Fuel Prices

Mel Stride Excerpts

Tuesday 15th November 2011 Commons Chamber

[Dr Sarah Wollaston (Totnes) (Con)]

When Labour came to power in 1997, fuel duty stood at 36.8p per litre. When it left office in 2010, the price was more than 57p per litre—“a pain in the gas” as they say in the United States. I therefore welcome the early and decisive action taken by the Treasury in taking 1p off fuel duty, scrapping the duty escalator and delaying the 3p per litre rise. Many Members have today made a compelling case for why we now need the Treasury to go further, however.

I represent a large rural constituency in south Devon, and having a car in order to get to work or exercise choice in education is not a luxury; it is an absolute essential. My constituents spend a far greater proportion of their disposable income on fuel than those who live in cities.

A further 3p rise in January would not just hit householders, however; it would hit essential local businesses, too. Some 65% of all the UK’s groceries are delivered on retread tyres produced by a company in my constituency: Bandvulc tyres. It also exports to cities across Europe. It is a significant employer and wealth generator, but a 3p a litre rise in fuel duty would cost it an additional £24,000 a year, because it uses more than 500,000 litres of fuel a year. It is a family-run manufacturing business producing a sustainable product and creating local jobs. It wants to stay in Devon but knows that it would make economic sense to relocate part of its business to eastern Europe as a result of the fuel duty rise. There are similar examples among other businesses in my constituency.

Another very important sector in my constituency is tourism. I am talking about businesses such as Sharpham wines and cheeses, which attracts 7,500 tourists a year and employs up to 40 people. More importantly, it is in the top six wine producers in the UK and it is another wealth creator that exports across Europe. That business spoke of the ripple effects of a further rise in fuel duty, as did many others. A business that I visited last week, Palladium Building Supplies, told me of the knock-on effect to the entire building industry across south Devon that there would be if we go ahead with this rise.

[Mel Stride (Central Devon) (Con)]

My hon. Friend is making a powerful point about the effect on businesses. Does she accept that not only are these high fuel prices damaging businesses, but that, in turn, that is leading to less revenue to the Exchequer, because businesses are becoming less profitable?

Jobs and Growth

Mel Stride Excerpts

Wednesday 12th October 2011 Commons Chamber

[Guto Bebb (Aberconwy) (Con)]

I hope that the five-minute time limit was not brought in because I was the next speaker. It is a pleasure to follow the considered comments of the hon. Member for Middlesbrough (Sir Stuart Bell). In particular, I welcome his comments about enterprise zones, which were also mentioned by my hon. Friend the Member for South Staffordshire (Gavin Williamson). The Jaguar Land Rover investment that he mentioned was bid for by Wales, too. It is a great shame that, as Tim Williams from the Welsh Automotive Forum stated, one reason why Wales lost out on that investment was the foot-dragging of the Labour Welsh Assembly Government, who refused to implement the enterprise zone process in Wales because it was a Westminster Government proposal.

The comments of the hon. Member for Middlesbrough were much more positive and balanced than those of the right hon. Member for Holborn and St Pancras (Frank Dobson), who decided to attack the credibility of bankers. He might be right, but when one is making a point in the House about the credibility of individuals, one should ask about the credibility of the shadow Chancellor, who advised the former Prime Minister to sell our gold reserves at a very low price. If we want to talk about credibility, we should remember the actions of Members on our own side as well.

This debate is about jobs and growth. I represent a constituency in north Wales where we have a significant small business community. That means that we have a lower dependency on public sector jobs in the Aberconwy constituency than in most of north Wales and most of Wales. That is not to say that the public sector is not important. I regret every single job lost in the public sector, but we have to acknowledge the fact that we must live within our means. The small business community in my part of north Wales has broadly welcomed the actions of the coalition Government. It has seen a credible approach to reducing debt, dealing with the financial crisis that we are facing, and creating a stable economic environment that will allow it to invest and create real employment opportunities for the people I represent.

However, in the context of the debate it is important to point out that there are issues that cause concern for small businesses. When I mention small businesses, I am talking about what most Members would describe as micro-businesses. In the 1980s, when we saw Wales recover so dramatically from the loss of the heavy industries, that recovery was based on the fact that Wales created more new businesses than any other part of the United Kingdom. I am certain that there are businesses in Wales that are willing to take that challenge forward, but there are issues that we need to deal with.

Those issues might not look very important to people dealing with swaps in the market in London and so forth. For example, one of the issues that small businesses in the tourism sector in my constituency resent is the VAT threshold. Most people would say, “What’s he going on about?”, but the VAT threshold is a barrier to growth. Someone setting up a small business in the tourism sector reaches a turnover level of £73,000 and faces a cliff edge—the fact that if they go on to turn over more than £73,000 a year, they are penalised by the system. Anyone who visited Llandudno this week would see cafes that have closed for the winter, bed and breakfast businesses—

[Mel Stride (Central Devon) (Con)]

My hon. Friend is making a powerful point about VAT and tourism. Does he accept that it is wrong that our tourist businesses, particularly those offering accommodation, are handicapped because VAT rates are higher in this country than in many of our continental competitors?

