Finance Bill

Mark Lazarowicz Excerpts

Tuesday 3rd July 2012 Commons Chamber

[Mr Gauke]

The arrangements that will be in place following the legislation will mean that repairs and alterations will be chargeable for VAT. However, the listed places of worship scheme will apply to both types of work. It has been the case for some time that repairs involved the payment of VAT. The listed places of worship scheme will enable people to reclaim the VAT costs relating to those repairs. An extension—which is an alteration, rather than a repair—will now have VAT charged to it, but it will be possible to reclaim it through that same scheme. The scheme is now more generously funded than it was before the Budget, which means that a higher proportion of the costs that the churches would have incurred will now be able to be reclaimed. We have taken steps that the churches have widely welcomed.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

I am sorry to have missed the beginning of the Minister’s remarks on this subject. I was actually checking up on certain aspects of a similar issue in my constituency. He said that the Church of England was content with the arrangements, but I hope that he will accept that it is not just the Church of England that is involved. I have a lot of churches, places of worship and listed buildings in my constituency, and I have been contacted by a church that was in the advanced stages of preparing to carry out work that could be seriously affected by the proposals. Will the Minister guarantee that, if the funding for the scheme does not meet the requirements, he will look again at the level of funding provided? Will he also monitor the scheme closely to ensure that no extra bureaucracy is introduced that could delay projects that would otherwise go ahead?

[Mr Gauke]

The hon. Gentleman is absolutely right to say that not just the Church of England is involved. I said earlier, however, that the Church of England had led on behalf of all the churches on this matter. On his second point, we have made the transitional rules more generous for churches that were close to commencing work at the time of the Budget. I obviously cannot comment on the specific case in his constituency without knowing all the details, but I think that he will find that many cases in which plans had reached an advanced stage will benefit from the transitional rules. He mentioned the funding for the scheme. We believe that this is a generous settlement, but we will of course keep such matters under review. He also mentioned bureaucracy. The scheme is organised by the Department for Culture, Media and Sport, but the Treasury will also take a close interest in it. The two Departments have worked together very effectively on this matter, and we are keen to ensure that the scheme works in an adequate way. I would underline the point that the representations that we have received from the churches suggest that they are happy with the arrangements.

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[Catherine McKinnell]

I was talking about the situation at RBS, which was caused by a total administrative meltdown and computer failure; it had nothing to do with regulation. On the subject of regulation, Conservative Members called for less regulation. Politicians on both sides of the House need to consider where we go from here.

[Mark Lazarowicz]

Whatever people say about the banks’ responsibility for things that happened in the past, there can be no doubt that what has happened at RBS in the past few days is the responsibility of people running the bank now and of those responsible for the financial sector now, who include the Government.

It is not just those on low incomes who suffer from the damage caused by the difficulties at RBS, which obviously is trying its best to resolve them. Businesses in my constituency have contacted me saying that if the problem is not resolved immediately, they face closure. The Government need to take that issue seriously, but clearly they are not.

[Catherine McKinnell]

I absolutely agree with those sentiments. When discussing the impact that the total administrative failure at RBS had had, particularly on those on low wages but also, as my hon. Friend has just said, on small businesses, I was shocked and taken aback at the political opportunism involved in jumping up and raising a question about regulation, which is entirely irrelevant to the matter that I was discussing.

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[Catherine McKinnell]

My hon. Friend makes a powerful intervention and reminds me particularly of my own region, the north-east, where too many people lost out on opportunities in the 1980s and never quite recovered from the experience. When I talk to young people today, I find that some of the brightest are coming out of school and choosing not to go to university or college but instead to try desperately to find whatever work opportunities might be available to them because, apart from the fact that they are put off by the tuition fees, they are so worried that if they did step on the ladder and go to university they would come out at the end to find there were still no opportunities. There is a deep sense of anxiety among young people that the Government need to be seriously aware of.

That is what is so concerning about the scrapping of the future jobs fund, which was not only providing real opportunities for young people and breaking the cycles of lack of opportunity, but helping businesses to open up and take on young people in particular. The Government replaced it with the work experience scheme, which they eventually rolled out last year and which offers only eight-week, unpaid placements. There is nothing to say that that is not valuable in itself, but it is simply not doing enough for enough young people. It is also available only for people under 21, so it does not cover unemployed people who have left further or higher education. Again, that compounds some of the anxieties that young people are expressing to me when they say that if they go on to college or university they will be no better offer at the end and they will instead be saddled with a lifetime of debt.

