Oral Answers to Questions

Mike Weir Excerpts

Tuesday 24th January 2012 Commons Chamber

[Mr Gauke]

We are taking measures to ensure that work will always pay. On the Labour party’s complaints, I point out that its flagship policy at the last election to increase national insurance contributions for employers would have hit the retail and other sectors very hard.

[Mr Mike Weir (Angus) (SNP)]

3. What recent discussions he has had with Her Majesty’s Revenue and Customs on the operation of the COP26 process.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

Ministers have regular meetings to oversee and challenge HMRC business, including the administration of tax credits and the recovery of overpayments.

[Mr Weir]

I am grateful for the Minister’s answer, but does he understand the intense frustration and anger of many of my constituents who repeatedly tell HMRC about errors in tax credits that HMRC does not correct, which subsequently give rise to overpayments? How often can HMRC be allowed to make mistakes and hide behind COP26 to evade any responsibility?

Scotland Bill

Mike Weir Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Gauke]

I look to others for inspiration on the precise details, but we are certainly talking about months. The hon. Lady is right to say that the detailed analysis has not been provided. I am sure that the Scottish Government are working very hard to produce it, but we have not received it. It could have been helpful for this evening’s debate, but so be it.

[Mr Mike Weir (Angus) (SNP)]

It might have been difficult for the Scottish Government to provide that information during the purdah period, and they were re-elected only a matter of weeks ago. It is perhaps no surprise, therefore, that those weighty documents have not yet arrived on the Minister’s desk.

[Mr Gauke]

I have to make a confession to the House: I have come only relatively recently to these issues. My understanding, however, is that the Scottish National party has been interested in this policy for some years. I am sure that if it is a priority, and I understand that it is, we will receive the paper very soon. I look forward to receiving it.

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[Iain Stewart]

My hon. Friend makes a very good point. We also have to look at the equality of the benefits given by defence spending—the protection that accrues to the whole country. It does not matter so much where the defence equipment originates if we are looking at the overall protection that the armed forces provide.

[Mr Weir]

The hon. Member for Finchley and Golders Green (Mike Freer) makes a valid point as regards defence. The attack on the Barnett formula is based on the fact that Scotland gets more per head, but if we take into account all spending, that is not necessarily the case because of the imbalance in the way that defence spending is allocated—so the figures are important. Where the assets are, for the purposes of this argument, may not be quite so important, but the amount of spending is very important. The economic impact of where the assets are is vital to many communities.

[Iain Stewart]

I am grateful to the hon. Gentleman for his point. May I infer that he is happy to retain the Trident base in Faslane, given the economic benefits that accrue to Argyll and Bute and West Dunbartonshire?

[Mr Weir]

There is little or no economic benefit from the Trident base, and there is an extremely disproportionate —[Interruption.] The point is that bases such as the RAF bases in Morayshire are important not only from a defence point of view but economically, and bases such as the Condor base in my constituency are important economically and also from a defence point of view.

[Iain Stewart]

I challenge the hon. Gentleman’s assumption about the lack, as he sees it, of economic benefits. I also contend that he is making a good case for Scotland's remaining part of the Union, so that the lion’s share of UK defence assets can be based north of the border.

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[Mr Reid]

My hon. Friend is correct. There would be an incentive for a white van man to drive south, fill up his white van, come up to Scotland and sell the alcohol at a profit. When I intervened on the hon. Member for Dundee East, we heard a sedentary intervention from the hon. Member for Angus (Mr Weir) to the effect that Argyll was not close to the border. However, I would point out to him that for a whole variety of reasons people from Argyll regularly visit England and, if they could buy alcohol cheaper there, there would be an incentive for them to fill up their car with it. That would mean a further loss of income to the Scottish economy.

[Mr Weir]

The hon. Gentleman is making a case, but for many years people have been going on holiday to other jurisdictions and bringing back alcohol with them; there is nothing unusual in that. The suggestion that all of a sudden there is going to be a massive influx seems to me ridiculous, especially given the cost of fuel in Argyll.

[Mr Reid]

But they would also fill up their cars with fuel when they were outside Argyll. The hon. Gentleman makes a point. We have heard about booze cruises to Calais, but despite the high price of fuel, it is cheaper for someone in Scotland to drive to England than to go to France. Britain has a certain degree of flexibility over its excise duties because it is surrounded by water. The one land border we have is between Northern Ireland and the Irish Republic and we have all heard the allegations of fuel smuggling. That shows it is more difficult for a country to set its own excise duties where there is a land border than it is when there is only a sea border. With a land border, setting a separate rate of alcohol duties would be difficult.

The hon. Member for Paisley and Renfrewshire North (Jim Sheridan) mentioned that people working regularly in England would be able to take alcohol back to Scotland on the train. That led me to think about what would happen on the train itself—I can imagine the announcement on the tannoy as the train leaves Carlisle: “Get your drink now because in five minutes the price goes up”!

To summarise, the SNP did not make the case for their amendments. Through their new clauses, the Government are giving substantial extra powers to the Scottish Parliament, so I will support the Government tonight.

Finance (No. 3) Bill

Mike Weir Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Malcolm Bruce]

That was precisely the point of my illustration about Apache and the Forties field. It wants to invest, and I believe it will continue to invest, but it is actively reviewing the extent to which it will invest in the light of these tax changes, which clearly make the investment less attractive.

[Mr Mike Weir (Angus) (SNP)]

Will the right hon. Gentleman give way?

