The Economy

Debate between Rachel Reeves and Danny Alexander

Tuesday 11th December 2012 Commons Chamber

[Danny Alexander]

As always, my hon. Friend makes a good point. We need people with experience in compliance and enforcement, and we are expanding employment in those areas. That is the right thing to do and it should have been done a long time ago.

The previous Government set out plans to increase fuel duty above inflation last year, this year and again in 2013 and 2014. However, as a result of repeated action by this Government, pump prices will remain at least 10p per litre lower for the remainder of this Parliament than they would have been had the Labour party remained in government.

[Rachel Reeves (Leeds West) (Lab)]

Slide 24 of the report by the Institute for Fiscal Studies shows that, including fuel duty changes and the changes to the personal allowance and tax credits, a one-earner couple with two children will be £534 worse off on average as a result of the changes in the autumn statement. Will the right hon. Gentleman confirm that?

[Danny Alexander]

No, I cannot confirm that. I do not recognise those figures—[Interruption.] Labour Members are waving bits of paper—

Oral Answers to Questions

Debate between Rachel Reeves and Danny Alexander

Tuesday 6th November 2012 Commons Chamber

[Danny Alexander]

My hon. Friend makes a very important point about care leavers. These ideas have been floated as part of a discussion within Government on the next phase of welfare reform. I will certainly make sure that his point is brought to bear in any discussions on that proposal.

[Rachel Reeves (Leeds West) (Lab)]

At a time when we are seeing cuts to the budgets for police, NHS and schools, it is right that last week this House gave the Government a mandate to negotiate a real-terms cut in the EU budget. However, instead of developing a strategy to deliver this, the Prime Minister has simply resorted to threatening a veto before negotiations have even begun. Of course, walking away is always an option for any EU Government, but can the Chief Secretary confirm that if Britain or any other country just turns up and uses the veto, the budget will rise in line with inflation anyway, costing British taxpayers an extra £310 million?

[Danny Alexander]

I start by congratulating the hon. Lady on the news that she is expecting a child, which was announced a few weeks ago. I am sure that the whole House would wish to join me in that.

Labour’s position becomes ever more extraordinary; its opportunism on Europe seems to know no bounds. That is why we have heard words of unease from several Labour Members who thought that Labour was a pro-European party. This Government have taken the toughest position of any European Government in these negotiations. We saw what happened with the previous Government’s negotiating tactics when they gave away half of Britain’s rebate. We are not going to do that all over again.

[Rachel Reeves]

I am not sure whether I caught an answer there. Frankly, the Chief Secretary should know better. After all, he was not only the chief press officer for the Cairngorms national park but the chief officer for Britain in Europe, and he should know that the only way to deliver a real-terms cut is to argue for one and build alliances to deliver it. Perhaps he should listen to his Cabinet colleague who said last week that it is “absolutely ludicrous” to threaten the veto now, weeks before the summit. Is that not just the desperate ploy of a weak Prime Minister with no influence, no allies and no strategy? He should get a good deal for Britain—a cut in the budget.

[Danny Alexander]

The hon. Lady was a pro-European once; I still am. We seem to be seeing an outbreak of amnesia on the Labour Benches. Not only has the hon. Lady forgotten what Labour did in the last multiannual financial framework negotiation, when it gave away half of Britain’s rebate by not forming any alliances and instead giving up vast amounts—billions of pounds—of Britain’s money, but the shadow Chancellor seems to have forgotten that more recently his party was running the largest structural deficit in the world economy in the good times, leaving this country more exposed than ever to the financial crisis. This country does not want amnesia from Labour—it wants an apology.

Infrastructure (Financial Assistance) Bill

Debate between Rachel Reeves and Danny Alexander

Monday 17th September 2012 Commons Chamber

[Danny Alexander]

The hon. Gentleman will know that the headline plan set out by the previous Chancellor and Government included cuts to capital spending that were substantially greater than those being implemented by this Government.

[Rachel Reeves (Leeds West) (Lab)]

Will the Chief Secretary give way?

[Danny Alexander]

I will gladly take another intervention after responding to the hon. Member for Luton North (Kelvin Hopkins). He will know that the low interest rates to which he has referred are in part a consequence of the fiscal credibility that this Government have established. It is precisely because we wish to use the strength of this country’s balance sheet which comes from that credibility that we are able to announce this guarantee scheme, which I will go on to describe in a moment. However, I shall take an intervention from the shadow Chief Secretary first.

[Rachel Reeves]

The right hon. Gentleman will be aware that the Office for Budget Responsibility has forecast that the previous Labour Government’s plans would have led to £6.6 billion more investment in infrastructure than that planned by this Government over the next three years. Will he confirm those numbers?

Oral Answers to Questions

Debate between Rachel Reeves and Danny Alexander

Tuesday 26th June 2012 Commons Chamber

[Danny Alexander]

I am grateful to my hon. Friend for that question. He is, of course, right to say that the recent figures show that unemployment has been falling, and that is good news, of course. Inflation is also coming down, which is good news for hard-pressed consumers.

[Rachel Reeves (Leeds West) (Lab)]

Does the Chief Secretary think the fact that the economy is in recession explains why today’s figures show that borrowing is going up, not down as the Government intended?

[Danny Alexander]

As I said to the right hon. Member for East Ham (Stephen Timms), the figures reflect a combination of things, including the fact that departmental spending has been held down by more than was forecast, but the automatic stabilisers in the economy are operating. That is the flexibility in our plan. It is because of the fiscal credibility the Government have brought to this country that we can do that.

[Rachel Reeves]

I do not think the Chief Secretary answered the question. Figures out this morning show that, with the economy in recession, tax receipts are falling, and the benefits bill is going up, so borrowing is already £4 billion higher this year than last. Is it not time that the Government admitted their plan has failed, and without action on jobs and growth, borrowing does not go down, it just goes up?

