Finance Bill
Natascha Engel Excerpts(9 years, 2 months ago)
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The Second Deputy Chairman of Ways and Means (Natascha Engel)
With this it will be convenient to consider the following:
Clause 17 stand part.
That schedule 2 be the Second schedule to the Bill.
Amendment 3, in schedule 3, page 74, line 4, leave out “8%” and insert “the relevant percentage”.
This amendment would replace the 8% rate of surcharge in the Bill with a new rate to be set in regulations.
Amendment 4, page 74, line 7, at end insert—
‘(1A) For the purposes of subsection (1), the “relevant percentage” is a percentage of the company’s surcharge profits for the period, not exceeding 8%, which the Treasury shall specify in regulations; and such regulations may specify different percentages in respect of different levels of surcharge profits.
(1B) Regulations under subsection (1A)—
(a) shall be made by statutory instrument, and
(b) may not be made unless a draft has been laid before and approved by resolution of the House of Commons.”.
This amendment would require the Treasury to set the level of the surcharge in regulations, and would allow for different tiers of surcharge. The regulations would be subject to approval by the House of Commons.
That schedule 3 be the Third schedule to the Bill.
New clause 1—Impact of changes to the bank levy rate and of the banking companies surcharge—
“(1) The Chancellor of the Exchequer shall, within three months of the passing of this Act, undertake a review of the overall impact of the changes made by sections 16 and 17 of, and schedules 2 and 3 to, this Act, on:
(a) the structure of bank balance sheets;
(b) the long-term tax revenue from the banking sector; and
(c) competition and diversity within the banking sector.
(2) The Chancellor of the Exchequer must lay a copy of the review before both Houses of Parliament.”.
Harriett Baldwin
What a pleasure it is to serve under your Chairmanship this evening, Ms Engel.
Clauses 16 and 17 and schedules 2 and 3 make changes to the banking tax regime. They will ensure that banks continue to make a fair contribution to the economic recovery in a way that does not harm the UK as a global financial centre or affect banks’ ability to support the economic recovery.
It might be helpful if I set out the background to the Government’s approach to taxing the banking sector. In his first Budget in 2010, my right hon. Friend the Chancellor announced the introduction of the bank levy, an entirely new tax on banks’ balance sheets, equity and liabilities. The levy had two objectives. First, at a time when banking profits were low, it was designed to ensure that banks made a fair contribution to the taxman to reflect the risks that they pose to the UK economy —risks that were made very clear in the extraordinary events of 2008. Secondly, the levy was designed to complement the developing regulatory regime by providing incentives for banks to reduce the size of their balance sheets and support their activities with more stable forms of funding.
Measured against those objectives, the bank levy has undoubtedly been successful. It raised more than £8 billion across the last Parliament and is forecast to raise a further £17 billion by 2021. It has played a key role in increasing the stability of the UK banking sector, with banks now holding more capital against their assets and being less reliant on short-term risky funding. It has helped to satisfy the UK’s resolution financing obligations under the EU bank recovery and resolution directive, thus supporting the more orderly resolution of banks in crisis. Despite those successes, the Chancellor has been consistent about the need for balance in ensuring that banks pay a fair contribution, while ensuring that this supports the UK as a global financial centre and banks’ ability to support the wider economy.
The Government believe that, as the sector returns to profit, a change is required to maintain that balance. The reforms in the clauses achieve that over the coming Parliament and beyond. The first change is a gradual reduction of the bank levy. Clause 16 reduces the bank levy rate to 0.18% from 1 January 2016 and sets out further reductions to the main rate over the following five years, resulting in a rate of 0.1% from January 2021. The Government have committed to exclude non-UK subsidiaries from the bank levy charge from January 2021, a change we are committed to legislate for in this Parliament.
Clause 17 introduces a surcharge on banking sector profit from January 2016. That is a new 8% tax on the corporation tax profits of regulated banking entities within banking groups. It will apply to profits that exceed £25 million across a group, disregarding the losses that banks have carried forward from periods before the surcharge’s introduction. The first £25 million will benefit from the reductions in the main rate of corporation tax—from 20% today to 19% and then to 18%—included elsewhere in the Bill, giving the UK the lowest rate of corporation tax in the G20. It means that the overall rate of corporation tax will be slightly lower for banks than it was in 2010.
The OBR forecasts that the surcharge will raise £6.5 billion from the sector by 2021. That revenue more than offsets the cost of reductions to the bank levy rate. It means that banks will pay an additional £2 billion in tax over the period, increasing banks’ total additional contributions beyond £23 billion.
Budget Resolutions and Economic Situation
Natascha Engel Excerpts(9 years, 4 months ago)
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Catherine West
Let me deal with aspects of the question of expenditure in turn. First, the employment training levy is being levied on small businesses by your Government. It is not a Labour proposal, but I support it because it is about investing in the workplace. Secondly, the position on student maintenance grants amounts to cost shunting—taking the costs from the university and putting them on to the individual. I referred to a case of a student owing £56,000, so instead of it sitting on the balance books of the Chancellor, it is sitting on those of the individual, which is a bad thing. Thirdly, we spent £60 billion on housing benefit over the last Parliament. We should have invested more of that in new build housing. We should not forget that council housing is not a cost. It is a net contributor to the economy because the rent is so low that housing benefit is not payable on many council properties. Housing benefit is mainly payable in the private rented sector. By investing in social homes, we will be saving the housing benefit bill in the longer term. Finally, on childcare, your own pledge by your own Government is 30 hours per week—
Madam Deputy Speaker (Natascha Engel)
Order. The hon. Lady must speak through the Chair, so she should be referring to the hon. Gentleman in the third person.