[Malcolm Bruce]

Before I do, I want to point out that today I received the Oil and Gas UK index of confidence in the industry, which is to be published tomorrow. It is not surprising to note that the index reveals a very sharp fall in confidence within the industry in the first quarter since the Budget. For example, exploration and production companies’ confidence has fallen from an index level of 71 in the fourth quarter of 2010 to 46 in the first quarter of 2011. Even the confidence of supply chain companies has fallen, albeit less so, from 61 to 54, and when asked why the fall was less sharp, they said it was because their business was now much more international and they expected to pick up business elsewhere that they would otherwise have lost in the North sea. That gives a clear indication that the industry is facing a loss of confidence as a result of these changes.

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[Malcolm Bruce]

At this stage, I am not here to attribute responsibility for the decision. My concern is—[Interruption.] With great respect, Members should acknowledge that, speaking as someone who represents a major North sea oil and gas constituency, I know my own industry and my own constituency. I also know the need for the Government to engage with the industry and I hope to persuade them that they can retrieve the situation to a degree by so doing.

Let me refer to a table that will appear in the UK Oil and Gas publication tomorrow. It shows something of which Labour Members should be fully aware—the correlation with the past. Interestingly enough, in 2009, North sea oil prices peaked at $145, yet within 12 months they were down to $35. At that peak level of production, investment had fallen £3 billion a year as a direct result of negative tax changes in 2006. The time lag, Ministers should be aware, is two to three years, after which investment falls away; it is then several years beyond that when we see job losses, lost investment and lost opportunities.

[Mr Weir]

The hon. Gentleman makes a good case, but he will know that it is not just the immediate impact that is important. With these mature fields, we need to make sure that the infrastructure remains in place, particularly if we are serious about carbon capture and storage, for example, which relies on much of the infrastructure from depleted fields in order to work in the North sea.

Fuel Costs

Mike Weir Excerpts

Monday 7th February 2011 Commons Chamber

[Mr Mike Weir (Angus) (SNP)]

I very much agree with my hon. Friend. However, is not the position even worse, given that people in many rural areas and constituencies such as mine have no alternative but to move goods by road? There is simply no other way of getting goods to our towns, which are not served, apart from the coast, by the railway line.

[Stewart Hosie]

My hon. Friend is absolutely right. In many parts of his constituency, goods must be moved by road. The days of rail terminals in Brechin or Forfar that would take freight are sadly long gone.

[Mr Weir]

I also point out that the idea that the goods can be moved by rail is flawed in any event because although, as my hon. Friend knows, a rail line goes through the coastal part of my constituency, there is no longer a goods terminal in Arbroath or Montrose, the two stations there. There is no alternative to road transport.

[Stewart Hosie]

My hon. Friend is right, and I am sure that hon. Members throughout the House will have examples of infrastructure that used to exist, but is no longer there, with the result that 100% dependence on roads is now the case.

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[Stewart Hosie]

My hon. Friend makes his point in his own inimitable way. I have to say that I cannot remember a time when the House was ever full of Liberal Democrats, but I think I know what he means.

I want to raise three specific issues in relation to the vital importance of the rural fuel derogation. In urban, built-up areas, 95% of people live within 13 minutes of a bus stop with a service more than once an hour. That compares with less than half of residents in villages and hamlets. Before any Member gets up to make a point about that, let me say that I know that there are parts of every constituency in which there are no bus stops, no bus services and no choice but to use a car.

[Mr Weir]

I am following with interest what my hon. Friend is saying. Did he read the report in The Guardian this morning which suggested that many English local authorities were slashing their subsidies on bus routes, which will lead to the closure of those routes in many rural areas? Does he agree that that would make the situation very much worse in rural areas of England as well?

[Stewart Hosie]

I have not seen that report, but those developments will clearly make things difficult in areas that depend on those subsidies. I hope, in the light of the price of fuel, that local authorities and the Government will try to ensure that as many bus services as possible, particularly lifeline services, are maintained. The key point about living in remote and rural areas is that there are fewer alternatives available, and in some cases, no alternatives at all. The use of a car in those areas is vital.

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[The Economic Secretary to the Treasury (Justine Greening)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes the dramatic increase in the world oil price to over $100 per barrel; further notes that there has been a significant impact on fuel prices in the UK as a result; recognises the impact this has on households and business; notes that the previous administration’s rises in fuel duty that have taken effect during the past year have further increased prices; further notes that the Government inherited the largest deficit in UK peacetime history, that the previous administration had no credible plan to deal with the deficit, that the Government has been clear that everyone will make a contribution to tackle the deficit but that the most vulnerable will be protected, and that the Government is considering a fair fuel stabiliser that could support motorists and businesses when oil prices are high; further notes that the Government in addition is taking forward swiftly its commitment at EU level to introduce a pilot scheme that would deliver a discount of up to 5 pence per litre in duty in remote rural areas such as the Inner and Outer Hebrides, the Northern Isles and the Isles of Scilly; and further notes that the Chancellor will update the House on all fiscal matters at the time of the Budget.”

We have long recognised on this side of the House—both parties in the coalition Government—that the price of fuel has been a very difficult issue for motorists, businesses and families up and down the country. I know that it is a particular concern for people living in our rural communities, and no doubt many Scottish Members who hope to participate in the debate will make points on behalf of their constituents and echo the concerns set out by the hon. Member for Dundee East (Stewart Hosie). I am sure that other Members representing rural seats will also want to set out their concerns.

There is no doubt that rising oil prices and their impact as they feed through to the petrol pump have been a real concern. In fact, even before we came into office, both coalition parties had committed to looking at the issues surrounding the cost of the fuel, as the hon. Member for Dundee East has pointed out. Let us be clear, however, that the last Government chose completely to ignore this whole area. They believed that the challenges posed by these problems were too great. When we were talking about alternatives to help families, hauliers and motorists, they said that it was all too difficult and that the issues were way too complex.

