Section 5 of the European Communities (Amendment) Act 1993

Richard Fuller Excerpts

Monday 22nd April 2013 Commons Chamber

[Mr Cash]

Absolutely, and one of the greatest pleasures I have had in the past couple of years has been to have my hon. Friend serving on the European Scrutiny Committee, with the diligence, knowledge and judgment he brings to all these matters.

It is also stated, at paragraph 2.19, that

“Brazil, Russia, India and China taken together were the destination for 6.5 per cent of UK exports in 2011.”

The real problem here is that our exports certainly have to go to the BRIC countries and also to the rest of the Commonwealth, which is where the emerging markets are, as well as to the United States.

I strongly recommend that this House of Commons and this Government start waking up a bit. I really mean that, as I am very concerned indeed, as any right-minded person in this country should be.

It is also argued in this paper that:

“Between 2009 and 2012 UK goods exports to Brazil increased by 49 per cent, to Russia by 133 pre cent, to India by 59 per cent and to China by 96 per cent.”

I have heard those figures before, but I asked what our actual import penetration into China was in relation to that of the rest of the world. It is 2%. The 96% increase is entirely relative, therefore. The real question is how much we are managing to export into China. Germany exports into China 45% of all the EU exports into China. I do not cite that figure in order to denigrate the expert efficiency, determination and political will of those who run Germany, but I do say that we had better get our act together. Continuing to be locked into these absolutely penalising treaties is causing us enormous damage, when we could gain so much by trading not only with Europe, but with the rest of the world on a much more enhanced basis.

There is far too much discussion and not enough action, and I was glad to note the campaign launched today by 500 business men and run by Matthew Elliott, and I also commend the book about the euro by the Institute of Economic Affairs, which puts its finger on many of the problems in the euro area.

[Richard Fuller (Bedford) (Con)]

I am very interested in what my hon. Friend is saying. Does he agree that this report has given us an opportunity to put an alternative argument against the strong argument about commonality? I know he will draw the House’s attention to the interesting comments about Europe by the Chancellor of Germany today. My hon. Friend talks about those other economies, and there is an argument against commonality and for the UK having an opportunity to be able to trade with the rest of the world, but that is being lost as a result of such statements. Is there an opportunity for us to make this case, because I am not sure we are making it strongly enough?

[Mr Cash]

I agree with my hon. Friend. We must be realists. T. S. Eliot once said,

“human kind

Cannot bear very much reality”,

but Britain has got to wake up. It is crucial at this stage that we understand—in a constructive, not a negative, sense—that we have both a problem and an opportunity, but that opportunity will not last much longer, and we must not simply repeat the recitations and mantras about section 5 while not tackling the intrinsic problems.

These papers were, no doubt, prepared by worthy civil servants, but they may well not reflect the real situation. Let us look at the question of the level of debt, for instance. I mentioned that in an intervention on my right hon. Friend the Financial Secretary, and I gave him the percentage figures. However, under the previous Government—I now turn my attention to those on the Opposition Benches—I repeatedly said, along with my right hon. Friend the Member for Wokingham (Mr Redwood) and one or two other Members, that the debt that was accumulating under them was causing so much damage to our economy. Furthermore, as I said at the time of the last election in my manifesto—or, rather, in my personal message to my constituents—the stated debt levels, which is the key issue, were based on what could only be described as a lie.

Budget Resolutions and Economic Situation

Richard Fuller Excerpts

Thursday 21st March 2013 Commons Chamber

[Ed Balls]

Perhaps the hon. Lady should also study the book. The interesting thing is that the OBR is also forecasting that unemployment will rise, not fall. More jobs, unemployment rising—maybe there are more people in the country. Does she know what the OBR forecasts net migration to be in the next few years? Tens of thousands? No. Net migration of 140,000 every year. That is what is going on.

It is groundhog day too because, as a result of the present stagnation, the Chancellor’s fiscal plans are even more wildly out of control than they were a year ago. No wonder his fiscal credibility is in tatters. The Chancellor used to claim that the national debt would start to fall in 2015 from a peak of 69.7% of GDP. He now expects it to rise in 2015, to rise in 2016, to rise in 2017 and to hit a staggering not 69.7%, but 85.6% of GDP. And the reason the national debt is rising is that, as the OBR said yesterday, the Chancellor’s deficit reduction plan has stalled. The deficit is now expected to be the same next year as it is this year and as it was last year. It is not a deficit reduction plan anymore. That is why the Chancellor is now set to borrow—[Interruption.] The Chancellor should listen to this. He is now set to borrow £245 billion more than he planned, vastly more than the borrowing he inherited from the Labour Government.

[Richard Fuller (Bedford) (Con)]

While the vast army of PAs behind the shadow Chancellor search for a bullet point on Bedford, let me say that his criticisms are not falling very strongly, in part because his hands are dipped in red—the red ink of years of borrowing and debt. Does he not think that the arguments would be stronger if he moved to one side and gave his seat to the fresh-faced young man sitting next to him, the shadow Secretary of State for Business, Innovation and Skills?

[Ed Balls]

The voters of Bedford might be disappointed to find out the truth: compared with a year ago, the Chancellor will borrow £29 billion more than he planned this year, £59 billion more next year, £73 billion more the year after and £77 billion more the year after that. Mr Deputy Speaker, if you want to know who the borrowing Chancellor is, it is him. Do you know what he managed to do yesterday in his Budget documentation? He fiddled around and managed to say that borrowing this year is lower than it was last year by £0.1 billion. We know why: as the OBR confirms, the Chancellor and the Chief Secretary to the Treasury, when one would think they would be working on a plan for jobs and growth or reform of the banking system, have been scrabbling around and hacking away at spending in this year in a desperate attempt to try to get the borrowing down.

The detail is set out on page 13 of the OBR document. It shows that, compared even with the autumn statement, tax revenues are down this year by £5 billion but that since December the Chancellor has found a further so-called underspend of £3.4 billion, which he says is not like normal underspends. What does the OBR tell us about that so-called underspend. It states:

“It is very rare for the government to under-spend the departmental plans it has set out less than a year ago by such a wide margin...Our overall forecast of under-spending has a number of elements: money that the Treasury has agreed to allow departments to move into future years;…money that departments thought they would spend this year, but which they do not now expect to spend either this year or in the future; and payments (for example to some international institutions) that were due to be made late in the current financial year, but which are being delayed into 2013-14.”

The cheque is in the post, but it will not arrive until after 1 April in order to massage the figures. Who does the OBR say has been hardest hit? The answer is the national health service, which has been cut by over £2 billion this year. At the same time the NHS is losing more than 5,000 nurses, the Treasury scrabbles around to try to save the Chancellor’s face.

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[Vince Cable]

A CCS competition is taking place. As the Chancellor pointed out in his Budget, there is a recognition of the problems of energy-intensive industries in the north-east, Scunthorpe and south Wales. They will be given an extra year of support as a result of yesterday’s announcement.

[Richard Fuller]

I commend my right hon. Friend’s comments on exports—I have seen for myself UK exports to the Nigerian market. Does he agree that getting traditionally reluctant small and medium-sized business to export is key? Does he also agree that the employment allowance will enable some of our small businesses to take on those additional employees to attack those new markets?

[Vince Cable]

The hon. Gentleman is right on both counts. I was recently in Nigeria supporting that effort. If we are to have momentum, it must come through small and medium-sized companies. Frankly, the export effort in many emerging markets was neglected for most of the past decade—the relationships are not there and must be built up. He is also right that the employment allowance, which will help 400,000 micro-companies, is a big step forward and a big incentive to them to take on that extra member of staff.

In my concluding section, I shall address some of the big strategic choices made in the Budget. We can argue about temporary changes, but it is important that the country has a sense of direction. First, the industrial strategy gives a sense of direction; secondly, the changes in money and banking policy are fundamental after the crisis; and thirdly, the tax agenda creates a greater level of fairness.

On the industrial strategy, I was teased earlier about the “compelling vision” for the British economy, but we clearly need a vision of the economy that goes beyond one Parliament and Government, and that stretches decades ahead. That is why we have made the commitment to long-term planning and working in partnership with business in those sectors of the economy that need such a framework. We have produced agreements with the aerospace industry, and will do so with the automotive and biological sciences industries, and with the supply chains in renewable and non-renewable energy, which were desperately hollowed out in the years when manufacturing was neglected under the previous Government. We are trying to rebuild those supply chains.

A Back-Bench colleague made the point that we have an extra 70,000 jobs in manufacturing after 1 million were lost in the decade of the Labour Government. Of course, the industrial strategy is not just about manufacturing; it is about key service sectors such as education and higher education, and professional and financial services, which are equally important in driving exports.

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[George Freeman]

I will develop my argument a little further, if I may, as time is limited.

We need a credible programme for deficit reduction, a fair burden of taxation and a long-term vision for the British economy, and that is what the Budget delivered. Simon Walker of the Institute of Directors said yesterday:

“We applaud this Budget. The Chancellor has stuck to his guns and held his nerve—which is exactly what we wanted to see. Deficit reduction is not an optional policy, it is an absolute necessity, and he is right to reject the siren calls to abandon it.”

Plan A is right for three central reasons. First, it tackles the appalling structural debt legacy that we were bequeathed by the Opposition. Secondly, it does so in a way that is fair in allocating the burden of taxation that must be paid. Thirdly, it is bold in setting out the platform at the base of an industrial policy for a sustainable economic recovery in which future generations—particularly the current young generation, who will have to deal with the debt crisis—can have confidence.

Let me remind the House, particularly Opposition Front Benchers, of the nature of the debt legacy we inherited. We started with the worst debt to GDP ratio of any country in the western world, worse than that of Greece and other economies that have been put into special measures by the IMF. The annual deficit when we started was running at 11% of GDP and is now 7%—that, for the benefit of Opposition Front Benchers, is a reduction.

In the situation we inherited, the interest on our debts was set to rise, if we had not acted, to £76 billion a year. We were spending £1 on interest for every £4 the Government were spending on public services. The national debt was just short of £1 trillion—roughly £15,000 for every man, woman and child in this country. As 1 trillion is a big number and people are baffled by big numbers, let me try to break it down. If it took 11 days to pay off £1 million, how long would it take to pay off £1 billion? Thirty-two years—[Interruption.] Opposition Members might think that it is funny, but I can assure them I do not, my constituents do not and the young people who will have to claw their way out of the crisis do not. If it takes 11 days to pay off £1 million and 32 years to pay off £1 billion, it takes 32,000 years to pay off £1 trillion at the same rate.

The truth is that we inherited not just an annual deficit but a structural deficit. For the benefit of Opposition Members who are not aware of the difference, the structural deficit is that bit of the Budget which, even when the economy is growing, continues to haemorrhage money. The biggest drivers of our structural deficit are pensions, benefits and the NHS. The IFS pre-Budget briefing yesterday, which was made available to all parties, makes it clear that the structural deficit continues to put a black hole at the heart of our public finances. The IFS forecasts that between 2011 and 2018 we will be spending an extra £5 billion on pensions, £20 billion on benefits and £15 billion on the NHS. That is after the sensible and pragmatic reforms we have introduced. It is a legacy the Opposition should be ashamed of.

Plan A sets out three key ways of dealing with that—tackling the deficit, a fair burden of tax and a sustainable long-term platform for growth. We have cut the deficit by 30%, from 11% of GDP to 7%, although the shadow Chancellor seemed unable this morning to accept that that is indeed a reduction. The IFS has made it clear that under the Labour party’s plan B we would incur £201 billion more debt by 2016-17. Who on earth could think that borrowing another £200 billion, given that legacy, is the answer?