Catherine West
How did I forget that? Through you, Madam Deputy Speaker, I am saying that the Government have pledged to provide 30 hours a week childcare, which is an excellent pledge, but it is not a Labour proposal. In fact, Labour proposed something more modest and more affordable. I am thus a little worried that the hon. Member for Bedford (Richard Fuller) thinks that we are over-spending, when this is a pledge of his own Government. I wonder whether it will happen, though; I worry about the feasibility. If we go through all those elements, we find that they are not really about cost; they are about feasibility and getting the job done.
Madam Deputy Speaker (Natascha Engel)
Order. I shall change the time limit on speeches to seven minutes—Members have kept their speeches nice and short.
Madam Deputy Speaker (Natascha Engel)
Order. Before I call the next speaker, may I say that since I raised the limit everybody has taken the maximum number of interventions and therefore we are getting a bit pressed for time again? We will leave the limit at seven minutes, but may I just ask everyone to keep interventions to a minimum and make them short? If we do that, we might get there.
Madam Deputy Speaker (Natascha Engel)
Order. I apologise to those Members who are still to speak, but we have had the maximum number of interventions and the maximum time for speeches, so the time limit will now have to drop to six minutes.
Richard Burgon (Leeds East) (Lab)
When I think of this Budget, I think of my constituents who will be hard hit by the measures it sets out; measures that were cheered to the rafters by the Conservative party, led in fist-pumping style by the right hon. Member for Chingford and Woodford Green, known to my more polite constituents as Iain Duncan Smith.
This Budget is bad for the economy and bad for the poorest, whether working or not, in my constituency and in our society. It takes money from the poorest in society and hands it to the wealthiest. Do not just take my word for it; criticism and concern has ranged from the TUC and major trade unions to Citizens Advice, the Joseph Rowntree Foundation and Barnardo’s, and from the Institute for Fiscal Studies to the Local Government Association and the Federation of Small Businesses. For example, Paul Johnson of the IFS has said:
“In general the more important tax credits are to someone’s income at present the less likely they are to be compensated by the higher minimum wage”—
note that he refers to the minimum wage, not the living wage—
“But the key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of losses that will be experienced by tax credit recipients. That is just arithmetically impossible.”
This Budget negatively affects a majority of the population. The IFS says that 13 million people will lose out through the freeze in benefits and tax credits. This Budget is bad for people in my constituency of Leeds East, where the cuts to tax credits will hit an overwhelming majority of families. In Leeds East there are 9,600 families with children claiming tax credits, 6,100 of whom are working families, with 12,600 children affected. The scale of the impact in my constituency and constituencies like it across the country should make Conservative Members ashamed. Sixty-seven per cent.—two thirds—of families in Leeds East receive tax credits, while 75%—three quarters—of children are in families receiving tax credits. This is an attack on the incomes of the poorest while helping the wealthiest.
Freezing benefits for four years and cutting tax credits will reduce real incomes. The Joseph Rowntree Foundation makes it clear:
“For those out of work, especially childless adults, it will further widen the distance between their incomes and what is needed to achieve an even basic standard of living. This is of course deliberate, in that the aim of the Government is to sharpen work incentives for those not currently in work.”
Citizens Advice says that
“a government serious about making significant savings to the welfare bill needs to tackle problems at the source including insecure work and failures in the housing and childcare markets...Cuts to welfare including freezing benefits for four years, lowering income disregards and work allowances, and cutting tax credits will all have a very serious impact on many people’s ability to meet day to day costs.”
I have to mention George Osborne, the Chancellor—
Madam Deputy Speaker (Natascha Engel)
Order. I say this in the spirit of helpfulness. We name Members not by their names but by their constituencies. This is the second time that the hon. Gentleman has done it, so I ask him to use the constituency or job title—“the Chancellor” will do.
Richard Burgon
The Chancellor’s so-called living wage is a con. He claims to be giving Britain a pay rise but his living wage premium is actually a new minimum wage undercutting the rate proposed by the Living Wage Foundation.
Quote after quote that I now do not have time to go into sets out the reality of the Government’s Budget. Many measures, as other Members have mentioned, are an attack on the hopes of young people. They include excluding under-25s from the so-called living wage, preventing young people from living independent lives by cutting their access to housing support, and abolishing student maintenance grants for the poorest and raising university fees. What we needed to hear in the Government’s Budget was a call for investment to publicly deliver affordable social housing, access to well-funded further and higher education, and new jobs and apprenticeships with better pay that would allow people to live decent and stable lives.
People in my constituency and areas like it across the country are not a priority for this ultra-Thatcherite Government. They talk about a northern powerhouse, but we need only look at what is happening with trans-Pennine electrification. They are cutting funding for infrastructure in Leeds and in the north. They talk about devolution, but I and many others fear that the real aim is to devolve the blame for the national Government’s austerity economics. We must not give up fighting against what is being done to my constituency and areas like it by this Government, who are all about siding with the rich and the powerful. I look forward to carrying on fighting, alongside Labour colleagues, campaign groups and trade unions, against this Government’s cruel plans and for a better society.
Madam Deputy Speaker (Natascha Engel)
Order. I am sorry to say that I must drop the time limit on speeches to five minutes to get all the speakers in.
Scotland Bill
Natascha Engel Excerpts(9 years, 4 months ago)
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The Second Deputy Chairman of Ways and Means (Natascha Engel)
With this it will be convenient to discuss the following:
New clause 21—The Scottish Office for Budget Responsibility—
‘(1) Part 2 of Schedule 5 to the Scotland Act 1998 (specific reservations) is amended as follows.