Summer Adjournment

Mel Stride Excerpts

Tuesday 19th July 2011 Commons Chamber

[Robert Halfon (Harlow) (Con)]

I declare a lifelong interest in this subject and refer Members to the Register of Members' Financial Interests. I am delighted to have the opportunity to speak in this debate, because I want to talk about a tale of British craftsmanship at its best, our failure to compete and a remarkable industrial revival.

The automatic watch is almost the same now as when it was invented in 1770 and it has often triumphed over computers. For example, in 1970, after Apollo 13 was crippled by a ruptured oxygen tank, Jack Swigert’s Omega Speedmaster was famously used to time the critical 14-second engine burn, allowing for the crew’s safe return. Even today, the Omega Speedmaster is still the only watch to have been worn on the moon.

Secondly, I wish to discuss British craftsmanship. London led the world, changing the course of history in the 17th century by manufacturing accurate clocks that allowed us to sail throughout the world, trade, make maps and acquire the British empire. British companies such as Smith and Son, George Graham, Josiah Emery, and J. W. Benson forged the first clock-making industry, despite outbreaks of the plague and the great fire of London. Many hon. Members will know the story of John Harrison, a self-educated English clock maker who solved the problem of longitude and was eventually awarded thousands of pounds from Parliament.

Sadly, in the 18th and 19th centuries Britain lost its expertise. The decline of our watch industry is a British parable, just like the tin can.

[Mel Stride (Central Devon) (Con)]

My hon. Friend shares with me a love of watches. I know that he is also passionate about apprenticeships, so does he have anything to say about their importance in this area?

[Robert Halfon]

I will answer my hon. Friend in my later remarks, and I thank him for his intervention.

The decline of our watch industry is a British parable, just like the tin can and the car assembly line: we invent but others capitalise. In 1800, London was producing some 200,000 watches a year, which were exported not just to Europe, but to Russia, the middle east and even China. However, we became trapped by tradition. After Napoleon’s defeat in 1814, the Swiss started to make machine-made copies of London clocks and flooded the market with cheap products. Britain responded with protectionism and price controls. We failed to compete, and our expertise was lost to Switzerland, America and even the far east.

However, there has been a revival in recent times. In 1923, the British National Physical Laboratory produced quartz oscillators, and we all know about the production of the atomic caesium clock in 1955. These are the foundation of telecommunications, satellites and space travel. Famous British household names in horology have resurfaced: Dent & Company, and J & T Windmills, which even has a factory in Essex. Today, we have one of the greatest living names in horology, George Daniels, a British man who invented the coaxial escapement, which is the first practical new watch escapement in 250 years; it is a smoother watch movement that almost eradicates friction, and it was commercialised in 1999 by Omega. Those who have done the most to support this revival in Britain are the British Horological Institute and the Worshipful Company of Clockmakers. We have lost out to Switzerland and the far east, but we still have repair shops, a wealth of academic study and some ultra-high-end manufacturing.

So what is to be done? I welcome the Government’s policy on apprenticeships and the work of the Minister for Further Education, Skills and Lifelong Learning, who is in his place, in his promotion of craft. As I mentioned in my early-day motion 623, our funding for skills qualifications must be open to small specialist courses for industries such as horology. I strongly welcome what the Government did last year to extend funding for BHI certificates in clock and watch servicing, and repair, and I am grateful to the Leader of the House for his letter of support in that campaign.

However, there is a wider issue to address: many smaller qualifications are being discontinued because they are not profitable enough for awarding bodies. There are now just three horology training facilities in the UK: Birmingham City university; West Dean college; and the British School of Watchmaking. In Harlow, we are very lucky to have the Eversden family of watchmakers, and they show that in an age of digital technology there is still a public demand for the crafts of old. As George Daniels proved, there is still a demand for British horological genius. I hope that all possible support will be given to the watch-making and clock-making industry, which was once dying but is now showing signs of life in Britain today.

--- Later in debate ---

[Mel Stride (Central Devon) (Con)]

I very much welcome this debate and the opportunity to speak about the importance of the growth of business to our economy. In doing so, I should express a personal interest, in that I have a majority holding in a small private company.

The Government have set the stage well for business growth, in that we have at least avoided being where Greece and Ireland are and where Portugal is teetering on the brink of being. Our economy is fundamentally sound and growing. That is happening against a backdrop of our having inherited the worst budget deficit in the G7 and against the more recent headwinds of the spikes in the oil price—it has increased by 60% in the past year—and the eurozone crisis, which we are all facing at the moment. Although some of the Labour Members who are shaking their heads may disagree with that, I am sure we can all agree that if we are to move away from a debt-driven, public sector-reliant economy into manufacturing and exporting, creating private sector jobs will be vital. I welcome the fact that the Government have done that over the past year, creating 500,000.

We must do whatever we can to support business and I welcome the fact that the Government have intervened in a number of critical ways. The first is Project Merlin, which aims to get the largest five banks lending another £190 billion to small and medium-sized businesses. I know from such businesses in my constituency that that is vital and I urge the Government to maintain that progress.

I also welcome what the Government are doing about red tape through the one in, one out rule on regulation, through embracing the recommendations of Lord Young’s review, which is extremely important, and through the work done by my hon. Friend the Minister for Further Education, Skills and Lifelong Learning on apprenticeships, on which this Government have a particularly proud track record, much of which is down to the personal commitment that he has shown in this vital area.

