Eurozone Crisis

Neil Carmichael Excerpts

Tuesday 15th November 2011 Westminster Hall

[Mr Baron]

My hon. Friend nearly stole one of the lines I was about to come out with. Fundamentally, I agree with him. The problem is caused by excessive debt: that is what makes this recession different from previous ones, yet the solution the eurozone leaders have come up with is to pile on more debt. That is not the solution. All it is doing is reinforcing failure and failed policies.

There are further reasons why this policy will not work. I cannot think of a monetary union in the economic history of this planet that has succeeded without fiscal union also being in place. Again, I call on the Minister to intervene if he can correct me. To pursue monetary union without fiscal union is a doomed policy. Can the Minister come up with one example of successful monetary union in a country where fiscal union has not also been present? As I say, I would welcome his intervention, but I doubt that he will have such an example.

As my hon. Friend the Member for Clacton (Mr Carswell) has suggested, another reason why this policy will fail is that it fundamentally ignores the importance of devaluation to recovering economies. Usually, there are three elements in an IMF package: reduced spending, increased revenue and the ability to allow the currency to devalue. That last bit is important because a currency that devalues helps to take the strain off the economy. If an economy is deemed to be, say, 25% uncompetitive compared with its neighbours, allowing its currency to depreciate to about the same extent will go a long way towards taking the strain. If we cut off that option, that 25% gain in competitiveness can really be brought about only by cuts to public services, salaries and pension funds. That is simply not an option, and for that reason it makes those austerity packages so much worse.

To my knowledge, the IMF has never lent to a country or put in place a programme in a country that cannot devalue, which is why the Government line that only three of the 53 IMF packages go to the eurozone is disingenuous. Can the Minister name one country, one package in those 50, where devaluation is not an option? That is the fundamental difference. In the three packages in the eurozone, devaluation is off the table, which will make the austerity packages worse.

Having asked the Minister several questions, I was hoping that a number of notes would have been passed to him so that we could get some answers. I am sure he has pre-empted my questions and has the answers in his brief. Again, I would welcome him intervening to name one of those packages outside the eurozone in which devaluation is not an option. They do not exist. Devaluation is terribly important when it comes to an IMF package, but we are not allowing that option in the eurozone. That is another reason why these IMF packages will fail.

[Neil Carmichael (Stroud) (Con)]

When the IMF intervened in our economy in 1976, when Denis Healey was fighting to save the pound, that intervention arrested the devaluation of the pound.

[Mr Baron]

I agree to a certain extent, but my hon. Friend cannot deny that we had the ability to devalue. The currency markets could take the strain and, to a certain extent, they did. If we look at the strength of the pound since the second world war, we see that it has been a sorry tale of devaluation. Had that devaluation not taken place and had we been locked into a system that did not allow devaluation, my goodness me, the austerity packages introduced to compensate for that lack of competitiveness would have been very severe indeed.

--- Later in debate ---

[Neil Carmichael (Stroud) (Con)]

I congratulate my hon. Friend the Member for Basildon and Billericay (Mr Baron) on securing this crucial debate. A large number of important matters have been raised, and it is a good opportunity to discuss them in this Chamber.

I take issue with the assumption that devaluation is a good thing. We have formally devalued twice since the second world war, and we are in a slowly-emerging devaluation. Post-departure from Bretton Woods, we effectively devalued over time. I see no evidence that any of those devaluations ever led to long-term improvements in productivity or competitiveness, so although the IMF, as it has in the past, has perhaps lent to countries that can and have devalued, it is not necessarily a good thing.

[Mr Carswell]

Does my hon. Friend accept that Argentina’s decision to decouple from the dollar and default on its debts helped it to achieve economic growth? Does he think that that was a good thing or a bad thing?

[Neil Carmichael]

I am a great believer in all countries growing. Argentina is doing reasonably well, but that has more to do with the neighbouring countries that it trades with in Latin America than with decoupling from the dollar. However, I take the point that some countries will take the opportunity for a quick leap forward.

[Mr Carswell]

Does my hon. Friend agree that the IMF’s decision to allow the Ugandan shilling to devalue helped to stimulate growth in Uganda in the 1990s and that, without that devaluation, it would not have enjoyed 15 years of prosperity?

[Neil Carmichael]

If my hon. Friend thinks that the devaluations of 1949 and 1967 in this country led to a period of improved productivity and competitiveness, I would dispute that. I want to pursue that argument, because that is what I think is important.

[Mr Baron]

My hon. Friend is being generous in giving way. Devaluation is not necessarily the best thing going, but it helps to take the strain for a currency that is weakening and therefore allows austerity measures to be perhaps less harsh than they would otherwise be. That is the point. There is no economic evidence to suggest that, if we did not allow devaluation to take effect, austerity packages would be worse and make the economic downturn much worse.

[Neil Carmichael]

I can certainly understand my hon. Friend’s argument, but it is worth pointing out that devaluation is not a panacea and should not be used frequently.

[Mr Philip Hollobone (Kettering) (Con)]

rose—

[Neil Carmichael]

I will take one more intervention on devaluation, or this discussion will be devalued.

[Mr Hollobone]

This country has devalued on a trade-weighted basis by 25% since the peak in 2008. If we had not had that devaluation, this country would now be inflicting on itself a far harsher austerity package and unemployment would be far higher. Without the devaluation mechanism, countries face far starker choices.

[Neil Carmichael]

This Government’s real achievement is to address the deficit. They have set out a plan that is effective and encouraging markets to understand that we are taking the appropriate action. That is one of the benefits of being outside the euro, and we should focus more on that, rather than worrying about the benefits or otherwise of devaluation. I repeat for the last time that I do not think that devaluation is a panacea that we should be pursuing.