On the second part of plan A, the fairness of the burden of taxation, the Opposition have been scaremongering about it and need to understand it. First, the Chancellor has decided, rightly, to pay off 80% of the debt through public spending reductions and 20% through taxation. The burden of taxation is powerfully shifted towards those with the broadest shoulders. I remind the House that 1% of taxpayers in this country pay 25% of all tax, and 50% of our income tax is paid by the top 20%. We have taken 2 million people out of tax altogether. The £130 billion funding to help new homeowners is the largest package of support—far larger than anything the Opposition were asking for. The £6 billion relief on fuel duty is a massive support for hard-working families, and coming from a rural constituency I particularly welcome its effect on the rural economy. The beer duty measure, too, is a substantial one for rural communities where pubs are at the very heart of rural life; substantial help is also being provided with child care.

This is a Budget to help the working poor. Taken alongside the universal credit and the welfare reforms, it will have a substantial impact on those who are striving to get on. In the remaining seconds, I want to pay tribute to the Government’s work in laying the foundations for a sustainable economic recovery. We cannot borrow our way out of this crisis. We will have to trade our way out.

[Richard Fuller]

I would be interested to hear what my hon. Friend thinks should be the foundations of that strategy.

[George Freeman]

I thank my hon. Friend for that intervention. I believe that this country has every reason to be optimistic about our ability to trade our way out of the present crisis. Around the world the emerging nations are growing at a phenomenal rate—7% to 8% for the BRIC nations and the 11+ nations following them. They have extraordinary needs, and in the next 30 years they will go through a revolution in medicine, food, energy, professional services, IT and leisure that we took nearly 200 years to go through. In all the areas where we have a strong and mature offering, these countries will drive phenomenal demand in the years ahead.

I applaud the work the Government have done to lay the foundations in science and research funding, skills and the industrial strategy, on which we heard from colleagues earlier. In my own sector—life sciences, food, medicine and energy, three of the largest markets in the world—today, Astra Zeneca has made a major commitment to this country, investing £300 million in Cambridge and making us its global head of research and development. With this vision, people can be confident that we are tackling the debt crisis in a way that is fair and that will allow their children to be optimistic for a better future.

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[Steve McCabe (Birmingham, Selly Oak) (Lab)]

This is a Government whose central argument rests on the spurious claim that the economic crisis was national and all Labour’s fault up until 2010, and magically internationalised only after they came to power. With every passing day, the extent of that basic deception and the false conclusions drawn from it are exposed. We were told the pain would be worth it because the Chancellor would have the debt and the deficit under control by 2015. Now it will be 2017-18 and, according to PricewaterhouseCoopers, the current debt overshoot is likely to be £8 billion higher than predicted just three months ago.

This was the tomorrow budget for a tomorrow that never comes—almost anything of any value is put off until 2015 or beyond. With a Chancellor whose forecasts have proved worthless so far, just what kind of certainty does that provide? The Government’s claim is that the deficit is down by a third but the OBR’s figures show that it is down by less than a quarter, and there is no prospect of further cuts in the deficit in the next two years.

[Richard Fuller]

Does the hon. Gentleman think that the answer is to borrow more money?

[Steve McCabe]

The answer can be to borrow some money for investment, but not to squander it on rising unemployment and wasteful expenditure, which is what the Chancellor is doing. All the pain will simply be to stand still. The OBR has also pointed out that the public debt in 2015, rather than being the £37 billion the Chancellor originally promised, will actually be a staggering £108.4 billion. Just when are this lot going to learn that they have lost all right to lecture anybody about debt?

I welcome the cut in the duty on beer, although the VAT rise added 5p to a pint of beer, and the likely benefit of the measure will be offset by the loss of jobs and sales in the whisky industry, so it is not quite the achievement that some people might think. I am also pleased that the Chancellor has offered some certainty by scrapping, rather than postponing for the umpteenth time, the planned rise in petrol. The £3 billion lift in capital spending is welcome, but we need it now, not in 2015. His own fiscal rules allow him to borrow to invest: why does he not do so?

We can all welcome the cut in national insurance for small employers as probably the one genuinely growth-stimulating measure in the Budget. Perhaps that is not surprising, as it was our idea.

The Chancellor has once again promised a cut in corporation tax in 2015. Just like the now-forgotten triple A rating, stimulating inward investment by cuts to corporation tax is a Government mantra. It is not working, however. Foreign direct investment inflows to the UK fell between 2010 and 2011, and are now about a third of what they were before the crash. Meanwhile our total investment rate is 15% of GDP—the lowest in the G7—and our current account deficit is now at its highest since the 1980s. We are stifling opportunities for investment.

Legitimate foreign students are worth approximately £8 billion a year to the British economy, and that is being lost in pursuit of the Home Secretary’s immigration target. Simultaneously, she is letting in 30,000 people a year on temporary student visas that require no entry qualifications, no evidence of income and no guarantee of qualification. As usual, it is the wrong target at the wrong time. Similarly, the lack of Chinese tourists means that the very people we need to attract and to encourage to trade with us are now four times more likely to take their spending to France.

As usual, this was a Budget of missed opportunities. Where is the plan for a properly capitalised British investment bank of the kind operated by every other G7 country? There is nothing in the Budget about a target to decarbonise by 2030, but that is exactly the message that would provide certainty for the renewables supply chain and create jobs. Only one in 10 wind farm components are directly sourced in the UK. Why is it that the Chancellor is unable to see what everybody else can see?

The Chancellor called this a budget for an aspiration nation; it sounds more like alienation to me. He is presiding over what Professor Arnold Blumberg calls a zombie economy where rising inflation and no growth eats away at savings, strangles enterprise and innovation, and deprives small businesses of the capital and opportunities they need to grow. We have yet to see who the real beneficiaries of the abolition of stamp duty on share trading will be, but we know who it will not be. This is an alienation budget because the vast majority of our people are into their third year of pay cuts and falling livings standards, and the only ones doing okay are the millionaires in line for a tax cut. There is alienation as it emerges that the mortgage assistance scheme is actually a second home subsidy at the very time when the bedroom tax threatens to throw others out on to the street.

I invite the Chancellor to try listening to real people, like I do. Of those I surveyed in Selly Oak, 50% said that creating jobs and the conditions for jobs should be his top priority, 39% were worried about the rise in domestic gas and electricity prices, and 29% cannot make ends meet and will be forced into debt by his policies. The people of Selly Oak are a good barometer and they know what needs to be done. When will this Chancellor start to listen to real people and do the things that the country desperately needs?

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[Richard Fuller (Bedford) (Con)]

It is always a pleasure to follow the hon. Member for Foyle (Mark Durkan), who represents a very different part of the United Kingdom from the one I represent. It is always informative to listen to his contributions, and I always learn something from them.

There are some very good points in the Budget for the people of Bedford and Kempston. The cuts in national insurance rates—Labour’s job tax—are a welcome change, meaning that the people of Bedford are more likely to have a job. When they travel to work in their cars, they can look at the petrol pump and see that fuel duty has been frozen. When they arrive at work, they will know that at the end of the day, thanks to the increase in the personal allowance, they will keep more of the money they have earned. When they get home in the evening and go out to the pub with their mates, they can raise a pint to the Chancellor and say, “Thank you very much for scrapping that other iniquity of our tax system left by the last Labour Government—the beer duty escalator.” Those are all very welcome measures. On fuel duty, it is particularly important for everyone to realise that when they fill up their tank and look up at the price per litre, 13p of that is Labour’s price on fuel, which applies every time we fill up our cars.

Let me draw your attention, Mr Deputy Speaker, and that of Members to page 12 of the Red Book, which features an interesting chart—I see Members avidly reaching for it—showing the growth of debt in this country from the mid-1990s until 2010. It shows that the last Labour Government left this country as the most indebted nation on earth. They grew our debt—this does not include Government debt, which has to be added on top—from two times to five times the size of the economy. That is a massive debt that must be paid for by our children and grandchildren. I wonder whether the Economic Secretary would consider adding the Government debt to this chart and requiring to be displayed on a poster in every single school, so that our children know what they are going to have to pay back owing to the policies pursued by the last Labour Government. Their policies were an abject failure of economic management.

In the private sector, when companies have poorly performing management, we fire them and bring in other people. In the Labour party, they promote them.

[Mr Iain Wright (Hartlepool) (Lab)]

He’s pointing at me!

[Richard Fuller]

The Leader of the Opposition and the shadow Chancellor were promoted, yet their fingers are all over this increase in debt. I must say that the hon. Member for Hartlepool (Mr Wright) has it right. Those two are acting as bed blockers for more talented people on the Opposition Front Bench. Let us hope there will be a change in that regard some day.

Let me say more broadly, if I may—I sometimes get a little controversial—that the debates I have heard in this place since becoming a Member of Parliament have reinforced my view that the political class has let down the people of this country, regardless of political party. The debt is not just the fault of the last Labour Government but of the country as a whole, which had got itself into terrible levels of debt.

There are two ways of looking at the problem. The Government are borrowing £1 billion every three days, the interest on which amounts to £15 million. So, every three days, £15 million has to be taken out of the budget for our schools and our hospitals. That is a very considerable burden that places pressure on the Government, and I say to the Economic Secretary that I am not sure the Government have done enough to bring public expenditure under control. We have to go further. We need to look at the Heseltine review of the way the Government spend their money—not as an end-point, but as a starting-point for a much more radical reform of how we provide our cherished public services, so that we can deliver on the promise of providing more for less money.

In my remaining time, let me mention the Help to Buy mortgage guarantee scheme. I have read the scheme outline and there are some interesting charts in it, but an important chart is missing—that for the loan-to-value ratio over time.

[Andrew Griffiths]

Does my hon. Friend share the joy of many first-time buyers in my constituency at the fact that this will give them a real chance to get on the housing ladder?

[Richard Fuller]

I appreciate my hon. Friend’s intervention, but I am not sure that I can share his joy. The impetus behind this Treasury document is the notion that enhancing loan-to-value ratios of 95% is somehow a good policy, and I need some more reassurance about that.

Let us compare the average house bought in 1997 at the average loan-to-value ratio of 80% with the average house bought in 2007—after all that price inflation—at a 95% loan-to-value ratio. Over the 20 or 25 years of their mortgage, the people who bought the average house in 2007 will have to spend £234,000 more than those who bought the average house in 1997. Increasing loan-to-value ratios depresses people’s ability to spend money on other things, because they are spending more on their mortgages. I want some more reassurance from the Treasury that this scheme will not have unintended consequences for their ability to spend money appropriately in relation to their incomes.

[Mark Lazarowicz]

Is not another possible unintended consequence of the measure the setting off of regionally based house price spirals, exacerbating some of the regional differences that other measures in the Budget are intended to address?

[Richard Fuller]

The hon. Gentleman makes a fair point, but I do not see that that would be a problem in this instance. In fact, the scheme might counteract the problem. However, it is clear that the issue needs to be sorted out as what is currently an outline becomes a fully developed scheme.

Let me end by making a fundamental point. Every politician in the House must recognise that our debt burden presents us all with a challenge to do more with less. The answer is not to continue kicking the can down the road. We must face up to our responsibilities, and we owe it to the generations to come to do that quickly, while interest rates are low, rather than waiting to see what—as was pointed out by my hon. Friend the Member for Folkestone and Hythe (Damian Collins)—may happen if they suddenly start to spike, and we find ourselves in a much more difficult position in trying to bring Government spending back under control.

Beer Duty Escalator

Richard Fuller Excerpts

Tuesday 5th March 2013 Westminster Hall

[Mr Jones]

I thank my hon. Friend for that extremely pertinent comment. I will come to that.

In my constituency, the sector accounts for 1,441 jobs, employing 431 young people. It also contributes £33.7 million in gross value added to the local economy. Nationally, the sector adds £19 billion to the UK economy, and it currently contributes £10 billion in taxation to the Treasury. Since the previous Chancellor introduced the beer duty escalator in 2008—my right hon. Friend the present Chancellor continued it in May 2010—beer duty has risen by a staggering 42%. If the planned increase is effected in April following the coming Budget, beer duty will have increased by an eye-watering 50% in five years.

[Richard Fuller (Bedford) (Con)]

I join others in congratulating my hon. Friend on securing this debate. He mentioned that the escalator principle of the beer duty was introduced by the last Labour Government. Does he not agree that there is something profoundly un-Conservative about having a tax that automatically increases year after year? Would it not be a mark of a Conservative Government to scrap that principle on both the fuel duty and the beer duty?