(2) In Section A1 (fiscal, economic and monetary policy)—
(a) For the heading “Exception” substitute “Exceptions”—
(b) After that heading, insert—
“The creation of a body corporate, called The Scottish Office for Budget Responsibility, for the independent scrutiny of Scotland‘s public finances, including all tax and spending in areas for which the Scottish Government has legislative competence.””
This New Clause would provide for the creation of a Scottish Office for Budget Responsibility to exercise fiscal and budgetary oversight over Scottish Government competencies. The Smith Commission recommended that the Scottish Parliament should seek to expand and strengthen the independent scrutiny of Scotland’s public finances in recognition of the additional variability and uncertainty that further tax and spending devolution will introduce into the budgeting process.
New clause 23—Local Discretionary Taxation—
Individual local authorities in Scotland shall have the discretion to raise additional income by levying a tax, in addition to Council Tax and Non-Domestic Rates, on either residents, occupiers, property owners or visitors in the local authority or within a discrete area of the local authority.”
The power will enable local authorities to introduce tax(es) without the need to seek approval from Scottish Government, with the rates and reliefs being determined locally and the local authority being both granted powers to ensure that those on which the tax is levied have a legal obligation to pay and the local authority having the discretion to determine how the additional revenue is expended.
New clause 24—Tax and Economy Forum—
‘(1) The Secretary of State shall appoint a Tax and Economy Forum to conduct an analysis of the impact of the changes in legislative and executive competence resulting from this Act on the economy, labour market and public finances in Scotland and in the other parts of the United Kingdom.
(2) The Tax and Economy Forum may make recommendations for fiscal reforms within Scotland, to be considered by the Secretary of State.”
The new Clause would require the appointment of a Tax and Economy Forum to assess the impacts of fiscal devolution proposed within this Bill on Scotland and on the rest of the United Kingdom.
New clause 25—UK Commission on fiscal powers—
‘(1) Within 6 months of the day on which this Act is passed, the Secretary of State shall appoint a commission to examine the deployment of fiscal powers at local, devolved and United Kingdom levels.
(2) The commission shall comprise between 4 and 6 representatives of any of—
(a) the Scottish Parliament,
(b) the National Assembly for Wales,
(c) the Northern Ireland Assembly,
(d) local government,
(e) the House of Commons, and
(f) the House of Lords.
(3) The bodies mentioned in subsection (2) shall select their representatives in any way they see fit and the chief executive or presiding officer of each of those bodies shall inform the Secretary of State of the names of the representatives of those bodies, which may replace their representatives whenever the body concerned has determined to do so.
(4) Subject to subsection (5), the commission may determine its own quorum and methods of working and must publish a protocol setting out its own terms of reference.
(5) The commission shall keep the operation of fiscal powers under review, making reports and recommendations as it deems appropriate.
The purpose of this New Clause is to ensure that there is proper consultation between the different parts of the United Kingdom to ensure that new Scottish fiscal powers are deployed in a way that does not undermine the cohesion of the UK. The proposed Commission could also make recommendation regarding the future of devolved fiscal powers.
New clause 33—Full fiscal autonomy for Scotland—
‘(1) The Scottish Government and the Government of the United Kingdom must enter into an agreement (the “Economic Agreement”)—
(a) setting out a plan for implementation of full fiscal autonomy for Scotland, and
(b) establishing a framework within which the two Governments are to coordinate their economic and fiscal policies in the context of full fiscal autonomy for Scotland.
(2) Full fiscal autonomy for Scotland means that—
(a) the Scottish Parliament and Scottish Government have competence for determining revenues raised in or as regards Scotland through taxation and borrowing,
(b) the Scottish Parliament and Scottish Government have competence for determining levels of public expenditure in or as regards Scotland,
in accordance with the amendments made by this Act.
(3) The framework mentioned in subsection (1)(b) must in particular include arrangements for—
(a) facilitating fiscal coordination,
(b) overseeing economic cooperation,
(c) joint responsibilities in areas of mutual interest,
(d) safeguarding fiscal sustainability.
(4) In determining the terms of the Economic Agreement the two governments must seek to ensure—
(a) the maintenance of monetary stability throughout the United Kingdom,
(b) the maintenance and promotion of the single markets in the United Kingdom and the European Union,
(c) that they cooperate in the exercise of their respective functions relating to the administration and collection of taxes,
(d) an equitable and transparent approach to consequences, resources and rewards,
(e) that the Scottish Parliament and the Scottish Government retain the benefits of increased tax revenues delivered by successful policies pursued by them,
(f) that the Scottish Parliament and the Scottish Government have the powers necessary to manage the consequences of full fiscal autonomy for Scotland,
(g) that full fiscal autonomy for Scotland is implemented over a period of time, as the Scottish Parliament and the Scottish Government acquire capacity to carry out their additional competences.
(5) The Economic Agreement is to be entered into as soon as possible and the two governments must cooperate in good faith with a view to achieving that.
(6) As soon as possible after the Economic Agreement is entered into—
(a) the Scottish Ministers must lay a copy of it before the Scottish Parliament, and
(b) the Secretary of State must lay a copy of it before both Houses of Parliament.
(7) The two governments must from time to time review the Economic Agreement and make such amendments to its terms as they may agree with a view to ensuring that it continues to meet the requirements of this section.
(8) Subsection (6) applies to the Economic Agreement as amended as it applies to the Agreement as entered into.
(9) The Secretary of State may, with the agreement of the Scottish Ministers, by regulations modify this section.
(10) A statutory instrument containing regulations under subsection (9) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
This new clause would require the Scottish and UK governments to reach agreement on the delivery of full fiscal autonomy for Scotland.