I also think that Government should get out of the way of business. It is important that we get taxation on businesses down. Over the next four years, as hon. Members will know, the corporate tax rate will fall by 5%, but that is not good enough. We need to do even more. When our local and national tax rates combined are compared with those of other countries in Europe they show that we are doing pretty well: in Germany, they are at 30%, in France at 34% and we are at 26%. However, when we look further afield, as we must when we consider the competitive pressures of the future, we see that places such as Hong Kong and Singapore have combined rates of 16% to 17%. I urge the Government to keep pressing firmly in that direction.

Let me make two more important points. First, although we have avoided the worst excesses of what Labour planned to do with national insurance, although it is expensive to lower national insurance as it is one of the three great revenue raisers of taxation and although I recognise and applaud the fact that the Government have introduced national insurance holidays in most regions of this country for new business start-ups, we must do more. It is a tax on jobs and we must start to get the figures down.

Secondly, micro-businesses—those that employ 10 or fewer employees—represent 96% of the businesses in this country and employ 700,000 people. We must get the number of onerous regulations for that group down. In particular, we should consider paternity and maternity rights and the idea that employees can leave the work force for 26 weeks or up to 52 weeks-a-year and their jobs must be held open. That needs to be considered and perhaps relaxed for those businesses, and I would welcome the Minister’s comments on that.

Sovereign Grant Bill

Mel Stride Excerpts

Thursday 14th July 2011 Commons Chamber

[Mr Davidson]

Of course, as my hon. Friend says, that biscuit would be a Bourbon.

It is worth while clarifying the question of the ownership of the Crown Estate. Is it owned by the monarch as an individual or the monarchy as an institution? When the Public Accounts Committee looked at this matter, there was a consistent attempt by officers of the monarchy to confuse and conflate the two. We need to ask ourselves this question: were the monarchy abolished, would Crown Estate moneys and properties belong to the deposed monarch as an individual or would they remain with the state? It is quite clear that they would remain with the state. Therefore, the moneys and the estates are not the property of the individual who happens to be the monarch at any particular time. That clarifies a number of things.

[Mel Stride (Central Devon) (Con)]

Will the hon. Gentleman give way?

[Mr Davidson]

No, I want to proceed because we are short of time.

I am seeking clarification from the Chancellor, who, I remember, was on the Public Accounts Committee when he was a young whippersnapper—I have often wondered what happened to him since. Will the National Audit Office, the interventions of which I will welcome, also be able to look at all elements of royal involvement? In particular, can it look at the royal art collection, about which there were serious discussions and disputes in the past? That would seem to be covered by what he has said, but it is not immediately clear.

Is the Crown Estate the right body to take into account when determining the monarch’s income? Those of us on the Public Accounts Committee who examined the Duchy of Cornwall’s accounts were absolutely clear that the Duke of Cornwall was manipulating the money involved, by playing a major role in determining the amounts of expenditure and income, thereby determining how much money came, or was available, to him as an individual.

Quite clearly, the Crown Estate could be leant on by the monarchy to make decisions on expenditure and income in the short term to affect the amount of grant that the royal family receive. The grant would then be on, as it were, a golden ratchet—a bit like EU expenditure, it would always go up, and never down. There is clearly scope for abuse in those circumstances. Will the Chancellor clarify those points?

Will the Chancellor also take into account the fact that there is due to be a windfall from wind and wave power? Will he assure the Committee that all of that will be taken into account when the review takes place in due course?

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[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I have a series of concerns with the Bill. First, it creates an artificial link between the profits from an estate given up by the royal family in 1760 and an amount required to carry their official duties in the present day. My major concern is with the escalator process that is put in place, whereby the amount that is received each year will be the same as or greater than that of the previous financial year, either through the floor introduced in the Bill or because 15% of the Crown Estate’s profits is greater than the floor. I am disappointed that the Opposition amendment on that was defeated in Committee.

There are curious oddities in the Bill. Why is there a need to round up the Crown Estate’s profit to the nearest £100,000? Why round it upwards and not downwards? Why round it up at all? The profit of the Crown Estate is a red herring. There is no link between the successful organisation of the estate’s affairs and the amount received by the royal family. This is not a business arrangement. I recognise that there are arguments that the royal family should receive a lump sum and be able to transfer funds for better use. I also recognise the argument that the money provided is given for a specific purpose. However, if it is not being used for that purpose, on what grounds is that amount of funding being given?

As many Members have said, there should be a regular needs-based analysis of the royal family’s expenditure, with grants provided accordingly. Having said that, I like the idea of a reserve fund for money that is not used. This sounds like the end-of-year flexibility that the Welsh Government set up under Plaid Cymru a few years ago, only for the Treasury to steal back £400 million earlier in the year. I look forward to the day when the Treasury follows the same pursuit in taking back money allocated to the royal family.

The Crown Estate, which is a key part of the Bill, is owned by the state and administrated by commissioners. It owns large areas of land in Wales and claims the seabed and foreshore as part of its urban, rural and maritime portfolios. Yet last week’s annual report fails to provide a nation-by-nation or regional breakdown of the investments and profits of the Crown Estate. Figures for Scotland are provided on the website, but apparently no comparable figures for Wales are published. In the interests of transparency, we would like to see those figures published. In the interests of Wales, we would like to see responsibility for the Crown Estate in Wales transferred to the Welsh Government. This is our land and our seabed, and it should be used for investments that benefit the people of Wales.

