amendment of the law

Pat McFadden Excerpts

Monday 24th March 2014 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am very interested in the figures that my right hon. Friend is reading out. What does he think the implications are for the Government’s policy to sell the student loan book?

[Mr Denham]

If I may, I will come to the student loan book in a moment, because that is a serious point.

One final point from the model that I have outlined is that the average amount paid back by each graduate would fall by £5,000 in total. On this model, usable university income would rise by at least £650 million a year.

The current approach is astonishingly wasteful in terms of public money and private graduate contributions —and that is not the end of it. As he said in the autumn statement, the Chancellor wants to encourage an additional 90,000 students, funded by the sale of the income-contingent student loan book. I do not object to the principle of selling the loan book. I tried to do it myself for two years when I was a Minister, but I became convinced that value for money was impossible to achieve. Buyers face such unknown risks on future inflation, earnings and the level of evasion that either the loan book has to be sold at a massive mark-down on face value or the buyer’s income has to be guaranteed through taxpayer subsidies—the so-called synthetic hedge, which is not so much plastic privet as guaranteed private profit. Selling a capital asset to fund hypothecated revenue spending is a short-term fix that exposes higher education to unsustainable costs when the money runs out. The Public Accounts Committee has said that it has no confidence in the ability of the Department for Business, Innovation and Skills to work out what is value for money.

This cannot go on. Universities are pressing for higher fees, and Ministers have refused to rule out an increase, but the financial futility of that is now clear. Every time fees go up, the cost and rate of debt cancellation will increase. Graduate repayments will rise, yet fewer and fewer graduates will repay their debts. The Prime Minister’s former head of policy, Paul Kirby, recently suggested closing 25% to 40% of all university courses—all those where graduate incomes are not enough to repay fees. Higher education is not simply a private benefit; it is a public benefit and a private benefit. It is now clear that we can reset the system so that there is a fair partnership between the state and the student. As my modelling has shown, we could have lower fees, lower borrowing and lower debt cancellation, with higher usable incomes for universities, within the current envelope of public spending. Only the ideological dogma and blinkered embarrassment of this Government stands in the way of doing just what is needed.

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[Mr Pat McFadden (Wolverhampton South East) (Lab)]

The Chancellor told the House last week that his policies had been vindicated. His basic case is that austerity is working so well that we need it for two Parliaments rather than one, as was planned. Of course, it is welcome that we have economic growth after so many lean years, but the inescapable fact is that the targets in the growth and spending plans set out at the beginning of this Parliament have been missed by huge margins. The cumulative effect is that cuts will last years longer than planned, and an extra £190 billion is being borrowed, compared with the figure in the plans set out after the election. If Labour had borrowed £190 billion more than was planned, I am not sure how Government Members would describe it, but I doubt whether they would be reaching for the term “success”. The return of growth cannot hide the fact that the outcome of the strategy pursued in the past four years is that one of the Government’s fiscal targets has been missed, and the other—the five-year rolling target—continues to be pushed into the future.

The increases in investment allowances are welcome, but let us be in no doubt: this is a U-turn from the Conservative manifesto and from the 2010 post-election Budget. At that time, when the Chancellor was talking about the “march of the makers”, he cut support for investment in manufacturing by £3 billion a year, and called it getting rid of complex allowances and reliefs. Rhetoric and policy were pulling in entirely different directions. I therefore welcome the U-turn, and on this point at least, rhetoric and policy are now pulling in the same direction, although needless barriers were placed in the way of investment by the policy previously pursued.

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

Does my right hon. Friend agree that when the investment allowance was reduced, corporation tax was reduced, which did not benefit manufacturing but benefited the banks?

[Mr McFadden]

That is absolutely right: a cut in support for manufacturing was used for business as a whole.

Although it makes sense to support investment decisions through the tax system, we should not kid ourselves that investment allowances alone will be enough. The UK’s export performance has been routinely described as disappointing in report after report by the Office for Budget Responsibility. Speak to any manufacturer and they will most likely say that their key challenge is skills. If companies cannot get the right people with the right skills, they cannot innovate, they cannot meet orders in time and they cannot operate as efficiently as they want.