[Mark Lazarowicz]

It is worth remembering, is it not, that this younger age group, who will no longer be getting jobs under the future jobs fund, but only its successor, will also be one of the main targets of the Government’s cuts in welfare benefits?

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[Charlie Elphicke]

For me, the issue is the size of the bonuses not in the private banks, but in the taxpayer-owned banks. That is the real concern that we ought to be focusing on. That is why the Government’s bank levy is the right way forward.

[Mark Lazarowicz]

rose—

[Charlie Elphicke]

Let me develop my point and I will then take further interventions.

The Government’s bank levy is the right way forward because if we take too much money out of the banking system, we will be pulling out capital. If we pull out too much capital through taxation—or, indeed, through dividends—we will constrain the ability of the banks to lend. We have a crisis in which banks are not lending because they are hoarding capital. If we pull more capital out of the banking system, it will constrain the granting of mortgages and loans to small businesses. In my constituency, that is an important issue, because many small businesses are having great difficulty in getting the lending that they need.

[Charlie Elphicke]

I am all too aware that my constituency has had a difficult time and that youth unemployment has been rising. It rose significantly in the last Parliament under the previous Government, who completely mismanaged the economy. I welcome the fact that the jobseeker’s allowance count in my constituency has fallen in the latest figures. That is really positive. All of us are, of course, concerned about unemployment and want to see more jobs and money. That is why we need to get the banks lending again. That will help businesses to expand and to create the jobs, money and prosperity that we want to see.

[Mark Lazarowicz]

I am a little unclear about the logic of the hon. Gentleman’s position. He is against taking money out of the banks in the form of a bank bonus tax because it would affect the capital that they can lend to businesses. I think that is a fair assessment of his position. However, that criticism also applies to the bank levy that his Government are in favour of. How is it that he is in favour of a bank levy that takes capital out of banks, but against a bank bonus tax that is paid for by the people who get the bonuses?

[Charlie Elphicke]

My position is that the bank levy strikes the right balance. That is why I asked the shadow Minister whether her proposal would be in addition to, or an alternative to, the bank levy. That is significant. She is arguing, on the gross figures, for more than £3 billion more to be pulled out of the banking system. That would have an immediate effect on the capital that banks can lend to small businesses and hard-pressed home owners.

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[Graeme Morrice]

I agree, and I shall deal with that aspect of bank lending in due course. It is vital for people’s trust in British banks to be restored as quickly as possible.

[Mark Lazarowicz]

Is not one of the tragedies the fact that the hundreds of thousands of people who work in the financial services sector—many thousands of them in my constituency and that of my hon. Friend—are being let down by those who are receiving the big bonuses? I was shocked and horrified by what is being done in their name, because they are often the victims of the criticism and the policies in the banks which have led to today’s debate.

[Graeme Morrice]

I agree. Many of my constituents who work in the banking and financial services sector contact me regularly to express concern about what their employers are doing.

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[Rushanara Ali (Bethnal Green and Bow) (Lab)]

I support the new clause because today more than 1 million of our young people—one in five of them—have no job. That is not because they are not trying to find work and it is not because they are not working hard to get experience and skills; it is because in this flagging economy—in this double-dip recession created by this Government’s failed economic policies—the jobs just are not there. Yet, at the same time, we see the banks paying out huge bonuses to some of those responsible for the economic mess we are in. Britain is now bottom of the pile for social mobility, and that is due to this Government’s failures. The top 1% of our society now control a greater share of the national income than at any time since the 1930s. Despite these crippling inequalities, this Government’s priority has been to give tax breaks to millionaires while building their austerity programme on the backs of some of the poorest in this country.

The current labour market is a bleak place. The hardest hit by unemployment remain women and older people, who face discrimination in the labour market, and of course young people. Long-term unemployment is at its highest since 1996. As my hon. Friends have already said, youth unemployment has increased by more than 100% in the past year. That is a travesty, because it means that we have failed to help young people live up to their ambitions and find the jobs they want—or, indeed, find any jobs at all. It also means that a great wealth of talent and productivity is being lost. That is a travesty, too, and one this Government should be ashamed of. According to a recent Association of Chief Executives of Voluntary Organisations report, that will cost the Treasury £4.8 billion this year and it will cost the economy £10.7 billion in lost output. I support the new clause because the Government’s plans are driving a wedge through our society, leaving too many people behind.