[Mr Cash]

What is my hon. Friend’s evidence for the success of the reduction of the deficit? Growth is running at almost zero, and much of that comes surely from the fact that we cannot trade with a completely stagnant Europe.

[Neil Carmichael]

One of the obvious pieces of evidence is that we are not talking about the IMF coming to bail us out—a huge achievement by the Government that should be recognised. We will have to move on from devaluation, but I think that I have made my point and others have attempted to make theirs.

Inflation would certainly help debt reduction, because it does in the long run. As I said in an intervention, when Denis Healey borrowed money from the IMF, that did arrest devaluation. We were more easily able to pay the IMF back quite quickly because of the impact of inflation. I do not support inflating the economy in that way either, as a remedy.

[Mark Field]

In the late 1970s, inflation was coming down quite rapidly from a height of 26% in 1975. One could argue that there has been a deliberate policy by the Bank of England, perhaps in cahoots with the Treasury, to allow a little bit of inflation to go into the system. That is exactly what is happening here in the UK, where historically we have had high real inflation, which is having a major impact on all our constituents’ living standards.

[Neil Carmichael]

Inflation did go down, but after the IMF loan was made. It reached a peak in 1976, which I think was 26%. That happened to coincide with the time of the IMF loan, so that is the position that we should discuss.

[Mr Edward Leigh (Gainsborough) (Con)]

My hon. Friend has been very generous in giving way. He will accept—will he not?—that we should not have stayed in the exchange rate mechanism.

[Neil Carmichael]

Well, we were blasted out of the ERM. We do not want to repeat that fiasco, and we should all recognise that.

We talked briefly about the United States. Gerald Ford, President of the United States in the mid-1970s, refused to bail-out New York, and quite right, too. He was a fiscal conservative. That was the right decision in the long run, and, of course, a decision that did not affect New York’s membership of the dollar. I just wanted to put that on the record.

We must focus on two things, and the Prime Minister identified them both in his speech yesterday. I want to ram home the importance of reforming the European Union, because that is what it needs. In particular, we have to drill down on the single market, to ensure that it is a single market and that competitiveness in goods and services is enhanced. We can really do that.

On euro measures, this country would be making a big mistake if we assumed that the euro will not affect us significantly, because it certainly will. [Interruption.] I shall wind up. I have been so generous with interventions that I do not have the time to point out that we need fiscal union in the eurozone, the ECB to be enhanced—as my hon. Friend the Member for Cities of London and Westminster (Mark Field) rightly said—and much more rigorous auditing of what is going on.

Last but not least, there is a democratic deficit, although the IMF extension was discussed in the House and we voted on 11 July. I have noticed two things. First, Germany and France are effectively bypassing the Commission in a lot of their decisions—

[Martin Caton (in the Chair)]

Order. The hon. Gentleman has gone on beyond the time at which I said that I wanted to start the winding-up speeches. Many Members have asked the Minister questions to which they want to hear the answers. I should be grateful to the hon. Gentleman if he stayed seated now.

Fuel Prices

Neil Carmichael Excerpts

Tuesday 15th November 2011 Commons Chamber

[Robert Halfon]

My hon. Friend is exactly right. Later, I will show that transport firms are closing because of the high cost of petrol and diesel. His constituents are lucky to have him to represent them. As I said, small businesses have no choice but to use their vans and lorries, and non-motorists depend on buses and are being crushed by rocketing food prices.

[Neil Carmichael (Stroud) (Con)]

Will my hon. Friend give way?

[Robert Halfon]

Let me just carry on for a bit.

The jobless, who are struggling to get off benefits and out of the poverty trap, cannot afford to drive to work. Fuel duty is a tax on hard-working and vulnerable Britons. I accept that the Government need to raise revenue, but let us at least be honest about who pays this tax. When fuel duty was first introduced in the 1920s, it was a third of its current level in real terms. However, as ever, tax increases have had the engine of a Rolls-Royce but the brakes of a lawnmower. The fuel tax escalator was introduced in 1993. Labour then accelerated it to 6% above inflation, and it was finally halted in November 2000, when massive fuel protests brought the country to a standstill. That was when petrol was just 80p a litre.

--- Later in debate ---

[Robert Halfon]

My hon. Friend will be pleased to know that I prefer Devon to Belgium. Of course, he is exactly right.

In the past four months, the price of oil has fallen by 8% but fuel prices have stayed static. Oil firms protest that they are forced to buy raw materials in dollars and that currency fluctuations have made price cuts impossible, but analysis shows that this is false. The cost of Brent crude has fallen by nearly 20% since April this year, and yet the dollar has just risen by 6%.

[Neil Carmichael]

rose—

[Robert Halfon]

Let me carry on for a moment.

Big oil firms should not hide behind currency fluctuations. Statistics from the UK Petroleum Industry Association, which is funded by the major oil companies, show that in early 2010 the price of crude oil fell steadily, and yet retail fuel prices stayed high for months. Why was that? Ultimately, the only way to resolve this is through open-book accounting. If the big oil companies want to prove their innocence, why do not they volunteer to publish the financial data?

I want to turn to the financial impacts. Since 2008, our consumption of diesel and petrol has declined, and the Government forecast that it will continue to plummet next year.

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[Robert Halfon]

I am pleased to say that I was also in the constituency of my hon. Friend for my holidays; it is such a wonderful part of the world. There is absolutely no doubt that fuel prices are threatening rural communities and preventing people from meeting and gathering together. Petrol is now so astronomically expensive that it is driving people off the roads and costing the Exchequer money.