[Danny Alexander]

That is an astonishing question from the party that made the mess in the British economy that we are trying to clear up, and the party whose plans wanted this Government to borrow even more. That just goes to show what would have happened to the UK economy if we had been unfortunate enough to have the Labour party stay in power.

Public Appointees (Tax Arrangements)

Debate between Rachel Reeves and Danny Alexander

Wednesday 23rd May 2012 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I thank the Chief Secretary for his statement and for providing advance notice of it. We welcome this review of the pay and tax arrangements of senior public servants.

At a time when ordinary families and businesses are bearing the brunt of the recession that this Government have created and at a time when more than 700,000 jobs in the public sector are being cut while ordinary public service workers who keep our NHS, schools and police services running have had their pay frozen and their pension contributions increased, people will be shocked that more than 2,000 senior public servants, many earning several times the average public sector wage, have been paid in a way that allows them to avoid paying their fair share of tax, and that 1,200 of these deals have been done by the present Government in the past two years.

The vast majority of working people in this country have no choice over how or whether to pay the tax that they owe and they will feel that those who benefit from the highest public sector salaries have a special responsibility to make their proper contribution to the funding of the public services on which we all rely and to which they owe their generous salaries. We should all be clear that if the taxpayer is paying someone a living, particularly a better living than the vast majority of taxpayers enjoy, that person has a duty to pay their fair share of tax and the Government have a duty to ensure that they do so.

The statement is a valuable step towards greater transparency and accountability and we welcome that, but I have a number of questions that I hope the Chief Secretary can answer today. First, on the question of the chief executive of the Student Loans Company, we now know that he was appointed at a salary significantly higher than that of his predecessor and that he potentially avoided paying around £42,000 annually in tax, an amount almost twice the average public sector salary. Will the Chief Secretary tell us which members of the Government agreed to the arrangement made with the chief executive of the Student Loans Company and which members of the Government were aware of the arrangements before the matter came to the public attention in February? Have changes been made to his payment arrangements since then and can we be assured that he is now paying his full share of income tax and national insurance? If not, when can we have that assurance? If his contract has been altered, has there been any cost to the taxpayer in doing so?

The Government committed to publishing details of all public servants paid more than £150,000, yet the chief executive of the Student Loans Company was not on the list published in 2011 despite, as we know, earning £182,000 and despite the fact that his predecessor was listed. Will the Chief Secretary explain why the chief executive’s name was not on that list and can he tell us if any other public servants paid more than £150,000 have not been listed so far and whether they will be listed in the 2012 publication?

Secondly, on the subject of the extent of the problem and the scope of the review, will the Chief Secretary confirm how many such deals were signed off since February, when the affairs of the chief executive of the Student Loans Company came to light? Will he confirm that those individuals paid more than the Prime Minister will have been personally approved by the Chief Secretary? How many has he personally approved? If any did not come to him for approval, can he explain why?

The review’s findings cover only people who earn more than £58,000, which is more than twice the average annual salary in this country. Will the Chief Secretary tell us why his review excluded anyone on less than £58,000 a year, and if he will return to the House with findings that include all such cases? In those cases where a public servant was not being paid on payroll, were the individuals concerned paying their proper share of income tax or national insurance? What was the cost to the Exchequer of those arrangements?

Despite the emphasis on transparency, the findings presented today do not include local authorities, non-maintained schools, public broadcasting authorities or other publicly owned companies. Those areas account for a substantial portion of the public sector pay bill. When will the Chief Secretary come to the House with figures that cover those areas? It is not enough for him merely to encourage the publication of that information by others.

The findings also do not cover publicly owned banks. I think that taxpayers who have paid to rescue those banks would expect those employed by the banks to be paying their tax at the appropriate rate. Will the Chief Secretary conduct a review of the extent of such arrangements in the publicly owned banks?

The findings also do not cover privatised or contracted-out services. Does the Chief Secretary think that those earning large incomes from taxpayer-funded contracts should be expected to pay their proper share of tax, and what steps will he take to ensure that that is happening?

Thirdly, as regards what the Government will do next, the Chief Secretary has told us that there will be a new presumption that the most senior staff must be on the payroll. How does he define “the most senior staff” for those purposes? Will he give a clearer definition of the exceptional circumstances in which he will allow some public servants to continue receiving their salaries off the public sector payroll? Will he give an undertaking that those cases for which those exceptions have been made will be made public and that the exceptional reasons for them will be given?

In future cases, will Departments be allowed to seek assurances about the tax affairs of public appointees with off-payroll arrangements, or will they be required to do so, as this morning’s news reports imply? If they will not be required to do so, why not? Why not have that duty to seek such assurances?

Where these arrangements are disallowed for current or future appointees, can the Chief Secretary give us his assurance that their salaries will not rise to compensate them for the loss of net income that may result? Can the Chief Secretary confirm that in accordance with previous commitments given on transparency and accountability, all those covered by the review whose earnings exceed £150,000 will be included in the Government’s annual list of people earning more than this figure?

On the wider issue that the Chief Secretary mentioned—how IR35 laws are used to avoid tax beyond the public sector, which clearly needs to be addressed—can he guarantee that HMRC will have sufficient resources to monitor, manage and enforce the full payment of taxes at a time when it is being asked to absorb £2 billion-worth of cuts to its budget?

In conclusion, the Government need to ensure value for money for every pound of taxpayer money spent, especially at a time of wage restraint for nurses, teachers and police, and huge cuts in the number of people working in the public sector, so the Opposition welcome the Chief Secretary’s commitment to rein in the avoidance of tax, but I hope this will apply to all those who are paid by the taxpayer, and that there will be genuine transparency in pay and in any exceptions to the rules set out today.