Let me state at the outset that we would be interested to hear from the Opposition whether they stand by the fuel duty escalator—the one that they put in place before the election; it is a bit like reaching from the political grave into taxpayers’ pockets. Or do they believe that that policy was a mistake? Are we to be treated to the spectacle of Labour Members arguing not only against the Government’s measures across a whole range of areas, but against the measures they put in place before being booted out of office? We have taken a very different approach to fuel prices to that of the last Government.

[Mr Weir]

I am listening carefully to the hon. Lady and it is not my place to defend the Labour party, as we spent much of the last Parliament attacking the Labour Government and their fuel policy, which was disgraceful. It is interesting to see that so few Labour Members are here today. However, the Economic Secretary is now in government: what is she going to do and when is action going to come? The problem is getting worse by the day, and unless action is taken soon, it will be too late for many businesses in rural Scotland.

[Justine Greening]

I can assure the hon. Gentleman that I shall set out our approach to policy in this regard in the run-up to the Budget in my further comments, but we need to recognise that the fuel duty escalator was put in place by the last Government. They have, I believe, a blank piece of paper that is called their economic policy, and they owe the House the honesty of being transparent about whether they believe that putting that policy in place was the right or the wrong thing to do.

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[Justine Greening]

The hon. Lady is right in that few Members in this House would not have their own particular reasons for raising the issue of the cost of motoring with government. This issue is clearly a real challenge, which is why the Conservative party acknowledged it in opposition and said that we wanted to examine how we could tackle some of the key issues.

The hon. Lady also referred to the impact of fuel duty on businesses. That is one of the reasons why our emergency Budget introduced a package of corporation tax reductions for companies, as she will recall. Small companies will now face a corporation tax rate of 20% whereas they were facing a rise to 22% under the previous Government. We also introduced reductions in national insurance, getting rid of the worst effects of the proposed jobs tax. We can support businesses in a number of ways to help them through a very challenging economic situation created by the previous Government.

[Mr Weir]

I reiterate a point that I made in last week’s debate about the Department for Business, Innovation and Skills: the Government keep saying that they have reduced corporation tax and although that is welcome for small companies, very many small businesses in our areas do not pay corporation tax. They are single traders or partnerships that pay income tax, so they are not being helped by these measures and being hammered by the VAT rises and the fuel cost rises.

[Justine Greening]

The hon. Gentleman will know that alongside those measures to support companies, particularly small ones, I could have mentioned the regional growth fund and the regional reduction in national insurance for new start-up companies creating new jobs. He will also be aware of the rise in the personal allowance, which has removed about 880,000 people from paying income tax altogether. We have also raised the threshold for national insurance, which means that employers no longer have to pay employer national insurance for thousands of employees. Across the board we are doing what we can, despite the challenging financial deficit left to us. We are doing what we can to make sure that we tackle the overriding priority of sorting out the deficit—that is what we have to do. For motorists, companies, families and unemployed people wanting to get back into the employment market and get a job, we have to get the economy back on its feet and public finances back on a sustainable footing. At the same time, we understand the pressures and challenges for motorists.

As things stand, there are alternatives for the devolved Administrations. I have to challenge hon. Members representing the Scottish National party in Scottish constituencies on whether they have considered using some of the devolved Administration budget to fund their own grant scheme to support motorists in their areas. They have taken different decisions on tuition fees to those taken in England and there is now additional scope for them to see this issue as a priority for their spending, as well as for the national Government to consider how we might be able to help in terms of tax policy.

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[Mr Mike Weir (Angus) (SNP)]

There has been a change since the general election. We spent the last Parliament trying to persuade the Labour Government to do something about this problem, and they steadfastly refused to do so. Now, we hear warm words from the new Government, but unfortunately we have yet to see any real action. That is the problem. Those on both Front Benches talked about the practicalities of this or that measure, and how they would have to look into them further, and I could hear the sound of things being thrown furiously at television screens up and down the country by people who are suffering now because of high fuel prices. It will be no good if it takes a year for any action to be taken, because, in that time, many of the businesses that are suffering now will no longer be in operation. That is important to the local economies of the areas concerned.

The Minister and others have talked about the need to pay down the deficit and to encourage growth. That is all true, but the growth in rural areas comes through small and medium-sized enterprises—the very businesses that are suffering most, as a result not only of fuel duty but of higher VAT and all the other factors affecting the economy. High fuel costs are strangling small businesses which have to transport goods into and out of their businesses by road, as there is no alternative. People have talked about transporting goods by rail, but in many areas such as my own, there is no realistic prospect of that happening. I have a rail line in my constituency; it goes up the whole of the east coast. Unfortunately, however, there are no freight depots on it. It is therefore impossible to use it for those purposes, and those businesses have to use the roads.

[Mark Tami (Alyn and Deeside) (Lab)]

The hon. Gentleman is making a powerful case. Does he agree that those same areas are also being hard hit by the rise in domestic oil prices? Are they not facing a double whammy in that regard?

[Mr Weir]

Indeed; I will come to that point later if I have time.

It is not only the businesses but their employees and the other people who live in the rural areas who are suffering in many ways. My constituency comprises small towns and villages, and many people have to travel to get to work. They have to use their cars to do so.

[Guy Opperman]

rose—

[Jim McGovern]

rose—

[Mr Weir]

I will not give way at the moment.

Many of my constituents have to travel to work, and they have no alternative to their car. There are bus services, but if we look at how people work today—many work split shifts and might have one or two jobs to make ends meet—we see that it is very difficult for them to get to their workplaces by bus. This places a great deal of pressure on family budgets. If we are talking about creating work and getting people back into it, we must make it easier for people to travel.

[Jim McGovern]

Will the hon. Gentleman give way on that point?

[Mr Weir]

I want to finish the point; I will give way to the hon. Gentleman in a moment.