If the Government are really serious about supporting UK manufacturing, they should heed the call coming from their own Back Benches today to stop chasing UKIP and putting in place policies that stop the brightest students and workers from around the world coming to the UK. The Government’s arbitrary net immigration target is a barrier to our accessing the best talent in the world, and the exclusion of such talent is not in the interests of UK businesses or the economy; nor is the threat of withdrawal from our biggest export market, the EU. It is no good supporting investment decisions through the tax system with one hand, and threatening to pull away from our biggest market with the other. The stance the Government have adopted on this is a complete failure of leadership: it is party management first, and the interests of the country second. No amount of support through investment allowances would undo the damage that pulling out of our biggest market would do. I am glad that my right hon. Friend the Leader of the Opposition made the announcement he made a couple of weeks ago, exercising leadership on this issue and rejecting the option of following the Government down this path.

Perhaps enough has been said about beer and bingo in recent days. As someone whose father was a labourer and whose mother worked in a local authority children’s home, the only thing I would add is that a more serious working-class aspiration is an education system that opens up opportunity to all; social mobility that is not based on but challenges closed elites; and a path to rising living standards that has been sadly absent in recent years. I suggest to the Government that a poster based on those things might have been truer to the heart of working-class aspiration than the one that was produced.

I echo some of the sentiments expressed by my hon. Friend the Member for Sedgefield (Phil Wilson) on the pension changes. There has been an attempt to reduce this proposal to the question of whether people can be trusted with their own money. Of course people can be trusted in that way, and empowering them to make their own decisions is a good thing. It is something that we should support in politics. Choice in public services empowers people. It has worked well in the area of personal payments for social care, for example. As my hon. Friend said, however, what is in question is not trusting people but trusting the financial services sector that sells people these often complex financial products. I serve on the Treasury Select Committee, and we have seen many mis-selling scandals in recent years, ranging from endowment mortgages to payment protection insurance. We should have learned the lesson that there is often a serious information mismatch between those selling those financial products and those buying them, and that customers are not well served when things go wrong.

How do the Government propose to address that issue? Simply shouting that we should trust people with their own money is not enough, given that the PPI compensation alone has had to be set at £20 billion; and nor is it the philosophy that has been pursued on a cross-party basis for auto-enrolment into the pensions systems. If customers are to be well informed, they need good advice and alternative products in which they can trust. It is perfectly reasonable—indeed, a duty—for a responsible Opposition to ask questions about how that is to be achieved, and to point out the dangers if it is not.

The recent economic growth is welcome, but if it is being funded by consumer spending, people will rightly ask how can we ensure that it has solid foundations and is not simply the froth from another unsustainable housing boom, and how we can ensure that Britain remains engaged with the world and does not turn away from the trade and exports that we need.

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[Sir Edward Garnier]

Yes, I do. I find that view deeply depressing, although not in the least surprising. The right hon. Gentleman is a good old-fashioned socialist and I respect him for that. I wish that more of his colleagues were as clear in their views as he is. I happen to take the view, however, that Mr and Mrs Retirement Person should be allowed to do what they like with their pension funds and that if the financial services sector misconducts itself, we should prosecute it or take regulatory action against it. We should not act to prevent the vast majority of individuals from doing what they think best for their financial future, either pre-retirement or post-retirement, simply because we fear that there might be one or two bad hats in the financial services sector. If those of us who are about to retire wish to invest our pension funds in property or in stocks and shares—

[Mr McFadden]

rose—

[Sir Edward Garnier]

I fear that I am limited to one free hit, and the right hon. Gentleman may not have one. Perhaps he should see his financial adviser instead.

If those of us who are about to retire wish to invest our pension funds in property or in stocks and shares—or in buying an annuity—let us do it. Let us be allowed to make informed, adult decisions. Yes of course we must build protections into the system to prevent people from being mistreated or misled, as the Chancellor made clear in his Budget statement, but we must allow them to make their decisions from a position of knowledge. For goodness’ sake, let us not imagine that Mr Whitehall Man, or even Mr Labour Cabinet Minister, is better able than anyone else to decide how I should lead my life. I really object to that form of nanny state—

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[The Economic Secretary to the Treasury (Nicky Morgan)]

Let me begin by thanking hon. Members on both sides of the Chamber for their contributions this evening. I will do my best to respond to as many of the points raised as I can.