[Danny Alexander]

I am grateful for the shadow Chief Secretary’s welcome for the steps that I announced today, though it was striking that in her response there was no reference at all to the fact that many of these arrangements date back to the time of the previous Government. About 40% of the cases identified began work under the previous Government.

If the hon. Lady wants to know more about why those arrangements came into place, she could ask her Front-Bench colleagues if they were here. She could ask the Leader of the Opposition, for example, as two cases date back to his time as Secretary of State for Energy and Climate Change. She could ask the shadow Home Secretary, as nine cases date back to her time as Secretary of State for Work and Pensions. She could ask the shadow Health Secretary, as 45 cases date back to his time as Secretary of State for Health. She could ask her colleague the shadow Chancellor, because at least 24 cases date back to his time as Secretary of State for Education. Yes, it is once again their mess and we are cleaning it up.

The hon. Lady asked a few questions. With reference to the chief executive of the Student Loans Company, as I said in answer to the urgent question from the right hon. Member for Newcastle upon Tyne East (Mr Brown) in February, the individual concerned went on the payroll straight away—that day. I announced that at the time of that statement, which I think the hon. Lady responded to. Of course, going on the payroll was the appropriate thing to do. As I made clear then, I had no knowledge of any tax benefit to an individual. As is the practice with cases where those involved are earning more than the Prime Minister’s salary, the approval is given within the Department. My role as Chief Secretary is to examine the salary level to make sure that it is consistent with the pay restraint that we are properly putting in place across the public sector.

This review looked at the salary level above £58,200 because that is the minimum salary level in the senior civil service, and it focused on senior public service appointments. These rules will be available for Departments to apply more generally, should they wish to do so. As I said in my statement, the review was not looking for evidence of tax avoidance because individual tax arrangements are a matter of taxpayer confidentiality, but all the results of the review from across Government have been passed to Her Majesty’s Revenue and Customs so that they can investigate if they choose to do so.

I referred in my statement to organisations that are not within the control of central Government, such as local authorities, the BBC and so on, but I am sure the many Labour councils around the country will have heard the shadow Chief Secretary’s remarks and will be bringing forward as a matter of urgency transparent publication of all the arrangements in their local authorities. I look forward very much to seeing that.

In relation to IR35, I should remind the House that in the spending review we provided an additional £900 million to Her Majesty’s Revenue and Customs specifically to focus on their work tackling tax evasion and tax avoidance. That will include resources to investigate cases caught out by the review or cases under IR35. The hon. Lady will know that the Office of Tax Simplification looked at the operation of IR35 last year and we are carrying forward some of its recommendations, but the proposal on which we are launching a consultation today—that controlling persons in organisations should, as a matter of course, be on the payroll—will strengthen the IR35 regime, which I hope Members on both sides of the House will welcome.

Business and the Economy

Debate between Rachel Reeves and Danny Alexander

Monday 14th May 2012 Commons Chamber

[Danny Alexander]

I was about to come on to the mess that the Labour party made of our economy, but the right hon. Gentleman’s question causes me to bring those remarks forward. One of the most calamitous failures of the last Labour Government was the complete failure to regulate the financial sector and to control the excesses that built up in the banking system, and the figures he gave are just one example of that. The banking Bill will implement the reforms that are necessary to deal with some of the excesses and, more importantly, to protect the taxpayer and the British economy from the sorts of problems that previously arose. It was very striking that in neither Labour Front-Bench speech did we hear any apology for the previous Government’s failure to regulate the banks properly, just as we heard no apology for the mess they made of our public finances and the many other mistakes they made, too.

[Rachel Reeves]

Will the Chief Secretary give way?

[Danny Alexander]

No. I have given way to the hon. Lady’s Front-Bench colleague three times, and I am now going to press on. I have only two minutes left, and she used up plenty of time.

There were a number of speeches about the groceries code adjudicator, including by the hon. Member for Macclesfield (David Rutley) and my hon. Friend the Member for St Ives (Andrew George), who played an important role in promoting the idea of the GCA and rightly welcomed the fact that the Government will take that forward. A number of comments were made, especially by Opposition Members but also from the Government Benches, on the enterprise and regulatory reform Bill. By and large, its measures on directors’ pay were welcomed, although concerns were expressed, particularly by Labour Members, about the proposals on employment law. The hon. Member for Bolton West (Julie Hilling) made that a key point in her speech, although I noticed that she welcomed the substance of the measures in the Bill, which are to do with providing more options before a tribunal is reached to enable complainants to resolve their case without the need to go through what she rightly describes as an often painful and expensive process. It is important that those measures are carried forward, and they will make a difference for many small businesses.

The economic context was an important theme in this debate, and Members on the Government Benches are fully aware that addressing the key issues is no easy task in the current economic climate, not least because of the crippling legacy the last Government left to us: a decade of unbalanced growth that left the UK one of the most indebted countries in the world; a decade that resulted in our having the most highly leveraged financial system of any major economy; and a decade that meant the UK entered the economic crisis with the highest structural deficit in the G7. All that meant that the UK was one of the hardest hit countries in the world when the crisis came.

Our recession was among the deepest and our deficit among the largest, which means that our challenge to deliver a sustainable recovery is among the greatest. Let me remind the House that when this Government came into office we inherited the largest peacetime Budget deficit this country has ever faced and the largest forecast deficit in the G20—larger than those of many of the countries mired in the sovereign debt storm in the euro area. It is only because of the decisive and immediate action we took that we have sheltered the UK from the worst of that debt storm.

The measures in the Queen’s Speech represent part of a bold and wide-ranging programme of economic reform: a strategy to rid the economy of the debt burden left by the previous Government; a strategy to secure our stability at a time of global instability; and a strategy that puts private sector enterprise, ambition and innovation at the heart of our recovery. It is the right recipe to clean up the mess that the Labour party left us and to bring this country back to sustainable prosperity.