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[Greg Mulholland]

The hon. Gentleman is absolutely right, and that is what I was alluding to when I mentioned the marketing claim that Magners Irish cider is made with Irish apples, when it clearly cannot possibly be.

A pint serving of beer is subject to 41p of duty, whereas cider is subject to 19p. I want to reiterate that when we are talking about those wonderful, small producers of cider and perry, they should have our support, but we cannot have a situation where the huge producers—as the hon. Gentleman has said, many of which are not using British or Irish apples—are being given the subsidy that they are getting, frankly, from overpriced beer. As well as protecting small producers, we need that issue to be looked at.

We need to remember that the beer duty escalator is not the only issue facing pubs, and I am delighted that the Government have now pledged to deal with the behaviour of large pub companies. I reiterate the message that the Minister must send to the large pub companies, which is that if the Government go ahead, as they must, and get rid of the beer duty escalator, pub companies need to pledge that they will pass on the reduction in duty and cost directly to their lessees on their so-called wholesale and list prices. That is fundamental, or frankly, those pubs will not see any benefit, because the money will simply deal with the debts that the companies have got themselves into. The Minister must put that message out, as well as listening carefully to the figures on investment that have been put in front of him, when considering the effect of his decision.

[Richard Fuller]

To help our hon. Friend the Minister, we know that money is short and that taking this action will cost the Treasury money, so what suggestions does the hon. Gentleman have on how the Government can make countervailing savings? It is unfair for us to go into a Budget discussion and ask the Government to make a cut in the duty that will be raised without coming up with suggestions on how the shortfall will be made up.

[Greg Mulholland]

The first point is that this tax does not make economic sense, because it is not bringing in what it is predicted to bring in. That simply is not sensible. A great deal of work has been done—this was a conversation that happened after last year—to show the effect that it will have on investment. In the end, we all agree that taxation is there to encourage. That is really what we would like taxation to do—to encourage positive decisions. What we are saying is, “Get rid of this tax and have fairer beer duty to encourage the sort of investment that has been demonstrated at the smaller end, where people do have lower and slightly fairer beer duty.” The prediction is that 10,000 new jobs would come from doing that. Then there would be the employment tax and the increase in business rates.

At the moment, instead of that, we have declining sales, which means lower duty and lower VAT. We have pub closures, which means a loss of business rates, council tax, employment tax and so on. We must turn this vicious circle into a positive one, and this is an opportunity to start to do that, but the hon. Gentleman is right to say that we must be focused on those economic issues. Let us look at the unfair subsidy provided to the huge producers of mass-produced cider. That would be one way of equalising things. We need to take the opportunity to look at that.

I have had conversations with the Minister about specific ways to assist pubs through the tax system. I hope that he has been looking at that. I hope that he has been trying to find a way, perhaps through rates, to have relief for the community value of a pub. I hope that he will continue to look favourably at anything that can encourage people to consume alcohol responsibly in pubs, as opposed to buying it from supermarkets.

I hope that this is the last time that we need to discuss this issue. It is great to see the faces supporting this campaign around the table, but I genuinely hope that the next time I see them will be with the Minister and that we will all be able to have a pint of excellent, locally produced British beer, knowing that it no longer has been subject, at the point of production, to the unfair, unnecessary and illogical beer duty escalator.

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[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship this morning, Mr Caton. I thank the hon. Member for Nuneaton (Mr Jones) for securing this important debate. As a number of hon. Members have suggested, there is a certain sense of déjà vu, given the number of debates that there have been on the issue, but the timing of this debate, ahead of the Budget, is critical.

I stress at the outset that a number of my hon. Friends have let me know that they would have liked to participate in this debate, but they were not able to do so because of other parliamentary business or commitments that they had already made. I hope that we can continue with the generous spirit in which the debate has been conducted, and focus on a number of issues that Members on both sides of the House would like the Minister to answer—although that is not to say that I will not make some reference to the previous Government’s position or press the Minister on some questions that I think all of us would like to be answered.

It is important to recognise, as many hon. Members have, the organisations that have briefed Members and allowed them to make visits and listen to representatives of the industry in their constituencies. Those organisations include the British Beer and Pub Association, the Society of Independent Brewers, the all-party groups on beer and on pubs and the Campaign for Real Ale. I have worked closely with CAMRA in my constituency; I had the joy of judging one of the beer competitions at a local real ale festival, for which I thank the local CAMRA organisation. We also heard about representations made by the TaxPayers Alliance and The Sun.

I always enjoy such debates, because they allow us to have, as one hon. Member suggested, not just a brewery bingo, but a pub bingo. They give us a list of places to visit when we travel around the UK when not involved in parliamentary business.

A number of hon. Members have talked about the importance of the wider brewing industry and of manufacturing. There is also, of course, the bottling sector, from which representations have also been received. We have discussed small and medium-sized enterprises, micro-breweries, the rural economy, and the focus of the pub trade as a base for the local community. The hon. Member for Montgomeryshire (Glyn Davies) recognised the impact on elderly people and the important social role that pubs play in the community. We also heard about the charitable events and the various activities that pub goers regularly get involved in.

In his opening speech, the hon. Member for Nuneaton praised the Minister as a listening Minister. He recognised the need to deal with the deficit and welcomed, as I have, some of the actions taken on fuel duty. He urged the Minister, as other hon. Members did, to assess whether the escalator was disproportionate. I will return to that issue with some specific comments for the Minister to consider.

My hon. Friend the Member for Stoke-on-Trent North (Joan Walley) talked about responsible drinking, which is important. Like her, I spent some time working in the voluntary sector before becoming a Member of Parliament. I have worked in a project that dealt with homeless people with drinking problems. I have also spent some time, when I was a social work student, working at a drinking problems unit in a psychiatric hospital. I have seen the difficulties and problems that emerge when people get involved in problem drinking. One theme that has come out from the discussion is the importance of the pub sector in providing a different ethos, culture and way for people to consume alcohol enjoyably and responsibly. We are all concerned to ensure that that continues.

Whatever regimes are put in place—this is where there is a VAT issue—to support responsible drinking, we all want to ensure that supermarkets are not given an unfair advantage over the pub sector. A number of hon. Members have talked about that. Regarding VAT, I do not think my hon. Friend the Member for Nottingham South (Lilian Greenwood) intended to make a hugely party political point—perhaps a slightly party political point. This important issue needs to be addressed.

The Opposition believe that the Government made a mistake in 2011 in increasing VAT, which had an impact not only on the pub trade, but more widely on families and businesses around the country. That rise, which was equivalent to a 12% increase in tax for the industry, was in the same year that the coalition introduced the biggest ever pence per pint increase in beer duty.

[Richard Fuller]

We all know that the last Labour Government left a crippling deficit for this coalition Government—I am being slightly party political—who have had to clear up the mess that they left behind. The escalator increases taxes on working people who enjoy a pint. Does the hon. Lady think that it was a mistake in principle for the last Labour Government to introduce that to our taxation system?

Economic Policy

Richard Fuller Excerpts

Monday 25th February 2013 Commons Chamber

[Mr Osborne]

Let me explain something to the hon. Gentleman. We inherited a 12% budget deficit, and the deficit is defined as the amount added to the debt every year. We are getting the deficit down in order to deal with the debt problem. His plan is to increase the deficit deliberately, borrow even more, add to the debt burden and repeat all the mistakes made by his colleagues when they were in charge.

[Richard Fuller (Bedford) (Con)]

Between the mid 1990s and 2010, the nation’s total indebtedness grew from two to five times the national income. The shadow chancellor and the Leader of the Opposition, who came to Bedford two weeks ago to advise that the country should borrow £200 billion more, were architects and supporters of a policy of indebting our children and grandchildren. Will my right hon. Friend tell me what the implications for the country’s credit rating would be if the Opposition’s policies were pursued today?

[Mr Osborne]

We are debating the decision of Moody’s credit rating agency, which said in its market notice on Friday that reduced political commitment to fiscal consolidation could lead to further downgrades of the United Kingdom. That is the verdict of the ratings agency. The verdict of the Institute for Fiscal Studies, an independent body, is that Labour plans would add about £200 billion extra to borrowing. That is the view of independent bodies about the Labour party’s economic policy.

Outsourcing of Public Services

Richard Fuller Excerpts

Tuesday 18th December 2012 Westminster Hall

[Chris White]

I appreciate both the point made by the hon. Gentleman and the CBI’s report. I will be coming to some of those issues later in my comments.

I support those five principles, which I am confident that Members in all parties support as well. The Government have been clear that they are seeking to increase the amount of public services delivered by independent organisations. Seymour Pierce has predicted that the value of the public services sector will increase to £140 billion by 2014. That is a huge amount of public money and, rightly, we should be concentrating on how that money is spent and on how we ensure maximum benefit for our community. A concern, however, is that the principles outlined in the “Open Public Services” White Paper, to make our public services more accountable, more transparent and more in the control of communities, have not been realised in practice.

One deep concern is explained in the Social Enterprise UK report, “The Shadow State”, which has highlighted a significant lack of transparency and accountability, with information from those delivering our public services hard to come by. It also highlighted the increasing dominance of our public services by a small group of large multinational businesses and the difficulties that small business, charities and social enterprises have experienced in accessing provision of our public services.

[Richard Fuller (Bedford) (Con)]

My hon. Friend is a champion of social enterprise in the House, and we pay great tribute to his work. He is making a point about large private sector organisations. Is he, like me, sceptical about the big state, but also sceptical about big private corporations? The Government are making some strides in promoting local organisations, but does he believe they are being somewhat timid in their agenda to promote social enterprise locally?

[Chris White]

My hon. Friend is also a champion of such issues. My speech is about that very subject: the change from public sector monopolies to, perhaps, private sector monopolies. We should be sceptical about that, as he said.

We need to be clear that, if we are opening our public services, we are doing so to achieve what is best for our communities, in a way that gives choice to commissioners and service users and that ensures appropriate levels of accountability. Unless the Government are able to deliver on their principles, we will not get the outcomes that we want from public sector outsourcing.

Over the past two years, through my work on the Public Services (Social Value) Act 2012, I have had the opportunity to speak to many community organisations and social enterprises about the Government proposals for opening up public services. Most are keen to engage in the process and to deliver services that are important to their local community. There appears, however, to be a number of obstacles to their involvement, some of which have been highlighted in the report.

First, the size of many contracts is a problem. I appreciate that commissioning on a large scale can create efficient economies of scale, but those are not the only economies that we should be focusing on; the most useful economy is secured through successful outcomes. Large contracts do not always lead to better outcomes, and can increase costs in the long term. For example, the UK Border Agency issued £1.7 billion in contracts for asylum-seeker services in March this year, but each of the contracts was for more than £100 million, completely locking out our charities, social enterprises and small businesses. The Work programme, in which £3.3 billion of contracts were awarded, saw one quarter of the contracts go to one company. That is not the opening- up of public services. Only a handful of organisations can bid for contracts of such size. More accessible contract sizes would go a long way to change the situation, as well as enabling a larger degree of social value, as such contracts are able to target additional benefits to be created through the commissioning process.

Secondly, there is an issue of governance and transparency. Despite extensive research, it is difficult for the public to access information about many public sector contracts. If I or my constituents have questions about state-delivered public services, we may ask questions in this place or through correspondence with Departments to get the appropriate answer. Private companies, however, are often not so willing or forthcoming with information, leaving a sense of unease among the public. Only greater levels of transparency and accountability can change that. I fully support the Government’s efforts to provide details on public spending over £100,000 at both central and local government level. That transparency should and can be extended to all public service providers. We cannot have one rule for public sector organisations and another for private sector providers. I appreciate that some information will be commercially sensitive, but I am confident that we can find a method that balances the public’s right to know with commercial privacy.

