advantage of the flexibility of income drawdown products only if they could demonstrate that they would not be entitled to means-tested benefits. That meant they had to have a guaranteed income of £20,000 a year. That of course predated the introduction of a single-tier pension, and the limit was set at an amount that ensured that people would not fall back on those means-tested benefits. Now that the single-tier pension is in place, it is right to reduce that amount to £12,000 this year.

We also know that for many consumers it is difficult to shop around to buy an annuity. They are bewildered by the choice in the market, and annuities are often the only product that many of them can buy. Recent surveys have shown just how badly off consumers are as a consequence of not shopping around. I think that the Chancellor’s announcement today about the simplification of the way people can use their defined contribution pension pot will radically transform the insurance and savings market. It will force insurance companies to demonstrate that their products are good value, and create room for innovation for others to come up with products that will help people maximise their income in retirement.

Annuities for Pensioners

Debate between Mark Hoban and David Rutley

Tuesday 7th January 2014 Westminster Hall

[Mr Mark Hoban (Fareham) (Con)]

I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on securing this debate. He is spot on in saying that annuities represent an important market and that we must ensure that it functions properly, fairly and to the benefit of those who have saved for their retirement and done the right thing but now face the second most difficult financial decision of their lives. The cost of getting that decision wrong is clear.

The National Association of Pension Funds has suggested that, every year, pensioners lose between £500 million and £1 billion by not shopping around for the best annuity rate, and that they make the wrong choices for a variety of reasons. We must tackle that. The research suggests that more than half of retirees do not shop around for an annuity but roll over to one of their existing pension provider’s annuities.

When I was a Treasury Minister, I worked with the Association of British Insurers in drawing up its code of conduct, which helps to shift the balance away from the default option of staying with the pension provider and towards shopping around. My hon. Friend the Member for South Derbyshire (Heather Wheeler) referred in her intervention to the change in the wake-up pack and the forms in it. However, I question whether that code of conduct is working; we must look carefully at whether the effective default is to shop around. I am not sure that the evidence exists that the code has been as effective as it should be.

My second point, raised in the report produced by the Financial Conduct Authority’s consumer panel, is about what happens when people do shop around. It is clear that the quality of help available is variable. There are some good sources of advice, but too often they are less than satisfactory. Some websites are not clear about the charges and commission earned from putting someone in contact with an annuity provider. It is sometimes not clear whether the website is offering a view of the whole market or just part of it. I looked at the Money Advice Service’s website this morning and it is clear that its comparison tables draw information from a panel of annuity providers. Firms must be much clearer about what service they are offering when people are shopping around.

We must consider whether consumers are being ripped off by hidden charges when they are shopping around, whether they are comparing the whole market or a segment of it, and whether they understand the regulatory protection when using such websites. We must ensure that consumers are properly protected and think about existing sources of information and whether they are adequate. My hon. Friend the Member for Gloucester referred to the Pensions Advisory Service. The Money Advice Service also provides information on annuities; one recommendation from the consumer panel was that the support given through the Money Advice Service and the Pension Advisory Service should be beefed up to help consumers.

We need to bear employers in mind, as they are another important player in the market. The reason why our constituents have to make difficult decisions about how to spend their pension pot is that employees are moved away from defined benefit schemes to defined contribution schemes. We are putting much more risk on the shoulders of employees. Although a large number of employers support their employees in making such choices and put them into contact with a pension adviser at retirement, we need to encourage more employers to do that, so that more employees who are coming up to retirement know exactly what they should be looking for and who they should be consulting.

We need to look at how the annuities market functions, because a poorly performing market has a detrimental effect on income for pensioners and also, in the longer term, reduces the incentive to save. If people feel that they will not get good value for money when they retire, they think, “Why should I put money into a pension? Why shouldn’t I put money into a house instead, or into an ISA?”

We need to make sure that we have a properly functioning market. That is not to say that all that providers should be doing is the bare minimum set out in regulation. Providers should recognise that they have a role to play in having high standards, so that consumers feel that they are being treated fairly and they know, for example, what they are being charged, that they have the best possible rate and that they have explored all the options. Providers have a role to play, too, in ensuring a high standard of conduct in those sectors. A low standard of conduct will lead to potential mis-selling risks in future and, as we have seen in the banking sector, that costs the industry dear.

[David Rutley (Macclesfield) (Con)]

I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on securing the debate. My hon. Friend the Member for Fareham (Mr Hoban) is making a compelling argument about the need to open up the market. I have been doing some research and it is clear that more than 400,000 people a year are making this decision. That is a huge number and it makes the case for opening the market up even more important. He talked about trying to delink product choices; we can look at what has gone on in the mortgage industry, for example, in decoupling household insurance. If we move forward to a more retail approach to the segment, it will help more people have a wide range of options as they consider this very important decision.

[Mr Hoban]

My hon. Friend is absolutely spot on. We need to ensure that there is a more retail-type approach. One reason why people are able to shop around and compare mortgages is that there is good-quality information out there.

