Taxation (Living Wage)

Paul Uppal Excerpts

Tuesday 22nd January 2013 Westminster Hall

[Paul Uppal (Wolverhampton South West) (Con)]

That point is well worn and made continually, and I am sure that all Members are aware of the top rate of tax being cut, but there is an element of financial amnesia here. As even people who only have a rudimentary understanding of economics will appreciate, the main way that wealthy people accumulate wealth is through wealth creation, rather than income, which is always variable. If we look at capital gains tax, the current rate is 28%, which is in stark contrast to the previous Labour Government, where venture capitalists were paying capital gains tax at a rate of 10%—often much lower than the cleaners who were cleaning their offices.

[Catherine McKinnell]

I appreciate the hon. Gentleman’s point. We always have to support business growth and creation. Unfortunately, many of the Government’s policies are impacting on individuals and on consumers who will buy the goods that such companies make. In reality, that is resulting in stagnation and no growth in the economy, which is taking the country backwards, not forwards, but I take his point on board.

I suggest that a simple and effective way of pulling off an image neutralisation attempt would be by not going ahead with that tax cut for the rich, and by not pushing through real-term cuts for people in work, but on low pay. The hon. Member for Harlow has put forward his alternative argument—the restoration of the 10p rate of income tax on income between £9,205 and £12,000. However, as he notes in his early-day motions, restoring the 10p rate of income tax would move workers on the minimum wage only

“about halfway towards earning the Living Wage”,

and that would be at a cost to the Exchequer of around £6 billion a year, according to the Library. I can see alarm bells potentially ringing in the Minister’s head at that prospect, particularly when the Government are forecast to borrow £212 billion more than they planned to borrow two years ago and are failing one of the key economic tests that they set themselves.

In conclusion, the Government have repeatedly stated that they support the living wage and encourage businesses to take it up where possible. That is laudable, and the Opposition agree that the living wage should not be mandatory, but we encourage as many companies as possible to implement it. I would be grateful if the Minister could provide us today with examples of measures that the Government have taken to encourage the uptake of the living wage, as well as specific examples of what firms are now doing as a consequence of the Government’s actions.

I know from my work on apprenticeships that the use of the public procurement system in encouraging take-up has been a particular area of interest for the hon. Member for Harlow. My right hon. Friend the Leader of the Opposition has suggested that we can learn from local government procurement to see whether central Government can use their buying power to insist that large firms winning major public contracts commit to being a living wage employer. I suspect that the Minister may cite EU procurement rules as preventing that from becoming a reality, but the European Commission has stated:

“Living-wage conditions may be included in the contract performance clauses of a public procurement contract ‘provided they are not directly or indirectly discriminatory and are indicated in the contract notice or in the contract documents’.”

Will the Minister clarify whether the Government have any intentions of taking that idea forward?

Finally, I would be grateful if the Minister outlined which Departments are now living wage employers and which are not. It is absolutely vital that the Government show leadership on that issue. Will he clarify whether the Treasury pays the living wage to all its staff?

Once again, I applaud the hon. Member for Harlow for securing the debate, and for highlighting the plight of low-paid workers and the squeeze on families in these straitened times. I am interested to hear the Minister’s response to the suggested approach; how that can be reconciled with the squeeze on low-paid workers that his Government forced through Parliament last night; and what his Government will do to encourage more businesses to pay their workers the living wage.

LIBOR (FSA Investigation)

Paul Uppal Excerpts

Thursday 28th June 2012 Commons Chamber

[Mr Osborne]

The part of the country that the hon. Gentleman represents has been affected perhaps more than any other by what went wrong in financial services. Northern Ireland has suffered enormously from the failure of banks in the UK and in the Republic, and it has paid perhaps a heavier price than anyone else, so he speaks with authority and passion on this. Let me make it absolutely clear: we are going to deal with the regulation of LIBOR, and we will choose the most appropriate vehicle. The Financial Services Bill has been introduced in the House, so it is a convenient vehicle but, as I said, let us introduce the right regulation and get this right after its having gone spectacularly wrong in the past. As for the forfeiture committee, it is completely independent of the politicians of the day, he will be glad to know. No doubt, its members will have heard what he said.

[Paul Uppal (Wolverhampton South West) (Con)]

Continuing the “Newsnight” theme, last night Lord Myners, when asked about the previous Government’s role, shrugged his shoulders and said that this was nothing to do with them. Does my right hon. Friend agree that although Opposition Members are anxious to distance themselves from banking involvement, the anything-goes culture was driven by light-touch regulation, and that if we are to make progress, those who sit on green benches or on trading desks must ultimately take responsibility for their involvement?