I will start by saying this: of course the Government, and everyone in the Chamber, want to see our economy growing and our living standards rising. The best way to achieve that is by ensuring that more people are going to work every morning and that those people are keeping more of the money they earn. That is exactly what last week’s Budget will help everyone to achieve.

Let me turn to the comments made in this wide-ranging debate. My right hon. Friend the Member for Mid Sussex (Nicholas Soames), in setting out his support for the Budget, mentioned the fact that we need more productivity. He also mentioned the need for investment in skills, as did other hon. Members. The right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) talked about a sense of opportunity for the youth of this country and a sense of security for older people. He welcomed the freezing of whisky duty. My hon. Friend the Member for Henley (John Howell) set out his support for the development at Ebbsfleet and mentioned neighbourhood plans, which he said were key, explaining that it was Thame in his constituency that launched the neighbourhood plan.

My hon. Friend the Member for Wolverhampton South West (Paul Uppal) talked about Labour always raising taxes—how very observant he is—and set out the help for businesses that the Chancellor announced last week and the successes in his constituency.

My hon. Friend the Member for Brentford and Isleworth (Mary Macleod) talked about the support that the Government are giving air ambulances, as well as the support for tax-free child care, for which 1.9 million families will be eligible. She also mentioned the record numbers of people in work, including women.

My hon. Friend the Member for Cardiff North (Jonathan Evans) talked, as other Members did, about the support that the Government are giving energy-intensive industries, and my hon. Friend the Member for Milton Keynes South (Iain Stewart) made a bid for the Alan Turing institute to be based in Milton Keynes. I am sure that my right hon. Friend the Minister for Universities and Science will have noted that plea. My hon. and learned Friend the Member for Harborough (Sir Edward Garnier) said that he was in favour of freedom for those with pensions to make decisions that are right for them, which was a key cornerstone of last week’s budget.

My hon. Friend the Member for City of Chester (Stephen Mosley) made a terrific speech about falling unemployment in his constituency and the great work that he has done on jobs fairs. My hon. Friend the Member for Dartford (Gareth Johnson) welcomed the Chancellor’s announcements about Ebbsfleet, of which I know he will be a great champion.

My hon. Friend the Member for North Herefordshire (Bill Wiggin) talked about the cuts in cider and beer duty, which he rightly said were good news for pubs and brewers. He also mentioned that the mother-in-law of my hon. Friend the Exchequer Secretary to the Treasury lives in his constituency. I am not sure whether there is any connection with cider and beer, but perhaps that is how those in Herefordshire like to spend their time.

My hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) mentioned funding for flood defences and the repairing of potholes. The Government have introduced a £6.5 million severe weather recovery scheme to support local authorities, including for highway infrastructure repairs. The scheme is now paying 100% of local authority costs above the threshold, rather than the usual 85%, and the threshold has been reduced for all county councils and unitary authorities to make it easier for them to claim support. Of course, we have also provided a further £140 million to help repair roads hit by weather damage and, in the Budget, £200 million for repairing potholes.

My hon. Friend the Member for Rugby (Mark Pawsey) talked about the importance of new homes and, like other Members, rightly pointed out that the rise in house prices is not universal across the United Kingdom. There is a particular impact in London and the south-east. My hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) mentioned the rise in the personal allowance, which the Government are proud to have delivered, and financial support for exporters.

My hon. Friend the Member for Braintree (Mr Newmark), the founder of the Million Jobs campaign, talked about the work that he has done, including on the Braintree jobs fair, and said that more growth needs more jobs. My hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) mentioned the Labour newsletter put out in his constituency about Labour’s economic policy. I wonder whether he would like to share it with Opposition Members, particularly the shadow Treasury team, because we did not hear much about that today.