Amendment 3, in clause 63, page 67, line 30, leave out subsection (3) and insert—
‘(3) Part 2 of the Bill comes into force at the end of 2 months beginning with the publication of the report of the Independent Commission on Full Fiscal Autonomy appointed under section (Independent Commission on Full Fiscal Autonomy).”
This amendment provides that Part 2 (Tax) will not come into force at the end of two months beginning with the day on which the Act is passed, in order to link the commencement of the tax provisions of the Act with the work of the Independent Commission on Full Fiscal Autonomy, appointed under New Clause NC1, which would be required to report by 31 March 2016.
Ian Murray
It is great to see you in the Chair, Ms Engel. Congratulations on your elevation to Deputy Speaker. It appears that in tonight’s debate there is a sense of déjà vu, as we debated full fiscal autonomy a few weeks ago. Given that the Committee stage of this Bill has been dominated by the SNP manifesto commitment to deliver full fiscal autonomy and bringing forward its watered down promise to deliver it this year, it is good that we have the opportunity to try to put it into this Bill. In fact, as we witnessed last week, the SNP’s hand had to be forced by its arch Thatcherite colleagues, when its Members went into the Lobby with the hon. Member for Gainsborough (Sir Edward Leigh). I said at the time that the worst possible scenario for Scotland would be the SNP demanding full fiscal autonomy and its being delivered by a majority Conservative Government. Those words were echoed—
Alex Salmond
On a point of order, Ms Engel. I am not sure that I heard the hon. Gentleman correctly, but he seems to be redrafting his clause during his speech. Would it be in order for him to redraft his new clause to include the House of Lords during his speech? Can he be that uncertain of his arguments?
The Second Deputy Chairman of Ways and Means (Natascha Engel)
The right hon. Gentleman knows that that is a matter of debate, so let us continue with that debate.
Ian Murray
The problem with the right hon. Member for Gordon (Alex Salmond) is that he does not want to debate full fiscal autonomy, as he knows that it is a bad policy. Let me emphasise that if the Secretary of State wants to accept the new clause, I would be more than happy to ensure that Members of the House of Lords were not on the commission. Let us be transparent and accountable in this place, rather than nitpicking about parts of the clause. The SNP do not want the scrutiny and that is the key to this argument.
Let us consider some of that scrutiny. The much-quoted IFS analysed full fiscal autonomy in Scotland and said that it would cost £7.6 billion next year and up to £10 billion by 2020. It has made it clear that that is over and above the deficit of the UK at the moment and the spending profile of the current Conservative Government. Let me emphasise again, as this has been misquoted by the hon. Member for Moray (Angus Robertson) on a number of occasions, that that figure is in addition to the current UK deficit.
The impartial analysis has been dismissed by the Scottish Government, so let us turn to another source of information, Her Majesty’s Treasury, which analysed these figures with results broadly in line with the analysis of the IFS. According to Treasury costings that I obtained through a freedom of information request, full fiscal autonomy would leave Scotland with an additional cash terms deficit of £7.7 billion in 2015-16, rising to £8.4 billion in 2019-20.
Madam Deputy Speaker (Natascha Engel)
I ask the Serjeant at Arms to investigate the delay in the No Lobby.
Productivity
Natascha Engel Excerpts(9 years, 5 months ago)
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Madam Deputy Speaker (Natascha Engel)
Order. Before I call the next Speaker, I am afraid that I must reduce the time limit to four minutes to accommodate as many Members as possible. With that in mind, I call Huw Merriman.
Madam Deputy Speaker (Natascha Engel)
Order. Many people want to speak and there is very little time, but if we do not have interventions there is an outside chance that everybody will get in. I just wanted to remind people of that.
Holiday Pricing
Natascha Engel Excerpts(10 years, 9 months ago)
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Natascha Engel (North East Derbyshire) (Lab)
Thank you, Mr Turner, for calling me to speak in this important debate. I also thank my colleague on the Backbench Business Committee, the hon. Member for Birmingham, Yardley (John Hemming), for securing it. When the e-petition came to us, we recognised its importance, not only because it reached 100,000 signatures, but because of the number of constituents who talked to us about the issue. His comprehensive speech—I hope I do not repeat any of it—highlighted how this is about individual cases. A big national policy that is supposed to apply to every single case will simply not work. I want to use a couple of examples from my own constituency to highlight how a more sensible policy would look at each individual case—each individual child and each individual parent—and give schools far greater discretion to allow people out of school and for how long.
We all agree that education is crucial and that the more time a child misses from its education, the worse it is for that child. Nobody is arguing for taking children out of school indiscriminately just because it is a little cheaper to go on holiday. We are talking about the people who are least able to afford to go on holiday, who have already got the greatest pressures on them.
A constituent of mine, Tim Farmer from Dronfield, has written to me. He and his partner share child care. One of them starts work at 6 am and the other finishes work at 11 am. They cannot afford to take their children on holiday during term time, and not spending time together means that the family is put under pressure. Heaped on top of that, they work absolutely punishing hours and never get the chance to spend time together as a family. That puts additional pressures on family life, and we are seeing, especially at a time of austerity, more and more families breaking up. We must look at the costs of not doing anything about it.
I have a distressing case in which the school’s response illustrates how a national policy does not really work in individual cases. The case involves a man who is separated from his wife. His seven-year-old daughter goes to a school in the constituency; he lives 120 miles away and visits on alternate weekends. The girl has just been diagnosed with a brain tumour, and they do not know what will happen to the child. He has asked the school whether he can take the girl on holiday for a week. The school has cited Government legislation to say there will be no unauthorised absences. It sounds quite threatening, but the school has no option, because of the rules. The school wrote:
“As from 1st September 2013 any holidays during term time will not be authorised, unless there are exceptional circumstances, for which there are set strict criteria. This is Government policy and parents who take their children on holiday without permission will incur unauthorised absences for their child. These remain on the child’s record and will be monitored for further action by the Education Welfare Service. Parents could be issued with a fixed penalty notice and/or court action.”