[Neil Carmichael]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are not meant to be waving around the Chamber, Mr Carmichael. I am sure that you have already caught Mr Halfon’s eye.

[Robert Halfon]

Just to relieve my hon. Friend, I will give way.

[Neil Carmichael]

I wanted to invite my hon. Friend to Stroud for his holidays, as well, if he has not already been. If he does come, he will see that we have a large number of road haulage firms that are very concerned about the price of diesel. Of course, they are having to pass that on to small and medium-sized firms, which, in turn, means difficulties for them. We need to understand that and give further strength to his case in this House.

[Robert Halfon]

My hon. Friend makes the point better than I have; I completely agree with him.

In the run-up to this debate, lots of people came to me and said, “We all want lower fuel duty, but how can we pay for it?” In fact, this is back to front. Evidence suggests that we are on the wrong side of the Laffer curve and that lower taxes might increase revenues. The Government’s own figures show that between January and June this year 1.7 billion fewer litres of petrol and diesel were sold compared with the first half of 2008. The AA has done its analysis and says that this equates to £1 billion in lost revenue for the Treasury. As the Chancellor said earlier this year, we must put fuel into the tank of the British economy, and cutting fuel tax is the way to do it. The economic impact of this is disastrous. The ex-Tesco boss, Sir Terry Leahy, told The Sun:

“I don’t think people fully appreciated what an oil shock we’ve had. Filling up the family car has gone up 70% in two years, causing what was a steady recovery to go sideways.”

As some of my hon. Friends have said, UK haulage companies are being driven out of business as they face higher taxes here than in nearby countries such as Ireland, with which we share a land border. To their credit, the Government have taken some action, and foreign lorry drivers are now charged up to £9 a day to use our roads. But still the insolvency firm SFP has said that three quarters of transport business failures in the last year have been caused by excessive fuel prices.

Fuel prices are adding to our dole queues. In 2006, when petrol was just 95p per litre, experts at the London School of Economics published research showing that unemployed workers who could not afford to drive or to commute to jobs stayed unemployed for longer. Since then, fuel prices have surged by 40%, despite the recession, and many workers have suffered from redundancy or wage freezes. The Government are working on a rural fuel duty rebate for remote outer islands such as the Outer Hebrides and elsewhere. This is welcome, but it will help only a tiny number of motorists.

Eurozone Crisis

Neil Carmichael Excerpts

Thursday 27th October 2011 Commons Chamber

[Mr Osborne]

The concept here is that first-loss insurance on newly issued debt from countries such as Italy, as my hon. Friend mentions, would be provided out of the special purpose vehicle. That would obviously make it easier for investors to buy bad debt.

[Neil Carmichael (Stroud) (Con)]

I welcome the Chancellor’s statement that some progress has been made to protect the eurozone. In parallel with repatriating powers, will the British Government make it absolutely certain that the single market becomes a place where competition can thrive and productivity can improve, as it is in our interest as well as that of the whole of Europe to make sure that it works well?

[Mr Osborne]

I could not agree more with my hon. Friend. The European single market has helped the UK economy over the last couple of decades. We want to see it completed further and we want to see the services directive properly implemented. Competition has brought great benefits not just to the economy, but to European consumers, including those in this country. To my mind, that is what the European Union exists to do. It should make its contribution to growth across the continent.

Eurozone

Neil Carmichael Excerpts

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

I always listen closely to my Cheshire colleagues.

[Neil Carmichael (Stroud) (Con)]

Does my right hon. Friend take comfort in the result of the German Parliament’s vote at the end of last month, when it effectively created a fund with conditions? Does he see that as a generation of political support for the robust action that the Prime Minister has been talking about over the past few days?

Global Economy

Neil Carmichael Excerpts

Thursday 11th August 2011 Commons Chamber

[Mr Osborne]

As the hon. Gentleman knows, we are in active discussion with all the parties in Wales and with the Welsh Assembly Government, discussing what further powers might be devolved to the Welsh Assembly, including fiscal powers that might have a role in economic development. I do not want to pre-empt that debate, but the fact that we have been prepared to engage in it shows that we are doing this in good faith.

[Neil Carmichael (Stroud) (Con)]

Given the credibility that the coalition Government have won through their deficit reduction programme, securing a triple A rating and having low interest rates, does the Chancellor think that it would be appropriate to send a message to encourage the same kind of decision making—swift and strong—across the eurozone?

[Mr Osborne]

I think we have got ahead of the curve. As I say, I am not one of those Finance Ministers who are having to come to their Parliaments and announce emergency budget cuts because they did not get ahead of the curve. It is important for the eurozone countries, and all countries, to have fiscal credibility. There are many good examples in the eurozone of countries that have done that and we are part of that pack.

Finance (No. 3) Bill

Neil Carmichael Excerpts

Monday 4th July 2011 Commons Chamber

[Stella Creasy]

I very much hope that there will be cross-party agreement, but, as I will explain, I fear that that consensus is being broken for the purpose of choreographing coalition conferences. That worries me greatly. I hope the hon. Gentleman will agree that when so many people are suffering by having to pay the high costs of credit that companies charge, any delay is unacceptable, and I hope he will vote accordingly.

I know that we are not alone in wanting action as soon as possible. The campaign has the widespread backing not just of MPs or policy makers but of debt experts, campaigners and members of the public. They are deeply concerned that doing nothing to regulate these firms is feeding a growing crisis of personal debt for families across the country, and they want action.

I fear that I am going to end up condemning the Government today, because we are debating not whether to act, or whether regulating for a cap on the cost of credit would be effective, but when to do so: debating when, not if, is unforgivable.