There should also be a central register of public sector contracts, both local and national, that are being provided by independent organisations, whether private sector companies, social enterprises, or charities, both past and present. That should outline the size of the contracts, their length, the expected outcome, and information about their success. All that should be online for ease of public access, and would not involve significant cost, because such information should be collected by commissioners in the regular course of their work. That would enable the public to see not only who is providing what services, but how successful providers have been, and could be a useful tool for commissioners.

The Government have rightly championed the cause of transparency to improve our public services, but that must be carried out across providers. I hope that the Government will work with commissioners, private businesses, charities and social enterprises.

[Richard Fuller]

My hon. Friend is making a good point about the role of national Government and supporting local commissioners. Is there a role for national Government to name and shame commissioners who are too slow in opening up to local providers, and to name those who are doing a good job and are at the forefront of the breakthrough of social enterprise, but shame those who just want the default of taking what had been a public service and giving it to the large national contractors?

[Chris White]

Absolutely. Naming and shaming is always a useful tool in such circumstances. Our commissioners should be encouraged to have a greater sense of urgency in dealing with such matters.

The Government have rightly championed the cause of transparency, and public sector commissioners should take a closer look and a closer interest in the corporate structure of the organisations they are commissioning from. Traditional large multinational companies may have some advantages, but the social enterprise model may also have the potential to deliver better outcomes for our communities. At a time when we are seeking to spend every penny possible on better outcomes, there is concern that traditional private sector models that seek to deliver large returns for shareholders may lead to money seeping out of our public services that might otherwise be spent on improvements to those services.

Social enterprise combines the need to deliver profitability, to innovate and to deliver better outcomes with a sense of community purpose. Not only that, but most social enterprises reinvest their profits either back into the services they provide, or into the communities where they are based. Moreover, through the structure of community interest companies, which are a model that many social enterprises are adopting for public service delivery, communities are directly involved in the governance of the organisation. That gives communities greater levels of accountability than if those services are provided by larger organisations with less accessible governance structures such as multinational corporations. Sometimes that will not be possible, but the Government should encourage commissioners to be creative and to experiment with differing governance needs.

Thirdly, the Treasury can help directly by ensuring that small businesses, social enterprises and charities can have access to the finance they need to bid for these contracts directly. The creation of Big Society Capital has been an excellent example of the Government taking a direct approach to stimulate the social investment market, and social impact bonds also have great potential. However, those methods do not resolve all the issues that are in the way of civil society organisations, which is why the Treasury’s internal review of social investment is so important.

We must ensure that we create a new climate of confidence in the social investment market, so that mainstream lenders and institutional investors feel that they can participate. Big Society Capital is an important step forward, but on its own it will not be able rapidly to expand the social investment market. That will take place only when our banks, pension funds and venture capitalists take a full part in the market, so I hope that the Minister will give us an update on the progress of that internal review, and the main policy areas that the Government seek to address. Broadening community investment tax relief into social investment tax relief that gives incentives for direct investment into social enterprises and their intermediaries could be transformational, and relatively inexpensive.

The report—“The Shadow State”— highlights a number of key policy areas, such as child care, prison, welfare to work, and adult social care, which need to be addressed. The report is constructive and proposes solutions. I hope the Minister will take the time to read the report, and I am happy to give him a copy if he has not already read it.

As we embark on a change in how we deliver our public services, it is vital that we do so in the right way so that the public feel engaged in the process and we deliver services not only with the best outcomes, but in the right manner. Confidence in our public services is important because, without confidence, there is a danger that people will not access the services they need, leading to more expensive interventions down the line. Communities need to feel a strong relationship with the provision of those services, and that is why social enterprises, charities and small businesses are often better placed to deliver them.

The Government have rightly identified a problem in our banking sector about institutions that are too big to fail, yet there is a danger that by relying on a small clique of large multinational organisations to deliver our public services, we end up creating the same problem in public service delivery. The way to combat that is through changing the contract process so that we make contracts more winnable for smaller organisations, helping to build supply chains that are resilient and have a plethora of providers. That will not only reduce costs in the long term through proper competition on costs, but will spur forward innovation and enable greater personalisation and localisation of services.

The White Paper, “Open Public Services”, was a step in the right direction, building on a set of principles that have wide-ranging consensus. All parties went into the election promising to open the door for delivery of our public services, particularly to social enterprises, mutuals and charities. We must now all work together to ensure that implementation matches the rhetoric.

“The Shadow State” report has been useful in helping to refocus minds in this debate, and we must consider the issues now, while we are in the process of reform. We have a fantastic opportunity to change our public services for the better, to realise a future in which people feel ownership of the services they are using, and to spur innovation and creativity. The Government have rightly seen the need to reform public services, despite a period of considerable economic difficulty, but we now need to deliver on the principles that we have outlined.

--- Later in debate ---

[The Economic Secretary to the Treasury (Sajid Javid)]

I am grateful for the opportunity to speak under your chairmanship, Mr Chope.

The outsourcing of public services is an area in which my hon. Friend the Member for Warwick and Leamington (Chris White) has a great deal of experience; he feels strongly indeed. I commend him for the successful private Member’s Bill that he pushed through Parliament with support across the Benches and congratulate him on securing today’s debate. I agree with a number of points that he has made this afternoon, and I hope that he will, in turn, agree with some of the sentiments that I will express.

My hon. Friend referred rightly to the biggest issue facing the country: the size of the public sector deficit. There are a number of ways in which we need to go about fixing that problem. One of the most important is that when we spend public money—the taxes of hard-working people—we receive the best possible value in return. The outsourcing of public services, whether to small and medium-sized enterprises, social enterprises or larger organisations, is an excellent way to achieve that. I want to lay out the broad principles behind the Government’s approach and then talk about some of the specific reforms. I also want to talk about some of the measures that we have taken specifically to help SMEs and social enterprises.

The Government are committed to improving the quality of public services and delivering them more efficiently. Last July, as my hon. Friend rightly said— I am glad that he welcomed this—we published the “Open Public Services” White Paper, which set out five key principles: choice, decentralisation, fairness, accountability and diversity. If we are going to be successful in achieving those principles, transparency, which my hon. Friend also mentioned, is key. He talked about it, rightly, at length. Transparency is important to achieving all those principles.

Key elements of our approach include increasing the amount of services that we commission out, taking advantage of efficiencies and real-world benefits that the voluntary and private sectors can deliver and ensuring a diverse provision of services to drive quality through competition. We are also making greater use of payment by results, which is good for Government, because the financial risk is taken by the investor, not the taxpayer. It is also good for the voluntary sector, as it opens up many more opportunities for social enterprises and charities to deliver public services. I am sure that our thinking is very much in the same sentiment as that of my hon. Friend.

Let me turn to some of the key reforms. I know that it is easy for a Minister to stand on this spot and talk about theories and ideologies, so let me be a bit more specific and give some examples of concrete action that the Government have been taking. An example is the Work programme. The Government have taken tens of thousands of people off benefits and helped them into jobs. Figures released last month show that at least 56% of the scheme’s earliest participants have come off benefits, with 19% spending at least six consecutive months off them.

Another example is social impact bonds. My hon. Friend mentioned the importance of access to finance, particularly for SMEs, if they are to win contracts. Social impact bonds are a valuable new way to involve the voluntary, community and social enterprise sector in Government contracts based on payment by results. Already, almost 10 SIBs have been issued throughout the country, tackling reoffending, youth unemployment, homelessness and family breakdown.

We also have a big new opportunity for payment by results in probation, where we are testing a range of models with the private, public and voluntary sectors. As the Prime Minister said just a couple of months ago:

“With payment by results, your money goes into what works: prisoners going straight, crime coming down, our country getting safer.”

He has indicated that he wants to see payment by results spread right across the rehabilitation system by the end of 2015.

[Richard Fuller]

Regarding payment by results, I urge the Minister to be cautious about the difference between the desire to achieve improved performance based on payment by results in the short term and the provision of competitive tendering for Government contracts in the long term. One of the issues with privatisation is that it was a good way to make a substantial amount of money in the short term, but there have been competitive results in the long term. I think that part of today’s debate is about ensuring that the Government have the right balance between large corporations that can deliver in the short term and providing more availability for small and medium-sized enterprises to provide that competitive tendering in the long term.

[Sajid Javid]

My hon. Friend makes an excellent point about the tensions that sometimes exist between short-term goals and long-term goals, and he has used the excellent example of previous privatisation programmes. The Government will indeed take that into account.

With regard to prison procurement, we currently have five new contracts in train, bringing the total number of contracted-out prisons to 14. Let me move on to another example. In health care, we have seen an increased volume of treatments being delivered via independent providers. We heard an excellent example from my hon. Friend the Member for Woking (Jonathan Lord), who referred to Virgin Care in his own constituency. In 2010-11, 17% of hip replacements were delivered by independent providers—a rise from 0% in 2003-04. By outsourcing the services that I have highlighted, we are not only driving up the quality of services available and saving the public’s money, but increasing the public’s choice about the services that they receive.

My hon. Friend the Member for Warwick and Leamington spoke eloquently about the importance of social value in procurement. He is passionate about improving access to contracts for SMEs and social enterprises. I hope that he is pleased that the Government share that passion. In fact, every Department in Whitehall has a nominated SME Minister who is responsible for delivering an SME procurement action plan for that Minister’s Department. In the case of my Department, that Minister is me, so he will know who to harass if he believes that the Treasury is not making suitable progress in this area.

Thanks to the provision that I have described, more than 2,000 of the 5,700 contracts awarded through the Government’s contracts finder website have been allocated to SMEs, and we are taking steps to give SMEs greater opportunities to bid for contracts. The Government’s procurement pipelines give forward visibility of future potential public sector procurement opportunities, providing greater confidence for industry to invest. The Cabinet Office is tracking a pipeline of about 100 developing and established projects, worth £84 billion in total.

I thank my hon. Friend the Member for Warwick and Leamington not only for allowing us the opportunity to discuss this issue today, but for his tireless work in this area during the past two and a half years. “Procurement” and “outsourcing” are rather dry words that can, if we are perfectly honest, force more than the odd eye to glaze over. I am sure that my hon. Friend would agree, though, that discussions about procurement and outsourcing are crucial to ensuring that public money is spent wisely. I thank all hon. Members for their contributions today and I thank you, Mr Chope, for your chairmanship.

Question put and agreed to.

Public Service Pensions Bill

Richard Fuller Excerpts

Tuesday 4th December 2012 Commons Chamber

[Richard Fuller (Bedford) (Con)]

In Committee, we also talked about the risk of people with public sector pensions making the perverse decision not to contribute to their pension because they feel that the contribution rate is going up significantly, missing the fact that a significant contribution is being made to their pension scheme by the taxpayer. Does the hon. Gentleman feel that the new clause would assist members of public sector pension schemes in identifying what a large contribution the taxpayer is making, and therefore help to reduce the number of people who take the irrational step of opting out of the pension scheme?

[Chris Leslie]

Even though the quality of the scheme has been eroded, as we saw with the unilateral imposition of the average 3% increase in employee contributions—that might even have been before Lord Hutton reported—they are still good defined benefit schemes and we encourage public sector members to stay in them. We have debated our concerns elsewhere over whether the viability of the schemes will be jeopardised by employees being deterred from joining or deciding to opt out. However, we encourage members to stay in the schemes. Unfortunately, the 3% additional contribution is not part of this legislation, so it would be outwith the scope of the Bill to table amendments on that or to debate it. That is a great shame.

It is important that annual benefit statements include not only the employee’s contribution, but the employer’s contribution, as set out in the new clause. If the defined benefit schemes are good, there is no reason not to have that level of clarity and transparency. I have no problem with accepting that that should be part of the information that is given to scheme members. I hope that the Minister will accept that.

New clause 3 is one of the most important proposals in this group. The Government promised to implement what is known as the new fair deal, which is one of the most important aspects of the agreement that was reached in the negotiations between the employee side and Government or employer side of the scheme. The new fair deal would ensure that all public service workers who were compulsorily transferred to an independent contractor, be it a private company, a charity or another third sector body, would be entitled to remain an active member of their public service pension scheme. That is a basic requirement and it was a core part of the agreement. We were glad that the Government committed to it.