That is quite threatening language, but it is national policy. If a child with a brain tumour does not fall under the category of a special case, I do not know what does.
Tim Farmer’s children have got 99% to 100% attendance at school. He wants the best for them, but he also says that going on holiday with the family provides a cultural experience, a broadening of horizon and a stability for the children that helps them. Education is much wider than what people get at school.
Dr Thérèse Coffey
Has a teacher or head teacher approached the hon. Lady on this topic, and, in this particular case, has she had a chance to speak to the teacher at the school, because head teachers do have discretion?
Natascha Engel
Absolutely, and the case is ongoing. I was citing it as an example of using a massive hammer to crack a nut. Everything is with good intentions. We all want the best education for our children. We all know that the less time a child spends at school, the worse its outcomes will be, and there are lots of different reasons for that. There are children from chaotic families and children who truant, but we are talking about looking at an individual child and the family’s circumstances and seeing whether it would be possible, not to have a week a year taken out of school time, but to have a week occasionally to make sure that that family can spend some quality time together. I am so glad that we are having this debate, and I am looking forward to hearing about other individual cases from constituencies, because they will highlight the fact that we do need to revisit the matter.
Obviously, we cannot force holiday companies not to raise their prices during school holiday times, but we do need to have a far more sensible and pragmatic approach. We need to give schools greater discretion to allow families to have holidays together.
Annette Brooke (Mid Dorset and North Poole) (LD)
I agree with many of the points the hon. Lady is making, but I have a concern about putting the onus on to head teachers without very good guidelines. Head teachers would find it difficult with parent against parent, and there would be inconsistencies across areas and across the country, so I think we need to dig into the criteria and guidelines that are issued.
Natascha Engel
That is an excellent point. I know the hon. Lady has a background in education, and she is absolutely right. All I am asking for is that we allow greater discretion. At the moment, there is not enough discretion, and that is why the issues are being raised with us as constituency MPs.
Mr George Howarth (Knowsley) (Lab)
I think I agree with my hon. Friend, but does she agree with me that the problem is that there are at least three variables? There are those—including teachers—who, by virtue of their employment, would never have the opportunities that others are seeking. There are those—she gave some good examples—whose own employment makes it difficult for them to find space. And of no less importance is the requirement for schools to provide the entire curriculum to all the children, and co-ordinating that would be a problem. The idea of more discretion is good, but it needs to be underpinned by some basic principles about how all the different groups can be catered for.
Natascha Engel
I absolutely agree. Our problem at the moment is that we have one national policy that is supposed to apply to everybody, and it is not working in the case of teachers, police officers, and the armed forces. There are lots of individual professions that will have problems. However, the head teachers that I have met know the parents and their children. We do not want a situation in which it becomes too easy to take children out of school—there would be abuses of that—but in the case of families with the lowest incomes and the greatest pressures on family life, where a lot of the families are breaking up, that is far worse for a child than simply missing a couple of days of its education because it has gone on holiday. We need to look at that a lot more carefully. I agree with the hon. Member for Mid Dorset and North Poole that we need to look at the guidelines more carefully. We must not impose so harshly on schools and use such a threatening tone with parents. For people on a low income, the inability to ever go on holiday would be a great shame.
Tomlinson Report
Natascha Engel Excerpts(10 years, 11 months ago)
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Natascha Engel
I am sorry to press this, but one of the very serious issues is the foot dragging, and the more time that is taken, even if it is under the guise of making sure that every i is dotted and every t is crossed, means more small and medium-sized businesses are unnecessarily going under, so the time pressure is really serious. I want to re-emphasise that the FCA must be put under pressure by the Treasury to ensure that the review is done as quickly as possible.
Tomlinson Report
Natascha Engel Excerpts(10 years, 11 months ago)
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Natascha Engel (North East Derbyshire) (Lab)
It is a pleasure to serve under your chairmanship, Sir Roger. I am delighted that the hon. Member for Aberconwy (Guto Bebb) has secured this important debate on what is an absolute shocker of a report. He has led a campaign to expose the bullying tactics that were often used by banks on interest rate swaps. We have all been quite shocked to discover that interest rate swaps were just the tip of what is a very large iceberg.
The Tomlinson report gives us an insight into behaviour that, if it is not systematic fraud, certainly reflects a culture and set of practices in the banking sector that are shocking in the eyes of most right-minded people. Small and medium-sized businesses are already struggling in a difficult business climate; to find that the very institutions that are supposed to help them through that difficult time are using practices that make their situation even more difficult—and often force them into insolvency —is truly shocking.
Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)
On interest rate swaps, is my hon. Friend aware that tailored business loans sourced from the Clydesdale bank, for example, have been excluded from regulations and from the review? Businesses taking out those loans are just as badly affected as everyone else, so does she agree that such loans should be included in a review?
Natascha Engel
Absolutely, and I will conclude later by saying that that means we really have to look at the whole banking sector. The Banking Commission has done a good job of starting to expose some of these malpractices, but they are very worrying. The issue does not affect just RBS, and it needs to be looked at more widely.
