Management of the Economy and Ministerial Severance Payments

Patricia Gibson Excerpts

Tuesday 15th November 2022 Commons Chamber

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

There was a time, not so long ago, when Governments took responsibility. Listening to the Minister, it seems that time has passed, as we heard no contrition and no humility for the Government’s calamitous decisions.

The events of the last few months in particular have been unbelievable, even by the standards of this Tory Government. “It’s all the fault of Putin. It’s all the fault of covid. A big boy did it and ran away.” People across the UK, including in my North Ayrshire and Arran constituency, are now suffering real financial harm and real financial hardship as a result of this Government’s incompetence. The Minister says there are tough roads ahead, and there are indeed tough roads ahead, but those roads will not be travelled by all equally.

[Neil Coyle]

Will the hon. Lady give way?

[Patricia Gibson]

I will give way.

[Neil Coyle]

The hon. Lady shows more courtesy than the Minister did.

The Minister would have us believe that the Government’s Budget had nothing to do with the 8,000 people in Southwark paying higher mortgage rates, and she would like to blame Russia. Does the hon. Member for North Ayrshire and Arran (Patricia Gibson) believe that the Government should take measures to punish those in Moscow and Russia who have profited since the war broke out, such as the Prime Minister’s family, to the tune of £7 million?

[Patricia Gibson]

The public are becoming increasingly wise to the snake-oil salesman approach in which one thing is said, accompanied by handwringing and head shaking, but no real action is taken to tackle those who profit in a way that most people would find obscene.

If we listened to the Minister, we would think that the so-called mini-Budget had not happened at all. The name “mini-Budget” is ironic because it makes it sound small, but the damage it has caused is very considerable. This Budget revealed, for those who still harboured any vestiges of doubt, whose side the Tories are really on. The so-called mini-Budget sought to scrap the bankers’ bonus cap, reduce taxes for the most well off, cancel the planned increase in corporation tax, refuse to bring forward an extended windfall tax and weaken the rights of trade union members.

Labour’s opposition to the mini-Budget amounted to £24 billion out of £43 billion of tax cuts, and it was left to the right hon. Member for Hayes and Harlington (John McDonnell), as it so often is, to call this mini-Budget what it actually is:

“the most socially divisive Budget in a generation.”

I understand that Labour is a bit worried about upsetting hardcore Tory voters in England, but sometimes harsh language has to be used.

Once the markets took fright and Labour saw the extent of the mini-Budget’s fiscal irresponsibility, it demanded that the entire mini-Budget be reversed, which was not its original position. The Resolution Foundation noted that almost half the gains from the proposed tax cuts would have gone to the richest 5%, who would have gained £8,650 on average, while the poorest half of households would have gained £230 on average. Almost two thirds, 65%, of the gains from the personal tax cuts would have gone to the richest fifth of households.

Torsten Bell from the Resolution Foundation described the measures as a

“simply staggering…tax cut for richer households”.

Save the Children described the tax cuts as

“a hammer-blow to low-income families”.

There were £45 billion of unfunded tax cuts, almost exclusively benefiting the rich.

While all this was going on, the SNP in Scotland was being urged, not least by the hapless hon. Member for Moray (Douglas Ross) among others, to follow the Tories in Westminster in entering the bowels of tax-cutting hell, where the most well off enjoy the windfall of a tax-cutting bonanza. Of course, he U-turned on this, as he so often does. It is often hard to tell if he is going somewhere or coming back.

It was, quite frankly, immoral for such a Budget to be delivered when so many are struggling to pay their bills, and the consequences of announcing these measures—again, it is difficult to call it a mini-Budget given its consequences—were catastrophic. The pound dropped by nearly 2% against the dollar, to the lowest level since 1985. The IMF rebuked the Government for causing such damage to the economy, and international investors declared that the UK’s greater economic suffering than similar countries is a consequence of the “moron premium” it pays due to its terrible leadership under the Tories. The cost of this so-called moron premium stands at £30 billion.