Interest Rate Swap Products

Paul Uppal Excerpts

Thursday 21st June 2012 Commons Chamber

[Guto Bebb]

There have been examples of such scenarios, which have come across my desk as a result of what has now become a campaign. One of the reasons for holding the debate is to ensure that more cases come forward, because the more information we have, the easier it will be for the FSA, for example, to bring the issue to a resolution and for the banks to acknowledge that there is a problem. The hon. Lady makes an important intervention.

[Paul Uppal (Wolverhampton South West) (Con)]

I have a slight confession to make. I spent a great deal of my 20 years in business dealing with swaps, collars, caps and all sorts of financial instruments. The case highlighted by my hon. Friend of its being a fixed rate product in a sense misses the point. In general, such products were hedges—they were there to mitigate risk. A lot of customers went awry because the bank would often present the products as a loan but would gear up much more if the risk could be mitigated. Such financial products were often sold on that basis.

[Guto Bebb]

That is an important point. My comments will state clearly that those products are not necessarily wrong. The question at stake is whether the products were sold appropriately, and whether there was a degree of mis-selling. Sophisticated investors, understanding what they are doing, should have the right to enter into such agreements. My question is whether the banks should be going after businesses with turnovers of less than £200,000 a year.

Jobs and Growth

Paul Uppal Excerpts

Thursday 17th May 2012 Commons Chamber

[Mr Tobias Ellwood (Bournemouth East) (Con)]

It is a pleasure to participate in the final day of the Queen’s Speech debate, where we focus on the economy. Occurring as it is just after the May elections, there is a tendency not only to look at the new policies that have come forward but to take stock of the Government’s performance to date.

An important match took place at the weekend—the Chancellor may have taken an interest as his constituency is not far away—which determined the outcome of the premier league. If we had taken the half time score to be the final outcome, we would have drawn very much the wrong conclusions. The same can be said of the economy. We must work towards a full programme across the Parliament, and at the moment we are halfway through that political cycle. Let us be fair: the 3 May local elections represented a tough result for the Government. I am sure that whole House will unite in delight at the re-election of Boris Johnson. [Interruption.] I am glad that everyone concurs. We look forward to his waving the Olympic flag once again, having seen him do that in Beijing.

[Paul Uppal (Wolverhampton South West) (Con)]

Does my hon. Friend agree that it is important that the Government are taking long-term decisions and looking at the long-term interests of UK plc?

[Mr Ellwood]

I am grateful for that intervention.

Labour Members may be rejoicing in their election results, but before they start measuring the curtains for No. 10 it is worth noting that they fell well below the magic number of 40%. That suggests that those results were more about sending a message to the Government of the day than voting for an alternative. Of course people are worried about jobs, the cost of living, rising fuel prices and generally making ends meet, and we must not lose sight of that. The results therefore reflect a backlash against the establishment which is having to implement these very difficult decisions.

Three observations can be drawn from the results. First, such backlashes are often witnessed. Back in the days of Margaret Thatcher, she went down to 24% in the polls but then continued to win general elections. Likewise, in 2000 the Tories managed to get 40% only to lose the general election in 2001. Secondly, the electorate should be cautious about listening to Labour’s alternative economic strategy of spending more, because it is that sort of irresponsible stewardship that got us into the financial crisis in the first place. Thirdly, the Government need to listen and must not be distracted by less important issues. They must focus on the priorities of the economy, education, welfare, reducing crime, and the NHS.

--- Later in debate ---

[Paul Uppal (Wolverhampton South West) (Con)]

The right hon. Member for Barking (Margaret Hodge) used the term “victim”, and also spoke of a lack of hope. That is a theme to which I shall return later. I think that we should be very careful in our choice of words, given how corrosive they may be in the world out there—the real world, not the Westminster bubble.

In difficult economic times, we should not be seeking quick fixes. It is important that we continue to build the foundations that are necessary for economic recovery. The solution to a debt crisis should never be more debt.

[John Stevenson (Carlisle) (Con)]

Does my hon. Friend agree that part of the Government’s problem is the fact that the last Government borrowed in good years, and had borrowed some £40 billion before we even entered the recession?

[Paul Uppal]

That is an excellent point, and it is not made only by Members of Parliament. Hamish McRae, the acclaimed journalist, made it in The Independent during 2003 and 2004. He regularly asked readers what had happened to those golden economic rules—but that is by the by, and we cannot change it.