[Mel Stride]

I feel that I must return to the status of the Crown Estate. Does not the hon. Gentleman accept that it is effectively owned by the institution of the monarchy and not by the state at all?

[Jonathan Edwards]

I do not agree. My belief is that the Crown Estate in Wales should now be devolved to the Welsh Government.

Profits are coming from the use and exploitation of these assets. Those profits, be they for renewable energy on land or sea, should be given to the people of Wales. Having control of the Crown Estate land and sea in Wales would give us the opportunity to be a world leader in renewable energy and to develop our economy accordingly. In the meantime, the Bill should not include reference to the Crown Estate and should instead provide a series of grants according to the needs of the royal family to undertake their duties. If we are to have one single sovereign grant that is not needs-based, then why not simply increase it by the consumer prices index, as that seems to be the Government’s preferred measure of inflation?

Finance Bill

Mel Stride Excerpts

Tuesday 28th June 2011 Commons Chamber

[Fiona Bruce]

No, I am going to continue now, because I have given way so many times that, as has been pointed out, it has interrupted the flow of my speech.

Family breakdown is an incredibly important challenge for the Government. The cost in human terms, especially in terms of children failing to fulfil their potential, is far too high. Although most single parents do a fantastic job in very difficult circumstances, and deserve support as they do so, the evidence is that on average, the children of married parents do better on significant measures such as educational attainment, health, likelihood of getting into trouble with the law, and alcohol and drug abuse.

The crucial thing to understand about British family breakdown is that the key is not only divorce, but the break-up of cohabiting relationships, which are far less stable than marriage. The CSJ report states:

“While marriage accounts for 54 per cent of births, the failure of marriages—ie divorce—accounts for only 20 per cent of break-ups and 14 per cent of the costs of family breakdown, among all families with children under five. Unmarried families account for 80 per cent of the break-ups and 86 per cent of the costs.”

[Mel Stride (Central Devon) (Con)]

My hon. Friend makes an extremely powerful case. Does she agree that Conservative Members are not denigrating forms of family other than those that involve marriage, but saying that we believe that marriage makes for a powerful start in life for children, and leads to better social outcomes on average?

[Fiona Bruce]

I agree with my hon. Friend in that respect—nor are Conservatives seeking to take away the support that we give to other family groups such as single parents. We are saying that there should be a tangible affirmation of the very important relationship of marriage.

A child born to cohabiting parents has nearly a one in two chance of living in a single-parent family by the time they reach the age of five, but a child born to married parents has only a one in 12 chance of finding themselves in that situation at that age.

Finance (No. 3) Bill

Mel Stride Excerpts

Tuesday 26th April 2011 Commons Chamber

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I welcome the Finance Bill in so many ways, many of which are to do with creating growth and jobs. The former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), noted in his comments after the Budget that it will create growth, so it is interesting that some of the newer members of the shadow Cabinet on the one hand praise him for the things he said but on the other ignore his praise for a Budget that creates growth.

The Budget is helping to rebalance the economy, which is never an easy thing. We need to get more from private sector, as we have been over-reliant on the public sector. An important point that is often missed when discussing the private and public sectors and whether the Government should spend more money here or there is that the Government do not have any money. It is not our money; it is the public’s money. It is the money we take off people and businesses and from trading throughout the world. It is not our money for us to do with as we like. It is the public’s money, and we should ensure that we deal with it responsibly.

[Mel Stride (Central Devon) (Con)]

I am following my hon. Friend’s powerful argument closely. Will he add that, to the extent that we go into debt, it is actually our children’s and grandchildren’s money?

Amendment of the Law

Mel Stride Excerpts

Monday 28th March 2011 Commons Chamber

[Harriett Baldwin (West Worcestershire) (Con)]

I rise to speak in support of my right hon. Friend the Chancellor’s historic and pivotal Budget. Today we have heard Conservative Members give examples of what a difficult hand the Chancellor has been dealt in producing a Budget. We have heard about the £120 million a day—£840 million a week—that the Government have to pay in interest. We have heard that interest has, in effect, become one of the biggest Government Departments. That is why it is so important to point out the difference between the deficit and the overall debt. In setting out the path that he did, my right hon. Friend still has to live with the fact that debt will be rising in every year of this Parliament until the last one. That means that the debt interest bill is still growing, despite the tighter economic conditions that he has imposed.

I think I am probably somewhat different from other Members of this House in that I did not aspire to come here when I was a student. Indeed, I managed to survive the first 40 years of my life without it ever crossing my mind that I should stand for Parliament. Shortly after Tony Blair’s second election victory in 2001, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) gave another historic Budget in which he departed from Conservative spending plans for the first time. At the same time, that Government were beginning to evaluate whether the conditions might be right to enter the euro. Those two horrors were the impetus for me to seek election to this place. I vowed, as a mother, that I wanted to ensure that my children did not grow up in a country that was facing bankruptcy, and yet I failed to get here soon enough to stop the rot. I am therefore very grateful to the Chancellor for having finally set out a path that will enable my children—and one day, I hope, grandchildren—to enjoy opportunities of the kind that I enjoyed when I left university.