As I mentioned in an intervention, The Guardian this morning features an article saying that bus routes are about to be slashed, and I understand that the rural bus rebate given to local authorities is also going to go. All that will cut back even further people’s ability to get to work by bus. I will now give way to the hon. Member for Dundee West (Jim McGovern) before he jumps up again.

[Jim McGovern]

I thank the hon. Gentleman for giving way. I must say first that I was disappointed that the hon. Member for Banff and Buchan (Dr Whiteford) criticised me for repeating a point and for not having been here earlier. I did explain why I was not here, but my main point is for the hon. Member for Angus (Mr Weir). I am sure he is aware that Stagecoach, a company owned by Brian Souter and one of the biggest donors to the Scottish National party, has said that the fuel price increases will help its business.

[Mr Weir]

The hon. Gentleman is bringing irrelevancies into this; we are talking about the real problems that rural areas face, and I am sorry that he does not understand that.

There is another problem with cars. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) made the point that many people in rural areas have old vehicles and cannot afford to buy new ones. That brings several problems. Those vehicles are not only less reliable, but use more petrol than modern vehicles do and cost more to maintain and more to run in road tax and other things. People are suffering seriously by having to travel to work by car.

The right hon. Member for Torfaen (Paul Murphy) talked about what the devolved Administrations could do. The devolved Scottish Administration have introduced a business bonus to help with the costs of running small businesses. The right hon. Gentleman mentioned the ending of the Severn bridge toll. There is a huge cost in fuel for transportation, which is really hitting small businesses.

The hon. Member for Argyll and Bute (Mr Reid) mentioned the green argument, and I would like to address some of the related issues. Strangely enough, I agreed with a lot of what he had to say—I shall surely not make a habit of it!—but it seems to me that there is nothing green about strangling local economies in rural areas. Some say that people can move on to drive electric cars. I would like to see an electric car that would take me around my Angus constituency, never mind Argyll or Caithness and Sutherland, but the range is simply not available.

[Jim McGovern]

Does the hon. Gentleman have time to give way again?

[Mr Weir]

No, I do not.

There are real problems with fuel prices and they are strangling business in rural areas. They are an attack not only on the business itself, but on the family budget.

The hon. Member for Alyn and Deeside (Mark Tami), who is no longer in his place, mentioned home fuel oil. I appreciate that it is taxed differently from petrol, so it is a different issue, but he is quite correct to say that throughout rural Scotland, the escalating price of home fuel oil—used in many hard-to-treat homes that are otherwise unable to get central heating or any heating at all—is a huge problem, which is also hitting many people. These costs are devastating the rural economy.

The right hon. Member for Torfaen also mentioned supermarkets giving discounts on petrol, but in some ways that is a somewhat insidious practice. The Minister talked about people going to petrol stations, but in many rural areas such stations have ceased to exist. One of the hidden costs of living in rural areas is that people often have to travel many miles to fill up their vehicles with petrol in the first place. Cars cannot be driven right until the orange light comes on; if they are, they are unlikely to get to a petrol station for a fill-up and will be stranded somewhere along the line. If supermarkets offer discounts, people travel long distances to get there to fill up their cars, which has a knock-on effect on business in rural areas.

The key point is that the fuel issue is at the centre of the rural economy. Unless we sort this problem out, there will be no rural economy. We will not see a recovery of businesses that are strangled by rising fuel prices. Businesses will not survive for much longer if the price continues to rise as it has recently.

I think it was the hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips) who talked about the Barnett formula. Frankly, that is completely irrelevant to this argument. If we had a fuel duty stabiliser, it would apply throughout the country. [Interruption.] The hon. and learned Gentleman is thinking about the derogation, which is a completely different matter: we are talking about two different systems here.

We have pushed for a fuel duty stabiliser to give certainty about the price, to allow hauliers, for example, to be able to quote in advance for a contract and know what the fuel prices are going to be. This will also allow people to look at their family budgets and know what they have to spend to get to work on a weekly or monthly basis. We need to remember that our constituents are not getting pay rises—in some cases, they are getting pay cuts—so they cannot cope with these rising prices, which impact directly on family budgets. For all those reasons, we need action now. It is all very well to talk about the problem and to look at the practicalities, but if this drags on into next year, I am afraid that many businesses will fail to survive.

Equitable Life (Payments) Bill

Mike Weir Excerpts

Wednesday 10th November 2010 Commons Chamber

[Mr Mike Weir (Angus) (SNP)]

If the hon. Member for Leeds North East (Mr Hamilton) presses his amendment, we will certainly support him.

I have been debating Equitable Life in the House ever since I was first elected, and I well remember endless debates in the two previous Parliaments in which I was joined by Conservative Members in trying to get the Labour Government to take action. I recognise that some Labour Members also pushed their own Government for action. It was a long battle, and frankly we did not get very far.

When the new Government were formed, I cannot say I had any great enthusiasm for the thought of the coalition, but I did at least think that perhaps we could get an end to this saga, which had brought so much unfairness to so many people throughout the country, many of them elderly.

One difficulty has always been what the final compensation bill should be. It is easy to get lost in figures, as they range from Chadwick’s £500 million up to EMAG’s latest figure of more than £6 billion, but the generally accepted figure seems to be in the region of £4.6 billion. The Government have set a figure of £1.5 billion, which is about a third of that generally accepted figure. I understand their reasoning that that is all that can be afforded, but sorting out Equitable Life could have been one of their great early achievements. It is being undermined by arbitrary decisions, the worst of which is the overall cap on the amount. Rather than an independent commission considering the matter and recommending a figure, a figure has been put in place and all the independent commission can do is decide how it is divided among policyholders.