Finance (No. 4) Bill

Debate between Rachel Reeves and Danny Alexander

Monday 16th April 2012 Commons Chamber

[Danny Alexander]

My right hon. Friend is right that the single most significant measure in the Budget was the largest ever increase in the income tax personal allowance. I will dwell on that in detail in a moment but his point—

[Rachel Reeves (Leeds West) (Lab)]

rose—

[Danny Alexander]

I shall finish my response to the previous intervention before gladly taking another one.

By far the largest measure in the Budget was the £3.5 billion tax cut for people on low and middle incomes through the largest ever increase in the income tax personal allowance—a massive support to 24 million working people across the country—and my right hon. Friend is absolutely right to draw attention to it.

[Rachel Reeves]

Will the Chief Secretary confirm the Institute for Fiscal Studies’ numbers showing that with the changes to the personal allowance and other changes—for example, to tax credits—the average family with children will be £511 worse off from this month?

[Danny Alexander]

No, I will not confirm those figures. According to my figures, 23 million individuals will be better off as a result of the personal allowance change—[Interruption.] A number of families are affected by our tax credit changes but many more benefit from our income tax changes.

--- Later in debate ---

[Rachel Reeves]

Will the right hon. Gentleman give way?

[Danny Alexander]

No, I want to make some progress, and the hon. Member for Pontypridd (Owen Smith) has already intervened on this point.

--- Later in debate ---

[Danny Alexander]

I certainly can confirm that, and I shall bring some proposals before the House in due course. The hon. Gentleman may recall that it was the case of the chief executive of the Student Loans Company that brought this issue to light. We have conducted an investigation into this practice in and across government, which has highlighted the fact that this process is far too widespread. As I say, I shall announce the details in due course, but the hon. Gentleman can rest assured that the Government take this issue very seriously indeed.

Debt buy-back measures announced last month will raise more than £500 million from banks that tried to avoid paying their due tax. In addition, the introduction of the UK-Switzerland agreement into legislation will help to ensure that we can tackle the tax loss from those who put their money into Swiss banks to evade paying tax.

Through the anti-avoidance measures in this year’s Finance Bill, we are already increasing revenue over the next five years by around £l billion and are protecting a further £10 billion that could have been lost. Going even further, we will consult on the potential for a general anti-avoidance rule—a new rule that will at last put the Government one step ahead of the tax avoiders. It is because of these far-reaching reforms that we will raise £500 million more each and every year from the wealthiest in our society. That is five times more than we lose by cutting the ineffective and uncompetitive 50p tax rate.

The 50p rate raised just a fraction of the amount that the previous Government said it would raise, but by cutting the rate to 45p, the direct cost to the Exchequer is only £100 million—a figure certified by the independent Office for Budget Responsibility, which I thought the Labour party welcomed, which described the figure as “central and reasonable”. Instead, the measures we have announced in the Budget will raise considerably more from the wealthy—five times more in total—allowing us to help millions of people on lower incomes to keep more of their earnings through the largest ever increase in the income tax personal allowance.

[Rachel Reeves]

Figures released by the Treasury today show that of those people earning more than £10 million, 72% pay the full top rate of tax, so can the right hon. Gentleman confirm that they will be receiving on average sums amounting to tens of thousands and in some cases hundreds of thousands of pounds because of the cut in the top rate of tax?

[Danny Alexander]

As the report from Her Majesty’s Customs and Excise, certified by the independent Office for Budget Responsibility, showed, the cost of reducing the rate was small, precisely because the tax did not yield the amounts we were promised by the previous Government. Instead, by putting our measures in place—the cap on uncapped tax reliefs, clamping down on stamp duty avoidance, the general anti-avoidance rule and many other measures I have mentioned—we will get more money from the wealthiest, who are precisely the people the hon. Lady talks about—

[Rachel Reeves]

Will the right hon. Gentleman give way?

[Danny Alexander]

No, I want to make some progress. The hon. Lady has intervened twice on this subject, and her colleagues intervened once, and they have not said anything new.

Oral Answers to Questions

Debate between Rachel Reeves and Danny Alexander

Tuesday 24th January 2012 Commons Chamber

[Danny Alexander]

Of course, as the hon. Gentleman says, I cannot and will not comment on ongoing individual cases, but he is right to say that the wealthiest need to pay their fair share. That was why we announced in the spending review an extra £900 million of funding for tackling tax avoidance and evasion, which has helped to set up a new specialist unit, which became operational last year, targeting offshore evasion. High-profile tax evasion cases could become more commonplace in future, and our message to tax dodgers is: “No matter how well known you are, how clever you think your accounts are or how far away you hide your money, we are coming to get you.”

[Rachel Reeves (Leeds West) (Lab)]

The Chief Secretary says that the Government’s fiscal plans are working and that only the eurozone has thrown them off course. Tomorrow, we will know by how much the UK economy grew in 2011, so let me ask him a simple question. In its last forecast, did the Office for Budget Responsibility revise up or down its estimate for growth in the eurozone in 2011?

[Danny Alexander]

The Office for Budget Responsibility made significant changes to its forecasts for the UK and for other countries. It made a significant change to its forecast for how much damage was done to the UK economy during the time when the hon. Lady’s party was in government, suggesting that our economy is now about 13% smaller than it otherwise would have been.

Yesterday was the eighth anniversary of the shadow Chancellor’s now infamous Ken Dixon lecture, when he rightly said that long-term interest rates were

“the simplest measure of monetary and fiscal policy credibility”.

Then, 10-year gilt rates were 4.76%. Yesterday, they were 2.16%. Case closed.