Enough of me; I think I should talk about the Budget. I welcome the Budget’s focus on growth and the private sector. When the right hon. Member for Morley and Outwood (Ed Balls) was an adviser to the previous Prime Minister, he set out something called a neo-endogenous growth strategy. Again, I realised quite early on that the problem with such a strategy is that before long the marginal impact of increased Government spending decreases, and one runs out of money. We therefore need to focus on private sector growth, which is why this Budget is so pivotal. A lower tax rate for businesses will bring in higher tax returns.

[Mel Stride (Central Devon) (Con)]

My hon. Friend makes a powerful point about the importance of lowering taxation on businesses to provide growth. Does she agree that the Chancellor was immediately vindicated the next morning, when Sir Martin Sorrell was on the “Today” programme explaining that WPP, the world’s largest advertising agency, would consider relocating to the UK as a direct result of the Budget?

[Harriett Baldwin]

Those sentiments were echoed by businesses in my constituency, where entrepreneurs welcomed and cheered the measures set out in the Budget. I also received a communication from a non-dom in west Worcestershire—I did not think we had one, but we do. He is so pleased with the clarity of the Budget that he is going to bring lots of money in on a remittance basis to invest in businesses in the UK.

I have a couple of questions for those on the Front Bench. I do not think that we can enjoy sustained economic growth until we resolve the problems with our banks. I agree with the hon. Member for Telford (David Wright), who said that Japan suffered from slow growth for many decades because it did not do anything about its banking sector. The sooner we get rid of the state’s ownership of so much of the banking sector, the better it will be for the health of the economy.

Given that the Financial Secretary is on the Front Bench, I will take this opportunity to read a passage from the Budget speech:

“from April, we are going to impose a moratorium exempting all businesses employing fewer than 10 people, and all genuine start-ups, from new domestic regulation for the next three years.”—[Official Report, 23 March 2011; Vol. 525, c. 956.]

I ask the Financial Secretary to raise this point with the Financial Services Authority, which we know is the regulator of many small, independent financial advisers. I suggest that he take this opportunity to suggest that small IFAs employing fewer than 10 people might be exempt from the increased regulation in the retail distribution review.

In conclusion, I believe that this Budget will be seen as historically pivotal, because it will create real jobs, real growth and real prosperity. Such real prosperity can come only from investment in business and from exports. There will be exogenous growth—the exogenous growth of the private sector. I look forward to supporting the Budget in the Lobby tomorrow.

National Insurance Contributions Bill

Mel Stride Excerpts

Thursday 13th January 2011 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right. He brings a great deal of business experience to the subject. Trying to pick out individual constituencies in the way in which the right hon. Member for Delyn intends will add little to our understanding of the operation of the scheme, but, as a Government, we are keen to put out more information and to make the scheme transparent.

[Mel Stride (Central Devon) (Con)]

Does my hon. Friend agree with Mr Mitah from HMRC who pointed out in Committee that the greater complexity and costs involved in the sub-regional route would damage the scheme overall? He said:

“If you have a system that required us to operate a more complicated, or a narrower, range of areas, by reference to which we were giving relief, that would raise the costs of compliance substantially.”––[Official Report, National Insurance Contributions Public Bill Committee, 2 December 2010; c. 35-6, Q121.]

[Mr Gauke]

My hon. Friend is absolutely right. Certain compliance problems would arise. Could we tell whether an address was for work or home? The scheme would become more complicated. Those claiming would need to ensure that they were in one particular postcode area or another, and there would be issues with boundaries. Distortions could be much greater than under the simpler scheme that we have introduced with essentially one boundary and three excluded regions. A host of difficulties would arise if we tried to follow the sub-regional route. Where would we draw the line? Would we end up considering boroughs, wards or polling districts? Exactly how would that work? We will revert to the matter later, but my hon. Friend is right.

Amendments 5 and 6 are aimed at providing flexibility to reduce the duration of the regional employer national insurance contributions holiday for new businesses. This would reduce the cost of the holiday to the Exchequer, and correspondingly reduce the benefit to new businesses. As I have explained, the Government want to target available resources to the regions most dependent on public sector employment. We do not intend to widen geographical coverage, and therefore have no need to find ways of reducing costs. We know that this scheme will reduce labour costs for new businesses, and has been widely welcomed by their representatives.

We have acknowledged that beyond this there is a good deal of uncertainty about exactly how the scheme will pan out in practice. However, introducing some flexibility to change the details of the scheme as proposed in these amendments would increase uncertainty for those who might potentially benefit, and could risk inhibiting decision making. This particular proposal could affect those who are already benefiting from the scheme, or those who are currently considering setting up a new business bearing in mind the Government’s policy. For example, a new business set up this month, which plans to take on employees towards the end of this year, would not get the full year’s holiday for these employees if we were to stop the scheme in September 2012.