[Mr Fabian Hamilton]

As I mentioned in my contribution, about half the overall £1.5 billion package will be consumed by the 100% compensation for the 37,000 post-1992 with-profits annuitants. Does the hon. Gentleman agree that the remaining balance will provide a considerably smaller sum in the pound to the rest of the policyholders?

[Mr Weir]

The hon. Gentleman is quite right. I understand that the figure quoted by EMAG is about 15% of their loss, which is a very small amount for people who have suffered.

What could have been a very good outcome seems to have been undermined by arbitrary decisions. I hope that the Financial Secretary will explain the rationale behind excluding the 10,000 pre-1992 annuitants from compensation altogether. I do not understand the logic of that. I do not see any suggestion that it should be done in the ombudsman’s recommendations.

I have said in previous debates that it is important that this Parliament supports its independent ombudsman, and there seems to have been a major deviation from what the ombudsman recommended. The hon. Member for Cardiff North (Jonathan Evans) made some interesting and relevant points about how compensation for pre-1992 annuitants should be calculated, which is undoubtedly a difficulty. I am not an actuary and cannot give him the answer to that, but I do not think it is beyond the wit of man—or even an actuary—to work out a figure.

Ultimately, this is a matter of principle. I raised that point on Second Reading. We are dealing with a situation in which many thousands of our fellow citizens have lost out through maladministration. The Government are ultimately responsible for that maladministration—the previous Government, not the present one, but they are the heirs to that. We should not accept the principle that the Government can say, “Okay, there has been maladministration. We are responsible, but we will set a cap on how much compensation we give and then arbitrarily decide which of the group who have suffered will be compensated.” That is a very bad principle. In no other case in which there has been loss and there is liability would anyone be entitled to say, “I’m only paying a proportion of that. That’s all I can afford.” The Government should not go down that route.

I believe that we will debate an amendment later to set up a totally independent organisation to consider the matter. We need that to be done independently, not with a cap and not with some people arbitrarily excluded. We will support amendment 1 if it is pressed, because it is only reasonable. We have to right what has been a terrible injustice going back well over a decade.

[Frank Dobson (Holborn and St Pancras) (Lab)]

I shall speak very briefly in support of all three amendments in this group—those tabled by my hon. Friends the Members for Leeds North East (Mr Hamilton) and for Nottingham East (Chris Leslie), and even the one that I have tabled.

As drafted, the Bill leaves practically everything to the discretion of the Treasury, which I find objectionable. I remind the Committee of what Winston Churchill said about people at the Treasury—that they were

“like inverted Micawbers, waiting for something to turn down”.

The chance of their coming to any generous conclusion for people who suffered in the Equitable Life scandal is very small. The courts have held that bodies given discretion are not allowed to fetter their own discretion. It is therefore necessary for the House to fetter the discretion of the Treasury.

I strongly support the view that we should not allow a situation in which the most elderly people will be excluded from compensation. In view of the fact that everyone places so much weight on the ombudsman’s contribution, I strongly support the amendment tabled by my hon. Friend the Member for Nottingham East, which suggests that we should give her a further look at what is being proposed. It will be preposterous if, in trying to do what the ombudsman wants, we end up doing something that she thinks is unsatisfactory and inadequate. The reasoning behind the amendment in my name is the same.

I do not wish to say any more, but the House should do its proper job of telling the Treasury what the rules should be when it considers the matter. I am not getting at Ministers; I am getting at the Treasury as an organisation. It does not have a good record, and ethics and decency are not major considerations for it. They never have been, and perhaps they should not be its major considerations, but we should bear them in mind, so that we can bear down upon the Treasury.

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[Mr Weir]

Does the hon. Gentleman not also agree that at no time did the ombudsman suggest that any group of annuitants should be debarred from receiving compensation, as is now being proposed?

[Mark Durkan]

I thank the hon. Gentleman for that point, which quite properly brings me to amendment 1.

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[Mr Hoban]

The hon. Gentleman makes an assumption that the scheme is open-ended, but it is designed to compensate policyholders who invested in Equitable Life from 1 September 1992. With regard to the implications of that, I shall respond to the intervention by my hon. Friend the Member for Cardiff North (Jonathan Evans).

[Mr Weir]

Will the Minister explain further, as I do not quite understand? He seems to be saying that only those who became aware of a regulatory failure in 1992 are affected. However, am I not right in thinking that that suggests that the regulatory failure goes back prior to 1992, and would have affected people then, although they would not have been aware of it? Are those people not entitled to compensation?

[Mr Hoban]

The ombudsman is concerned about people who invested in Equitable Life who might not have done so had they been aware of that regulatory failure. That regulatory failure would not have been known to them until September 1992, so there is a clear, rational argument for 1 September 1992 being the right date to start the calculation of losses.

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[Mark Durkan]

Obviously we are waiting to hear what the Government will say about their amendment, but the other amendments—including the new clause proposed by the hon. Member for Harrow East (Bob Blackman)—are in essence an attempt to ensure that there is a sense of competent independence in how the scheme is administered and payments made. In terms of making appeals available and ensuring that the design and administration of the scheme are independent of Government, the new clause offers a reasonable construct of what a clearly independent scheme would be.

In the debate on the previous group of amendments, there were plenty of references to pledges that many of us signed and how far the Government’s measures will mean that we have discharged those pledges, but I do not think that any of us signed pledges that said we would do the whole thing just according to Treasury lights and nothing else. The amendments are an attempt to ensure that it will be not only Treasury lights that govern the terms of the scheme and its performance.

[Mr Weir]

Does the hon. Gentleman not feel, however, that the problem remains that the whole thing will be governed by the ultimate cap? That is the difficulty that faces all Equitable Life policyholders.