[Rachel Reeves]

Given that the Government went to the trouble of setting up the Office for Budget Responsibility, one would expect that the Chief Secretary would read its forecasts. The reality is that it revised up its forecast for growth in the eurozone in 2011 and revised down its forecast for growth in the United Kingdom. The Government like to blame everybody except themselves for the economic troubles. First they blamed the snow, then they blamed the royal wedding, now they are blaming the eurozone. When will they take responsibility for their own actions, which choked off the economic recovery a year ago by cutting too far and too fast? As a result, they are borrowing an extra £158 billion. That is the cost of this Government’s economic failure.

[Danny Alexander]

Once again, the hon. Lady is wrong in her economic policy pronouncements. The Office for Budget Responsibility has the UK growing more slowly this year, but faster than countries in the eurozone in the next few years. That is a testament to the Government’s economic policies. If she wants to know who is at least partly responsible for the mess that the country is in, she should just look immediately to her left. It has come to something when Katie Price’s tweets make more sense about the economy than Labour Front Benchers.

Youth Unemployment and Bank Bonuses

Debate between Rachel Reeves and Danny Alexander

Monday 23rd January 2012 Commons Chamber

[Danny Alexander]

I have heard nothing coherent from the Opposition, and I have heard nothing from the business community in this country but support for our policies to deal with the deficit and restore this country’s economic credibility. The coalition has never shirked its responsibility to take tough and sometimes unpopular decisions to tackle the deficit and pull the country out of the hole that the previous Government dug. Because we did not delay, and because we took action to get ahead of the curve, we can cut the deficit on our own terms and shelter the UK from the debt storm that has engulfed our nearest neighbours.

[Rachel Reeves]

The right hon. Gentleman says that the Government are tackling the deficit, but will he confirm how much extra borrowing there will be during this Parliament, compared with the prediction when they took office? Is that not a cost of their failed economic policies?

[Danny Alexander]

I can confirm that according to the latest forecast, there will be significantly increased borrowing compared with the previous one. The hon. Lady should have explained in her opening speech that her policies involve substantial further increases in borrowing, which would destroy this country’s economic credibility and the hard-won low interest rates that we have achieved.

As a result of our action, we have record low bond yields that feed through to record low interest rates, which benefit households paying mortgages and businesses refinancing loans right across the country. Whereas our bond yields are just 2.1%, those of Spain have risen to 5.5%, those of Italy remain over 6%, and those of Greece have climbed to a staggering 34%. Even a 1% rise in our market interest rates would force taxpayers to find an extra £21 billion in debt interest payments. A 1% rise in effective mortgage rates would result in an extra £10 billion for mortgage payments.

The Opposition have had 18 months to come to terms with the mess they created, but they still do not get it. It has taken them 18 months to move from the wrong place to all over the place. The Leader of the Opposition called the pay freeze an

“ideological attack on the public sector”,

but he now accepts it. The shadow Chief Secretary to the Treasury called the uprating of pensions with the consumer prices index an “ideologically driven move”, but it is a move that the Opposition have now accepted for their party’s own pension scheme. So let us be clear—financial discipline is not ideological; it is a necessary condition for effective government. In the past 10 days, members of the Labour shadow Cabinet have succeeded in proving that they cannot even convince themselves of the credibility of their economic policy.

--- Later in debate ---

[Danny Alexander]

I do not think that those on the Opposition Front were trying to shout the apology that the country wants from them. They should say sorry, too, for letting the deficit and the country’s debt get out of control. Instead, all we have heard today is the apology of a speech made by the shadow Chief Secretary.

[Rachel Reeves]

I wonder when the electorate might get an apology from the Liberal Democrats for trebling university tuition fees and imposing a VAT bombshell.

[Danny Alexander]

I am sorry that the shadow Chief Secretary did not take the opportunity to offer an apology for the terrible mess made by her party and the Government of which the shadow Chancellor was a leading member.

It is the coalition Government who are investing in skills, infrastructure and innovation to create new opportunities in the recovery. It is this coalition that is reforming a broken financial sector to entrench greater stability and embed long-term sustainability. It is this coalition Government alone who are determined to face up to today’s economic challenges to build tomorrow’s fair, prosperous and sustainable economy.

Public Service Pensions

Debate between Rachel Reeves and Danny Alexander

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

Opposition Members never have any answers, so they chunter from the sidelines instead.

At the same time, by offering transferred staff the right to remain members of the public service scheme, we are no longer requiring private, voluntary and social enterprise providers to take on the risks of defined benefit that deter many from bidding for contracts in the first place. Replacing so-called bulk transfers of pensions with continued access to public sector schemes means that we continue to protect public service workers’ pensions, manage the risk to the taxpayer and forge ahead with our ambitious plans for public service reform.

I have made the commitment that these reforms will be sustained for at least 25 years. The Government intend to include provisions on the face of the forthcoming public service pensions Bill to ensure that a high bar is set for future Governments to change the design of the schemes.

What does this deal really mean? For our work force, it means that they will continue to receive the best-quality pensions available in this country—and rightly so. In the private sector, these pensions could be bought only at a cost of one third of salary. This is a proper reward for a lifetime’s commitment to serving the public. The new scheme is fairer to women too. By moving to career average, we will give a better pension in future to those, mainly women, who have low or steady salaries throughout their careers.

The Government have been clear that because we are living longer, public service workers must work a bit longer and pay a little more for their pensions. But in return we have also made an important commitment—that at retirement, those on low and middle incomes will get at least as good a pension as they do now. I can confirm today that we have met that commitment. For people who depend on our public services, it means that most unions will be asking their executives to lift the threat of further strike action while work is done to conclude the final agreement, and I hope that the remaining unions will do the same. For the taxpayer, it means that tens of billions of pounds extra that would have been spent on unreformed pensions over the next 30 years is now available for other pressing demands. These are reforms that significantly improve the long-term fiscal sustainability of this country, and reinforce the credibility of our fiscal stance.