Social mobility in this country has ground to a halt, and as I represent one of the most deprived areas of London, I see that all too clearly; it has always been hard, but now we are moving backwards. Every week, I meet young people in my constituency who are losing out. My area has one of the highest rates of youth unemployment, at more than 8%. The loss of the education maintenance allowance is making it harder for these young people to stay on in school. The lack of jobs makes it seem like the rising cost of university or education is just not worth it. Georgia Rowe, a student at one of the colleges in Tower Hamlets, recently said to me:

“I thought about university but it doesn’t guarantee a better job. You might as well not be in debt.”

This is the generation of young people who are being left behind.

That is why Labour has proposed the real jobs guarantee to help give our young people a chance, as we know the scarring effects that long periods of unemployment can have. People need work experience, training and to learn the skills that make them more employable in today’s difficult labour market. I know what a massive difference it can make to a young person’s chances if they get a little experience. Programmes such as Job Ready, which is hosted by Futureversity in my constituency, and Skillsmatch, and those of the Adab Trust and City Gateway, along with access to a job, can help people overcome the psychological barriers to economic opportunity, and build ambition and confidence. They connect business and young people, opening up new opportunities and partnerships, but those programmes are all struggling without adequate support.

The Work Foundation has rightly called the Government’s approach to youth unemployment “piecemeal” and “fragmented”. The Government’s headline plan to get young people back into work through the Work programme and youth contract is failing. They have managed to get only about a third of those on the programme into jobs, and in this age of austerity that is not good enough. Recent figures in my constituency showed that at least 15 people were chasing every job vacancy. The Government should be looking for real ways to help solve these problems and not continuing to kill off jobs and growth prospects through their draconian austerity measures.

Young people in my constituency can see the opportunities a short distance away in Canary Wharf and the City of London. They want to know how to get jobs there. They see bankers in the city getting tens of thousands of pounds in bonuses while unemployment soars. This is what happens when social mobility grinds to a halt. Those kids in my constituency, who are as talented and aspirational as any others, simply do not have the same opportunities, so it does not seem like such a bad idea to ask those who have so much to pay a little more.

When I consider the behaviour of the banks and some of their employees, I do not always see shining examples of socially responsible companies. The finance sector is a vital part of our economy and many companies and their staff behave responsibly, but too many of the highest paid behave the worst, as we have seen with the Barclays bank scandal. Such behaviour is at best reprehensible and at worst criminal and requires inquiries and investigations as soon as possible, yet those people are some of the highest paid in the country. Bob Diamond earned 600 times more than the average income in my constituency, so a tax on the excessive bonuses received by people such as him is only too fair. But instead the Government are reducing the tax paid by banks, with the bank levy raising just over half as much in 2011-12 as Labour’s bank bonus tax would have raised this year.

[Mark Lazarowicz]

I was interested to hear my hon. Friend say that Bob Diamond’s bonus and salary were 600 times the average wage in her constituency and want to highlight that point. Most of us understand that top bankers will probably be paid a lot more than most people in the country under any system, but such a discrepancy is obscene. That is what people find so disgusting and what they want to see tackled.

[Rushanara Ali]

I thank my hon. Friend for his intervention and hope that the Government are listening. They must understand how serious the matter is and the deep resentment and anger that are felt in constituencies such as mine. The borough that contains my constituency is also the borough in which Canary Wharf is based and the injustice of some of the behaviour and the worst abuses in the banking sector must be addressed. The Government must take responsibility.

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[Grahame M. Morris]

I would have more respect for the hon. Gentleman’s intervention if he had sat through the whole debate, because those points have been raised. It behoves the Government to do more, not less; we have to learn from the lessons of history. I urge hon. Members to support new clause 13.

[Mark Lazarowicz]

I want to say a few words in support of a bank bonus tax. I emphasise that I am supporting that not to bash the bankers, but to end the unacceptable face of banking in the form of an excessive bonus culture that is still far too widespread.

As I said earlier, the vast majority of people who work in financial services certainly do not get vast bonuses; many thousands of people in my constituency work hard behind bank counters or in bank offices serving customers, and they are often on modest incomes. Many have paid with changes in working conditions, while others have paid with their jobs, when redundancies flowed from the financial crisis caused by the irresponsibility of senior executives. We are not targeting those people; we want to do something about the small minority who are still getting excessive rewards.