What is really worrying is that RBS would, arguably, not exist if not for the fact that it was bailed out, and is 80% owned, by the taxpayer. However, some of the practices exposed by Tomlinson represent a double whammy for the taxpayer. I can cite examples of RBS using the GRG to take money out of bank accounts that businesses had set up expressly to pay Her Majesty’s Revenue and Customs. The bank was, therefore, not just taking taxpayers’ money so that it could continue to exist, but taking money from accounts specifically set up to pay HMRC.
I started to get involved in this issue as a result of constituents coming to see me about interest rate swaps. One particularly big example involves a man who owns care homes, which are disproportionately affected by interest rate swaps. He was a solvent customer running a successful business, but RBS bullied him into taking on loans that included interest rate swaps. He wanted to refuse, but RBS bounced his cheques until he took the loans on. He is now involved with the GRG, even though it was expressly set up for severely distressed customers. He is not in severe distress now, but he soon will be, because the money he has to use to pay back the interest rate swaps RBS forced him to take on should be going into investing in his care home business. In addition, when RBS first forced him to take on the loan, the exit fee was £10,000. Only a few months later, it was £150,000. Given the amounts involved, we really need to start taking a serious look at what RBS is doing.
The hon. Member for Aberconwy was reluctant to use the word “fraud”, and I understand why, because it is a serious accusation. However, what I would like to hear about from the Minister is the reverse: what makes him confident that systematic fraudulent activity is not happening in RBS? I am focusing on RBS because that is what the Tomlinson report focused on, but also because RBS is more than 80% state owned. What makes him confident that the bank is not forcing people into the arms of the GRG, with the result that perfectly solvent businesses are not solvent any more, and asset stripping them at the same time? What makes him confident the bank is not taking huge fees from companies that bank with them, asset stripping them and making sure they can no longer exist properly?
Tessa Munt
On that point, the bank sold the business of one of my constituents, which was bought by another of the bank’s customers, who then found themselves in exactly the same situation as their predecessor. The bank therefore profited from not only the distressed sale, but what happened afterwards. Worse still, the sale happened as a result of interest rate swap mis-selling, but there is another interest rate swap agreement with the new company, so something that happened in 2005 happened again in 2007. Very often, these things are happening to the people who provide large numbers of jobs in our constituencies—the businesses that will provide the jobs and the growth.
Natascha Engel
Indeed. Those responsible are laughing all the way to the bank—ha, ha! The engineering of loan defaults allows a company to be put into the GRG. What we find, and what we see in the Tomlinson report, is that the lending is refinanced—companies are forced to refinance—and the bank gets far higher margins on the new loans. The bank also prioritises taking disproportionately high penalty fees from companies.
All of that is chipping away at small and medium-sized companies, which just want to get on with their business; they do not want to have to worry about what these massive organisations are doing. The banking sector is supposed to help people. Before the crash, banks were over-generous in flinging money at people; after the crash, they have become highly reluctant to lend even to perfectly good businesses. Where they do make business loans to companies, they are behaving, if not fraudulently, then at least appallingly badly, as I think we can all agree.
The all-party group’s investigation into interest rate swap mis-selling revealed not just the banks’ bullying tactics, but many cases that highlighted the imbalance between the size of the banks and the size of small and medium-sized enterprises, which the hon. Member for Wells (Tessa Munt) mentioned. We recently had a meeting with the Minister about that very issue. Can we really say that individuals have access to justice, when RBS—I repeat that it is mainly state owned—can call on some of the best legal minds in the country to support it against tiny businesses? I would say that those businesses do not have access to justice, and I would like the Minister to look at that.
To return to interest rate swap loans, which is where all this started, another problem is the foot dragging by the banks, which are looking into this, and which would say they are dotting the i’s and crossing the t’s; by the Financial Conduct Authority, which is also making sure it gets everything absolutely right; and by the Treasury, which is not putting enough pressure on the banks and the FCA to make sure this issue is dealt with swiftly. As we have seen, exit fees can go from £10,000 to £150,000 in only a few months, and interest rate swap mis-selling is costing businesses vast amounts, so every day matters, because all this money is going to the bank, not the businesses.
We cannot be confident—the Tomlinson report highlights this—that systematic fraud is not going on, perhaps in the wider banking sector, but certainly in RBS. I would really like the Minister, when he responds, to say what he is doing to make sure we can be confident that systematic fraud is not going on at RBS and more widely in the banking sector. I will conclude there, because I would like to give him as much time as possible to respond.
Sajid Javid
I disagree with the hon. Gentleman. The value of the report is that it is entirely independent. It was done by Mr Tomlinson in a personal capacity. He was free to look at any of the issues that he saw as important to the SME sector. I will look at the important issues he has raised, but at this stage I want to make it clear that it was a personal report by Mr Tomlinson and not a Government report. Once that is taken into account, the answers to the questions that the hon. Gentleman asked become clear.
The allegations made in Mr Tomlinson’s report are deeply concerning, and they have raised questions as to whether banks—particularly RBS—are treating their customers appropriately. We expect all banks to act with integrity across all the business activities that they engage in. Separately, as we have heard, the new management of RBS also commissioned Sir Andrew Large to conduct an independent review to examine RBS’s support to SMEs and the decisions that they make on SME lending. Following that review, a report was published on 25 November, and RBS has committed to implement its recommendations in full.
The reports, which were not Government reports, contained some very serious allegations, as we have heard from various hon. Members, particularly from my hon. Friend the Member for Aberconwy. It is now the responsibility of the Financial Conduct Authority to undertake investigations into allegations surrounding RBS’s lending practices and treatment of small businesses.
The FCA has now considered both reports. It has notified RBS that an independent skilled person will be appointed in accordance with the FCA power under section 166 of the Financial Services and Markets Act 2000 to review the allegations made against RBS.