[Neil Carmichael (Stroud) (Con)]

I am concerned that the action that the hon. Lady recommends might well drive people into the worse position of having to appeal to really rather unpleasant loan sharks. That must be the great worry.

[Stella Creasy]

The evidence on which that presumption —that myth—is based is very uncertain. I would argue that there is a strong parallel with the debates on the minimum wage and the fear that its introduction would drive companies out of business. We now know that that is simply not the case. Evidence shows that a cap on the cost of credit would lead to a fairer deal for consumers, for which we are arguing today. It is important that we get it right, given the number of people involved in the market. I ask Members to support the new clause because it proposes regulatory action now, given the consensus that there is a problem. It states that it covers

“other measures relevant to the high cost credit lending sector that may prevent consumer detriment.”

By consumer detriment, we mean lending that drags people into debt.

We might all agree that there is a problem in the market, and that something needs to be done, but the coalition’s choreography is getting in the way, and I fear that our constituents will lose out. In making the case for Government Members to change their mind about the political fancy footwork and instead dance with us to action now, I want to set out what the problem is, what is causing it, what could be done about it and why doing nothing, or even delaying doing anything, should not be an option.

This question is important when we are debating a Finance Bill, because we can use taxation and regulation to deal with social and economic problems. For example, we could tackle problem drinking by raising taxes on high-strength alcoholic drinks. Indeed, in Committee, the Economic Secretary to the Treasury said:

“We can see that such a measure will have a disproportionate impact on tackling problem drinking, because the change in taxation will make it less attractive for producers to make such strong products.”––[Official Report, Finance (No. 3) Public Bill Committee, 17 May 2011; c. 166.]

By the same principle, the Treasury could tackle problem lending by penalising companies that fail to meet certain standards in their provision of consumer credit.

The problems in the lending market make the issues clear. The UK has one of the highest levels of personal debt in the world. As of April last year, Britain owed more than £1.4 billion in private debt. As the hon. Member for Tiverton and Honiton (Neil Parish) pointed out, borrowing money is sometimes essential, whether to enable someone to pay for training or a house, or to start a business. Indeed, borrowing is critical for our future economic recovery. I am therefore saying not that we want to stop people borrowing, but that we want to stop problem borrowing. However, the current signs are that personal debt is on the rise, and that is a problem.

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[Stella Creasy]

I agree absolutely with my hon. Friend. There is no ceiling on this market, which means that company rates are going up, not down. We also know about the lack of competition with other sections of the market. Provident owns 6% of the market. In 2004, the Office of Fair Trading referred the doorstep lending industry to the Competition Commission and, in 2006, its report confirmed the lack of competition. As Citizens Advice argues, however, the fact that these problems are getting worse, not better shows that the measures suggested in 2006 have not worked and that it is time to strengthen the intervention we make in this market.

Although I am an avid supporter of the credit union movement, it cannot at this moment present any kind of alternative to this market within any relevant timetable. Credit union membership is growing by 8% a year, but the payday lending industry alone is three times as big as it was two years ago. Credit union lending therefore remains relatively small scale, equivalent to just 5.9% in value terms of the high-cost commercial sector. As a consequence, it is unlikely to exercise any real competitive restraints on the prices in the high-cost credit sector.

With all the signs that this market is growing exponentially, this new clause and the review it recommends would allow us to look at a number of issues on how to tackle it effectively. First, it could consider excess profits—

[Neil Carmichael]

Will the hon. Lady give way?

[Stella Creasy]

Briefly, as I am conscious of the time.

[Neil Carmichael]

I thank the hon. Lady for giving way. I think that credit unions are really important. I have promoted them in my own constituency and I will continue to do so. I have joined one myself to demonstrate that it is something that we should all think about. Surely it would be a good idea to put out a more positive message about the role credit unions can play and encourage people to start thinking about being responsible in the management of their finances through the use of credit unions.

[Stella Creasy]

The hon. Gentleman is being a little unfair to accuse me of not putting out a positive message about credit unions, given that I worked long and hard to set up the Waltham Forest community credit union and to secure it more than 4,000 members from my borough. My point is that when only 2% of the British public are part of a credit union, it cannot be the answer to the problems caused by these companies. The question is how to get the right mix, and I believe that regulation needs to be part of that mix. Of course extending access to affordable credit is part of the solution, but it will take decades for credit unions to provide a serious alternative to these companies from which people are borrowing and getting into debt with now.

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[Mrs Chapman]

I am unclear as to the point that was being made, but I recommend that the hon. Lady follows my hon. Friend the Member for Walthamstow on Twitter, as she might therefore become more familiar with my hon. Friend’s efforts to secure meetings with senior officials at Wonga and might also understand the frustration felt by Labour Members. It is frustration not only with the high-cost lenders, but with the Government too. Five months ago, the Backbench Business Committee initiated a positive debate on this issue, but there has been no movement since then—no announcements and no indication that something is in the pipeline. That fosters a great deal of frustration and a lack of trust among Opposition Members.

[Neil Carmichael]

The hon. Lady is expressing her case very well, and I sympathise with everything she is saying. However, is she not impressed by the work of, for example, the Office of Fair Trading in issuing its guidelines, and does she not recognise that it has the power to withdraw licences if the guidelines are not respected? I could also draw her attention to a number of other possible actions that have been put in place to enable movement in the direction in which she rightly wishes to proceed.

[Mrs Chapman]

All those steps are very welcome, but they do not go very far at all in addressing the fundamental issue. The Competition Commission says that what the OFT wants to do is nothing like enough. I understand the hon. Gentleman’s intention: it is to give the Government a background against which they can decide not to support this new clause, but we are trying to force this issue to the fore and get something done about it. We are all for cross-party consensus—that is wonderful when it can be achieved—but what we actually want is something to be done. I hope the hon. Gentleman will therefore forgive Opposition Members if we are sometimes slightly intemperate in the way we express our views on this issue.