I want to raise an issue which I spoke about during the Budget debate. We are right not to allow protectionist rhetoric to creep into our political system, and continually to challenge protectionism abroad. That is crucial to the rebalancing of our economy to change it from an economy that spends on imports to one that earns through exports. I am encouraged to note that British exports rose by £50 billion last year, and that unemployment has fallen by over 45,000 in the first quarter.

I believe that there are two areas in which the Gracious Speech can make a real difference: the creation of the right conditions for private sector investment, and investment in our work force and the work force of tomorrow. Analysts have estimated that UK businesses have cash assets of more than £750 billion, equating to nearly half our GDP, and that investing just £20 billion of that in the UK could deliver a 1% increase in growth. We need to ask the difficult question: why are these cash-rich institutions not investing domestically?

The answer begins with the boom that preceded the recession. Unlike booms preceding earlier recessions, that boom was financed by public and private debt, which has continued to depress household borrowing and spending. The IMF’s analysis of advanced economies over the past 30 years concluded that recessions preceded by an unsustainable increase in household debt tended to be more severe and protracted. That is because as long as households pay down debts and increase savings, demand will remain weak.

One explanation for the weakness of private investment is concern among companies about the future availability of bank finance. They are becoming more reticent in their investment strategies, and are using cash as an insurance against a crisis. The situation is not helped by fears of contagion, or by the lack of liquidity in the banking sector. A solution to the problem would be the creation of a banking system that improved lending and the supply of credit. The introduction of a ring fence around retail banking separating retail banking services—such as deposit holdings and lending—from investment would pave the way for a more competitive banking system.

Tellingly, the removal in 1999 of the Glass-Steagall Act, which separated deposit holdings and lending from investment, changed the landscape of banking in America. It allowed larger investment institutions to enter the deposit and loan markets, creating a grab for small banks. In 1999, there were 19 significant large banks in America; today there are four. The picture in the UK is similarly worrying. Although there are smaller banks in the UK and the US, large banks have consolidated their position, creating market dominance. The consolidation of banking on such a scale is bad for businesses and bad for lending. With only a handful of lenders, concern arises about the availability of credit. We often talk about how banks are too big to fail, but rarely do we talk about banks being too big to be effective. Banks can only be described as quasi-public institutions, and will be accountable to the public long after they are sold. They are the engine of any economy, as they provide credit, investment and savings. We need a banking sector that not only serves shareholders, but benefits the wider economy.

I would also like to discuss how investing in the UK should involve our work force today and the work force of tomorrow. On a personal note, I recently held a jobs fair in Wolverhampton. We had more than 1,500 young people attending and more than 30 employers. One conversation I had on that day still sticks in my mind. It was with a young person from Wolverhampton who said, “I want to thank you, Mr Uppal, for organising this. You’ve given me hope.” When the Leader of the Opposition stands up and says that there is no hope in the Budget or the Queen’s Speech, the effect is deeply corrosive. I know that the situation in places such as Wolverhampton is challenging, but to dismiss people and just wipe away their dreams so quickly and flippantly is very damaging. Sometimes politicians in this House need to think carefully about the terminology they use.

We all appreciate that the Opposition have a job to do in holding us to account. However, it is important that we do not respond with knee-jerk reactions, but instead always look at the broader picture of what we are doing for the economy and not look to make political capital out of the situation. Investing in the work force of tomorrow means preparing young people for work today. Careers events in schools, inviting local companies to speak at schools, and lessons on interview and presentation skills could all help, and not just in year 11, but early on, when children are starting to think about options and subjects. It is not about getting young people to pick a career early on; it is about them knowing that their options will help them to make the right choices and give them goals for the future. If young people know that maths and science are essential for accessing the type of job they are considering, such subjects will seem more beneficial.

Ensuring a skills base for the future to drive Britain’s industry and manufacturing is evidently important, and recent reports point to a skills gap. It is disappointing to hear companies say that they cannot find the skilled people they need, especially when that is coupled with high unemployment. The west midlands is a great base for manufacturing, and, with the introduction of the i54 site, we can only improve on this. Taking the long-term view on jobs and growth—helping young people to get the best possible start early on—can only be beneficial in preventing them from ending up not in work, training or education.

Let me finish by saying, for the second time in this Chamber, that when it comes to the difficult decisions, at least those of us on the Government Benches are walking the walk, whereas Opposition Members are just talking the talk.