I hope that the right hon. Member for Delyn would agree that we were right to start operating the scheme as soon as we could, in anticipation of legislation being passed. Had we not done so, the benefit to businesses would have been delayed, and new businesses that had planned to start operation might have delayed in order to benefit fully from the scheme. I am conscious of the fact that the scheme requires the consent of Parliament, and we have been very clear about that in our guidance to potential beneficiaries. We are not pre-empting the decisions of Parliament. However, I hope that hon. Members would agree that it would not be desirable to withdraw the benefits we had planned to give to entrepreneurs who have already decided to set up in business. That risk applies to these amendments, and I am advised that as drafted the amendment is insufficient to provide a mechanism for extending the holiday, and does not therefore meet the intended aim.

With the commitment I have made today on the reports, I hope that the right hon. Gentleman will withdraw new clause 1 and, in the light of my comments, not press amendments 5 and 6.

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First and foremost, we know that the NHS needs more money; it has always needed further investment. Indeed, in 2002, the Wanless report set out some of the challenges that our generation of parliamentarians will face in supporting the national health service. More recently, the King’s Fund has highlighted the massive financial pressures on the NHS as it seeks both to make efficiency savings and to deal with the impact of inflation on the cost of treatments. I note that the King’s Fund estimates that the Government’s VAT rise will cost the NHS an estimated £200 million to £300 million every year. In Committee, the Minister argued that the Bill will reduce the amount of national insurance overall that the NHS has to pay by £200 million a year, so it is interesting to note that that reduction will be swallowed up by an increase in expenditure as a result of the rise in VAT that the Government have introduced. That is before we get to the cost of the planned reorganisation. We must ensure that the NHS has as much funding as it needs to meet its obligations, notwithstanding the promises and pledges that the Government have made.

[Mel Stride]

Does the hon. Lady accept that, irrespective of whether the amendment is accepted, the Government have the ability to provide whatever level of resourcing for the national health service that they deem fit?

[Dr Creasy]

The hon. Gentleman raises the interesting question of how we guarantee that. That is precisely the point that I am coming to, because his Government made a pledge to my Walthamstow constituents that they would “cut the deficit, not the NHS”. As my right hon. Friend the Member for Wentworth and Dearne (John Healey) has set out in his remarks, there is some uncertainty over whether that is the case. Indeed, we could be seeing cuts in the NHS unless we can be sure that the money it needs will be generated. The amendment provides the Government with an opportunity to show how and why they will do so and to consider hypothecation through the national insurance contributions fund, which has been accepted as a principle across the House, to ensure that the money is provided.

There has been sleight of hand in the investment promised by this Government for the NHS through the attribution to social care. As a former local councillor I know that social care is one of the largest costs that any local authority will face, so the cuts that we have seen in local authority budgets over the last couple of months raise severe questions about the ability to deal with adult social care—even before we consider its relationship to health care at local level. It is very clear to me that there are real concerns about the funding that will go to the NHS in the years ahead.

The amendment would mean that we could all have confidence in the fact that money would go to the NHS budget, about which I know Members across the House care, so that the real-terms increase that my constituents and the Minister’s constituents were promised can be made good—not to mention concerns about job losses in the NHS as a direct result of some of this Government’s policies. If Government policy is about job creation and the Bill is about ensuring that people are employed and the economy is in recovery, cuts in the NHS that will lead to job losses will provide a real challenge. The amendment is designed to make sure that, given the pressures on its budget, the NHS has the money that it needs, and that the public’s expectation, which is reasonable and proportionate given the statements made by Ministers both before and after the general election, will be met.

I note in particular that before the election the Chancellor was very concerned about what the national insurance contribution rise might do to the NHS budget. I am sad to see that the Chancellor is not in his place today; I wish he was here to talk to us. I know that my right hon. Friend the Member for Wentworth and Dearne wrote to him, encouraging him to participate in today’s debate. The Chancellor should apply the same degree of concern to ensuring that the money is there for the NHS.

As a member of the Public Accounts Committee, which deals with the National Audit Office, I particularly support the amendment. The amendment would involve the NAO, which has a strong track record of ensuring not just probity but value for money. It is a key concern for us all in these times of economic austerity to ensure that the money goes to the front line in the NHS, that there is a real-terms increase, as we have been promised, and that the Government are held to account if we do not get that, because my constituents living in a poor area such as Walthamstow are already losing out by not getting the national insurance holiday and should at least have confidence that when national insurance contributions go up, the money will go to the NHS, as many of us hope.

I hope that the Government will accept the amendment. It is a reasonable amendment to help the Government keep their promise to the people of Britain that the money goes to the NHS so that we can all have confidence that the NHS will thrive in the years to come.

Autumn Forecast

Mel Stride Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

We certainly want to support the construction industry. It is one of the specific sectors that we are looking at, as the growth review that we publish today sets out. If I can just correct the hon. Gentleman, however, I must say that the capital investment programmes of this Government are actually higher than the capital investment programmes set out in the March Budget. If he is not aware of what the Labour party fought the election on, so be it.

[Mel Stride (Central Devon) (Con)]

I welcome my right hon. Friend’s statement and, in particular, today’s OBR forecast, which sees projected public sector job losses drop from 490,000 to 330,000. Based on the previous 490,000 figure, PricewaterhouseCoopers projected that half a million jobs would be lost in the private sector. Will my right hon. Friend comment on the likely reduced impact on private sector unemployment as a result of today’s lower projected job losses in the public sector?