[Mark Durkan]

Yes, I do. There is no escaping the constraints that the cap will create. In the last group of amendments, we considered the questions that arise when the cap comes together with the cut-off. That conspires to create a pretty selective injustice for a group of people who are then left with very marginal compensation.

Even a very independent process, such as that proposed in the amendments, will be constrained by the cap. However, people would trust a credible independent process applying that cap with due consideration for all the concerns, rights and needs of policyholders more than they would trust the Treasury. In the last debate some Government Members said confidently how impressed they had been with the Treasury since they came into the House. That might well be—we are in the early stages of this Parliament and this Government and the first few pages of the exercise book are lovely, neat, impressive and perfect—but degeneration creeps in later on and even the Treasury will revert to its traditional roots and habits.

--- Later in debate ---

[Mr Weir]

No one is going to oppose the Bill’s Third Reading, for the simple reason that, if it fell, no one would receive any money. None the less, dealing with the Bill has in many ways been a frustrating experience. It is a paving Bill, as others have said, and the big elephant in the room is the cap and its effect on the overall amount of money available.

It would be churlish not to acknowledge that the Government have moved swiftly, and that is welcome. After 10 years spent arguing about the matter, we are finally getting somewhere with it, but to some extent the Bill is a missed opportunity, because of the cap and the inability to do anything about the Treasury’s decision to introduce one. The effect will be dramatic. Nobody is arguing that, in the current situation, everybody should receive all the money to which they might be entitled. Even EMAG accepts that there will be, as the group put it, a “haircut”, but some people will lose 80% of the compensation that they should have received, and that is not fair.

There are other inequities involved. I was frankly baffled by the Minister’s mental contortions over the exclusion of pre-1992 with-profits annuitants. As I understand his remarks, we are now in the position where maladministration is okay as long as one does not know about it and where it becomes an issue only when one does know about it. That seems utterly perverse. By resorting to these measures, the Government have undermined what could have been a very good end to this long-running matter.

The hon. Member for Harrow East (Bob Blackman) is right—had the previous Labour Government grasped the nettle at an early stage, this issue could have been dealt with much more cheaply. A lot of the fault over the cost lies with the previous Government’s unwillingness to do anything about it. Many of us have spent years in this House arguing that they should have done so; I have not changed my position over that period.

I think that there should be compensation, and I welcome what has been done. It is not sufficient, however, and many policyholders will still feel very aggrieved, and rightly so. It could have been dealt with better had it been done differently, perhaps with a larger cap or payments over a longer period. I can give half a thanks for the Bill, but I think that the Government will face problems in future because of their failure fully to deal with the issue.

Equitable Life (Payments) Bill

Mike Weir Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

The hon. Gentleman makes an important point. Speed is of the essence, and we want to make sure that payments start to be made as quickly as possible. There is quite a lot of work to be done before we get to that point; I will say a bit about that work later on.

[Mr Mike Weir (Angus) (SNP)]

rose—

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

rose—

--- Later in debate ---

[Mr Weir]

We cannot object to anything in the Bill, but the detail on quantum is not in it. Does the Minister intend to provide details on the scheme to the House so that we can debate it before it is introduced?

[Mr Hoban]

I shall come to that in a minute, but the Bill simply gives the Treasury the powers to make the payments. It is right that the Treasury takes those powers, but it needs to do so now so that we can move on to the procurement process and identify who will make the payments.

--- Later in debate ---

[Mr Weir]

I am listening with interest to the right hon. Gentleman’s comments. As I understand it, the Labour party’s position is that it still supports Sir John Chadwick’s work. If that is the case, can the right hon. Gentleman confirm that Labour would support whatever compensation package Sir John comes up with, or would it follow the coalition and put an arbitrary cap on that?

[Stephen Timms]

Sir John has, in fact, reported. He did so in July. That was rather later than he was going to report; he would have reported in May, and my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) said that we would have produced a scheme within two weeks. As I have said, our view would have been that we should proceed as we had intended, and as we set out before the election, on the basis of the report that we commissioned.

The new Government delayed publication of the report until July, and we still do not know what the scheme will be. We know almost nothing about the timetable, but I am afraid it will not be what EMAG has been demanding, which it thought current Ministers were signing up to when they signed all those pledges. A great many people feel very let down indeed.

--- Later in debate ---

[Mr Mike Weir (Angus) (SNP)]

I am pleased to follow the maiden speech of the hon. Member for Congleton (Fiona Bruce). Ann Winterton will be a very difficult act to follow, but I am sure that the hon. Lady will be a fine representative of the people of Congleton in years to come.

On the Bill, the Scottish National party and Plaid Cymru have always supported the campaign to bring justice to the victims of Equitable Life. I am clearly pleased that we have before the House a Bill that will bring compensation a little closer, and we will support its Second Reading. The real problem, however, is that it simply sets up a mechanism for which a scheme can be introduced, presumably, through secondary legislation. I tackled the Minister on the question of whether the scheme would be debated on the Floor of the House, but I received no answer. Given the significance of the matter, it is important that it comes to the Floor of the House so that we can have a good look at the proposal.

Given the further fact that the independent commission is not due to report until early next year, it appears that the victims of Equitable Life will have to wait another year or so before they know what, if anything, they will receive in compensation. That is also a problem, as members still do not know the specifics of the scheme. The huge concern of my affected constituents is that recent Government statements point to a watered-down scheme that is not that different from what the previous Labour Government proposed, except for the innovation of an overall cap on payments. That proposal will cause fear among many victims because if that cap is imposed, it will heap injustice upon the great injustices that those people have already suffered.

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

Does my hon. Friend agree that it is essential that the scheme rules out the Chadwick report’s proposal of a payment cap for each policyholder, which would limit compensation to between only £400 million and £500 million?

--- Later in debate ---

[Mr Weir]

The policyholders are entitled to due compensation, and I shall address that point in a moment.