The Chief Secretary to the Treasury confirmed the Government’s commitment to the new fair deal in a written statement in July, which stated that

“the Government have reviewed the fair deal policy and agreed to maintain the overall approach, but deliver this by offering access to public service pension schemes for transferring staff. When implemented, this means that all staff whose employment is compulsorily transferred from the public service under TUPE, including subsequent TUPE transfers, to independent providers of public services will retain membership of their current employer’s pension arrangements.”—[Official Report, 4 July 2012; Vol. 547, c. 54WS.]

That is an improvement on the current fair deal arrangements, which ensure that outsourced staff receive broadly comparable arrangements to those under the public service schemes. The Government’s promise to implement the new fair deal was central to the rationale and at the heart of why many public service workers agreed to support the new proposed pensions reform, even though aspects of it were detrimental to them.

--- Later in debate ---

[Richard Fuller]

I am intrigued by the hon. Gentleman’s point. He is absolutely right that firefighters, prison workers, doctors and nurses contribute to their pensions, but so do taxpayers. Indeed, a considerable amount of most public pensions is paid for by the taxpayer. If he wishes to push the point about certainty, does he agree that the Government should have considered a fully funded pension scheme, rather than rely on future taxpayers to pay for future pensions, with all the uncertainty about whether they will be able to afford it? Should the Government not have grasped the nettle and gone for a fully funded pension scheme now?

[John McDonnell]

The local government scheme is fully funded, yet the Government seek to interfere with that, too. If we are to open up the debate, let us do so; however, the Government seem to be making piecemeal reforms for their own economic objectives and then not even standing by them. The problem is the uncertainty.

Let me turn to the detail of amendment 4. As those of us who have been involved in pension negotiations will know, one of the most important elements is ensuring that the valuation process is right, because that is what determines not just the future payouts from the scheme, but its future security; there are also probity issues. I am concerned that the legislation as drafted would give no role to employees or their representatives in the revaluation system. My amendment 4 is a mild-mannered amendment to provide that the valuation report should be sent not just to the scheme manager and the employer, but to the employees’ representatives. That would promote at least some openness and transparency, which might reassure participants in the scheme.

Few pension decisions are more important to employees than the contribution levels, which stem from the valuation process. We have seen a unilateral change in contribution rates, which I think, to be frank, will deter many people from participating in those schemes and may throw the long-term future of those schemes into jeopardy. If there has been a valuation, the report should be sent to the employees’ representatives. It should be open and transparent, and it should then be possible to have a discussion about the valuation. That is what amendment 4 seeks to do. It simply says that the report should be sent not just to the scheme manager, but to the employee representatives, and that the terms of the revaluation should be mutually agreed. It is simply about participation.

[Richard Fuller]

Would the hon. Gentleman, like me, put this issue in the same area as transparency and giving information to people in pension schemes, which will help people to make better judgments? Just as we heard when new clause 2 was being moved, the provision of information about what is in their pension or how that is assessed helps people to make rational decisions.

[John McDonnell]

That is exactly right. There has to be openness and transparency. The point has already been made, but some of us will now have to go out there and campaign to keep people in these schemes. The way to do that is by having openness and transparency about what they are paying in, the benefits being made and, I agree, the overall contribution made by taxpayers.

I fear for the future. We have seen the Fire Brigades Union survey of what would happen if there were increases in pension contributions to those workers’ scheme and also a reduction in benefits. Some 30% told the survey that they would question whether they wished to continue in the scheme. A 30% withdrawal rate would undermine some of those schemes. That is why openness and transparency are important. One of the key areas for openness and transparency is in the valuation process, with the terminology and methodology agreed with the employee representatives, so that they have confidence that the process is being conducted fairly, openly and, to be frank, professionally. In addition, once the revaluation is done, the report should be provided to the employee representatives. I can see nothing in that with which the Government could disagree.

--- Later in debate ---

[Richard Fuller]

To press the hon. Gentleman on his point, he has made the assertion—it may be a fact—that the sole criterion for the exemption of these professions from the normal retirement age is the physicality of the job, but does he accept that there are other differences between those types of public sector workers and others and that that might be why they have been given a different retirement age?

[Chris Leslie]

I wonder what the hon. Gentleman is alluding to; perhaps he should elaborate. The Minister has not said that there are considerations other than the physically demanding nature of being a firefighter, a police officer or a member of the armed forces. Is the hon. Gentleman suggesting that there are different categories of public sector workers beyond some of those physical issues?

[Richard Fuller]

I will clarify my view, although I cannot speak for the Government. One criterion that differentiates these workers, other than physicality, is that they put themselves in danger in their public service, perhaps not routinely, but as an important aspect of their work. A firefighter will run into a burning building to rescue someone, a member of the police force will stop altercations and put themselves in physical danger, and members of our armed forces routinely put their lives on the line for our country. Does the hon. Gentleman not accept that that is an important point of differentiation and that it is not just to do with physicality, which is the basis for amendment 16?

--- Later in debate ---

[Chris Leslie]

That is why amendment 16, which I urge the hon. Gentleman to look at, does not prescribe different pension ages for different categories of worker. We are looking only to give power to the Secretary of State, who

“may by order specify following the publication of a scheme specific capability review”,

to allow disapplication in relation to categories of public service worker for provisions in clause 9(1).

If reviews are ongoing—the Government have undertaken the working longer review in the national health service, and the fire service review—we must ensure almost as an issue of drafting that any conclusions of those reviews can be enacted and reflected in legislation, if the Secretary of State agrees. That is the extent of the amendment; it would simply ensure that if there are technical reviews of the capability of certain classes of employee, the Government will be able to create exemptions from any arrangement. That is why the amendment is narrowly defined. I accept there is a theoretical or philosophical argument about risk and physicality, but to return to the practicalities of our arrangements, we must look at how the legislation is drafted. That is our duty as a loyal Opposition.

[Richard Fuller]

The hon. Gentleman is being generous in giving way. He may regard the amendment as narrow, but I regard it as a broad generalisation that seeks to introduce uncertainty in an otherwise specific Bill. If his principle of physicality is an important test for public sector pensions, is it also an important test for private sector pensions or the state retirement age?

[Chris Leslie]

If a private sector scheme rules to make its own arrangements, it has the flexibility to do so. We are simply saying that in future, some degree of latitude and flexibility should be placed in statute to allow Secretaries of State to take account of the outcome of any reviews. We are not saying there should be a requirement for exemptions to be made; we want to give the Secretary of State the power to implement the findings of any reviews should that be deemed fit.

--- Later in debate ---

[Mike Freer]

My hon. Friend makes a good point, but if he revisits some of the private sector schemes, he will find that they rely on actuarial and physical evidence provided by various medical boards, and that the retirement age in certain private sector schemes already reflects the physical demands of certain roles. In an intervention, I mentioned, rather light-heartedly, people such as steeplejacks and jockeys, but there are other roles whose physical demands are reflected in certain private sector pension schemes, which already have mechanisms in place.

[Richard Fuller]

Does my hon. Friend not accept that those pension schemes are fundamentally different from the types we are debating? The former tend to be defined contribution schemes rather than defined benefit schemes. Does that not have an impact on the flexibility of those schemes and their ability to take account of those issues?

[Mike Freer]

My hon. Friend makes a good point. He knows my views and is tempting me down the path of debating the future of defined benefit schemes. I have been entirely consistent on this point: for many years, I have said that all defined benefit schemes are no longer sustainable, whether in the private sector or public sector. That is a debate for another time and is certainly not pertinent to the amendment, but I share his view that perhaps we need more wholesale change and a larger debate.

In supporting specific exemptions where physical demands can be proven, I am not undermining the broad thrust of ensuring that our public sector pensions are sustainable. I have long argued that the contribution rates of both employee and employer do not match: what goes in does not match what comes out. That has driven my long-held view that defined benefit schemes are no longer fit for purpose. Having said that, this Bill is a major step forward in making sure that our public sector pensions are sustainable. We have a duty, however, to protect those who protect us and we ought to revisit this point where there is hard empirical evidence that physicality, in certain roles within those categories, can be proven to be detrimental to people’s health after retirement. I am not suggesting that I will support the amendment, but I am urging my ministerial colleagues to revisit the matter.

I have rehearsed at length the point about physicality. I am sad that the Minister is no longer with us, but I hope that he will address that point when he winds up. Should empirical evidence emerge, I hope that we can revisit this subject.

--- Later in debate ---

My amendments would allow the Scottish schemes to reflect the realities of Scottish circumstances, such as the persistently low life expectancy, and would provide a key flexibility in negotiations with employers, unions, and others. They would exempt Scottish schemes for which the Scottish Government have devolved responsibility from the link to the state pension age and enable meaningful negotiations to proceed with employers and unions, in the interests of not only public sector pensioners but all of us who use and value public services. I shall test the view of the House on amendment 29 and, given the debate we have had on this subject, I hope Members on both sides of the House, including Members representing Scottish constituencies, will support the amendment.

[Richard Fuller]

It is a pleasure to follow the hon. Member for Banff and Buchan (Dr Whiteford), who made some important points about Scotland.

I oppose Opposition amendments 15 and 16. It was absolutely right for the Government to continue to recognise the specific nature of the roles played by our fire and rescue workers who are firefighters and members of our police forces and armed forces, and it is right that that is reflected through having a lower retirement age. I pay tribute to the Government for recognising that and for pursuing it through legislation.

Members have talked about the issue of physicality. I agree that it is an important issue, but we should not have a specific provision on it in this Bill. In setting pensions, we have a hope that masquerades as a realistic assumption: people are living longer and we are increasing the retirement age, and we hope that people will perform their work as easily in their later years as in their younger years. We hope that is the case, but it cannot be assumed. If people do not save, they run the risk of having a period of poverty, because they might not be able to continue their work until their pensionable age, so there will be a gap in their earnings. As a nation, we have indebted ourselves over the past 20 years far more than any other country. People in this country have not saved to protect themselves financially.

I do not think this specific issue is pertinent to the Bill, however, as it covers all types of employment and all regions—not only Scotland, but the rest of the United Kingdom, too. I therefore ask the Opposition not to push their amendment to a vote as I believe a broader debate would be more appropriate.

[Lady Hermon]

What justification does the hon. Gentleman think there could possibly be for excluding from clause 9(2) prison officers, and in particular those in Northern Ireland, who live daily with a deadly threat from a brutal enemy called dissident republicans?

[Richard Fuller]

The hon. Lady has spoken eloquently and passionately about that point. I do not know whether she was present earlier when I expressed my personal view, but her point may fit in with it. In addition to the issue of physicality, in undertaking their work the people employed in the careers identified in clause 9(2) put their lives at risk. If that is the case for prison officers in Northern Ireland, too, they should be included, and I would be interested to hear what my hon. Friend the Economic Secretary has to say about that.

[Bill Esterson]

rose—

[Richard Fuller]

Other Members want to contribute to the debate, so I will not give way to the hon. Gentleman. He might have an opportunity to speak later.

If we are to change the retirement age for the careers in question, we must undertake those physical tests as well. My hon. Friend the Member for Finchley and Golders Green (Mike Freer), who is of a similar age to me, has said that he is going to do the police test, and I have agreed that I will do the firefighter test. I reiterate his challenge to the shadow Minister and to the Minister, both of whom are at least a decade younger than us, to sign up to do those tests if we are to proceed with the Bill at the end of Third Reading. I would be very grateful to hear them accept that challenge, and indeed to hear the Government Whip, the hon. Member for Chelsea and Fulham (Greg Hands), do so.

[John McDonnell]

I wish to speak in support of amendments 1, 2 and 9. Amendment 2 is straightforward: it seeks to ensure that people are not forced to retire beyond the age of 65, as most of our work force have planned to retire then. On the argument that the amendment is unaffordable, let me remind hon. Members of what Hutton said about the 2007-08 changes. He said that they are likely to reduce costs to taxpayers of the pension schemes by £67 billion over 50 years, with costs stabilising at around 1% of GDP or 2% of public expenditure.