For households across the UK, the cost of the Government’s staggering incompetence is still being counted. Forty-one per cent. of mortgage deals that had previously been available were pulled by the banks, with more than 1,700 mortgage products being reintroduced at rates 2 percentage points higher, leaving hundreds of thousands of families across the UK paying far more for their mortgage. Pensions almost collapsed, and the instability within the UK was the talk of the international steamie. The Minister talks about restoring financial stability, but such urgent measures would not have been needed had the Government not caused such instability.

[Danny Kruger]

It is true that mortgages are at their highest rate in 10 years, in Germany. Does the hon. Lady blame the mini-Budget for that? If not, what does she think might be happening?

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[Patricia Gibson]

The hon. Gentleman cannot escape the fact that the markets went into meltdown after the mini-Budget. I know this Government want to pretend the mini-Budget, the consequent run on the pound and the near collapse of the pension system did not happen, but government is about taking responsibility and even saying sorry when mistakes are made.

[David Linden]

Would my hon. Friend also point out to the hon. Member for Devizes (Danny Kruger) that the Government cannot have their cake and eat it? They sometimes talk in this Chamber about how Germany is over-reliant on Russian gas, but simply trying to use Germany as a comparator in this argument is rather like comparing apples and avocados, is it not?

[Patricia Gibson]

Absolutely, and I am sure the hon. Member for Devizes (Danny Kruger) will be taking note and learning the lessons he needs to learn from that insight.

There is not expected to be a reduction in mortgage rates any time soon.

[Gareth Bacon]

It happened yesterday.

[Patricia Gibson]

Some estimates put additional mortgage costs at £5,100 a year, on average, by the end of 2024. I hear the chuntering from the hon. Gentleman about mortgage rates going down. He would do well to reflect on the fact that 73% of mortgage holders are worried about rate rises.

Alongside this, the UK Government are set to raise taxes. They will balance the cost of their own incompetence on the backs of those who are already struggling, and whose struggles have been made so much worse by a Government who could not find their backside with both hands. The number of Scots seeking mortgage help has nearly quadrupled, again as a result of this Government’s staggering incompetence. It is particularly galling for people in Scotland, the majority of whom roundly rejected this Government.

As if all this were not enough, inflation is soaring, rising to over 10% in September, a rate not seen since the early 1980s, outpacing normal earnings growth and expected to peak at 11%. Inflation is partly driven by sky-high energy costs, and the Government are already backtracking on the one thing they have done to bring down energy costs, with the expected bill rises early next year hammering households all over again—we could see bills of more than £4,000 in April. The shadow of recession is looming over the UK and threatens Scotland’s recovery from the pandemic, with the Scottish Government’s budget £1.7 billion lower due to the impact of inflation and the need to help households on which the UK Government have turned their back. This means that in Scotland budgets have had to be reprioritised across a range of areas to provide this much-needed support. Sadly, for the Labour party, when Wales’s budget is under pressure it is the fault of the UK Government because of how devolution works, but when the Scottish Government’s budget is under pressure Labour joins the Tories in condemning the SNP. That is why Labour is thrashing around in its death throes in Scotland, because standing shoulder to shoulder with the Tories is not working for it. The people in Scotland are not fooled.

It is bad enough that households across the UK are struggling to balance budgets in the face of soaring inflation, rocketing energy bills and huge increases in mortgage costs, and it is bad enough that my constituents in North Ayrshire and Arran are facing unprecedented financial pressures, but while they do they are watching the revolving door of Government jobs, which have been changing with breathtaking speed. The loss of a Cabinet post is compensated for with three months’ salary, and that applies even to those who were in post for only a few weeks. Sky News has reported that this ministerial churn has amounted to £709,000 in severance payments for former Ministers and Whips. A total of 71 Ministers are eligible for this pay as a result of the instability of this Government. In view of the financial stress our constituents are facing because of decisions made by this Government, they have a right to know who has taken these payments, which are due entirely as a result of the instability and incompetence of this Government. Perhaps the Minister will be able to tell us today, but I certainly will not hold my breath.