Amendment of the Law

Paul Uppal Excerpts

Monday 26th March 2012 Commons Chamber

[Paul Uppal (Wolverhampton South West) (Con)]

The Budget and the coalition Government will ultimately be judged on how well we recover from the economic mess left to us by the last Labour Government, many of whose Ministers occupy senior positions in the shadow Cabinet. To quote the Prime Minister, the coalition will

“give our country the strong, stable and determined leadership that we need for the long term.”

That is something that I often argue about in this Chamber. There are many ways in which this Chamber divides. In essence, I am a passionate believer in the long-term view, as opposed to the short-term view. There is more to do and more that we can do, but the Budget continues the work that the Government have done in their first two years and shows that we are building the long-term foundations that the economy needs.

That was demonstrated by the World Economic Forum’s most recent competitiveness report, which returned Britain to the top 10. It cites the lack of access to finance as one of the top factors that discourages business. I will make two points about that. I am pleased to see the extension of the enterprise finance guarantee, which will ensure that we get finance for the small and medium-sized businesses that need it the most. Secondly, it is good to see the details of the business finance partnership, which involves co-operation between the public and private sectors in lending directly to mid-sized businesses.

The Budget gives our economy a strong and stable long-term future by addressing the factors that are contrary to growth and that are thus making Britain uncompetitive in an increasingly crowded global marketplace. By reducing the complexity of our tax code and the rates at which businesses are taxed, we are signalling that we are again in a position to build on what Britain does best: creating innovative products that are attractive to consumers on the world stage. The Chancellor has shown the leadership that we need for the long term by aiming to double exports to £l trillion by the end of the decade. We have demonstrated that we are not only rebalancing the economy from public sector growth to private sector growth, but rebalancing our trading position to one that is led by exports rather than imports.

The Government are expanding UK export finance and setting out new plans to help smaller firms in new markets. We are right to concentrate on the BRICs—Brazil, Russia, India, and China—because they account for more than 40% of the world’s consumers and because, in recent decades, rising incomes in those countries have created a growing aspirational middle class. It will not be an easy task to get British products into the homes of those people. A recent letter to the Financial Times illustrates the problems that we face in exporting British products to those developing and expanding markets:

“Last month we had an opportunity to export some of our UK-manufactured products as we were more competitive than a Chinese competitor, only to find that there was a 22 per cent import duty to add to our cost, taking away our advantage. Yet when Chinese goods are brought into the UK there is no duty to pay.”

We are right never to allow protectionist rhetoric to creep into our political system, but we must also continue to challenge protectionism abroad. We must continue to work with our trading partners to negotiate fairer treaties and, where necessary, submit complaints to the World Trade Organisation and similar institutions.

By pushing for the abolition of import duties and the liberation of foreign markets, we are again building the foundations of an export-led recovery, with job creation, sustainable investment and economic growth. It is right that the Budget focuses not just on short-term gains through artificial stimuli, but on proper policy planning to assess the barriers to growth and tackle them head-on.

Many Members have said that there are winners and losers from the Budget. They are right. The winners are common sense, long-termism and opportunity. The losers are those who try to make political capital and who always take the short-term view.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I call Graeme Morrice.

Eurozone Crisis

Paul Uppal Excerpts

Thursday 3rd November 2011 Commons Chamber

[Paul Uppal (Wolverhampton South West) (Con)]

Does my hon. Friend agree that one of the most important lessons we can learn from this crisis is that if there had not been a change of Government in this country in 2010, we would be talking today in the Chamber about the UK sovereign debt crisis, not the Italian and Greek crisis?

[Mr Hoban]

My hon. Friend is right. If we had not taken the tough action we took when we came into office, the UK could be in the firing line, not just Greece and other eurozone member states.

Private Finance Initiative

Paul Uppal Excerpts

Thursday 23rd June 2011 Westminster Hall

[Jesse Norman]

At this point, I want to keep the rebate voluntary because we are making good progress, but many Members feel that something more stringent would be appropriate. In the assessment of the profits on these equity stakes, I would caution that in some cases those equity stakes have been built up over a considerable period and one should not necessarily look at just the headline number if it is the result of a 10 or 15-year investment.

I have spoken about the campaign that we have run so far. An important feature of the rebate campaign is that at least part of any savings would remain with the public service involved. The result, therefore, would be a win not merely for the taxpayer but for local communities, which could potentially benefit from many millions of pounds in savings over the next two decades.