The other issue involved here is what our priorities are. The last figure I had for how much the unfunded public sector pension schemes were costing us was for 2009-10, when it was less than £4 billion. Some 60% of gross tax relief on pensions goes to higher rate taxpayers—that is £22 billion. The cost of providing tax relief to the 1% of our population who earn more than £150,000 was double the amount we are funding with regard to the public sector unfunded pensions—that is £8 billion. So the fact that we are willing to subsidise the higher paid—the rich—while forcing others to work longer and cutting their pensions at the same time reflects our priorities. That is why I have tabled the amendment: I do not accept the settlement or the Government’s rationale for these proposals.

Amendment 1 was eloquently discussed by my hon. Friend the Member for Wansbeck (Ian Lavery), and I must declare an interest at this point: I am an honorary life member of the Prison Officers Association. One point that the POA made, which we made on Second Reading, is that if we increase the pension age for prison officers, we lose money because more of them will become injured and more will go off sick, and more cost will be incurred in compensation. The actuarial figures are there almost to prove it, so it is anomalous not to include prison officers. The point about psychiatric nurses is the role they play, particularly in institutions such as Broadmoor, where they are dealing with the most difficult cases—physical challenges—within the NHS. I find it bizarre that we are expecting police officers to retire “early” at 60—I hope we do not go to that—because of the physical nature of their jobs in dealing with criminals, yet when those criminals go into prison it appears that they no longer provide a physical challenge to the officers dealing with them then. The situation is anomalous, which is why I support the amendment to include psychiatric nurses.

I also tabled amendment 9, and this is specifically for the Fire Brigades Union. As my hon. Friend the Member for Nottingham East (Chris Leslie) has said from the Front Bench, the Government have set up, in agreement with the unions, the working longer review in the NHS and the physical assessment in respect of the fire service. Evidence is piling in to those reviews—independent academic evidence, and details of physical tests that have been undertaken—to demonstrate that it is tough to do the job at 55, let alone at 60. I have seen some of the evidence put forward in the fire service review. When the previous Government increased the retirement age to 55 it was on the basis that there would be more firefighters doing preventive work and people could be redeployed into that work. This year, only 15 posts nationally have been available for redeployment, so redeployment is not an option. These people are still out there doing that physical job, and it is unacceptable to push the retirement age to 60. That is why amendment 9 would ensure that the pension schemes would be able to take into account the reviews currently taking place and that we would be able to adhere to a lower retirement age, particularly for firefighters and others as they are justified.

I am interested to hear what the Government’s responses will be, so I shall finish on this next point. Overall we seek to ensure that there is justice in the Bill, and that is certainly not the case at the moment. I reiterate that the Bill is increasing the contributions and increasing the length of time that people will be working. Given the life expectancy in my constituency, a large number of my constituents will not reach retirement age. Already, a third of all members across the schemes retire within three years of when they should normally do so because they cannot physically continue in the job. They therefore live on reduced pensions and in some poverty. My constituents will contribute more, work longer, most probably have a reduced pension at the end of it and have to retire early. That is an unjust deal when we are subsidising the wealthy through tax relief on their pensions.

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[Richard Fuller]

The Minister makes an important point on tax, but this is the largest bill for the taxpayer that this Parliament will pass—we are passing a £1 trillion bill on to current and future taxpayers. I applaud him and the Government for protecting lower-paid public sector workers from pension changes, for protecting the retirement age, and for career-average schemes, but does he accept that we are still asking taxpayers working in both the public and private sectors to pay an enormous bill for public sector pensions?

[Sajid Javid]

My hon. Friend made passionate contributions in Committee, where he made that same point. I will say the same thing in reply. The Bill and other changes we have made to public sector pensions deliver significant cost savings for the Government and future taxpayers, but maintain our commitment to generous, fair pensions that are sustainable in the long term for people who serve in the public sector.

The Bill is not simply about bringing costs under control and ensuring that schemes are sustainable. We are also seeking to address issues of unfairness that exist within the current scheme designs.

--- Later in debate ---

[Richard Fuller]

There is one other amendment, which I tabled in Committee, but which we did not push to a vote. Perhaps the shadow Minister can say whether he would be interested in having it proposed in another place. Constituents of mine in Bedford and Kempston are being asked to cough up to pay for the pensions of judges and others on salaries of £150,000. It seems particularly unfair that those on £24,000, which is the average income in Bedford—they are also on a pretty high tax rate—should be asked to contribute to a pension scheme for a judge who will retire on a pension that is two or three times larger than such an income. That has not been changed in the Bill so far. I was not sure in Committee whether the Labour party thought it was fair for my constituents to pay for judges’ pensions. Perhaps the shadow Minister can clarify whether he would like that amendment to be moved in another place.

[Chris Leslie]

We did not table any amendments on judicial pensions. I suspect that the question of relative taxpayer support for private pensions might come up tomorrow in the autumn statement. I am intrigued that hon. Members have castigated previous Governments for changes that have affected private sector schemes. It will be interesting to see what the effect will be on the sustainability of some of those pension pots, but we can only speculate at this stage and see what happens. However, this question is certainly of the moment. It is only a matter of hours before the Chancellor stands up and—undoubtedly—makes his announcement on pensions tax relief. We will see what happens at that point, but we felt that some significant proposals needed to be made.

Beer Duty Escalator

Richard Fuller Excerpts

Thursday 1st November 2012 Commons Chamber

[Richard Fuller (Bedford) (Con)]

I very much welcome this debate and would like to draw attention to two aspects. I want to call for the economic and social impacts, both of which are equally important, to be covered in the review.

On the economic impact, there is the principle of the automatic above-inflation tax increases enshrined within the escalator principle. I shall address myself directly to the Minister, who is new to his post. I do not wish to test his mettle today, but he will be keen to make an impact so I ask him this. What ethics lead to a Government’s presuming that they should increase taxation—automatically, year on year—on such staples of life as beer and fuel? I can think of no more regressive taxation than to continue with above-inflation increases on those items.

We have already had a debate on the automatic fuel duty escalator; I am sure that the Minister heard the strong voices of those on the Government Benches arguing that the Government should abandon that policy. The same applies to beer duty. Many hon. Members have talked about the economic impact of the brewing sector in their constituencies. My constituency of Bedford is home to the largest family-owned brewery, Charles Wells, maker of Bombardier beer. What could be more patriotic than drinking Bombardier beer on St George’s day—or, indeed, any other day of the year?

Brewing is now taxed at 50% of its turnover. A 50% tax on brewing turnover will almost certainly tax our brewers out of existence. This is not an issue that the Treasury can avoid, and that is why so many hon. Members have spoken in favour of the motion.

[Charlie Elphicke (Dover) (Con)]

Will my hon. Friend give way?

[Richard Fuller]

I will not, if that is all right, because time is limited.

I would like to mention the social aspect of pubs. As part of “MP in a pub” week, which must be one of the easiest campaigns to organise that I have heard of, I met Nickie and Roger McGlory at The Half Moon. I am sorry for the impact on the profitability of The Half Moon during my session there! I have also spoken to Nigel and Sue Anstead at The White Horse, who, every single week, do something to support local charities and endeavours. This Saturday, many of us will be joining Paul Davies at The Cricketers Arms as Bedford Blues rugby club gets ready to thrash Newcastle in a very important game. Whether it has to do with sports or charities, pubs are an essential part of what we do in our communities.

The vital point, as several hon. Friends have said, is the role of pubs in ending pre-loading. When the Minister deals with this issue, will he also consider the imposition of minimum pricing such that the health benefits can more than outweigh the reduction in revenues from scrapping the beer duty escalator?

Public Service Pensions Bill

Richard Fuller Excerpts

Monday 29th October 2012 Commons Chamber

[Danny Alexander]

I certainly will, when I come to it.

Lord Hutton’s first set of recommendations consisted of safeguards to ensure that the long-term cost of pensions was sustainable through a link between state pension age and normal pension age, and included a cost-cap mechanism to protect the taxpayer in the event that other unforeseen costs arose. He recommended that the new schemes should be fairer by smoothing the current disparities between high and low-income earners and ensuring that benefits are distributed more equally, which was why he recommended a move from final salary provision to career average revalued earnings—CARE—schemes. Finally, he recommended stronger governance provisions for the new schemes so that scheme members and the public could understand how the schemes were run and what they cost.

We accepted all 27 of Lord Hutton’s recommendations as the basis for discussion with trade unions and scheme member representatives across the public service, and designed our blueprint reference scheme in a way that reflected the recommendations of the Hutton report without any cherry-picking. Our aim was to strike a deal that would last, unchanged, for 25 years. Talks with the unions took place on all elements of that deal. I should stress that the Government did not do all the talking in those meetings—we listened carefully, too. Agreeing the design of these pensions has taken a considerable cross-Government effort over the past 18 months. The Minister for the Cabinet Office, the Home Secretary, the Lord Chancellor, the Education Secretary, the Defence Secretary, the Communities and Local Government Secretary and the former Health Secretary worked hard to understand the concerns of the trade unions and member representatives in their sectors.

[Richard Fuller (Bedford) (Con)]

The Chief Secretary talks about a deal on pensions that will last over the long term. Lord Hutton specifically ruled out moving from defined benefit to defined contribution schemes. We currently do not account for the cost of public sector pensions within our public debt numbers. Would it not have been wiser to have looked for a system that included the long-term costs for public sector pension schemes if the Government wanted to achieve such long-term sustainability?

[Danny Alexander]

The hon. Gentleman will know that Lord Hutton addressed that issue. The costs of such a transition would have been enormous and very disruptive, and I think that the recommendation on the career average revalued earnings scheme is preferable from that point of view. He will also know that the new whole of Government accounts presentation of the public finances takes detailed account of the unfunded liabilities in public service pension schemes. That means that the public and the House have precisely the information that he wants transparently available, so I hope that he regards that as progress.

--- Later in debate ---

[Rachel Reeves]

If that was such a disastrous thing, why have this Government not reversed it or made any efforts to do something about it? They have no intention of doing so.

The contribution increases in this Bill were based on no assessment of the future funding needs of public sector pensions and were simply a tax on public service workers who were already facing a pay freeze and redundancy risks. The increases came long before Lord Hutton had published his final report. He warned that excessive increases could hit lower-paid workers hard and result in a counter-productive increase in opt-out rates. He has said that although it is for Ministers to decide by how much contributions should rise,

“there must also be a careful examination of the implications of any possible increase in opt out rates in these schemes as well.”

But the Government chose to plough on, not mindful of the increase in opt-out rates and with little regard for the consequences.

The Government promised that lower-paid workers would be protected from excessive and unaffordable increases, but the reality is that as many as 800,000 part- time workers earning less than £15,000 a year are already paying higher contributions. As I said, for many of them the contributions are 50% higher, because their full-time equivalent salary takes them over the minimum threshold. That approach had nothing to do with long-term reform and everything to do with a cash grab by the Treasury, which made it much harder to deliver progress on the real reform we needed, because the Government acted arbitrarily before Lord Hutton reported and lost the trust of public service workers.

In addition to imposing that hike in contributions, the Government used their June 2010 Budget unilaterally to change the indexation of pensions from RPI to CPI. On average and over time, public service workers will be 11% worse off in retirement as a result. According to analysis published last week by the Pensions Policy Institute, this is a bigger hit than the extra contributions, the raised retirement age and all the other changes to pensions put together. Independent experts, such as the Royal Statistical Society, have emphasised that CPI fails to reflect the spending patterns of pensioners and the rising costs they face. As pensioners worry about the hikes in energy bills this winter and expected steep increases in food prices, we should be particularly mindful of the challenges that retired people face in meeting ever-rising costs.