The Office for Budget Responsibility will provide a forecast of the savings in its next fiscal sustainability report. For industrial relations, I believe this shows that it is possible to reach agreement through negotiation in good faith, based on clear objectives. That is the right way to approach relations between government and the trade unions. Sometimes the talks have been difficult, but it has been right to stay at the table. In these difficult times, it is important to show that people can come together to achieve genuine reform, preserving the best of the past, but recognising the realities of the future. This is a fair deal for public service workers, an affordable deal for the taxpayer, and a good deal for the country. I commend this statement to the House.

[Rachel Reeves (Leeds West) (Lab)]

I thank the Chief Secretary for his statement. Families and businesses who rely on public services, as well as the millions of public service workers worried about their finances and their future, will be relieved to see that real progress is finally being made in these talks. Labour has been clear from the beginning that the Government and public service employees would need to find ways of adjusting to the welcome fact that people are living longer. We said in response to the Chief Secretary’s previous statement on 2 November that any resolution to the dispute needed to be fair to taxpayers, fair to public service employees and genuinely sustainable for the long term, and that that would be endangered by a search for quick cash savings or the playing of party political games.

The vast majority of public sector workers, including dinner ladies, community nurses and police community support officers, retire on very modest pensions; moreover, they are already being hit hard by a pay freeze and worried about mounting redundancies. It was clear to us that tearing up decent public service pension schemes or imposing punitive and unaffordable contribution increases would be entirely counter-productive if it resulted in lower savings and inadequate retirement incomes that only left more people retiring into poverty, dependent on state benefits in their old age.

We will be looking at the detail of these proposals on the basis of the tests that we have set out. In particular, can the Chief Secretary offer clarification on the following points? Can he set out the timetable for further consultations and negotiations for each of the four schemes discussed today? When will he come forward with details for the police, armed forces, judiciary and fire service pension schemes? For each scheme, can he give us the new schedules for contribution increases across the schemes, the timetable according to which they will be introduced and how he will ensure fairness and affordability for lower-paid employees, especially those who work part time?

For each scheme, can the Chief Secretary give us the new accrual rates and methodologies for uprating pensions, and say what the timetables for introducing them will be? What assessment has he made of the impact of the changes on the number of public sector employees opting out of the schemes, and the implications of that for future scheme income and viability, as well as future pensioner poverty and the demands on state benefits?

How will the Government ensure that older workers, especially those in physically demanding jobs, are not forced to work beyond a point that would be detrimental to their health, or their ability to do their job? What will the Government do to maintain the morale and engagement of public service employees doing vital work for our country at a time of falling real pay, heightened job insecurity and significant changes to their pensions? Although we are pleased that there is agreement on a fair deal, there is a genuine fear across the public sector that the Government intend to use that deal more as they privatise parts of our NHS and schools, as well as other parts of our public sector. Crucially, how will the Government make good on their promise to deliver a deal that is secure and sustainable for the next 25 years, so that in future we do not face the uncertainty, anxiety and disruption that we have seen over the past year?

The Chief Secretary has made much of Lord Hutton’s review of public sector pensions. We have always said that Lord Hutton’s report provided an important starting point for negotiations, and we have always recognised that change is needed. However, Lord Hutton has also stressed the need to approach these issues in a careful and balanced way, with particular care for the affordability of any additional contributions for lower-paid public service workers, and to avoid fuelling a race to the bottom on pension provision. However, the Government have made it much harder to make progress on many of Lord Hutton’s sensible long-term recommendations by seeking to impose, prior to any negotiations, a steep 3.2% rise in contributions and a permanent switch in the way in which pensions are uprated—from the retail prices index to the consumer prices index—neither of which formed part of Lord Hutton’s recommendations.

However, it is good to see that the Chief Secretary recognises that he needed to do more to address the genuine concerns about his plans over the last 10 months—concerns about the need to do more to protect lower-paid public service employees from unaffordable increases in contributions; about the need to reassure older employees worried about how long they will have to work; and about the need to ensure that people who dedicate their working lives to our public services can expect a decent income in retirement. However, it must be a matter of regret for everyone in this House that it took 10 months of stalemated negotiations and strike action that resulted in closed schools, cancelled operations and disrupted lives for families and businesses around the country, for us to reach this point, just five days before Christmas.

The last Government agreed and established a framework to negotiate reform and manage long-term costs; this Government chose to tear that up and take an aggressive and provocative approach to this serious and sensitive issue. For months the Government have refused to engage in constructive talks to address the issues concerning public service employees, engaging instead in unhelpful megaphone diplomacy. Major changes to public service employees’ current contributions and future security have been announced without warning and imposed without negotiation. Last month’s strikes could and should have been avoided. In short, the Government have displayed negotiating skills similar to those that we saw at the European summit, being more interested in going for the cheap headline than putting in the hard graft necessary to get an agreement that works for everybody.

Clearly the Government still have a lot of work to do over the next few weeks. Ministers and employers will need to clarify the details of their latest proposals, and trade unions will rightly want to inform and consult their members. Reaching a final agreement will be a difficult and delicate process, and we must hope that it is not jeopardised by provocative tactics or inflammatory rhetoric, as we have seen in previous months. We hope that further progress will be made and that early in the new year the Chief Secretary will be able to return to the House and report that a fair and sustainable agreement has been reached, and that we will not see further industrial action. That is what the Opposition want to see, and it is what the country wants to see as well.

[Danny Alexander]

I am not sure that the hon. Lady was listening to anything that I said in my statement, because I have already answered almost all the points that she raised. She certainly seems to have forgotten that this is the season of good will. She said that the Opposition’s position was clear, but she did not say what it was. As she and her party have opposed most of the reforms, perhaps they should have the good grace to admit that they got it wrong. It is no doubt uncomfortable for the Labour party that many of its union paymasters have been willing to come to an agreement in the interests of their members—and, indeed, in the national interest.