Let me make it clear that I am not for one moment suggesting that existing PFI contracts should be torn up, but contracts are routinely renegotiated in the private sector. The rebate would be a voluntary one, and not a haircut imposed by Government. There is a valid precedent in the code of conduct that was signed in 2002, by which the contractors agreed to share windfall refinancing gains with the taxpayer. It may be that that code of conduct needs to be further extended to the secondary market trading of equities.

What I did not expect was the level of support that I and colleagues have received from key players in the PFI industry itself. They know that something is wrong. They are aware of public concern, and they want to participate in the next generation of economic infrastructure. Having started as a solo mission, the campaign has become a cross-party movement of more than 70 Members of Parliament. We have sat down with many large PFI companies and talked in detail about the scope for savings.

Parliamentary concern about the costs of the PFI has resulted in an inquiry by the Treasury Committee and, to their huge credit, the Government are taking the idea of a rebate very seriously indeed. Ministers at every level have made clear their desire to see savings. The Cabinet Office has been looking closely at the PFI in its quest for greater efficiency across the public sector; the Ministry of Defence has announced that it is reopening three major contracts as part of its own renegotiation strategy; and the Treasury has opened discussions with the PFI industry about a new code of conduct and it has recently concluded a “deep dive” investigation of the PFI contract at the Queen’s hospital in Romford. That is the first time in 15 years that a Government have taken a forensic look at a specific PFI contract, and it sends out a clear signal of intent to dozens of other PFI projects. So we are making progress. That is the context for this debate—the first Parliamentary debate on the PFI—and I hope that colleagues from all parties will make their support loud and clear for these actions for better public services and real savings for the taxpayer.

However, to understand the present we must understand the past. How did we get to such a sorry state of affairs with the PFI? The history is surprising and damning by turns. It can be divided into three phrases: experiment; ramp-up; and standstill. The PFI was introduced in 1992 from Australia by the Major Government, which was interested in how private capital and expertise could be used to support the public services. Labour Members often deride the Conservatives for introducing the PFI, but the facts tell a very different story. The Major Government could not make the PFI work. They insisted on judging each deal on its merits, having inherited a structure from the Ryrie rules, and the merits were sometimes very thin indeed. By 1996, barely £6 billion worth of PFIs had been approved and no PFI hospitals had been approved, let alone built.

Meanwhile, Labour was split. Old Labourites denounced the PFI in traditional terms as “creeping privatisation”, but it is often forgotten that the new Labour position was the exact opposite of that. New Labour thought that the PFI was a good thing and that the problem was that the Tories had not gone ahead with it fast enough. In a speech in Parliament on 28 November 1995, Tony Blair rammed that point home repeatedly. His position was perfectly clear:

“The PFI is right in principle. We have supported it, and in many ways we have been advocating it.”

At that point, John Prescott, who is now Lord Prescott, helpfully intervened with, “We initiated it.” Blair continued:

“It should not be manipulated to cook the books of public finance.”—[Official Report, 28 November 1995; Vol. 267, c. 1077.]

On that point at least, the future Prime Minister and his Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), were agreed, since the right hon. Gentleman also remarked in the early 1990s that

“PFI is a cynical distortion of the public accounts.”

How are the mighty fallen, and in what disgrace. We are accustomed to make fun of Lord Prescott—rightly so—but at that point he spoke truer than he knew. In many ways, Labour was in fact the real originator of the PFI in its current form. In 1997, the new Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath, and his then adviser, the right hon. Member for Morley and Outwood (Ed Balls), were tied down by the promise that Labour had made to stick to Conservative spending plans for two years. They had committed to keep public sector net debt below 40% of GDP, according to their sustainable investment rule, but they were desperate to leave a legacy by building a huge amount of public infrastructure. They quickly spotted that PFI projects offered a way out of that quandary, because PFI liabilities could be treated as off-balance sheet and so they would never appear formally within the net debt numbers. Of course, as we now know, they later fudged the sustainable investment rule by redefining the economic cycle and then the rule was blown apart as the financial crisis took hold.

After the 1997 election, the new Paymaster General, the hon. Member for Coventry North West (Mr Robinson), summarily fired Alastair Ross Goobey, the chair of the PFI panel and a man with an impeccable record of protecting shareholder value, and ramped up the PFI dramatically. Over time, an unholy alliance developed between the Labour Government and the PFI companies. PFI became the “only game in town”, as more and more projects were pushed in its direction by Government Departments that were desperate for capital spend but prevented by central Government from looking at alternatives.