I remind Government Members that the coalition agreement clearly states:

“We will implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.”

Will the Minister tell us how that statement can be reconciled with the letter that the ombudsman has sent to all Members, in which, referring to Sir John Chadwick’s recommendations, she states:

“I also explained to him the basis on which I had come to my conclusions and what my recommendation for compensation involved. I am very disappointed therefore to discover that Sir John has explicitly rejected those explanations and that assistance and has substituted his own interpretation of these matters without seeking my further comments.”

That is a fairly damning indictment of what is now proposed. I stated in the previous debate on the matter that the failure to support our own ombudsman brought great shame on the previous Parliament, but, if we do not act now to re-establish trust in the system and listen to what our own independent ombudsman says, it will bring shame on this Parliament as well.

Prior to the election the Conservatives were clear in their view, and in March the motion before Members specifically stated that the House

“calls on the Government to set a clear timetable for implementing the Ombudsman’s recommendations and remedying the injustice suffered by policyholders.”

Regrettably, that does not seem to be what is now proposed; the new Government seem to have pretty much jettisoned the ombudsman’s recommendations and adopted the process that the previous Labour Administration were putting in place—a system that the Conservatives roundly condemned prior to the election.

I do not quite share the indignation of Labour Members on this matter, because, if one reads carefully the speech given in the March debate from the now Minister, one discovers that the seeds of the current situation were already sown. He stated:

“The hon. Gentleman refers to the bill for compensation, but no one knows how big that will be. That figure will be part of the outcome of the process that the Government launched back in January last year. He will know, from reading the ombudsman’s report, that her recommendations on compensation had two important caveats—that payments to policyholders should reflect relative loss but that the impact of any compensation bill on the public purse should be borne in mind.”—[Official Report, 16 March 2010; Vol. 507, c. 744.]

It seems to me, however, that only the second part of that statement is now the overriding consideration, and that the question of the amount of compensation has little to do with relative loss, being concerned purely with the perceived state of the public finances. We have moved on from means-testing the victims to means-testing the Government before deciding the level of compensation.

The problem with that approach is that it sets a very dangerous precedent. The Government, through the regulator, were responsible for what happened at Equitable Life, and the maladministration that occurred led directly to the losses suffered by the policyholders. However, the Government are effectively going to cap the amount of compensation at what they think that they can afford and, worse still, as part of a comprehensive spending review that is expected to impose swingeing cuts on all Departments.

I wonder how I would get on if I drove my car into a Porsche, causing many thousands of pounds worth of damage, and said “Sorry for your loss, but I can only afford to pay a small proportion of the damage.” I suspect that any court in the land would give me very short shrift. It is a principle well established that those who have caused the damage are due to make recompense. That principle appears to have been watered down in the case of Equitable Life policyholders, and, as the right hon. Member for Holborn and St Pancras (Frank Dobson) said, that is not the case for other victims of financial circumstances.

In previous speeches, the Minister has praised the Equitable Members Action Group for its excellent work in keeping the matter in the public eye, and rightly so. Given that, we should take on board the very real concerns about what is now proposed. The group has made clear its concerns in three main areas, including the continued reliance on the Chadwick process, the remit of which was devised by the previous Government and clearly intended to minimise payouts. Indeed, the previous Administration did not accept many of the ombudsman’s findings, coming up instead with a system of ex gratia payments to which many of us objected at the time. We in the SNP and Plaid Cymru supported Liberals and Tories in that objection. The important point is that the basis on which Sir John Chadwick was carrying out his work was that adopted by the previous Government. I remind Government Members that they supported the recommendations of the ombudsman in their manifestos and the coalition agreement.

The losses are to be calculated by the Treasury and not by the independent commission, and indeed the very basis on which that is to happen is moving from the relative loss identified by the ombudsman to an absolute loss method adopted by Chadwick. That reiterates the importance of debating the terms of the scheme on the Floor of the House. Furthermore, the commission is left with the unenviable task of distributing inadequate compensation, having had no say in calculating the true losses.

The policyholders of Equitable Life were treated shamefully by the previous Government. In opposition, the coalition parties promised to take action, but unless they tackle the concerns raised by policyholders and the ombudsman, this issue will continue to undermine the standing of this Parliament, faith in our ombudsman service and, as was pointed out, the continuing faith of all our constituents in saving for their futures; they might not be assured that their savings will be protected when investing with apparently reputable companies.

I urge Ministers, even at this late stage, to address these issues and come forward with a scheme that will bring this sad debacle to a just end. We should be given the opportunity to debate the scheme on the Floor of the House, so that we can be assured, and we can assure our constituents, that everything possible is being done for the unfortunate victims.

--- Later in debate ---

[Justine Greening]

I know that my hon. Friend the Financial Secretary has met representatives of EMAG over the past few days. EMAG will have the chance over the coming weeks to make representations to the commission about what it considers the fairest way to allocate payments. The independent commission must be independent of everybody and must be allowed to get on with its job. That is what we propose to let it do. We should not prejudge it. We should allow it to proceed with the work that has been set out. As I said, the approach recommended by the ombudsman in her report was that the setting up of the scheme should be looked at independently. We have decided to follow her recommendation. It is important that that should now happen.

Members asked about an appeals process. That is a fair question. We are still considering the details of how such a process might work. I am sure that the independent commission will also consider how that could become part of the process. The key requirement is that any appeals process is independent of the initial assessment of an individual’s claim.

One of the other issues that has come up is why we have not put more detail about the scheme in the Bill. Although that it a fair question, it prejudges what the independent commission might propose. As I have said a number of times, we need to allow it to get on with its work so that it can propose the design of the scheme. It is wrong to prejudge that by baking into legislation steps that the commission may consider unnecessary.