[Anthony Browne]

I wonder whether the hon. Lady would refresh my memory. She has been talking about the severance pay that the UK Government pay to former Ministers, but what do the Scottish Government do? I understand that in Scotland Ministers who leave are also entitled to three months’ pay, just the same as it is for the UK Government, and that they often take it up. Do correct me, but I understand that it is the same.

[Patricia Gibson]

Perhaps the hon. Gentleman has listened to a podcast or something and has not been listening to half of this debate. The point of today’s debate is that the instability created by this Government means that Ministers who have been in post for a matter of weeks are hoovering up huge payoffs. If he can tell me that there is a precedent for this level of instability, I am happy to sit down and let him explain it to me. I see that he is not attempting to do so, so perhaps he should sit there and reflect on the fact that he is attempting to defend tens of thousands of pounds being paid to Ministers who were in post for a matter of weeks. If he is happy to defend that, he certainly will not have the confidence of my constituents.

[David Linden]

Just to reassure my hon. Friend, I can confirm, as a keen and close watcher of Scottish politics, that in the Scottish Parliament Ministers do not resign on average every four days, as they appear to do in Westminster.

[Patricia Gibson]

I thank my hon. Friend for that, but the hon. Member for South Cambridgeshire (Anthony Browne) seems to think that this is okay and perfectly in order. Goodness knows what his constituents will make of it, but that is a matter for him.

If Labour Members are concerned about these obscene ministerial payments, they must support the amendment tabled by my hon. Friend the Member for Glasgow East (David Linden), which would prevent this situation. That is really important, because we cannot allow this situation to continue. All of this adds up to an incompetent Government who have no direction or judgment. They have brought us into this mess—

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[Mr Deputy Speaker]

Indeed. So there is no amendment and it is a straight vote on the motion.

[Patricia Gibson]

Thank you, Mr Deputy Speaker. I regret that the amendment has not been selected.

The Government have brought us into this mess, inflicted financial harm and are thrashing around to try to fix it. It is a failure of the Labour party not to be able to take on, in England, these arguments. The Labour party is preparing for government, but it has been caught out, because its interim leader, who was intended to steady the ship, will now, by himself, by default, lead the party into the next election. This is a London-centric ostrich, in common with the Tories, who thinks he can dictate, in a deluded fashion, to Scotland just how much democracy it can have. I think he will find, when the votes are counted in Scotland, that that will not have worked very well for him.

The reality is that when Labour and the Tories dictate to Scotland at election time, they are, in effect, two baldy men fighting over a comb. The voters of Scotland are sick to death of being patronised and talked down to, with their right to choose their own path dismissed and ignored by those who set themselves above them as their betters. The UK is in a mess—it is broken. Scotland did not vote for this and the incompetence of this Government is having an impact on Scotland in a way that is undemocratic, because we did not vote for this. It will never vote for a Labour party that is trying to out-Tory the Tories to win Tory seats in England with a pretence that Brexit can be good for the UK and to impose it on Scotland despite the damage it is causing. Shame on you! A plague on both your houses. Scotland will choose her own path and we will extract ourselves from this sorry mess of Westminster. Scotland will choose her own path in spite of, and because of, this shower in Westminster.

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[Paul Howell]

No—that is the easy answer. There have been many challenges with Brexit, but we voted Brexit through in late 2019. Being in a pandemic three months later did not exactly help the process of getting things done.

Coming back to my point, since the pandemic the Government have spent billions to protect businesses. Are Opposition Members saying that we should not have spent that money—that we should not be in debt because of covid and that we should not have supported businesses and people?

[Patricia Gibson]

The international investment markets have talked about the UK’s suffering more economic hardship than other comparable countries, which they refer to as the “moron premium”. How does the hon. Gentleman respond to that? Are they wrong?