As I said when talking about my ten-minute rule Bill, for me the key issue is the advertising of these products, which is irresponsible. It might be argued that people are being given a choice, but people are not making that choice on value-for-money grounds. They are not shopping around. They are not thinking, “What’s the best product for me?” They are instead thinking, “What will get me an answer to my problem as quickly as possible, and who will say yes to me? I don’t want to go to the bank and be told ‘No’ or ‘You can’t have this but you can have something else and do you want to make an appointment to come back next week?’” These people have very immediate financial difficulties, and these products are deliberately targeted at them.

Private Finance Initiative

Neil Carmichael Excerpts

Thursday 23rd June 2011 Westminster Hall

[Neil Carmichael (Stroud) (Con)]

It is a great pleasure to be operating under your chairmanship, Mrs Main. It is a great thing that my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) has done in securing this very important debate, because he has raised a number of issues that have been challenged or discussed and, often, supported in useful ways.

The idea of securing a rebate is a good one. I know that the Treasury, in the form of Lord Sassoon, the Commercial Secretary to the Treasury, is busily doing just that—he is attempting to negotiate a rebate. I am not sure how well the negotiation is going, but it is clearly under way. So the concept of making savings, with of course the proviso that standards and services are not threatened, is well established. My hon. Friend the Member for Hereford and South Herefordshire is absolutely right to push this issue further up the agenda. I salute that.

There is a question about off-balance sheet expenditure. It is right that that issue should be carefully considered. In the context of the green investment bank, we have already done that. The funding for that is now measured to about £3 billion. When our deficit is going down, that bank will be able to raise more capital. There is the same sort of issue, although obviously better controlled by the present Government than the previous one, in connection with the PFI.

I want you to cast your mind back to the time before PFIs got started in this country. Can you remember those schools that were designed poorly, built badly and maintained with no attention to longevity? I have buildings in my constituency that could have been much better designed and of much better quality. Indeed, a building that was literally knocked up in 1956—frankly, it was a disgrace—was recently knocked down. It was put up by a local authority as a technical college, and I could see when I first arrived in Stroud that it should have been knocked down years before. We must remember that PFI schemes have improved the quality of buildings, and in many cases that has improved the quality of services.

[Mr Bacon]

If my hon. Friend were to visit St Thomas Aquinas grammar school and Wellington college in Belfast, he might disagree. Wellington college was built under the PFI, and halfway through negotiations on what should have been a quality building the contractors suddenly said, “Sorry, these are off. Here is your L-shaped school.” St Thomas Aquinas school was procured conventionally. The schools were the same size, the same capital was available for both, and they had the same number of pupils and were of the same socio-economic background, but St Thomas Aquinas school ended up a much better quality school. I have spent a lot of time in both schools and have seen the difference for myself.

[Neil Carmichael]

I thank my hon. Friend for making a good point; I shall answer it later in some detail.

I turn next to the history of the PFI. It goes back much further than 1992. The United States has been using PFI schemes for decades because it wanted private money to be used to provide public utilities, roads and so on. The PFI has a history in the US, in many parts of Europe and in most regions of the world. We have plenty of experience of it. There is much activity in that sector that we can draw upon in order to improve the way in which it works. That is the key point.

PFI schemes have recently become far too complicated. As was pointed out earlier, in many of the original schemes things were simply designed, built and then maintained. More recently, however, we have been throwing in services and all sorts of extras. As a result, the process has become complicated; indeed, many of us have used that word today. That is largely because we have confused the original concept of the PFI by adding on services and so on. There is nothing wrong with that, but it brings me to the fact that we must get the procurement systems right. To do that, we must specify much more clearly what is wanted. Local authorities have to learn to do that, as must the health service; it is a question of commissioning. My hon. Friend, who represents a beautiful Cornish seat—it is in Cornwall, is it not?

[Anne Marie Morris]

It is in Devon.

[Neil Carmichael]

Devon: it gets better! My hon. Friend made that point rather well. It certainly needs to be considered, as specifying and procurement are critical.

We also need to understand value for money. Most PFI schemes under the previous Government did not seem to do so. The next big task is to define value for money. That will be helped if we get the data right and if we understand the systems in each project. Many people talk about the difficulties of PFI schemes in hospitals. I am not surprised, given that many hospitals cannot even tell you the cost of an operation. We need more data. If we have much more information about what is happening, it will inform the debate about value for money.

Another big problem is the lack of accountability in the decision-making process. I said that it is important to specify and procure properly, but if we do not hold those who do the specifying or procuring properly to account we will have only ourselves to blame. We need systems to ensure that specifications are clear and all-inclusive and produce the right procurement. We then need to ensure the right attitude to procurement, a point made by my hon. Friend the Member for Warrington South (David Mowat).

[Steve Baker (Wycombe) (Con)]

I hope that my hon. Friend will forgive me telling a small anecdote. I remember being told a story by one of the famous bomber command air officers. When talking about procurement, he said, “The thing to do is not to make a small mistake, because if you do they can pursue you for it. The thing to do is to make an enormous mistake.” Is that not part of the problem? Enormous mistakes are being made, and we cannot possibly hold individual officials or politicians to account for such giant sums.

[Neil Carmichael]

I thank my hon. Friend for that. I do not like any mistakes; I do not like small ones, but I especially dislike big ones. We need a system that allows fewer of both, but particularly large ones.