Natascha Engel
Is there a time limit on the investigations being launched by the FCA? Foot dragging is a really serious issue, and every single day means more money lost to small businesses, so is there a specific time frame to which that person is working?
Sajid Javid
First, the FCA has yet to appoint the skilled person. I am not aware of a specific time limit, but it is fair to say that the FCA understands the urgency of the situation and the need to look into the allegations as quickly as possible. However, the hon. Lady will agree that it should take whatever time is necessary to get to the bottom of such serious allegations. The FCA will need to be satisfied that the skilled person appointed to review the allegations is sufficiently independent to carry out the work.
Sajid Javid
I will in a second. If the findings of the review reveal issues that come within the FCA’s remit, it can consider further regulatory action.
Natascha Engel
I am sorry to press this, but one of the very serious issues is the foot dragging, and the more time that is taken, even if it is under the guise of making sure that every i is dotted and every t is crossed, means more small and medium-sized businesses are unnecessarily going under, so the time pressure is really serious. I want to re-emphasise that the FCA must be put under pressure by the Treasury to ensure that the review is done as quickly as possible.
Sajid Javid
I agree with the gist of the hon. Lady’s comments, but I am not sure what she means by foot dragging. The report was published on 22 October. On 23 October, it was given to the FCA, and, within days, the FCA announced that it would investigate, so it would be wrong to accuse the FCA or anyone else of foot dragging, but she is right to suggest that we must stay on top of this and make sure it is handled in a timely way.[Official Report, 19 December 2013, Vol. 572, c. 7MC.]
The hon. Lady and other hon. Members mentioned the allegations of fraud in the report. They will understand it is not for Ministers to determine whether criminal activity by any institution or individual has or has not taken place. That is something that the courts and authorities must look into. If she or other hon. Members have been contacted by businesses with concerns, it is timely to remind her that micro-enterprises can go to the Financial Ombudsman Service with any such concerns. Businesses can also raise concerns directly with the FCA, which will investigate if it is appropriate, and of course any organisation is free to go to the police with any concerns about criminal activity. The police may involve other authorities such as the Serious Fraud Office.
Interest Rate Swap Derivatives
Natascha Engel Excerpts(11 years, 1 month ago)
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Natascha Engel (North East Derbyshire) (Lab)
It is a pleasure to follow the hon. Member for Aberconwy (Guto Bebb), and it was a pleasure to see him before the Backbench Business Committee again, although we had hoped that the position would be resolved on the first occasion when he appeared before us. It was also a pleasure—here I echo the sentiments of other Members—to be a member of his all-party parliamentary group on interest rate mis-selling. The group has demonstrated the power and effectiveness that all-party parliamentary groups can display when they are organised around a single issue, particularly when the issue is an injustice of this kind. The Committee was delighted to be able to schedule today’s debate, and I hope that we shall have as much effect today as we did all those months ago.
I want to focus on just a couple of issues raised by the hon. Member for Aberconwy—in particular, the idea of a moratorium, but also the terrible way in which this issue has been allowed to drag on and on. It is not just the banks that are involved; the Treasury is involved as well, and we should also consider the role of the Financial Conduct Authority. When, many months ago, members of the FCA appeared before the all-party parliamentary group, many of us were unimpressed by their lack of a sense of urgency. Everyone recognised that they wanted the redress scheme to be drawn up properly, but they certainly did not show the sense of urgency that they had shown when signing people up to the mis-sold schemes when it came to the question of redress.
Greg Mulholland (Leeds North West) (LD)
I do not know whether the hon. Lady has experienced the problem experienced by certain other Members. When the hon. Member for Harrogate and Knaresborough (Andrew Jones) and I wrote to the Financial Standards Authority about a shared case, the FSA replied that it did not deal with individual cases. We then wrote to the Minister, who told us to raise the matter with the FSA. We are going around in circles. Do we not need a different body—possibly even the National Crime Agency—to get a grip on the issue?
Natascha Engel
That is a very good point. We have had any number of cases where they have been passed from pillar to post. One of the terrible aspects of all this is that the individuals affected do not know where they can go to get justice, and they certainly do not have very much time to do that, because their businesses are going bust while they are waiting for justice.
Kelvin Hopkins
This very morning I have been speaking to a constituent who has been driven to the edge of bankruptcy by what the banks have done, and I have helped him to some extent. My hon. Friend is making a point about the lack of force behind the action that has been taken so far. Is there not a case for strong Government action now and, indeed, as the hon. Member for Bedford (Richard Fuller) mentioned, for criminal sanctions?
Natascha Engel
Indeed, and I am going to finish on both those points.
One way to make sure the banks cannot drag their feet in the way that they have is to impose a moratorium on the payments. That would really focus their minds. If the money is not coming in, I am sure they would try to settle this matter once and for all much more quickly. The number of suspensions of payments—and only in those cases where people are suffering significant hardship—is an absolute scandal. The fact that 30,000 businesses or individuals are waiting for some kind of redress and only 32 have had redress is also an absolute scandal. Something must be done.
Clive Efford (Eltham) (Lab)
My constituency also has a business that has been affected by this. When we wrote to the Financial Conduct Authority, the response was really an apology for the banks, as though this is just some sort of error that has been made. Does that not underline the fact that there has been a lack of urgency by the regulators, on whom we rely to act on behalf of our constituents when they are wronged in this way? We need more urgency from the regulators; they must get on with their job.
Natascha Engel
That is right and this whole scandal has shown how it has been possible to pass the blame between banks, the FCA and the Treasury, and nobody will take any responsibility for what has been an absolute scandal.