That ramp-up was aided by the introduction of PFI credits, which allowed Departments to avoid running local authority PFI spend through their own budgets, thus evading responsibility for them; it was also aided by the use of high official project discount rates, which artificially privileged the PFI over other forms of procurement; and it was also aided by the unwillingness of both the Blair and Brown Governments to permit debate on the issue, conduct any overall analysis of the PFI’s cost-effectiveness or gather the full data on primary and secondary transactions, which would have allowed proper transparency and proper public accountability. Frankly, that was disgraceful behaviour.

Fast forward to today and what do we find? More than 800 PFI projects are now in place, covering every imaginable form of public infrastructure from hospitals and schools to roads and military hardware. Nearly £70 billion—not £6 billion, as was the case in 1997—of capital commitments have been made, with a total liability to the taxpayer of well over £200 billion. And—irony of ironies—new accountancy rules are in place that require PFI debt to appear in the national accounts after all. The Balls-Brown attempt to fix the books has proven to be a failure, and a costly failure to boot.

It is important to say that many PFI projects have been completed on time and within budget. There is a mixed picture. Contractors such as Jarvis have gone bust when projects failed, or taken huge financial hits. Also, conventional procurement itself has not always covered itself in glory, as demonstrated by the Eurofighter, Wembley stadium and British Library projects.

In response, it is easy to highlight the many PFI projects that have been horrendously overpriced. They range from huge deals, such as the Airtanker contract, which is now estimated to cost £1.5 billion too much, and the M25 widening, which is now estimated to cost £1 billion too much, to tiny but telling details about smaller schemes, such as the kennels at the Defence Animal Centre in Melton Mowbray, which cost more per night than rooms at the London Hilton.

An even more telling criticism emerges if we look at the overall record on the PFI. We now know that there is no general evidence that the PFI is cost-effective, or that the PFI improves the quality of buildings. Average annual maintenance costs are higher in PFI hospitals than in non-PFI hospitals. The most detailed study of PFI hospitals demonstrates that there is a large element of excess return to both debt and equity holders. Indeed, for equity holders the financial returns have been on occasion up to six times higher than the risk would justify.

There have been important secondary effects. The ramp-up of PFI projects helped to create an artificial boom in construction, which pushed up costs and over-extended the construction industry. Within the NHS, it has resulted in a huge and inflexibly designed Maginot line of hospitals, each one on inflation-adjusted contracts lasting decades, at a time when health care is moving towards more flexible models that combine specialist institutions with health and social care nearer to the home.

[Paul Uppal (Wolverhampton South West) (Con)]

First and foremost, I congratulate my hon. Friend on securing such an important debate. It is a testament to his tenacity, research and expertise in this field that this debate has been attended by so many Members. I concur with his view that the PFI picture is mixed—

[Mrs Anne Main (in the Chair)]

Order. I remind the hon. Gentleman that interventions must be brief.

[Paul Uppal]

I will attempt to be brief. Does my hon. Friend concur with my view that, although the picture is mixed, the fundamental issue is that the PFIs are often short-term solutions to the long-term problems that we face in government? That is illustrated exactly by the issue with Southern Cross, which has often used sale and leaseback to finance its own businesses.

[Jesse Norman]

I thank my hon. Friend for that intervention. I absolutely share his view that there is an interaction between inflation-adjusted costs and budgets, which of necessity are less able to rise, and that that interaction creates tremendous tension within these institutions. In many ways, Southern Cross is rather similar to the PFI, as the Chairman of the Health Committee, my right hon. Friend the Member for Charnwood (Mr Dorrell), reminded me this morning. The PFI costs for hospitals that I have been describing are not under the hospitals’ control, so the effect of escalating payments will be to suck up free cash flow within hospital trusts, to reduce flexibility and to impede innovation, just when those things are most needed.

We are in an unhappy mess, which is the true legacy of Messrs Brown and Balls. We shall better see the financial extent of that mess in July, when the Office for Budget Responsibility reports on the whole of Government accounts. However, the key point is that, although PFI was expensive before 2008, since 2008 it has become exorbitant. As a result of the financial crisis, PFI credit margins over gilts have risen from an average of around 0.75% to between 2.5% and 3%. Specific projects have even worse financial profiles. For example, the outline business case for the £244 million Royal Liverpool and Broadgreen University hospital projects a weighted return to investors of 8.58%. That is more than double the rate on long-term Government gilts, which is 4%. The extra cost is such that there is now a strong case for a one-year moratorium on that project, as on others, to allow proper consideration of alternatives, and I encourage the Government to consider that suggestion closely.