[Mr Osborne]

The OBR also makes a projection for private sector employment and takes into account all the potential impacts on that, and it finds that a net 1.1 million jobs will be created over the period: there will be 30 million people in employment at the end of this Parliament, compared with 29 million today.

Banking Reform

Mel Stride Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Mudie]

Let me finish my point and I certainly will. The behaviour of the banks over bonuses at the senior level is obscene and offensive to every one of our constituents. At a meeting on Saturday morning, I spoke to someone whose wife works for Halifax. She is going to lose her job. If one speaks to people in every part of the community one finds that they are looking forward to 2011 with great worry and concern because more than 100,000 of them are going to lose their job in the public services alone.

[Mel Stride (Central Devon) (Con)]

Will the hon. Gentleman give way?

[Mr Mudie]

Excuse me for a second. Given the amount of money that the state has pumped into the banks to rescue them, it is unacceptable that bankers and senior bankers still, at this stage in the game, demand obscene bonuses at levels that many people could never think of earning even when they have worked all their life. That shows a state of mind that is not exactly right. We hear that if all that does not work, Bob Diamond will take business away from the UK. What on earth is the point of spending time building up a regulatory structure if that is the attitude? For safety, I join the hon. Member for Bromsgrove (Sajid Javid) in thinking that Glass-Steagall is a good alternative, but unfortunately for us both, as we move in that direction the Governor of the Bank of England seems to be moving in the opposite direction. We can never pin that man down, can we? I think that is the direction we should go in.

In the minute that remains, I shall explain the reasons other than safety why I support a move in that direction. I know that this might mark me out as old-fashioned, but I want the retail banks to go back to the fine role that they have historically played in financing individuals and small and medium-sized enterprises. That was their function and they did it very well, but that has been lost because the emphasis has shifted to the investment side of banking. If we are talking about rebalancing the economy, the engine for growth must be the banks. If we can get them to move across to their old role and let the investors go off and play their casino games, our real interests will be satisfied because we will get people in the financial world to focus on the productive side of the economy.

--- Later in debate ---

[Mel Stride (Central Devon) (Con)]

I rise to speak against the motion, not least because of the argument made by my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) that implicit in the motion is the suggestion that the Government have done nothing to avert a future banking crisis. I also believe that the motion is too prescriptive at a time when these matters are being considered in detail, not least through the Sir John Vickers commission. This Government set up the commission and released its issues paper as recently as last September.

Huge complexity, tensions, conflicts and dangers are inherent in the development and implementation of policies that are designed to stabilise the banks. Many hon. Members have spoken about banks being too big to fail. It is true that if we have banks that are too big to fail, there is moral hazard in the actions of those who run them, because they always know that the taxpayer is there to back them up if necessary. In such situations, there is an element of unfair competition in that larger banks, backed by the taxpayer, can afford to take larger risks. However, we are also told by many in the industry that size is a function of competitive advantage and that being big is important in global markets.

Many hon. Members have rightly mentioned capital asset ratios. It is important that banks strengthen their balance sheets and that Basel III is implemented, yet there are inherent dangers even in that. PricewaterhouseCoopers has estimated that the implementation of Basel III in the UK will result in £600 billion put into increased capitalisation, which could in turn reduce growth by between 1 and 2%. I therefore welcome the fact that Basel III will not come into full effect until about nine years’ time.

[Matthew Hancock (West Suffolk) (Con)]

Does my hon. Friend think that it is inconsistent to argue both that the banks should lend more to small businesses and that the improvement in capital ratios should be speeded up, as we have heard from some hon. Members?

[Mel Stride]

That is precisely my point. If we speed up the rate at which the banks have to recapitalise, there is a real danger that we will choke off the supply of lending. There is an argument that lending is not just about supply, but about demand. Companies are not taking up many existing bank overdraft facilities, so it is conceivable that there is an issue with demand, as well as with supply.

We have heard a great deal about the importance of united global action. In an internationally competitive world, there is such a thing as regulatory arbitrage. If one jurisdiction adopts a particularly light approach to regulation, vast sums of money can flow in that direction. However, as the Chancellor of the Exchequer has pointed out, our country needs to retain flexibility to reflect the particular conditions in our banking markets.

I agree with many of the comments on the importance of transparency in corporate pay, and in particular bonuses. I accept that because banks can ultimately turn to the state and the taxpayer for support, we have a right to take an interest in that matter and to see that fair dealing prevails. However, I concur with Sir David Walker’s recommendation that we should act in a united way globally so that we do not disadvantage countries that might move on their own.

We have heard very little about taxation on banks. I congratulate the Government on being the first to introduce a permanent tax on banks. However, the arguments about taking out capital that banks might otherwise lend also pertain to that measure. We want the banks to lend more, but the picture is not clear as to why they are not lending, as I alluded to in response to my hon. Friend the Member for West Suffolk (Matthew Hancock). It may not be just a lack of supply owing to recapitalisation and a greater aversion to risk among the banks, but to do with a lack of demand among companies, many of which are focusing on paying down debt, rather than taking on more.