[David Mowat]

It is about accountability and procurement. Much of what has been said this afternoon is about procurement failures rather than the failure of the PFI technique. I do not agree that people cannot be held to account for big procurement errors. Many organisations succeed in holding others to account, but the Government do not. I would be interested to know whether people in any of the procuring organisations involved in these awful contracts have been held to account—how many jobs have been lost and how many promotions have been missed—but my guess is not many on either count.

[Neil Carmichael]

I think that you are absolutely right if you agree with me that we need more accountability in the procurement and specification systems.

[Mrs Anne Main (in the Chair)]

Order. I do not disagree with the hon. Gentleman. He is making an interesting speech, but I keep hearing “you.” I do not want to disrupt the flow, but I am aware that it happens sometimes.

[Neil Carmichael]

Thank you for being so understanding, Mrs Main. This is such a complex subject that you have to marshal your thoughts clearly.

The discussion of procurement leads me to the next big issue—the competitiveness of the tendering process. One of the difficulties is that there are not often enough bidders. That is not surprising, because the bidding costs are sometimes far too high. We therefore need to think about the competitive process and the bidding issue together. I believe that the answer is to make the contractual arrangements and the contracts simpler and more adaptable. You cannot alter a system as complicated as this by looking at one part of it and making some changes, because that will have consequences further down the line, but I think that bidding costs are indeed too high, largely because contracts are too rigid and too few organisations are looking into that as a mechanism.

One or two Members have mentioned income streams. That is a really good point. Most schemes with strong income streams have worked rather well. Those with no proper measure of income or service have not worked so well. We need to divide the concept of the private finance initiative into those schemes with strong and reliable income streams and those mainly to do with service and operation. The difficulty is that we apply the strict definition of the private finance initiative to virtually everything, when we have a much more flexible phrase—public-private partnership. That is what we should be thinking about, so that we do not get ourselves tied up in knots.

[Mr Bacon]

I have tried to resist intervening on my hon. Friend to ask him whether he realises that he is talking unutterable rubbish. First, if you have more specifying, you are obviously going to increase the costs hugely. As for public-private partnerships, I would encourage him to look at the London Underground PPP, where the finance costs were £500 million higher because of the complexity of the scheme, and because the Chancellor of the day detested Ken Livingstone, the professional fees added another £500 million. You—one, Mrs Main—must be careful to distinguish between the different facets. My hon. Friend said that clinical operations cost more in some hospitals than others. Of course he is right, but that has absolutely nothing to do with the PFI.

[Neil Carmichael]

Thank you very much. [Laughter.] You know, it is always great when someone makes a point in opposition that proves the point that is being made. If you keep changing the specifications, you will increase the complexity, making it harder for those who are procuring to understand, and the bidding process just goes awry. The real problem is that various organisations have not specified clearly enough and have not stuck to the specifications as first announced. Therefore, there have been far too many changes, sometimes as late as just before contract signing. That is what I am getting at. It is totally unacceptable. It wastes huge amounts of money—millions of pounds—and it puts off other bidders because, of course, they think to themselves, “Where are we in this? It’s a movable feast.” That is not what we want. We need to bolt it down, and that is why I emphasised the importance of specification. It is a really important point, and my hon. Friend has just proved it. If you keep changing the specification, you will always end up having a problem with a contract of any description. That is where I stand on that issue.

Finally, I want to mention the ridiculous business about light bulbs, car parking at hospitals and so on—the sort of things that we must get away from. That is really important. It is what the Treasury and indeed any organisation involved in such a situation should be moving away from. It is not acceptable; it causes a huge number of problems. It is nonsense to argue that an income stream for a hospital will be the car park for the patients who turn up to it. That needs to be stated. We need to get a grip on what the hospital is actually for and apply the logic of the contract to that. That is the answer to the second point made by my hon. Friend.

In summary, PFI has a role to play, but we must be imaginative about making sure that it works better. If we are going to be spending more than £200 billion on our infrastructure alone in the next decade or so, we will have to appeal more effectively to the private sector to dip into its pocket. Properly modified, PFI can do that. That does not mean that we should not be looking at rebates, and it does not mean that we should not be concerned about what is on or off the balance sheet and so on. It does mean that we must apply value for money on the scheme and ensure that it works for those who need it.

[Mrs Anne Main (in the Chair)]

Before Dr Thérèse Coffey makes her very eloquent speech, I am sure she will bear in mind that I have had very little to do with PFI schemes, and I would appreciate it if she were mindful of that.

Fuel Prices and the Cost of Living

Neil Carmichael Excerpts

Wednesday 16th March 2011 Commons Chamber

[Neil Carmichael (Stroud) (Con)]

May I clarify that it was the Labour Government who introduced most of the VAT increases, which needs to be discussed? Does the hon. Gentleman agree that it is wise for the Chancellor to be considering a fuel stabilisation change?

[Nic Dakin]

When there were huge economic challenges caused by the great global banking crisis, the Labour Government reduced VAT on fuel and on everything else—they did not put it up and worsen the situation, which is the policy of the parties on the Government Benches.

Let us look at the impact of this tax on growth on people and businesses. Alongside the tax on growth, we have cuts in public services, rising prices, inflation wobbling out of control, cuts to the education maintenance allowance—given to the poorest of our young people so that they can continue and aspire in education—and tuition fees being set at record levels. Unemployment among young people is, on this Prime Minister’s watch, the highest it has been for almost 30 years. That is the Government’s disgraceful economic record.

People on fixed incomes—including pensioners and those on disability living allowance—are hugely worried about the mobility effect of the hike in fuel prices and the difficulties it will make to their lives. Only today, a witness appeared before the Select Committee on Education—David Lawrence, the principal of Easton college in Norfolk—who said, “Higher fuel costs are a disincentive to participation.” That is what is happening in the real world.