I shall sum up. A new settlement is needed on the PFI, and I offer three recommendations. The first is that the Government should take steps to improve their database on PFI deals, and their collection of new data. The quality and quantity of PFI data are surprisingly bad. On primary deals, that is due to inconsistencies in collection, and on secondary market deals it results from a hands-off methodology, which regards trades in PFI debt and equity as purely private transactions, outside the scope of government. All aspects of data collection should be reviewed and improved.

My second recommendation is that the Government should undertake a major consultation soon on the best means to procure and finance new infrastructure. This country badly needs new infrastructure, at a likely cost of hundreds of billions of pounds over the next few decades, and the private sector has a vital role to play. To finance that development, we need alternatives to the PFI, and several economic models are available. These include regulated asset base models developed from the utilities market, property-based models, strategic infrastructure partnerships and tax increment financing, as well as a reconsideration of conventional procurement methods. I have recently advocated the idea of a national asset trust fund as well, in a publication of my own. The consultation should also focus on how procurement is done. Should different models be used for different sectors? How can public sector institutions be made into better clients?

Thirdly, and finally, the Government should continue their current drive towards a taxpayer rebate and a new code of conduct on the PFI, if possible with every PFI company involved. Many have already engaged with the Treasury, but some—particularly some large banks, accountancy firms and legal advisers—have yet to do so. I have written to the head of every major PFI firm to put the question directly to them, and I plan to keep the House informed of their participation. The code of conduct would in due course lead to a matrix of all PFI transactions, which would show savings agreed with the private sector to ensure that they were fairly shared. That will require implementation over some months, so that the savings are genuinely realised. The Treasury could also set up a small team to advise individual hospitals and other public services on how to benefit most from the rebate process, with the team’s costs being met out of the savings generated. One thing, however, is vital. Most of any rebate should of course go back to the Treasury, and on to the taxpayer, but a portion should remain with the affected local public service, so that local people can be absolutely certain that their school, or hospital, has benefited.

I very much hope that all colleagues present—and there are many—will support these recommendations, and will join me in pressing the Government to ensure that savings are made and local people feel the benefit.

Regulatory and Banking Reform

Paul Uppal Excerpts

Thursday 16th June 2011 Commons Chamber

[Mr Hoban]

The hon. Lady is absolutely right to say that it is important that banks lend to businesses. If the economy is to continue to recover and to pick up momentum, banks need to be able to lend. That is why we introduced the lending commitments under Project Merlin, and we will monitor them very carefully. We have said that we will not be afraid to use any tools at our disposal if those targets are not met.

[Paul Uppal (Wolverhampton South West) (Con)]

Continuing the theme of competition, and being mindful that the Vickers report will be published in September, will the Minister assure the House or provide guidance on how any future framework will provide genuine competition? In the US, in particular, banks fail without adverse publicity or at any cost to the public purse because there is a larger proliferation of smaller banks, and that would swim against the tide of mega-super-banks, on which we have been over-reliant.

[Mr Hoban]

My hon. Friend makes an important point about diversity in the financial system. One of the points that the Governor of the Bank of England made in his Mansion House speech last night was about the need to reduce the barriers of entry to the banking system in order to encourage more competitors to come forward. That is an excellent way in which we can promote choice and competition and get a better outcome for consumers, whether individuals or businesses.

Amendment of the Law

Paul Uppal Excerpts

Monday 28th March 2011 Commons Chamber

[Paul Uppal (Wolverhampton South West) (Con)]

I thank all Members for the speeches that they have made this evening. We have heard a bit of knockabout and a few partisan comments, and of course that is all good fun in the Chamber, but I want to shed some light on the issue. I want to draw attention to the writings of one Hamish McRae, the economics correspondent of The Independent—a newspaper which, if truth be told, has not always expressed a favourable opinion of Conservative Members.

From about 2005 onwards, Hamish McRae’s weekly columns highlighted the fact that the then Chancellor was quoting his famous golden economic rules less frequently, until he eventually stopped referring to them, in much the same way as he stopped using the word “prudence”. In later years, Mr McRae pointed out that the Chancellor had continued to borrow money even when tax receipts were fairly plentiful. Despite Tony Blair’s best efforts to stress economic credibility and use the term “prudence” from the beginning of the last decade, the Labour Government abandoned Conservative spending plans and resorted to type, which meant spending money. Labour Members cannot help it: in the end, they always think that they can cure society’s ills and promote social mobility by throwing money at a problem.