I have seen this in my casework. Mr and Mrs Chadwick buy and sell homes and their business has been very successful. These small and medium-sized companies are not just viable; they are successful. It is only because of this mis-selling scandal that they are going bust. I cannot understand the logic of this: what interest does a bank have in a business going bust and losing all its money? The logic of that is beyond me.
I am also concerned about banks that have taxpayer funding, such as RBS, which has a lot of these cases. We must look much more carefully at the link between the regulator, the banks and the Treasury.
I agree that proper criminal penalties must be imposed on those banks, individuals and organisations that have been proven to have been part of this injustice, and I also agree with the call for a moratorium.
Steve Brine
The issue of suspensions and the length of time this has all taken was raised with me at a business breakfast in Winchester last week. This has generated so much anger. While it was understandable that there were no suspensions while things were supposed to be done on a shorter time scale, it has now taken 16 months in some cases. That is why it is causing real hardship and anger, and I hope that point comes across loud and clear to the FCA, which I know is listening to every single word this morning.
Natascha Engel
I could not agree more. I do not know whether other Members have received a letter from Barclays today outlining, in not very easy-to-understand English, what it is doing and proudly proclaiming how “tightly controlled” and “heavily scrutinised” the review is
“whereby all the banks involved are required to develop a detailed methodology for agreement”,
blah, blah, blah. It goes on and on and on. If this is phrased in anything like the same way as the products individuals were sold, I am not surprised they did not understand what was going on.
Mark Tami
My hon. Friend talks about sanctions. A lot of these people were tricked at the last minute, whereby they were about to sign the loan and this clause was put in. They were told, “Oh no, it is an added safety for you.” Nothing was explained the other way and these people are now paying the price, but the real people who should pay the price are the banks that tricked them in the first place.
Natascha Engel
Not only was this a trick, but some individuals were not able to take loans unless they bought these products—that was the real scandal. The other tragedy has been: the many individuals who have taken their lives; those whose lives have been ruined; those whose marriages have broken up; and those individuals whose businesses have gone bust. What happens to them under any redress scheme? Those are the sorts of individuals that Bully-Banks has done a very big job to support, and I hope that today’s debate will mean that if the FCA is listening and if the banks are listening, they will do something about these people, and quickly.
Economic Growth
Natascha Engel Excerpts(11 years, 6 months ago)
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Natascha Engel (North East Derbyshire) (Lab)
It is a great pleasure for me to take part in this final day of the Queen’s Speech debate, and to talk about the Government’s plan for economic growth. I have serious concerns about their proposals for the big infrastructure project HS2, which will mean that high-speed trains go through the northern part of my constituency, just south of Sheffield—through Staveley, Killamarsh and, in particular, the village of Renishaw.
My main objections are to the lack of information for, and consultation with, the people whom the project will affect; the lack of a coherent economic case beyond a vague promise to open up the regions; and the lack of any real information about that economic case, when £800 million of taxpayers’ money has already been spent on preparatory work, and preparation is currently being made, in the two Bills that are to come before Parliament, for the spending of at least a further £33 billion.
Some of the things I am most concerned about, however, are the complete lack of understanding about people’s lives and the communities in which they live, and the fact that regeneration projects were blighted on the very day the plans for the HS2 route were published. Even though nothing will happen in my part of Derbyshire for 20 years, people are already finding it almost impossible to sell their homes, and businesses are starting to suffer. The main business and employer in the village of Renishaw is a fabulous wedding venue for people all around south Yorkshire and northern Derbyshire. It is very famous and has been operating for many years. Even though it is 20 years before anything may or may not happen, people are already cancelling weddings there simply because of the uncertainty.
The Chesterfield canal project, which regenerates very poor parts of the constituency, has also been operating for decades. The HS2 tracks will go right over the canal, and any match funding raised for the development of the canal has already stopped. These are important economic regeneration projects that have been stopped in their tracks because of the publication of a train line route, which has not even been finalised yet, let alone built.
This is not a “not in my backyard” argument. The tracks will go right through families’ houses, and through villages in which people have lived for many generations. They will not benefit from HS2, as the train does not stop in Derbyshire, but the HS2 project will stop all the regeneration and economic gains we have been making since the closures in the coal and steel industry.
That is not the only thing that is of concern to me. This is feeding into a far wider political problem. We say we represent these people, but they say they are not being consulted and not being allowed to have a say. In fact, we are saying we know better than they do what is good for them, but in this case we do not. I urge the Government to consult, persuade and explain, and to listen to all these people whose lives we are proposing to destroy. Until we do so, I will oppose these plans.
Economic Policy
Natascha Engel Excerpts(11 years, 9 months ago)
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Mr Osborne
My hon. Friend is absolutely right. As I have said before, the Institute for Fiscal Studies says that the Labour plans would add £200 billion extra to borrowing. In the end, the clue is in how one answers the questions, and the shadow Chancellor was asked six times on the radio—many will have heard it—whether borrowing would go up under a Labour Government. He did not want to give a clear answer. Why is that? It is because Labour does not want to admit that borrowing would go up. Finally, on the seventh question, he was forced to admit it, but it is the policy that dare not speak its name.
Natascha Engel (North East Derbyshire) (Lab)
As well as the lack of growth in the economy, Moody’s also cited in its downgrading decision its concern about the implementation risks surrounding the current austerity plans. What is the Chancellor doing to address those?
Mr Osborne
That is the first sensible question we have heard from the Labour party all afternoon. I agree with the hon. Lady that we have to make sure that the decisions we take on reducing the size of Government are implemented. Collectively as a Parliament we have to reduce Government spending and we have to get the deficit down. I look forward to her support in the Division Lobby as we take further difficult decisions this year.