Again, those changes were imposed on public service workers without any negotiation or discussion. Lord Hutton stated:

“If these reforms have any chance of succeeding then people need to know that they are being treated fairly.  We have seen…the anger that has been triggered on the state pension when older women feel the finishing line is being put back at the last minute with very little time to adjust. So there should be full and proper consultation and discussion with the trades unions. That is how we do things in Britain—the public would take a very dim view of any government that fails to honour this basic requirement. We must try and avoid the confrontation and division that marked previous decades and must not turn the clock back.”

I regret to say that the Government did not follow that advice. Sometimes it seems that they are turning the clock back to the conflicts and divisions of the 1980s, and perhaps that was exactly their objective. Their aggressive and provocative approach to these serious and sensitive issues resulted in months of stalemated negotiations and several days of strike action, which resulted in closed schools, cancelled operations, and disrupted lives for families and businesses across the country.

[Richard Fuller]

There are times when the hon. Lady seems to be making a coherent argument and then she goes back to using rhetoric. She said that the change from RPI to CPI is the most significant one. If she seeks to make amendments on that issue and she does not want to make savings on the basis of a change from RPI to CPI, will she set out where she would make the savings in order to make the overall numbers add up as they are at the moment?

[Rachel Reeves]

I am sure that the hon. Gentleman has read the Bill. The RPI to CPI change was imposed before it, so it is not contained in the Bill and we will not be able to make any amendments in terms of RPI and CPI when discussing it. The point is that the Government acted arbitrarily before Lord Hutton reported, thus making it harder to deliver the long-term reform to public service pensions that we need.

Labour Members think that those strikes could and should have been avoided last year, and that it is a matter of deep regret that this Government have lost the trust and damaged the morale of millions of public service workers, whose engagement and commitment is vital at a time when they are being asked to accept prolonged pay restraint while delivering continued improvement in the quality and efficiency of public services with fewer resources.



Let me turn from the Government’s mishandling of the issue to the specific provisions in this Bill. The Bill is designed to put the new schemes on a clear and consistent legal footing, with clear lines of accountability to scheme members, public service employers and taxpayers. That, in itself, is a worthwhile objective. I have already emphasised that our big disagreements with the Government’s approach to public service pensions lie elsewhere, so we will not oppose the Bill on Second Reading.

However, we have a number of concerns about the Bill that we hope to address in Committee. It is an ill-prepared and poorly drafted Bill containing a number of mistakes, including giving the wrong dates for the transitions to new schemes. The Bill fails to deliver on the commitments and assurances given by this Government to underpin the provision of decent pension schemes that allow public service workers to save for their retirement with confidence. In short, as we have come to expect from this Government, it is a shambles of a Bill that has not been properly thought through, risks creating more problems than it solves and fails to deliver on the promises that Ministers have made.

First, we think it is right that pension ages rise in line with longevity, but it is essential that that is done carefully and fairly, with due notice given to people whose retirement plans may need to change and due consideration given to the impact of working longer on people in front-line or particularly strenuous occupations.

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[Katy Clark (North Ayrshire and Arran) (Lab)]

The Bill and, perhaps more significantly, the delegated legislation that will follow it, will undoubtedly have far-reaching consequences for all those who receive public sector pensions in this country, as the debate has clearly highlighted. Analysis from the Pensions Policy Institute suggests that the proposed changes to the NHS, local government, teachers and civil service pension schemes will reduce the average value of the benefit offered across all schemes by more than a third compared with the value of the schemes in place before the coalition Government came forward with these proposals and the other steps they have taken since coming to power. The Minister has already spoken about a 40% cut in costs over time, so I assume that he will accept that figure.

We find it shocking that while there have been pay cuts of 40% in Greece as its austerity programme has been implemented, pensions in the UK are facing equivalent cuts yet most people are unaware that that is happening, perhaps in part because many people find pensions complex and difficult to understand. Of course, pensions are as much a part of our employment package as other benefits, such as pay. Indeed, many argue that pensions are in fact deferred pay, so in effect we are discussing significant cuts in the terms and conditions of all public sector workers in this country, which will, of course, have all sorts of ramifications for the private sector.

According to the Pensions Policy Institute’s analysis, following the coalition’s proposed changes, the scheme value across the four largest public sector pension schemes will reduce on average from 23% of a scheme member’s salary to 15% of their salary, with the net effect that the pension will form a much smaller part of an employment package. I argue that we should not support that. I have listened with interest to the debate on private sector pensions—I hope that we have can have a much fuller debate about it on another occasion—but I think that the message that should be coming from the House is that we want the pension to form a much bigger part of a person’s employment package. We should put in place a framework whereby the individual is required to save, as is the employer, and the Government have a role to play by ensuring that the policy framework is in place to enable that to happen.

My hon. Friend the shadow Minister said that the change in the indexation for public sector pensions from RPI to CPI is wiping 11% off the value of pensions in the public sector. In effect, that means that the pension of each public sector worker will be 11% lower in each year of their retirement. We have already heard about the implications of people opting out if these proposals are implemented, but we must also consider the implications for the public purse if people have lower incomes in retirement and therefore need to look to the state for support through welfare benefits. Half of all women workers who have a pension of less than £4,000 will be worse off, and the TUC estimates that 60% of all public sector part-time workers earning less than £15,000 a year will have to pay higher contributions. We need to look at the wider implications of the proposal.

In previous debates in the Chamber on public sector pensions, many figures have been cited to show the low salaries that most people who receive such pensions receive. As we know, public sector pensions are far from gold-plated. The Hutton report said that the average pension paid to scheme members was about £7,800 per year, with the median payment being £5,600 per year, while half of all women public sector pensioners get less than £4,000 per year. In reality, however, many people in receipt of public sector pensions receive smaller sums. The proposals suggest that those people should be required to pay greater pension contributions, to work longer, and to receive a worse pension at the end of the process.

Tribute has already been paid in this debate to the former right hon. Member for Croydon North, Malcolm Wicks. It is incredibly sad that he is not here to explain, in his most articulate way, why it is not the case that everyone should be expected to work longer, especially those who have worked in heavy manual jobs from an early age. Perhaps such people should have a lower retirement age, with the retirement system and their pension schemes taking that into account. I remember chairing a sitting of the Committee that considered the Bill that became the Pensions Act 2011 during which Malcolm Wicks entertainingly and powerfully highlighted his passion for this issue as he strongly led a rebel Labour effort to make the case that we need to look seriously at how we deal with those who carry out manual tasks.

[Richard Fuller]

Does the hon. Lady share my particular concern about firefighters whose retirement age will be extended? It is argued that fire prevention roles requiring less manual work will be made available to them, but does she agree that that will probably not prove to be the case for the vast majority of firefighters as they reach their later retirement age?

[Katy Clark]

I am grateful to the hon. Gentleman for that intervention. I referred earlier to clause 9(2), which clearly states that firefighters will be required to work until the age of 60 before receiving their pension, whereas at the moment they have to work only until they are 55. My understanding of the fire service is that jobs requiring lesser physical skills would not be available, so I asked the Minister what he expected people to do. Labour Members fear that they would retire early, but would then have to get other employment, such as a part-time job in Tesco, or to sign on. That is not an adequate way to deal with people who do such jobs over a lengthy period.

Of course, it is not only firefighters who will be affected. Many people in the public sector work in very physical jobs, whether they are the paramedics in our ambulances or nurses—particularly grade A nurses. Those who carry out manually demanding tasks would not be able to work until they were 68, but other jobs might not be available to them. We need to think this through very carefully. Having listened to the Minister, I am worried that the Bill has very little flexibility. We need to be able to think far more flexibly about working ages. We must recognise that while it may be appropriate for some people to work for longer—indeed, many people might want to work until they are much older than has traditionally been the case—for others that is simply not appropriate.

The Bill will have significant implications for the various public sector schemes in Scotland, where there has been considerable debate about its impact. Of course, the civil service schemes are a matter for this Parliament, but the local government, national health service and police pension schemes, as well as those of teachers and firefighters, are devolved. When Westminster legislates on matters that are devolved to Scotland, it usually needs to obtain a legislative consent motion from the Scottish Parliament. I appreciate that the Scottish National party spokesperson, the hon. Member for Banff and Buchan (Dr Whiteford), is in the Chamber, so she might address this later, but I am told that Scottish officials have advised Ministers in the Scottish Government that such a motion is not required, although the view of the trade unions in Scotland, on the basis of legal advice that they have obtained, is that a motion would be necessary. I was interested to hear what the Minister said about that, because there are very significant implications for Scotland. The negotiations that have taken place there are not identical to those that have been held with Ministers down here. I hope that the Scottish Government will wish to ensure that they are able to enact measures on the basis of whatever agreements are made with the unions in Scotland.

I believe that this is a devastating Bill, not only for pensioners in the public sector, but for those in the private sector. It sends all the wrong messages about what we should be seeking for pensions. We need to put in place frameworks through which we collectively save far more than we have in the past to ensure that we have provision in retirement. That does mean that individuals who can afford to should be paying more into their pension schemes, but it also means that the employer should be paying more and that the state should be playing a greater role in ensuring that that happens. In 2007 and 2008, the then Labour Government implemented reforms to the four largest public sector schemes that took account of the changing demographics that we faced. My view, which is shared by most people who have looked seriously at this, is that those schemes are viable and that sufficient funds are available to ensure that pensions are paid out.

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[Andrea Leadsom]

The hon. Lady makes an extremely good point. I am not advocating that we reduce public sector pensions to the private sector level, but this does, of course, absolutely bear comparison. This Government are not reducing public sector pensions to the pitiful state the Labour Government left private sector pensions in when they left office. That is precisely the point I am trying to make. We are proud of the fact that our public sector pensions will remain among the best in the world. That is something to be very proud of, and the Opposition should be congratulating the Government on having achieved that at this extraordinarily difficult time.

Let me disabuse Members of one final myth. The Opposition like to say that private sector workers earn more, so private sector pensions make up for the shortfall in salaries. That is not the case. The Institute for Fiscal Studies calculates that on average hourly public sector wages are 7.5% higher than hourly private sector wages, even when we take into account an individual’s education, age and qualifications. That is a very important point. Public sector pensions do not subsidise lousy working rates—quite the opposite, in fact. Those in the public sector rightly have a good deal in their employment and in their pension. That is what we wanted to achieve and I commend those on the Front Bench for doing so.

The most important aspect is sustainability, because what we had was unsustainable. Over the past decade, public sector pension costs increased by a third in real terms. Between 1999-2000 and 2009-10, the amount of benefits paid from the five largest public service pension schemes increased by 32% in real terms. In five years’ time, we are set to spend £33 billion a year on public sector pensions—more than on police and transport combined and 1.8% of GDP.

[Richard Fuller]

On that point about overall fairness and sustainability, does my hon. Friend believe that the Government could have gone further in ensuring sustainability by looking to move towards a fully funded form of public sector pension scheme? There is still an exposure for the public purse in the future. and although the Minister is putting in some cost control, we could have gone further, could we not?

[Andrea Leadsom]

Of course, my hon. Friend is quite right: we could have gone much further. Across Europe, public sector pensions and terms are being cut with immediate effect to deal with the appalling debts that countries have run up, whereas this Government are putting in place measures that are entirely fair and sustainable both for the taxpayer and the public sector worker.

Let me conclude by saying again that it is an unmitigated good thing that people are living longer, healthier lives, and that we should celebrate our public sector workers and the job they do. They do a fantastic job for us of which we are very proud and we want to ensure that they are fairly rewarded, in a way that is sustainable for the public purse for many decades to come.

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[Richard Fuller]

One issue is the fact that the cost that will fall not during this Parliament but on future taxpayers—our children and grandchildren. Does not the Bill do something to relieve some of the burden on future taxpayers? As the Intergenerational Foundation has said, that is a fair way to proceed.

[John McDonnell]

Let me quote the Treasury, which has said that the cost of the unfunded public sector schemes—I am particularly interested in the civil service one—as

“a share of GDP was 1% in 2007-08 and was projected to rise to only 1.2% in 2057.”

Only 18 months ago, the National Audit Office produced the report, “The cost of public service pensions”, and showed that

“when projections of liability are based on earnings, the total annual payments from the civil service pension scheme will be largely stable over the next 50 years.”

