Comprehensive Spending Review

Mel Stride Excerpts

Thursday 28th October 2010 Commons Chamber

[Lilian Greenwood]

I am absolutely delighted that new jobs are being created. My concern is that when the cuts start to feed through that will no longer be the case.

Although some of the children whom the Prime Minister and Deputy Prime Minister were talking to will have had improvements to their homes—new windows and doors to make them secure, or new boilers or better insulation to make them warm—their classmates will not all get the same opportunity. The Prime Minister did not tell them what will be happening to some of the schools that they will go to when they leave Welbeck primary, or to the schools that their brothers and sisters might go to. The projects to rebuild Trinity and Fernwood secondary schools in my constituency have been scrapped altogether. As for the projects to rebuild Nethergate, Farnborough and Bluecoat, a few months ago, the Secretary of State for Education said that they were unaffected, but they are now being told that there is a cut of 40% in the funding available. I am sure that if the Prime Minister had asked the kids at Welbeck they could have told him that “unaffected” means not affected. Sadly, that is another broken promise and it is not fair.

Finally, let us nail the myth that this is all Labour’s fault. When he spoke in the Chamber last week, the Chancellor did not mention the word “recession” once. We have just come through the biggest economic crisis in generations—a global recession. If he does not understand why the deficit is high how can he possibly understand how to fix it? The deficit went up because we had a huge fall in output and tax receipts plummeted. Spending went up so that we could protect people’s homes and jobs, protect businesses and prevent the recession from becoming a depression. Labour took the right decisions and the Conservatives would have made the wrong choice every time. They are gambling with people’s jobs and homes and they have no plan for growth.

[Mel Stride (Central Devon) (Con)]

If the previous Government took the right decisions, why were we the first of the G7 countries into recession, the longest in it and the last out?

[Lilian Greenwood]

We suffered most during the recession because we had a high reliance on financial services. It was because our tax receipts were hit so badly that we needed to take action to protect people’s jobs and homes. The Conservatives would have done nothing and they have no plan for growth. I am afraid that the next time the Prime Minister and the Deputy Prime Minister come to Nottingham, they might not get such a warm welcome.

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[Mel Stride (Central Devon) (Con)]

I have sat through most of this debate with a sense of growing incredulity at the collective amnesia and denial of Opposition Members who, quite simply, are unprepared to face up to the reality of the fiscal disaster they have bequeathed to us to attempt to clear up. Let me just remind them of some of the figures. [Interruption.] I am pleased to see that they find this so amusing: £270,000 per minute in debt interest, £120 million a day, £43 billion per year—which is more than we spend on education. That is a disgrace.

Let me put this in historical context. In 1976, when another Labour Chancellor, Denis Healey, went cap in hand to the International Monetary Fund because this country was busted, our deficit represented about 7% of GDP. Today, it stands at 11.4%. Our house is well and truly economically out of order. This will not only affect our children, who will have to pick up the strain in repaying the debt. It has also affected our standing in the world, because this country has the worst deficit in the G20. Our deficit is worse than that of many Latin American countries; Brazil has a nominal annual deficit, as of April 2010, of a little over 3%, compared with ours of 11.4%, so we are 300% behind Brazil. It has come to something when we have to look enviously at Latin America’s fiscal position.

Much has been said about how quickly the Government have determined to reduce the structural deficit over the lifetime of this Parliament, but many are on our side, including the OECD, the Bank of England and the Office for Budget Responsibility. Let us not forget that Labour’s plan and proposal, as far as there is one, is to halve our structural deficit over the period of the review. That would leave us with £100 billion in additional debt and an additional £5 billion in interest to pay on it. I see Labour Members sighing, but perhaps they could tell us what they are going to cut to find that extra £5 billion or what extra taxes they are going to raise to meet that requirement.

[Rehman Chishti (Gillingham and Rainham) (Con)]

Does my hon. Friend agree that the International Monetary Fund’s statement was clear about the fact that what the Government are doing is right and proper, and will lead to growth in the long term?