[Mr Weir]

When the Minister was introducing the Bill, I asked him whether the details of the scheme would be debated on the Floor of the House. Those details are important. We all understand that this is an enabling Bill, but we must have the opportunity to examine the scheme in more detail.

Finance Bill

Mike Weir Excerpts

Thursday 15th July 2010 Commons Chamber

[Stewart Hosie]

I do not intend to delay the Committee. By and large, I am very supportive of clause 6. The two-year extension for people reaching the age of 75 in order to allow them to buy an annuity when it is most effective for them is a good thing to do. The clause seems to be pretty well drafted and the description of it is extremely good. I am pleased about the protection in paragraph 8(2) of schedule 3, which provides that if a member dies before a year has passed since their 75th birthday, and at the date of death there are still funds held for the purposes of the arrangement that have not been designated as available to pay an unsecured pension, not paid as a lump sum, and not applied towards the provision of a scheme pension or a dependent’s scheme pension, those funds are treated as though they had been designated as available for the payment of an unsecured pension and will then be taxed on death at a rate of only 35%. That makes sense.

However, I am aware, through a constituent of my hon. Friend the Member for Angus (Mr Weir), that there are a small number of individuals who have already reached 75, or will hit 75 before 22 June, and who did not buy an annuity because it was not worth it or not effective. I want to describe the position of that person and then see what help the Minister might be able to provide, or hear her explanation of how the clause might assist.

As the rates for annuities were very low, this gentleman did not take up one on reaching 75 in 2007. Instead, he chose a scheme pension that allowed him, subject to pension regulation supervision—a specialist firm did that for him—to continue to manage his pension fund for a period of 10 years and take the actuarially calculated levels of income from it. That was very sensible and prudent. However, the downside is that on his death, if any of that fund is left, it will be subject to inheritance tax at a rate of 80% before it passes to a family member of his choice.

[Mr Mike Weir (Angus) (SNP)]

Indeed it was a constituent of mine who brought the matter to our attention. Does my hon. Friend think that a way round might have been for the clause to allow anyone to take the extra two years if they were to reach age 75 or were already in that position? I cannot imagine that the numbers affected would be huge, but it would have got round this particular problem.

--- Later in debate ---

[Justine Greening]

I am grateful to the hon. Member for Dundee East (Stewart Hosie) for his questions, and it is probably wise if I take this opportunity to set out to the Committee the background of clause 6 and address the issues that he raised. I am sure that he will be interested in the consultation document that has been launched today on a number of them.

The Chancellor announced in the Budget that the Government would end the effective requirement to purchase an annuity by age 75 with effect from April 2011. The reason why we want to do that is that it will provide greater flexibility and choice for the individuals affected. In considering the hon. Gentleman’s amendments, it is important for the Committee to understand why we are making that change and how we are going about it.

A consultation on the detail of the changes was launched earlier today by my hon. Friend the Financial Secretary, and our intention is to introduce any changes from April 2011. As set out in the consultation document, the Government will be guided by the following principles in implementing the changes: first, that the purpose of tax-relieved pension savings is to provide an income in retirement; secondly, that any changes to the pension tax rules should not incur Exchequer cost or create any opportunities for tax avoidance; thirdly, that individuals should have the flexibility to decide when and how best to turn their pension savings into a retirement income, provided that they have sufficient income to avoid exhausting their savings prematurely and falling back on the state; fourthly, that pension benefits taken during an individual’s lifetime should be taxed at income tax rates, with the tax-free pension commencement lump sum continuing to be available; and fifthly, that on death, as the hon. Gentleman mentioned, the pension savings that have been accumulated with tax relief should be taxed at an appropriate rate to recover past relief provided, unless they are used to provide a pension for a dependant. Those principles will ensure that the new rules offer maximum flexibility to pension savers, while avoiding undue complexity or incurring a cost to the Exchequer.

The proposals set out in the consultation document will create additional flexibility for anyone saving into a defined contribution pension. That new flexibility means that individuals will be able to decide for themselves whether and when to purchase an annuity. It will also allow them to leave their pension fund invested in an income draw-down arrangement beyond the age of 75, and to take benefits from their pension fund later than that age if they wish. In addition, individuals who can demonstrate that they have secured a minimum income will be free to draw down unlimited lump sums. The changes will also allow the pensions and annuities industry to consider more innovative products, giving consumers greater choice.

While the new rules are being finalised, it is important that individuals who are about to turn 75, and who have not yet made a decision about what to do with their pension savings, are not disadvantaged in the meantime. The changes set out in schedule 3 are the minimum necessary to enable those reaching 75 on or after Budget day to defer the decision on what to do with their pension savings.

The Bill achieves that by providing for the pension tax rules that previously applied to draw-down arrangements only up to age 75 to continue to apply up to an individual’s 77th birthday. That means that the higher inheritance tax charges that apply specifically to pension scheme members aged 75 or over will not apply to individuals who are about to turn 75, and who have not yet made a decision on what to do with their pension. They will not now have to make a decision until they reach 77, and in the meantime we will have worked through the consultation process. Clause 6 and schedule 3 will therefore ensure that they need make no decision until after new rules are finalised next year. To do otherwise would be unfair and confusing, and changing the rules retrospectively would add unnecessary complexity.

[Mr Weir]

I understand the Economic Secretary’s point and I am closely following her argument. Does she accept that many people did not get annuities in the past two or three years because the economic position meant that it was simply not a good time to buy them? Those people are effectively being penalised. Would it not be fair, as I suggested in an earlier intervention, to say that everyone had two years from now, while the consultation goes ahead and changes are being made, to consider their position? Perhaps some people will wish to continue as they are, but at least they would have the option, which is rightly being given to people who are approaching 75.