Let me quote one letter that I have received this week, which illustrates the sort of correspondence that we all receive from our constituents. It reads:

“I am thirty eight years old, married with a family of six running two small cars to keep the cost down on tax and running costs. The biggest cost that we are finding hard to cover is fuel, since the beginning of last year, average petrol pump prices have risen from just under 111p/litre to almost 128p/litre. Diesel now costs more than 132p/litre, compared to 112.5p a year ago. I would like to explain to you what impact this is having on my ability to drive and go about my everyday life. The price of fuel not only affects work but personally the cost of running my car has significantly increased so that I only can afford to travel to work, any family trips to visit other areas of the region/country I simply just can not afford.

I am employed as a Transport Manager for a local business that relies heavily on local haulage transport companies and also sub-contractors that travel to our region making deliveries. To keep cost down along with trying to keep our CO₂ emissions down we use these sub-contractors as back hauliers as a reduced rate. Over the past few months we have seen transport companies we use either going to administration or just closing the business whilst they can pay back the creditors. This has a big impact on the business I work for as we can not be competitive in a tight margin industry we work in.”

That illustrates the difficulties caused in people’s private and working lives by fuel prices getting out of control and their impact on the economy.

In my area, as Government Members who represent Humberside constituencies know, we also have the spectre of the Humber bridge board threatening to put up the cost of Humber bridge tolls—an outrageous suggestion of yet another tax on local people and a tax on local businesses.

Let us look forward at what we can do. There are things we can do and messages about what we can look forward to. I agree with the hon. Member for Devizes that we should be careful not to engage in political posturing. We all, on both sides of the House, do that from time to time—I think she did a little bit, and I probably have, too—but there are practical things we can do. There is no need for the planned fuel duty increase. It should be postponed or stopped completely because of the circumstances that we are in. We can also consider what can be done about VAT. It did not need to go up on everything and there ought to be imagination and resolution in the EU to ensure that VAT is treated properly for people who drive vehicles in this country.

There are things we can do and it is time to do them. It is time to stop talking and time for action.

Royal Assent

National Insurance Contributions Bill

Neil Carmichael Excerpts

Thursday 13th January 2011 Commons Chamber

[Kelvin Hopkins]

I strongly support the amendments, which my right hon. Friend the Member for Delyn (Mr Hanson) moved so ably. As it stands, the Bill has crude, arbitrary and unfair discrimination built into it. The amendments would remove the unfairness and discrimination at a stroke and turn the measure into something that we could all happily accept.

I have to declare an interest: my constituency is in one of the excluded areas. The proportion of public sector employment in Luton North puts it at the top end of the table—number 48 out of 650 constituencies. Some 41.2% of employment in my constituency is in the public sector, so it will suffer substantially as a result of the Government’s cuts in public spending. If 450,000 jobs go nationally, we could be talking about 1,000 jobs in my constituency at the very least. Already it is suggested that 500 jobs might be going in Luton as a result of the cuts, and a higher proportion of those will be in Luton North because of the degree of public sector employment there. I therefore have a vested concern and a constituency interest.

I am more concerned, however, about the overall principle, which will affect so many other people unfairly. My right hon. Friend the Member for Delyn suggested that because of the likely decline—certain decline, I think—in economic activity and rising unemployment, take-up will be much lower, owing to the fact that far fewer businesses will be formed in an atmosphere of the economy entering recession, with jobs being lost in both the public and private sectors. If the economy were expanding, of course, we would expect many more small businesses to be created, and therefore a much higher take-up. The take-up will probably be well below anything that the Government anticipate, simply because the economy is going to enter—I believe—serious recession as a result of their policies.

It is strange that the Government have chosen the British standard regions to discriminate in this way. They have actually played down regionalism—they are abolishing the regional development agencies—and are diminishing the regions as a basis for policy in other areas, but they are using the standard regions as a basis of policy in this area. That seems to be contradictory. If we are to provide assistance to industry and employment, it would be preferable to target it much better and in other ways. Given that the Bill will work in such a way, however, the only fair approach is to apply it across the country as a whole. As my right hon. Friend the Member for Delyn said, the costs would not be so great of including the three regions excluded in the Bill and ensuring that every small business across the country has the advantage of the subsidy.

[Neil Carmichael (Stroud) (Con)]

Surely the whole point of the regional argument is that we should be focusing on the regions that need extra help to encourage the development of smaller business. On the hon. Gentleman’s point about the state of the economy, it is the growth of new small and medium-sized businesses that will boost the economy. That is what we want to encourage through this legislation.

[Kelvin Hopkins]

I thank the hon. Gentleman for his intervention, but the Government have chosen to play down regionalism by getting rid of RDAs, yet have chosen regions as a crude way of excluding certain areas from the policy in the Bill. Within those regions, of course, some areas really require assistance, and by any standards, Luton is one of those. We have seen a massive loss of jobs there as a result of the decline in manufacturing industry. Fortunately, we have an airport, public sector employment and so on, which has helped, but we have also lost a lot of jobs and need assistance more than most other areas not just in the south-east, but elsewhere in the country.

Independent Financial Advisers (Regulation)

Neil Carmichael Excerpts

Monday 29th November 2010 Commons Chamber

[Neil Carmichael (Stroud) (Con)]

Will my hon. Friend give way?

[Tessa Munt]

I want to be brief.