A study published at the end of June showed that average pay for chief executives at 15 leading banks in the US and Europe increased by 12% over the last financial year. That may be less than the 36% increase in the previous year, but whatever the increase—it is about 50% when we add both increases—it is wildly out of line with falls in profits and share prices that have frequently characterised the sector. That is not performance-related pay in any sense that most people would understand and it is certainly not a performance that would justify what is effectively a further tax cut on top of a tax cut for the highest paid.

A tax targeted on bank bonuses is necessary because the existing attempts to curb the bonus culture have so obviously failed. That is the key point. The issue is not about saying that people should not be very well paid at the top of banks and financial institutions, but we want to get away from a position in which sums wildly in excess of anything that could be said to be deserved are paid as a matter of course. None of the steps taken so far has changed that culture, even in an era of financial crisis among the banks and beyond.

The second reason why we want a bank bonus tax is that it would raise money for some valuable purposes. The issue of jobs for young people affects all our constituencies. My constituency normally comes in the middle range of unemployment across the UK, and we have seen a substantial increase in youth unemployment. I certainly want that issue to be tackled in my constituency.

We are also saying that the bank bonus tax would be used to provide affordable housing. That, of course, would bring two benefits. First, it would bring more housing into the sector. Constituencies such as mine have to some extent, although on a lesser scale, experienced the same phenomenon as happened in London, where high rates of pay in certain sectors such as financial services have pushed up house prices and made it harder for people on lower incomes to get affordable housing, so this proposal would be important for those people as well. Of course, building affordable housing and new homes also gives a boost to the economy through providing new jobs in the construction sector and helps people who have been out of work because of the collapse of that sector in many parts of the country.

Our proposal of a bank bonus tax would not only tackle the excessive bonus culture but provide jobs for our young people and affordable homes, giving a boost to the construction sector. I therefore hope that the House will support it.

[Mr Hoban]

We have heard a series of slightly strange speeches by Labour Members. We have become accustomed to their belief that they left us a golden economic legacy, but the reality is that when they left office unemployment was higher than when they came into office. They seem to believe that the problems of youth unemployment started under this Government. At least the right hon. Member for South Shields (David Miliband) has the good sense to recognise that it is a long-standing and deep-seated issue and that its growth started under the previous Government.

Labour Members seem to forget that when they left office the deficit was out of control. We have tackled that and reduced the structural deficit by a quarter.

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[Mr Hoban]

The challenge that we face is dealing with the economic legacy left by Labour, with the huge boom in financial services and the huge bust that followed.

We have heard Labour Members’ story that they presided over a golden age in the financial services sector. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) could not bring herself to admit that the scandal over LIBOR fixing took place between 2005 and 2008 or that the interest rate mis-selling that affected so many small businesses took place in the same period leading up to the financial crisis.

Labour Members deplore the bonus culture, but let us not forget that when they were in government, bonuses were paid out in the year that they were earned and paid out in cash. That was the hallmark of the age of irresponsibility that characterised their time in office. This Government are taking action to tackle the bonus culture. This Government have introduced rules to ensure that bonuses are not paid out in the year they are earned but spread over a three-year period, that they are not paid out in cash but in shares, and, crucially, that they can be clawed back where there have been problems in the business or where there has been wrongdoing. This Government have tackled the bonus culture in the UK whereas the previous Government let it run riot, and we have seen the financial consequences of their so doing.

[Mark Lazarowicz]

rose—

[Mr Hoban]

Perhaps the hon. Gentleman will apologise for the approach that his party’s Government took towards the bonus culture.

[Mark Lazarowicz]

The bank bonus tax was first introduced by the previous Government. In fact, I think that our Government should have done much more about the bonus culture in the banks in the past and was wrong not to do so. However, will the Minister at least accept that at no stage did his Government suggest any action whatsoever to tackle the bonus culture? He should not suggest that the responsibility lies only with Labour but accept his share of the responsibility as well.

[Mr Hoban]

We have taken action to tackle the bonus culture by ensuring that the interests of shareholders and management are aligned and that where there is wrongdoing bonuses can be clawed back. That is a significant change that has happened since this Government came to office. In the same way that we are remedying the regulatory failures left behind by the previous Government, particularly by the shadow Chancellor, the inquiry set up into the fixing of LIBOR will ensure that in future LIBOR is regulated to fill the hole in the Financial Services and Markets Act 2000 and ensure that there are criminal penalties for manipulating LIBOR—again, filling the hole left by the shadow Chancellor when he designed the regulatory system.