It is easy to compare the different rates on mortgages and the monthly payments people will make on different mortgages. The charges are very transparent as well. We can learn things from the mortgage market and its transparency that can be applied to the annuities market. I do not often disagree with the pensions Minister, my hon. Friend the Member for Thornbury and Yate (Steve Webb), but I am not entirely convinced that being able to trade in annuities will work and be effective. There are some comparisons with the mortgage market that we cannot necessarily draw.

Finally, I want to make a broader point. Over the course of the past decade, there has been quite a lot of focus on, to use another bit of jargon, the accumulation phase—what happens when people build up their pensions savings. The previous Government commissioned Lord Turner to look at pensions. I think there was some dispute between Tony Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) about whether Lord Turner’s recommendations should be implemented, but they were, with cross-party consensus. There is considerable consensus over the introduction of the single-tier pension. One area that we have not debated in enough detail today starts that process. What happens when people spend their pension pot? What choices are available to them?

My hon. Friend the Member for Gloucester talked eloquently about an asymmetry of knowledge between someone seeking an annuity and an annuity provider, and about the circumstances that people face. Alternative products, such as income draw-down products, are out there, but that transfers both the investment risk and the longevity risk to the investor—the pensioner. We need to look carefully at the products out there, recognising that this very polarised market, with annuities on the one hand and draw-down products on the other, may not necessarily be in the interests of consumers. Other alternatives might be out there.

Oral Answers to Questions

Debate between Mark Hoban and David Rutley

Tuesday 6th March 2012 Commons Chamber

[Mr Hoban]

It is important that people take as much advantage as they can of the discounts on offer. The Money Advice Service is there to provide advice to people at all levels of income. Encouraging more people to open bank accounts and to take advice on direct debit services is a key part of its role.

[David Rutley (Macclesfield) (Con)]

15. What assessment he has made of the effect of Government spending commitments on the budget deficit.

Regulatory and Banking Reform

Debate between Mark Hoban and David Rutley

Thursday 16th June 2011 Commons Chamber

[Mr Hoban]

As I said earlier, re-mutualisation is an option. The advice we have received is to proceed with the sale process, which could be to a proprietary business or another mutual. Once that process is under way, we will be able to compare that outcome with the other two possible outcomes, which are an initial public offering or a stand-alone re-mutualisation. I am keen that United Kingdom Financial Investments engages with this, as it has done already, to see whether that is a viable option.

[David Rutley (Macclesfield) (Con)]

I welcome the Chancellor’s move to put an end to the failed tripartite model. What steps will be put in place to enhance the working relationship between the Treasury and the Bank of England, given the Bank’s enhanced role?

[Mr Hoban]

My hon. Friend makes an important point, and one that the hon. Member for Nottingham East (Chris Leslie) noted in his remarks. It is absolutely vital that the Bank has a good and robust relationship not only with the Treasury, but with this House. I think that we all agree that the relationship between the Treasury Committee and the Monetary Policy Committee, for example, is one of the most transparent between any central bank and any legislature across the world. We want similar standards of transparency and openness to apply in the relationship between the FPC and the House.

The White Paper sets out how the relationship between the Treasury and the Bank will be strengthened and how the Governor will meet the Chancellor to discuss the outcome of the financial stability review. We are also in the process of developing a crisis memorandum of understanding to ensure that the proper channels of communication are open between the Treasury and the Government. That is a much better set of arrangements that will ensure that the House is kept informed and that we can hold the Bank to account for its new responsibilities.

Finance Ministers’ Meeting (Ireland)

Debate between Mark Hoban and David Rutley

Wednesday 17th November 2010 Commons Chamber

[Mr Hoban]

As I said before, it is important that Britain stands ready to support the Irish Government to resolve those problems.

[David Rutley (Macclesfield) (Con)]

Will the Financial Secretary tell the House about the strong interest being shown across the world in the Government’s positive approach to tackling fiscal consolidation? Does not that further confirm that this country is now on the right path to tackling the economic crisis?

[Mr Hoban]

My hon. Friend is absolutely right. The crisis reminds us of the continuing focus on sovereign debt. The Government have taken clear measures to tackle our fiscal problems, and international bodies have recognised that. It is one of the reasons for Standard & Poor’s reporting our credit rating as stable compared with its negative outlook under the previous Government. We are taking the right steps to secure our fiscal position, bearing in mind that the crisis in Ireland is around banking, not the fiscal position.

Equitable Life

Debate between Mark Hoban and David Rutley

Thursday 22nd July 2010 Commons Chamber

[Mr Hoban]

The hon. Gentleman should listen more carefully to statements given in the House. The independent commission is at arm’s length from the Treasury and will be responsible for designing the payment scheme. I would have thought his constituents would welcome that independence and transparency, which was not evident in the ideas put forward by his colleagues.

[David Rutley (Macclesfield) (Con)]

Can the Minister provide more detail on the advice and guidance that will be provided to those affected by this sad situation, following his announcement and given the extreme passage of time?

[Mr Hoban]

My hon. Friend makes an important point. Some of the changes that I want to make to the process of ensuring that Equitable Life policyholders receive justice are to do with speed and transparency. More information will be available to policyholders on the Treasury website, where they will be able to see some of the work that Sir John has done and the letter that Towers Watson provided to us. There will also be questions and answers on the website to help address their concerns.