[Mel Stride]

My hon. Friend is entirely correct, and there is no doubt that if the Government had not taken prompt action as we did in the emergency Budget in June, we would have been that close to a Greek-style economic meltdown.

[Alison McGovern (Wirral South) (Lab)]

Will the hon. Gentleman explain to the House how our debt was similar to that of Greece, given that the Debt Management Office in this country has been far better and we have far better terms? The question of whether the debt is sustainable is what leads to crises, not the amount of deficit, given the size of our economy.

[Mel Stride]

The answer to that is that we came that close because the credit rating agencies, such as Standard & Poor’s, came that close to downgrading our triple A status. The consequence would have been that the Government, in funding their debt through their bonds and gilts, would have had trouble getting those debt requirements away, interest rates would have risen, mortgages would have gone up through the roof and the businesses on which we are counting to pull us out of the malaise that we are in would have been crippled by higher interest rates. That is the basic economics that Labour Members fail to understand—

[Mr David Hanson (Delyn) (Lab)]

rose—

[Mel Stride]

I will not give way because I have limited time available. [Interruption.] In the great tradition of not giving way, I will not give way after taking two interventions. One very important point is that we must look to the private sector to create the jobs. It is true that the OBR has said that 490,000 jobs will be lost in the public sector, and there is no getting away from it. It is also true that PricewaterhouseCoopers has suggested that 500,000 jobs in the private sector might go as a consequence of the slimming down of the public sector. So we must look to growth from the private sector.

I am therefore very pleased that this Government have had such a firm and positive focus on private sector growth. We have removed national insurance for new business start-ups outside London and the south-east; we will bring corporation tax down, in steps, over the next four years from 28 to 24%; and we have cut red tape. We have also created the regional growth fund, which we heard about in the Business Secretary’s statement earlier today. It involves some £1.4 billion, much of which is to be channelled into the very areas of the country where the private sector is weakest and the public sector has been strongest, and I welcome that as positive action.

I also welcome the fact that the Government are listening to business in a way that their predecessors never did. The Conservative party is a party that understands business; we understand how difficult it is to create the wealth that is needed to supply the public services that all in this House want.

[Chris Williamson (Derby North) (Lab)]

Will the hon. Gentleman give way?

[Mel Stride]

I will not give way now, because I have very little time left.

I am also pleased that the OBR, an independent body, has stated that employment will grow in every year across this plan. I know that one swallow does not make a summer, but it is encouraging that in the last quarter—the one up to the end of September—growth was double that anticipated, at 0.8% as opposed to 0.4%. That is an encouraging sign. The Opposition should cheer at that. They should stand up for our country. They should feel good about the fact that we are improving where we are going and that we are beginning to make a difference—a difference that they never achieved.

I want to talk briefly about fairness, which is at the heart of the CSR. I want to challenge the IFS’s point that somehow the CSR is regressive. It is to an extent, if one considers taxation and benefits, but if one includes the use of public services, it is not regressive. It is a progressive move.

I welcome the fact that we are going to keep 50% as the higher rate of tax, with 800,000 people coming out of taxation altogether, and child benefit being means-tested. The £2.5 billion that will be saved is exactly the amount that will go into the pupil premium to help the poorest children in our land. Those are all aspects of fairness, and we cannot build a society based on social justice on a mountain of debt. I commend the review to the House.

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[Kwasi Kwarteng]

rose—

[Mel Stride]

rose—

[Mr Hanson]

I shall give way to the hon. Member for Spelthorne (Kwasi Kwarteng).

Equitable Life (Payments) Bill

Mel Stride Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

Indeed, and it was the work of my hon. Friend, who was characteristically modest in his intervention, that found a way in which the ombudsman could publish her second report into Equitable Life. Had he not found the way through, we would not be in this position today, so the House and policyholders owe him a debt of gratitude for getting us to this position.