The present Government have produced a pro-growth and pro-aspiration Budget. First and most important, it outlines a strategy for growth, a strategy for reducing the national debt, and a strategy for continuing to restore confidence in our once broken economy. We must never shy away from supporting businesses by offering competitive levels of taxation, and we in the House of Commons must send out the message that the country is once again open for business.

Over the last decade, many high-profile companies have left the UK to escape our complicated tax system and our higher than average rate of corporation tax. Given the increased mobility of capital and people, Britain must be an attractive place in which to work and live. We must be a beacon for investment from around the world and the jobs that it will bring. With this Budget, we can once again start to attract the kind of investment that the country needs. Britain must be able to compete to attract the brightest and the best, and enterprise zones, lower corporation tax and other measures outlined in the Budget will achieve that.

I am proud to be able to speak about what I feel is the most important part of the Budget, the part that deals with enterprise zones. I know that the black country has already been allocated an enterprise zone, and I am delighted that the Chancellor has made that decision. I have in mind Wolverhampton and my constituency of Wolverhampton South West when I say that I hope and believe that the reintroduction of enterprise zones will offer the black country an opportunity to rebalance the regional economy and provide the building blocks for future prosperity in areas that have missed out on capital spending projects over the last decade. I grew up in the shadow of Merry Hill. I remember the original site, and I saw with my own eyes the power of ambition and aspiration being tangibly enhanced as the buildings rose up in a sea of regeneration.

The recovery must be led by the private sector, and the Budget outlines how we will be able to achieve that. The growth of small businesses employing a handful of people will be central to our future economic prosperity. They are the engines of our economy, employing 60% of the private sector work force and contributing half the United Kingdom’s annual turnover. Lower taxation, planning simplification and less bureaucracy will provide an ideal cocktail of measures to kick-start local economies and encourage the growth of that vital sector.

Let me end by briefly discussing another of Labour’s legacies. Labour created an environment in which young people feel unable or unwilling to take the first steps in creating their own businesses. On Friday I visited a number of sixth-form politics and economics students. When they were asked whether they wanted to set up their own businesses, none of them said that they did. I was struck by their reaction, which suggested that future generations would not be inspired to go out into the world of business. Indeed, that supports the finding of commissioned research that 50% of young people do not feel that they are encouraged at school to be entrepreneurial. Changing that culture is vital to our economic future. Children in our education system need to be challenged and encouraged to take employment into their own hands. We need to invest in and develop talented young people, supporting them in the first steps on the difficult journey towards creating their own businesses and ultimately becoming successful.

Perhaps more pernicious is the Opposition’s determination to play politics and present the most draconian picture of the responsibility measures taken by the Government. Indeed, the Leader of the Opposition compared the demonstration on Saturday to the struggle for civil rights and the suffragettes. In 2009-2010 Government spending was £669 billion; by 2014-15 it will be £647 billion, a few percentage points leaner. Even more tellingly, in 1999-2000 it was £343 billion, and had it followed inflation, it would have been £438 billion by 2009-2010. In fact, expenditure increased by over 50% in real terms during the current decade. Labour just cannot help itself: it will always be in its DNA to spend other people’s money. Thank goodness we on this side of the House are implementing measures to return the country to good economic governance and responsible spending.

Comprehensive Spending Review

Paul Uppal Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

I think the hon. Gentleman is referring to child benefit, and it has clearly been a difficult decision to remove child benefit from families where there is a higher rate taxpayer. It raises £2.5 billion. It is interesting to note that, although it was the first issue raised by the Leader of the Opposition at Prime Minister’s questions last week, not a single Labour MP has mentioned it. I think they are beginning to realise that making this their priority for public spending is probably a mistake. I understand that it is a difficult decision, but I have to try to make this fair. These higher rate taxpayers represent the top 20% of earners and the decisions that I have taken have tried to make this fair across the income distribution.

[Paul Uppal (Wolverhampton South West) (Con)]

It is often said of the last Labour Government that although talk is cheap, the consequences of their actions were very expensive. Does the Chancellor agree that the sentiment of the spending review is not about cuts but about responsibility and the financial responsibility that we bequeath to our children and our grandchildren?

[Mr Osborne]

My hon. Friend makes a very good point. We have talked a lot about fairness and about fairness across the income distribution, but there is also a fairness between generations. If we do not deal with these debts and do not have a credible plan, it will be our children and grandchildren who are saddled with the debts that we were not prepared to pay. I think that is very unfair.