[Paul Howell]

There are so many people who have so many opinions about the different things that have happened and will put them into different contexts. We need to keep ourselves in context. To quote the numbers, the House of Commons Library estimated that the Government spent between £300 billion and £400 billion on various pandemic-related issues. That is between £4,600 and £6,100 for each individual. That is a tremendous amount of money. Before we had the chance to recover from the pandemic, Russia invaded Ukraine, causing the price of food and so on to explode. The enormous support that the Government have given in response to energy prices is expected to cost £60 billion over six months.

The Labour party are scaremongering that the support will stop in April and everybody is falling off a cliff. Nobody has said it is stopping in April. They have said that the likes of you and I, Mr Deputy Speaker, might not be receiving support—I would quite like to get support, but I do not need it. We need to ensure the money we spend is spent with those who need it, not those who just want it, and achieve that balance, but the immediate reaction on energy support—to provide it as quickly as possible—was wholly appropriate.

When people start to talk about interest rates, the rhetoric we hear from Labour about the £500 increase is selective noise, using a specific comparator of a two-year mortgage that was 1.6% two years ago, was 3.7% before we went into the mini Budget and is now probably close to 5%. The real effect on people is not a £500 difference.

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[Patricia Gibson]

Does the hon. Gentleman agree that the £65 billion used to shore up pension funds following the mini-Budget—£1,000 for every man, woman and child in the UK—is also a testament to the incompetence of this Government?

[Justin Madders]

Indeed; we are all the poorer for this folly and we will all be paying the price for many years to come. And where was the Prime Minister during all this? He did not say a word; I did not hear anything from him about why this was wrong. He kept silent and kept his cards close, playing the game, waiting for the opportunity to strike. But now it is his responsibility to clear this mess up and he had better do that.

While the markets have now begun to stabilise a little, the damage has already been done for many, with those coming off fixed-rate mortgages facing payment increases of five to seven times their current deal and some being shut out of the housing market entirely. Anyone on a fixed rate, and that is many of us, will be looking ahead in despair and fear over the next 12 to 18 months at what their mortgage payments will be. Martin Lewis has warned about a ticking timebomb; it is indeed a timebomb and, worse still, this did not need to happen at all.

The impact is not solely on those with mortgages. In my constituency, the pressure on the private rental sector is extremely high, which has already contributed to increasing rents. It is now impossible to secure a three-bed family property for less than £900 a month, which is about 50% of the average income in the constituency. I am already hearing from landlords who cannot afford to continue to rent out their properties without drastically hiking the rents, something many of them know is simply not realistic. They are therefore selling their properties, which will reduce the number of available properties in the private sector and push up rents again. Other landlords are now considering issuing section 21 notices to their tenants, because they know that if they relet the tenancies they can get 20% to 30% extra on the rents; that will push yet more people into homelessness.

Finally I want to say a few words about a group who, sadly, know only too well the impact of high mortgage rates: mortgage prisoners who have been trapped on standard variable rates for years. A constituent of mine is facing the 14th year on such a rate, and in October his mortgage increased once again by £100 a month. In 2021, he was on a fixed rate of 4.54%, double the average two-year fixed rate deal available at the time. Through no fault of his own, my constituent is limited in the mortgage products he can access and while the amendment to the Financial Services and Markets Bill would have capped mortgage prisoners’ SVRs and ensured access to fixed-rate deals under certain circumstances, the Government chose to vote that down. The measures introduced to provide switching options were found to have a limited effect by the Financial Conduct Authority, and with the contraction of mortgage products, hope for mortgage prisoners is now at an all-time low. They have experienced for years the issues that are now widespread in society, leading to frustration from many that their plight was met with little coverage or understanding when it could have been addressed and mortgage rates were historically low. I recognise those frustrations.

The Government also must ensure that any measures cover not just mortgage prisoners but other people who are trapped in their homes. Many leaseholders with unsafe cladding or other fire defects, and those with egregious ground rent clauses that make the properties unsellable, will see their costs increase due to interest rates going up, but they will not even have the choice of being able to sell their properties because a lack of Government regulation has let them down by leaving them in a home that they do not really own but they cannot leave. That is a wrong that it is taking far too long to put right.