My hon. Friend is absolutely right that the previous Government did everything they could to avoid a second ombudsman’s inquiry into Equitable Life. The Penrose report, published in 2004, demonstrated that there had been regulatory failure at Equitable Life over a decade covering both Governments—I have no problem accepting that. However, the previous Government could have acted in 2004, but instead they dug their heels in—and here we are in 2010 with policyholders still waiting for justice.

[Mel Stride (Central Devon) (Con)]

My hon. Friend was talking about the delays in the response to the ombudsman’s report in April 2008. Does he not also recognise, as we all do, I think, on the Government Benches, that the response of the then Chief Secretary to the Treasury was to start talking about those disproportionately affected by the saga but still without setting any time scale for compensation?

[Mr Hoban]

Indeed, and we have tried to bring to this matter a time scale and a sense of purpose and pace in resolving it. Of course, had it been resolved earlier, the compensation bill would have been cheaper and the pain suffered by Equitable Life policyholders far less. The previous Government dragged their feet, and we have to pay the price.

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[Yasmin Qureshi (Bolton South East) (Lab)]

I congratulate the hon. Member for Congleton (Fiona Bruce) on making her maiden speech. As a fellow north-west MP, I am sure that we will work well in future for the betterment of the north-west region.

Mindful of what you said earlier, Mr Deputy Speaker, I will keep my speech short. I shall not go into the history of Equitable Life, because everyone in the Chamber is aware of the history, nor shall I go into the merits or demerits of Sir John Chadwick’s report or the ombudsman’s report. I want to talk about my constituent, Mr Barri Sharrat, who was made redundant by his company and whose pension was moved to an Equitable Life policy, which was to be his main source of income on retiring. Mr Sharrat put his trust and faith, along with years of savings, into the hands of Equitable Life to build a secure retirement. I want Mr Sharrat and millions like him to be compensated.

I agree with the ombudsman’s view that people should be put in a position similar to that which they would have been in had Equitable Life not collapsed. I welcome the Bill and would urge the Government not to short-change the people on a promise that they made before the general election. However, I am afraid that the argument about money just does not carry any weight, because before the general election there were many debates about the country’s finances. Therefore, the level of debt was well known to everyone. Knowing that information, Members who are now in government made a promise that they would honour the ombudsman’s recommendation. I would ask them to continue to honour that promise, and then all those present who have taken a sanctimonious approach to the issue can be properly sanctimonious about it.

I urge the Government to make the Bill fair and effective. To make the legislation effective, they should put the independence of the compensation scheme on a statutory basis. There should be an independent appeal process, and a timetable—a short one—for making payments should be set out. The criteria by which compensation is to be paid should be made clear and simple. Again, I urge the Government to accept the ombudsman’s recommendation that people should be put into the position that they would have been in had Equitable Life not gone bust.

[Mel Stride]

Will the hon. Lady give way?

[Yasmin Qureshi]

I have actually finished, but the hon. Gentleman may intervene.

[Mel Stride]

I just wanted to say that it is my understanding that the ombudsman’s report contains the recommendation that the public finances should be taken into account when coming up with the final compensation to be paid.

[Yasmin Qureshi]

The public finances may be taken into account, but it is my understanding that the Bill proposes to go along with Sir John Chadwick’s proposal, which was not a very good one. As my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) said, the compensation does not have paid in the next few months or even the next year; it can be spaced out over five years or perhaps even 10 years, so that people can be given the compensation that they deserve. As has been said, the ombudsman has made a recommendation, but it is for us here in Parliament to do right by our constituents, and that means going back and giving the appropriate level of compensation.

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[Mel Stride (Central Devon) (Con)]

Like many other Members who have spoken this evening, I welcome the Bill. It is timely—it has certainly not come before time—and I congratulate the Financial Secretary on introducing it so early in the life of this Government.