Lord Hutton’s contribution was significant; indeed, he is the only Labour Member—or former Labour Member—who has made a contribution. It is worth telling the hon. Lady that he welcomes the deals that we have announced today. She asked a question about the agreement put in place by the previous Government, so let me tell her what Lord Hutton said about that cap and share deal:

“Cap and share cannot take account of the increases in cost of pensions over recent decades because people have been living longer. Also, untested, complex cap and share arrangements cannot of themselves, address the underlying issue of structural reforms, nor significantly reduce current costs to taxpayers.”

That is why we could not rest with the position agreed with the previous Government.

The hon. Lady asked a few questions about the timetable. As I said in my statement, the timetable for reaching heads of agreement is finished. Negotiations on the heads of terms have finished, and as I said in my statement, those heads of terms are agreed by most unions in all schemes. That is a good result, which I hope she would welcome. The other schemes—for the judiciary, armed forces, police and so on—will be agreed in due course. For the firefighters the deadline is 20 January; for the police service the second round of the Winsor report, due at the end of January, will take forward that process.

I think that the hon. Lady still opposes the increase in member pension contributions, but I have to tell her that, as a consequence of today’s announcements, that is continuing. She asked a question about the relationship between accrual rates and revaluation factors. I listed the precise accrual rates and precise revaluation factors for each scheme in my statement; I do not propose to repeat them now, but they will certainly be available in Hansard later. As for older workers, one of the reasons why the trade unions favoured the relationship in question between accrual rates and revaluation is precisely that it works more strongly to the advantage of older workers. We will bring forward legislation, I hope in the next Session, that will include the changes that we want to make to ensure the 25-year guarantee.

The truth about this exchange, as with so many others, is that there are two parties on this side of the House acting in the national interest and one party on the other side that seems to find it increasingly hard to see even its own self-interest. While we on this side of the House are working together to build confidence in the future of the British economy, Labour Members are fighting with each other, as they lose confidence in their own leader. As a result of this statement, at least the hon. Lady can assure the Leader of the Opposition that if he falls on his sword there will be a good pension available to him. All that the British people will see is a party that has not a shred of economic credibility left.

Public Service Pensions

Debate between Rachel Reeves and Danny Alexander

Wednesday 2nd November 2011 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I thank the Chief Secretary for his statement and for advance notice of it. I welcome today’s signal that the Government are now willing to enter into proper discussions. That is a welcome change from the months of Treasury and Cabinet Office intransigence that came before.

Too often in recent months it has appeared that the Government have not understood that strikes are a sign of failure on both sides. Let us be clear: it was this Government’s decision to rip up the framework established by the last Labour Government and to go much further much faster. In particular, it was the Chancellor’s decision to pre-empt Lord Hutton and impose a 3% surcharge for all employees announced in the spending review last year, before negotiations had even begun. That decision suggested that rather than negotiating in good faith, the Government were intent on acting unilaterally and so provoking confrontation. It is good news, therefore, that the Government have at last made a constructive move to begin proper discussions.

Let me be clear: no one wants strike action. The Government and the unions have a duty to show that they have exhausted every possible avenue. Our focus is on those who rely on services that would be affected by strikes—from parents who will have to take a day off work to those who rely on home help. However, public sector workers—nurses, teachers and dinner ladies—also care too much about the people they serve day in, day out to consider action as anything other than a last resort, yet those who work in front-line public services are also desperately worried about their future and about whether they will be able to afford retirement. It is for the Government to ensure, therefore, that change is agreed and delivered in a way that brings with them the nurses, teachers, home helps and dinner ladies affected by the changes.

It is welcome that the Government have now recognised that announcing tactical offers on the airwaves, rather than constructive proposals in proper negotiations, is not the right way to proceed. However, I would suggest three key tests for a fair agreement. First, on affordability, do the changes deliver a fair deal for taxpayers when times are tough, taxes are rising and spending is being cut? Secondly, on fairness, do they deliver a fair deal for public sector workers on low and middle incomes, whose pensions are far from gold-plated and who have given so much to the services in which they work? Thirdly, on sustainability, do the changes deliver a workable settlement for the long term that does not undermine the sustainability of existing schemes and which can be flexible in the face of rising life expectancy? That is how we will judge the outcome of the negotiations.

To meet those tests, it has always been clear that public sector workers will need to accept higher contributions on average and, given that people are living longer, an increase in the retirement age, too. That was fundamental to the arrangements put in place by the previous Government for capping the Government’s contributions and then, as costs rose, negotiating how to increase workers’ contributions or change entitlements. Equally, however, the Government have to accept that for many low-paid staff, their pension is the only means of security in retirement. In a time of pay freezes, sharp increases in contributions risk hardship today and increased levels of opt-out, pushing up pensioner poverty in the future, which is why we have been critical of the confrontational stance taken by the Government and of the rush to early industrial action in June.

We will see in the coming days whether these moves are sufficient to restore the much-needed trust in these discussions that could ensure that, even at this late stage, there is still time for both sides to step back from the brink. We must all study the detail of what is now on the table, but on affordability will the Chief Secretary set out the cost of these concessions to the public purse? As he rightly sets out the transitional protections for workers in their 50s and tapering arrangements for those in their late-40s, can he say whether both these additional costs will have to be made by savings elsewhere in the system? On fairness, can he confirm that the proposed increase in contributions, if applied across the board, would still mean an increase in contributions for low-paid and part-time workers earning less than £15,000 a year? Have the Government assessed the impact of the pay freeze on opt-out rates from public sector pension schemes to date?