My hon. Friend the Member for Spelthorne (Kwasi Kwarteng) mentioned the recovery, as the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) just has. He reminded us that a year ago the Opposition said that there was no recovery. Now, of course, it is the wrong kind of recovery. To say that it is hard to please them would be an understatement. My hon. Friend the Member for Macclesfield (David Rutley) talked about the important reductions in corporation tax and employment allowances.

I turn to the speeches that Opposition Members made. I must congratulate them on one thing—at least most of them talked about the Budget. That is remarkable given last week’s Budget response speech by the Leader of the Opposition, in which I think he failed to mention a single Budget measure. I have to say that listening to Opposition Members is like watching arsonists making a call after they have started a fire and saying, “Please, the fire’s not being put out quick enough.”

The right hon. Member for Leeds Central (Hilary Benn) asked various questions. I probably do not have time to go through all of them, but it is interesting to note that Tower Hamlets, one of the poorest boroughs in London, has received £49 million from the new homes bonus, compared with £6 million for Wokingham, so he is not entirely right to say that money has been taken from the poorest authorities in the country. He also asked about the Financial Policy Committee’s remit on monitoring the housing market. The latest remit was published last week, on 19 March, and, as the FPC has said, it will monitor in particular developments in house prices,

“relative to indicators of affordability and sustainability.”

The right hon. Member for Southampton, Itchen (Mr Denham) talked about student loans and debt. I do not think he is in his place now, but—[Hon. Members: “Yes, he is.”] I am sorry, I missed him. I ask him just what Labour’s policy is on student loans. I represent a large university in Loughborough, and the vice-chancellor would like to know.

The hon. Member for Stoke-on-Trent South (Robert Flello) spoke about fuel price cuts. Average pump prices under this Government’s policies will be 16p per litre lower than under the plans of the previous Government. The hon. Member for Blyth Valley (Mr Campbell), who sadly is not in his place, blamed the entire financial crash on Lehman Brothers, but I point out to him that Northern Rock collapsed before Lehman Brothers.

The hon. Members for Glasgow North (Ann McKechin), for Edinburgh North and Leith (Mark Lazarowicz), and for Sedgefield (Phil Wilson), talked about protecting pensioners from themselves, which I think is deeply patronising.

[Mr McFadden]

Will the Minister give way?

[Nicky Morgan]

No, I will make some progress. The right hon. Member for Neath (Mr Hain) talked about exports. Exports to countries outside the EU continue to grow, rising by 23% since 2010. The right hon. Member for Wolverhampton South East (Mr McFadden) talked about the referendum on the EU damaging investment. That is a common theme on the Labour Benches, but the Government believe it is time to trust the people and ask them about important issues. Labour Members clearly do not.

The hon. Member for Penistone and Stocksbridge (Angela Smith) talked about support for energy-intensive industries, which she and I have discussed before. She encouraged us to make strong representations to the European Commission for the extension of compensation, and I take those points on board. The hon. Member for Southampton, Test (Dr Whitehead) spoke about the carbon price floor, and the hon. Member for City of Durham (Roberta Blackman-Woods) talked about the north-east needing more support. The right hon. Member for Holborn and St Pancras (Frank Dobson) talked about Euston station.

The hon. Member for Barrow and Furness (John Woodcock) talked about Olympic-scale investment under this Government, and the hon. Member for Hartlepool (Mr Wright) mentioned productivity. He is right; the job is not yet done. That is why we do not think that anyone should entrust the keys to those who crashed the car. The hon. Member for Washington and Sunderland West (Mrs Hodgson) missed the fact that this Government are already spending £5 billion on child care, before we get to tax free child care.

I welcome the hon. Member for Wythenshawe and Sale East (Mike Kane) to the House. I know this was not his maiden speech, but if he can raise a laugh after five hours of a Budget debate he is a welcome addition to the House. He mentioned reform of air passenger duty. That is what I was discussing with his predecessor just before Christmas, and I look forward to continued discussions on that.

My hon. Friends the Members for Wolverhampton South West and for Brentford and Isleworth said that we need greater business investment, and they are right. Investment has been too low for too long, and it has held back growth. Had business investment increased by just 10% in 2012, the level of GDP would be £12 billion higher. We must create an environment that encourages business to invest.