I too signed the EMAG pledge to stand up for fair and appropriate compensation, and like many other Members, I too have had many individuals in my constituency come to me in a terrible state because of what has happened to their pensions and their future as a consequence of maladministration and regulatory failure. For each one of those individuals that is a tragedy, but when we consider that 1 million policyholders and 1.5 million policies are involved, we see that it is not a tragedy; it is a national catastrophe, because it hits saving. We have now come out of one of the worst recessions in modern times—one of the worst since the second world war—and one of the things we must now do as a nation is get back into the habit of saving. Nothing in the previous Government’s approach to the Equitable Life saga has done anything to encourage that habit.

I have sat through most of today’s debate and I have been disappointed and slightly irritated by the synthetic anger from Labour Members—I felt that particularly at the beginning of the debate. They have suggested that in some way we have been responsible for the delays and for the fact that these payouts are not happening more quickly, but we know of the previous Government’s attitude and approach to Penrose, of how they obfuscated on the second parliamentary ombudsman’s report and of the, in my opinion, cynical way in which they set up Chadwick to report after the general election so that it would be us who would be standing in this Chamber addressing these issues as we are today.

[Neil Parish (Tiverton and Honiton) (Con)]

I thank my hon. Friend for the powerful points that he is making. May I reinforce the fact that this is about the message we send to all those who are saving for their old age in order to give themselves a good quality of life? If we do not sort out the Equitable Life situation, it will send exactly the wrong message to hard-working people. I congratulate the coalition Government on having the political will to sort it out, given that the previous Labour Government had no such will. In fact, they used taxpayers’ money to fight policyholders. I urge our Front-Bench team to get this sorted.

[Mel Stride]

I thank my hon. Friend for making a very important point, with which I entirely agree. I welcome the coalition’s commitments on several important matters, and they must not be overlooked in all the discussion about what the final payout is. The first is that there will be no means-testing. As we know, means-testing, when applied appropriately, can often provide resources to those who are most needy, but in this instance it will do nothing other than to punish those who have acted responsibly and have saved, putting something away for their future.

I too am very pleased that the Financial Secretary has stated that the estates of the 30,000 people who have died since this saga began will benefit through this scheme. I also welcome the transparency that has been proposed and the independent commission, which is so important in terms of designing and administering the scheme. I am happy that it will report so early in 2011, in time to make payments for the middle of next year. I am also particularly pleased that Brian Pomeroy has been appointed to that independent commission and that that was acceptable to EMAG.

I do not believe that interim payments should be made, because I accept what the Financial Secretary has said—I think he talked about this in his statement to this House on 22 July—about how that would overly complicate matters. What hon. Members must now concentrate on is making sure that we hit the end date—a final point at which justice is done in this matter.

Many hon. Members have also rightly recognised the complexity of the task facing the independent commission in deciding on the payments and administering them. We are talking about 30 million pension transactions over the period that we are considering. I urge the Financial Secretary to ensure that he does everything possible to ensure that no delay now occurs as a result of that task.

As we know, the Bill is enabling legislation—it is not designed to determine the final payout. That is part of the comprehensive spending review, and the report back to this House will be made on 20 October. EMAG suggests that £5 billion should be the amount. Chadwick’s remit was distinctly different from that of the parliamentary ombudsman, and because of the assumptions that he made about the proportion of people who were likely to have invested in Equitable Life, irrespective of the maladministration—in other words, if they had known of it at the time—he is perhaps looking at 10% of that figure.

We should not dismiss the Chadwick report’s methodology and much of the hard work that was done, which took more than a year to put together in that report. However, I agree with this statement made by the Financial Secretary:

“I am aware that some of his findings will be contentious”.—[Official Report, 22 July 2010; Vol. 514, c. 577.]

Furthermore, I contend that they will be more than that if they result in 10% payouts; they will be wholly unacceptable.

I have been impressed by one aspect of today’s debate, which is that members of EMAG have sat patiently watching our debate; I recognise one of the gentlemen in the Public Gallery at the moment. We owe it to them—we owe it to the individual policyholders—to do the right thing. We have a moral duty to them and we have a national imperative in terms of re-establishing the trust between government and people, which hangs on the decision that the Financial Secretary will take later this year.