On sustainability, has an assessment been made of the impact of the 3% increase in contributions proposed from April and of whether increased drop-out rates could affect the viability of funded schemes, such as the local government scheme? Is it the Chief Secretary’s intention that those affected as a result of the settlement will have the certainty of knowing that there will be no further changes for 25 years? How will he deliver on that commitment? Will he give the House a timetable for discussions over the next eight weeks, given his aim to secure agreement by the end of the year? I hope that he can reassure taxpayers and public sector workers—teachers, the police, home helps and others—on those points. The Government must leave no stone unturned in their negotiations to seek a genuinely sustainable agreement that is fair for public sector workers and taxpayers, and avoids a strike this autumn.

[Danny Alexander]

I am grateful to the hon. Lady for her response, although she left a few questions unanswered herself, which I shall come to.

On proper discussions, I reject what she said about the Government’s stance. Talks have been going on constructively for the last eight months. The Minister for the Cabinet Office and I have spent many, many hours in those discussions, and if the hon. Lady talked to the trade unions, she would discover that they, too, see them as constructive. She also referred to the previous Government’s cap and share arrangement. Let me tell her what Lord Hutton said about it in his report:

“Cap and share cannot take account of the increases in cost of pensions over recent decades because people have been living longer. Also, untested, complex cap and share arrangements cannot of themselves, address the underlying issue of structural reforms, nor significantly reduce current costs to taxpayers.”

In other words, the previous Government’s arrangements were simply not good enough at controlling the costs in the way we need to.

The hon. Lady asked me several questions; let me address them directly. As I said in my statement, transitional protections and tapering are outside the cost ceiling, so they will not be met at the expense of other arrangements, which may be negotiated on a scheme-by-scheme basis. On contributions, there was an assumption, audited by the Office for Budget Responsibility, about the impact that 1% of pay bill would have on opt-out rates, which I accept. We are engaged in a separate track of negotiations with the local government pension scheme—which the hon. Lady also mentioned—precisely in recognition of the fact that it is a funded scheme and that therefore different considerations apply.

On affordability—the first of the hon. Lady’s three tests—let me tell her that, yes, the changes are affordable. Her test is met. This test ensures—[Interruption.] Opposition Front Benchers are saying, “Part-time workers?” The contributions increase has been set out. We have ensured, on a scheme-by-scheme basis, that the contributions will be tiered according to income. Those earning less than £15,000 a year on a full-time equivalent basis will have zero—[Interruption.] The right hon. Member for Morley and Outwood (Ed Balls) likes to hector from a sedentary position. Instead of being the shadow chunterer, perhaps he will sit there and listen. We have made it clear that those earning up to £21,000 on a full-time equivalent basis will have a reduction. The full-time equivalent basis for pension reform is the basis—[Interruption.]

Oral Answers to Questions

Debate between Rachel Reeves and Danny Alexander

Tuesday 1st November 2011 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I must say that I find the Chief Secretary’s answers incredibly complacent. Given that unemployment is at a 17-year high and long-term youth unemployment has risen by more than 60% since the start of the year, we all know what impact the Chancellor’s policies have had on unemployment. Instead of being complacent, will the Government support calls for them to repeat the bankers’ bonus tax in order to create 100,000 extra youth jobs and to introduce a national insurance holiday for small businesses taking on new workers? That is what Labour has proposed in its five-point plan. We need policies that will get the economy moving again and reduce unemployment, thus reducing the deficit. When will the Government act?

[Danny Alexander]

The hon. Lady’s position would have more credibility if she recognised the fact that youth unemployment rose during Labour’s time in office, as did long-term unemployment. As for her proposal for a bonus tax, that was written off by the last Chancellor of the Exchequer, who said that it could not work. She should listen to her own colleagues first.

Jobs and Growth

Debate between Rachel Reeves and Danny Alexander

Wednesday 12th October 2011 Commons Chamber

[Danny Alexander]

No, I will not.

We will not return to growth on the back of what we might call predatory growth, based on spending money we do not have, so that when the music stops and the bills fall due, they have to be paid for by the rest of us. Instead, we are committed to building a new model of growth powered by investment, exports and enterprise, for example by investing in infrastructure. Over the four years of this spending review period, we will invest more in transport infrastructure than our predecessors managed in the previous four years.

[Rachel Reeves]

Before the general election, the Secretary of State for Business, Innovation and Skills said:

“Cuts without economic growth will not deal with the deficit.”

Does the Chief Secretary agree?

[Danny Alexander]

I do, and I am about to set out exactly what this Government are doing for economic growth, if I can be allowed two or three more minutes to fill in that point.

As I was saying, we are investing in infrastructure. Only two weeks ago, I announced the creation of a new “Growing Places” fund—half a billion pounds that will kick-start developments that are currently stalled, deliver on key infrastructure and create jobs.

As my hon. Friend the Member for South West Norfolk (Elizabeth Truss) said, we also have to stop the decay in our competitiveness that has marred the past decade. so we are cutting corporation tax to 23% by 2014, taking it to the lowest rate in the G7. We will increase the SME rate of research and development tax credits to 225% by April 2012, and we are tackling the problems of the imbalances in growth between regions, which a number of Members on both sides of the House have raised. That is why today, the Business Secretary announced the first of our new technology and innovation centres that are being established, and why we have committed £1.4 billion to the regional growth fund, which has committed to projects in the north-east, the north-west and across the country.

As the hon. Member for Middlesbrough (Sir Stuart Bell) rightly observed, we have also announced 22 enterprise zones that will attract hundreds of new start-up enterprises and create thousands of jobs by 2015. We are ensuring, too, that our young people have the skills to seize their opportunities through the recovery. We are supporting more apprenticeships than any previous Government—by the end of this Parliament we will deliver 250,000 more than the previous Government planned, on top of a total of 100,000 work experience placements.

I know that this is a difficult time for many people and families across the country, and that it is not much comfort to say that it would be very much worse if it were not for this Government’s determination to fix the failures of the past.