My hon. Friend the Member for Orpington (Joseph Johnson) and the hon. Member for Bassetlaw (John Mann) mentioned competition. This country has a highly concentrated banking sector and it became more concentrated after the financial crisis, when some foreign lenders withdrew and some banks amalgamated. Lloyds and RBS make up 50% of lending to the retail, mortgage and small and medium-sized enterprises sectors. That is a huge degree of concentration. There are high barriers to entry to banking, not least the very regulation that we are discussing. Over the past century, the only new high street bank, disregarding demutualisations, has been Metro Bank, which was created last year. On the other hand, Australia and Canada have highly concentrated banking sectors and seem to have been spared the worst of the financial crisis.

I welcome the Government’s approach to Basel III and their setting up of the Financial Policy Committee, along with its oversight role in relation to the Bank of England and the Financial Services Authority. I particularly welcome the setting up of the Independent Commission on Banking under Sir John Vickers, which has been welcomed broadly by business, including in a recent speech by Richard Lambert, the director general of the CBI. I welcome some of the approaches that the Government are taking to encourage equity finance to increase above the current level of 1 or 2%.

I fear that stalking the perimeters of the debate on the Government side and perhaps at the heart of the debate on the Opposition side is the idea of bashing bankers and of revenge. The hon. Member for Streatham (Mr Umunna), who I think is no longer in the Chamber, denied that that was what he said. However, when he was speaking, I jotted down his reference to bankers being “to blame”. That is the kind of populism that we must get away from; emotionalism must not triumph over the rational when we consider such issues.

This is a highly important sector in which we have a world-leading position and we must retain that. Protectionism, trade imbalances and exchange rates are threats, but I argue that we must not lose momentum on banking reform, particularly in countries that have not been as swept up in the crisis as we have, for what has bitten us may yet come round to bite them.

--- Later in debate ---

[David Mowat (Warrington South) (Con)]

One of the odd things about this debate is that those of us who believe that structural reform of the banking sector is necessary are characterised as being anti-free market, anti-capitalist and anti-banking. I am none of those things. In fact, I believe in the necessity of such structural reform precisely because I am pro-capitalism, pro-banking and pro-free market. The case for some kind of firewall, along the lines of the one introduced by Glass Steagall, is irrefutable. That will be considered by the Vickers commission over the next year but that is no reason not to discuss it here.

[Mel Stride]

Does my hon. Friend accept that the problems in Iceland and Ireland were caused solely by retail banks? The Lehman Brothers collapse presaged the financial crisis, but that was wholly an investment bank that never took a retail deposit.

[David Mowat]

I intended to address that later in my remarks, but I shall take it head on. Lehman Brothers was a bad bank and it rightly went bust. However, that affected a whole lot of other banks, which required massive Government bail-outs, because there was no firewall. Nothing in my remarks will imply that retail banks such as Northern Rock will never go wrong or need to be saved. Frankly, my hon. Friend’s example makes my point rather than contradicts it.

Two or three hundred years ago, capitalism was developed by joint stock companies, which was a clever and wonderful thing. If such companies made the right decisions and were wise, they prospered and grew. The other side of that was that companies failed if they made unwise decisions or mistakes, lost money, or failed to recognise risk—Gaussian distribution or not. In the past 15 to 20 years, unintentionally, a new type of company has emerged. Such companies are not subject to the same penalties for risk as other businesses. That creates moral hazards and poor decisions. In the end, that was a large contributing factor to what happened in this country two years ago.

The arguments in favour of a firewall are overwhelming, but what are the arguments against it? The principal argument against a firewall has been the subject of the most intense banking industry lobbying imaginable, and I hope that when the time comes to legislate, hon. Members and the Government do not bow to it.

The first argument is that such a separation implies that investment banking, derivatives and all that goes with that are casino-type activities and of less value to society. I do not think that at all. I sold my business to investment bankers, I like investment bankers and I understand why we sometimes need derivatives. I have no problem with those instruments, but I do have a problem with the fact that if the people using them mess up, they cannot go bust, because there is not a firewall between their activities and the rest of the banking world. That is the problem.

The second argument was raised just now by my hon. Friend the Member for Central Devon (Mel Stride)—the Northern Rock and Lehman Brothers example. I will not repeat what I said, except to say that Lehman Brothers should have been allowed to go bust, but should not have been able to bring in billions of dollars of taxpayers’ money after it, as it did.

The third argument is that a firewall would be too complicated: banking has now got global and is so mixed up that we cannot separate out investment banking and retail banking. Well, we can. The Basel III agreement contains a requirement that the capital considerations for each part of the banking portfolio be different. That can be done.

The fourth argument is that we can do all this with capital ratios and that if we impose them on banks we will not need this firewall, this separation. That is partly true, but actually they are not mutually exclusive—we need both—and, as was said earlier, capital ratios, unless we are careful, will shrink bank balance sheets and reduce lending at a time when we want more credit. What I am proposing would not do that.

The fifth argument is that, if we did this in this country, in front of the rest of the world, it would put our banks at a competitive disadvantage. That might be true—it is a reasonable argument—but I would say two things in response: first, the banking sector in this country is about four to five times as significant, as a proportion of GDP, as it is in any other country, so we ought to be leading the world in this regard. It matters more to us. Secondly, even if the argument is right, it is not a reason for us not to try to get the world behind us, create these firewalls and get this under control.