We should consider what an IFA’s clients are seeking to buy when they look at financial products, look at what they do not like about the present procedures and consider whether the RDR will change anything. A constituent of mine has stated that when his clients buy their financial service products, they are seeking a similar experience to that when they buy other goods. First, they want the buying process to be a simple and pleasant experience. If the Government wish the public to buy more financial products and take responsibility for their future, they should not forget that fundamental point. That is not easy to achieve in the current environment. For a start, most clients do not like to be issued with mountains of complex paperwork. They find it quite intimidating.

Secondly, a lot of people visit an IFA with a specific purpose in mind—to invest some spare funds, to discuss their pension, and so on. They wish to restrict the conversation to those points that they believe are relevant and, having listened to what the IFA has to say about the matter, will wish to make up their own minds about whether the product under discussion is suitable for their needs. However, once in discussions, people often have to go through the IFA’s “advice process”, and are no longer responsible for their own decisions. The IFA has to be sure that the product is right for them, so these people find themselves undergoing a time-consuming and irritating process, having to answer personal questions that they often consider an invasion of their privacy.

Thirdly, clients quite rightly seek value for money. Unfortunately, the whole regulatory procedure is so cumbersome that it is no longer cost-effective for those with limited funds to seek an IFA’s advice. The cost of many financial products has risen dramatically. For example, 30 years ago the annual management charge on a unit trust was usually 0.25% or sometimes 0.375% per annum, but now it is usually 1.5% per annum. Much of the increase has arisen purely as a result of regulatory costs. A significant part of the cost increase is driven by regulation, so everyone suffers.

Will the RDR change any of the above? Not in my opinion: there is little evidence that any of those fundamental issues will change as a result of the RDR. We are all in favour of raising standards, but further examination passes will not address any of those issues.

--- Later in debate ---

[Pauline Latham (Mid Derbyshire) (Con)]

I congratulate my hon. Friends the Members for Wyre Forest (Mark Garnier) and for West Worcestershire (Harriett Baldwin) on securing this debate and on the passion with which they made their points. Indeed, I congratulate all hon. Members in the Chamber on their passion and strength of feeling about this review.

I have been contacted by a large number of constituents who work in this sector and are worried that the retail distribution review will have many unforeseen negative impacts on their employment. I hope that the review is not a knee-jerk reaction to the recent financial crisis.

[Neil Carmichael]

A recurring theme of this debate has been the heavy-handed nature of the Financial Services Authority: people have said that a sledgehammer is being used and so on. Is it not time for us to recognise that it ought to be held properly accountable, just as other quangos are and just as we intend them to be? This persistent theme is at the heart of this discussion and we need to address it.

[Pauline Latham]

I am sure that the Minister will take my hon. Friend’s views forward, and I thank him for the intervention.

I believe it is right that the customer is always put first when it comes to their money. We cannot go back to the financial irresponsibility that led us into the crisis in 2007, which we are, thankfully, just getting out of. Therefore, splitting the financial advice sector into two is probably a good thing, but we must make sure that the advice given by advisers in the primary sector will not stop people moving into a financial position where they will require the full range of services offered by the higher financial advice sector in the future.

My constituents have also suggested that the proposed regulation will force between 30 and 40% of financial advisers to leave the sector, and many hon. Members have mentioned figures of 20, 30 or 40%. It is vital that that does not happen. As my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) said, we are in the business of keeping small businesses and promoting them. We need to do that in this instance, because we do not want all these people to be out of work at a time when life is difficult.

Training and recognised qualifications are important, as they demonstrate to the customer that the financial adviser they are employing to deal with their future can be trusted. If we all agree that there should be a better qualification, surely it should be for those new to the sector and not for those who have had the years and years of experience that we have heard about in various examples. If this proposed qualification is to be in place by 2013, surely we will be rushing it and too many people will be trying to do it, so there will not be enough providers to allow this to happen.

What will happen to all these people who leave the sector in the rural areas and small towns? Very often there are not many of these people in such places. It might be fine if this occurs in cities, where more choice is available, but there is not a lot of choice in rural areas. There is a worry that a lot of the people who will need to take this qualification if it is imposed will not be able to do so in the short time available to them before 2013. Nick Cann, chief executive of the Institute of Financial Planning, has said that the FSA must develop a “catastrophe strategy” in case it reaches June 2012 and half the advisers are not meeting the RDR requirements.

The other concern that the financial advisers in my constituency have mentioned is that the proposed changes to the sale of financial advice will lead to customers being worse off, as they will not be given the range of options currently on offer. Surely, if anything, we should be looking at providing choice for people. Leading critics suggest that the more lucrative financial advice roles will be moved to the banking sector, which will mean that customers will be offered only options that benefit the bank.

Interestingly, the mystery shopping exercise carried out by Which? across the industry concluded that its

“surveys tend to show that IFAs perform better than banks.”

Based on all the evidence that we have heard tonight, I believe that, irrespective of whether it is the desired outcome or it happens by mistake, the increase in the role of the banks in the financial advice sector is wrong and worrying, and that we should be looking at providing choice.

Richard Howells, the director of Zurich Life, said in June 2009:

“The big question…is still around what benefit it will have for the ultimate consumer. I am still not convinced that all of these changes, when you sit down with a consumer and explain them, actually give rise to a consumer benefit that I can…hang my hat on.”

I believe that the aim of the RDR is vital in ensuring that the consumer is defended and our financial sector is strengthened in the light of the recent crisis, but I do not believe that the changes need to be made as the FSA says at the moment. I simply ask the Minister to ask the FSA to reconsider the outcomes of the review and to ensure that its original aims, set out when it began back in 2006, have outcomes that will be advantageous for the whole sector and, more particularly, for the customer, whom we should be protecting. I am sure that the Minister will ensure that the passionate arguments made in the Chamber tonight are taken forward and that they will colour his views.