So no, I do not accept that analysis, and neither did the Treasury at the time.

I oppose the Bill. Members of my Front-Bench team will abstain tonight, I believe, because they hope they can amend the Bill. The Bill is unamendable to make it acceptable to me. Therefore I oppose it and I wish to have the opportunity to vote on the Bill if I can. If that means walking through the Lobby on my own, I will. I will find a teller somewhere, I hope.

The Bill is extremely damaging to the well-being and living standards of ordinary working-class people. We know that. My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) quoted the definitive piece of work, an independent analysis from the Pensions Policy Institute, which is a charity funded by the Nuffield Foundation to undertake the research. It confirmed that the Bill means that pension benefits will be cut by a third. My hon. Friend the Member for Leeds West (Rachel Reeves) referred to the shift from RPI to CPI, which was a further 11% cut. What the cuts in pension benefits mean is exactly as others have said—a reduction in participation that will ultimately threaten the viability of the schemes. Perhaps that is what the Bill is about—the degradation of the schemes so that they will eventually be replaced by the private sector.

Let me deal with the issue of private sector pensions, which is dragged out on every occasion. It is a rewriting of history. Let us go back to the 1980s and 1990s. The state pension was undermined by the Thatcher Government when they broke the link between earnings and pensions. That also undermined the earnings-related element of the state pension. They encouraged people to enter private sector schemes but, as we heard, they allowed many employers to take pension holidays, not for one or two years but for long periods. Eventually that undermined the schemes and a number of them in my constituency were wound up almost overnight.

Individuals were urged to enter into their own arrangements, which they did, only to be fleeced on their endowment policies and other mechanisms. Previous Governments, particularly in the 1980s and 1990s, destroyed private sector pensions and now this Government are moving on to destroy public sector pensions in the same way.

--- Later in debate ---

[Sajid Javid]

I will in a moment.

Because of their long-term nature, pension reforms will not save money quickly, but they make an essential long-term contribution to the health of public finances. We have heard that today from a number of Conservative Members, including my hon. Friends the Members for Bognor Regis and Littlehampton (Mr Gibb), for Bromley and Chislehurst (Robert Neill), for Monmouth (David T. C. Davies), and for Thurrock (Jackie Doyle-Price). As the Chief Secretary has said, it has been forecast that the Bill will save UK taxpayers £65 billion over the next 50 years.

[Richard Fuller]

My hon. Friend talks of savings for the taxpayer. Will he admit that this was a golden opportunity for us to convert public sector pensions from a “tax as you go” model to a fully funded scheme, saving future taxpayers billions and bringing true fiscal prudence to the way in which public sector pensions are set? Why has my hon. Friend missed that golden opportunity to go further and save future taxpayers more money?

[Sajid Javid]

My hon. Friend raised the same issue in his speech. I think it fair to say that that would have involved an excessive fiscal cost, and would have been much more complex than the approach that we have taken. I hope my hon. Friend accepts that.

In preparing this policy, we have been careful to follow the recommendations set out by the former Labour pensions Minister Lord Hutton in his independent report. We have heard much about trade unions today. The head of the TUC, Brendan Barber, whom I met recently to discuss our reforms, has described the report as a “serious piece of work”. He has taken a very constructive approach to the problems that the Government are trying to address.

While we are on the subject of trade unions—

Small Charitable Donations Bill

Richard Fuller Excerpts

Tuesday 4th September 2012 Commons Chamber

[Miss Smith]

I do not want this debate to descend into a battle of quotations—although I could, for example, provide the hon. Gentleman with a quotation from Mr Graham, the chief executive of a charity not far from my constituency, who has said:

“Being a very small charity relying on small private donations and monies collected in tins positioned in shops etc I welcome this Bill. It will certainly make a difference to the very needy children in Kenya that Mnarani Aid supports.”

The Bill has been broadly welcomed by the sector. It puts cash towards charities. I shall set out how it does that and deal with some of the points that some stakeholders have made over the summer and beyond. I am confident that the Bill does what it sets out to do, which is to support charities in a constructive way and the funding will be welcomed.

[Richard Fuller (Bedford) (Con)]

If I may, I shall take the Minister away from the details and towards the overall philosophy. In the tax treatment of charities, we can use the gift aid or “charity grabs back the tax” model or we could convert to a model whereby individuals deduct from their tax the charitable contributions they make, as happens in the United States and other countries. Was that general philosophical debate part of her consultation and deliberation on the Bill, or has she looked more specifically at how to improve and enhance the gift aid scheme with this new initiative?

[Miss Smith]

I shall try to be careful in responding. A number of interesting issues have been raised that are not necessarily part of today’s Bill. In addition, a number of improvements to gift aid have often been mooted or discussed, but they are not necessarily part of the Bill either. In direct answer to my hon. Friend’s question, therefore, the matters for consultation and scrutiny to date relate closely to this scheme and the mechanisms within it, which I shall now set out.

Under the scheme, charities will be able to claim top-up payments equivalent to the basic rate of tax paid on a donation, which is currently worth 25p for every £1 collected on small cash donations of £20 or less. Therefore, if a charity claims on the full allowance of £5,000 of small donations in a year, that will mean an additional £1,250 of income. It is that which charities will welcome. Hon. Members will know that tax reliefs for charities and charitable giving are an important source of income for charities, totalling over £3 billion a year. Of those, gift aid is the largest relief and is worth over £1 billion a year. We estimate that the gift aid small donations scheme could result in additional Government funding of around £100 million a year for charities and CASCs by 2015. That represents a significant boost in income for the sector and will be especially valuable to small charities. That is why—I again emphasise the point—this is a Bill that is to be welcomed and which has been welcomed by many across the voluntary sector.

To ensure that the new scheme is as accessible as possible to charities, it will be administered using the same mechanisms that apply to claims for tax relief under gift aid. The scheme will look and feel familiar to those charities and CASCs that already claim gift aid, and Her Majesty’s Revenue and Customs will publish clear guidance ahead of the commencement of the scheme to ensure that it is simple to access. However, because the new scheme will not be a tax relief, it cannot be legislated for through the usual Finance Bill route— I regret to deprive my hon. Friend the Member for Bedford (Richard Fuller) of the chance to serve on such a Bill and discuss the philosophical principle—so we are legislating for it in this programme Bill instead. The scheme was widely welcomed by the sector when it was announced in Budget 2011 and continues to be well received. We have worked closely with the sector to get the scheme right.

Let me now address some of the points of detail that have been raised, and which I am confident will be well understood by hon. Members. I shall set out the rationale for the ways in which we have designed the scheme, but first I want to set it firmly in the wider context. We have had to take steps to ensure that it operates as fairly as possible, but also to ensure that it remains affordable and is protected against fraud. We want this money to go to legitimate charities doing important work with real social benefit. We also want the small donations scheme to be as fair as possible. We want to ensure that charities doing the same kinds of work at local level, but which have different historical structures, get allowances under the scheme that are not hundreds, or even thousands, of times different from one another.

Those are the key driving principles behind the scheme: fairness, protection against fraud, and providing a complementary scheme to gift aid. We also want to channel some extra funding to charities, which I suspect that no hon. Member would want to speak against. I ask hon. Members to keep those principles in mind as we debate the detail of the gift aid small donations scheme. Let me take them in turn.

First, we want the scheme to complement gift aid rather than to replace it. I would urge all charities that receive donations to make full use of gift aid, where there is no limit on the amount of donations on which the charity can claim. However, there are some donations for which gift aid declarations are hard to come by, and that is what the scheme is designed to address.

--- Later in debate ---

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

It is a pleasure to follow my hon. Friend and constituency neighbour, the Member for Brent North (Barry Gardiner), whose contribution reflects today’s interesting debate. We started with the Economic Secretary’s opening speech, during which there was a series of interesting interventions. The Chair of the Public Administration Committee, the hon. Member for Harwich and North Essex (Mr Jenkin), made a series of interventions, one of which dealt with the need to build into the legislation easy scope for a review of its effectiveness. As my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) made clear in her opening remarks, we need to make every effort to ensure that the primary legislation is as strong as possible. The hon. Gentleman made an interesting point. He has developed a reputation as an assiduous— and, for the Government, troublesome—Chair of the Committee. In the eyes of his Whips, that may rule him out of serving on the Public Bill Committee, but his comments were a helpful guide to amendments that we might want to think through.

In her intervention on the Economic Secretary, the hon. Member for Congleton (Fiona Bruce) highlighted a concern that has clearly been put to her: whether, because of the way the clauses on community buildings have been drafted, hospices will benefit from the Bill as much as had been hoped. The hon. Member for Dartford (Gareth Johnson), in the first substantive speech in the debate, made a point of praising the Arrow riding centre in his constituency. It does indeed sound an excellent organisation, and in that sense probably reflects the many excellent organisations that each of us in this House can point to in our communities. They benefit our communities and make them stronger, particularly because of the enthusiasm of the volunteers and original sponsors of these charities.

Our challenge is surely to try to do what my hon. Friend the Member for Clwyd South (Susan Elan Jones) suggested: to simplify the system as much as possible and to enable those with fire in their belly—those behind a particular charity with the passion and commitment—to benefit as much as possible from this legislation. She has clearly been working throughout the summer recess, carrying out extensive research on charity debates and tracking down the first ever discussion of charities in the House of Commons, more than five centuries ago. That is a particularly impressive piece of work that I suspect puts the rest of the House to shame. It is not surprising, however, given her track record of interest in this sector.

In his short time in the House, the hon. Member for Warwick and Leamington (Chris White) has already built a track record of interest and enthusiasm in this subject. He urged Ministers to pay close attention to the comments and concerns of the National Council for Voluntary Organisations and the Charity Finance Group. He raised a particular concern about whether the three-year HMRC rule is quite as necessary as the Economic Secretary suggested in her opening remarks. He went on to argue that Leamington is the most generous town in Britain. He is stretching the credulity of the House there, if I may say so; nevertheless, it sounds almost—but I suspect not quite—as generous as Harrow.

The hon. Member for Stafford (Jeremy Lefroy), who has already established a strong record in this House in working with international development charities, outlined his support for the Bill. He will recognise that people in this country rightly respond to disasters around the world, and that the Bill could enable such charities to do more to make their money and effort go a little further.

The hon. Member for Banff and Buchan (Dr Whiteford) emphasised that Ministers should do further work on the detail behind the Bill, and I understand that she has a strong track record of working with charities, including development charities. Among the many thoughtful points she raised was whether or not HMRC might be persuaded to use marketing or analytical tools to provide further support to ensure that charities benefit as much as possible from this legislation, when both Houses eventually conclude their debates.

My hon. Friend the Member for Foyle (Mark Durkan) outlined his scepticism about the Bill being perfectly formed. He made the perfectly proper point that debate with the Northern Ireland Assembly on some of the detail is required. Again, Ministers and the Committee will need to have further conversations with the representatives of the sector to maximise the Bill’s benefit.

The hon. Member for Milton Keynes South (Iain Stewart) praised another excellent sounding organisation, Community Action Milton Keynes, which he knows well. He raised concerns about the three-year rule on eligibility, highlighting the need to get right the balance between preventing fraud and helping more charities to benefit. He hoped that today’s discussion is part of an “evolutionary” approach by Ministers, and I hope to encourage the Minister to take such an approach. My hon. Friend the Member for Brent North, in his substantive remarks, emphasised the concern of all Members about the eligibility criteria in the Bill and whether as many charities that rely on small donations will benefit from the Bill as might do.

As my hon. Friend the Member for Kilmarnock and Loudoun made clear, the Opposition will support the Bill, but we have a series of concerns about its detail, which she set out and which I will touch on briefly at the end of my remarks. The House will of course be aware that the Bill’s proposed changes to gift aid build on the reforms that my right hon. and hon. Friends introduced under the previous Government—my hon. Friend the Member for Clwyd South made that point. My right hon. Friend the then Chancellor had an excellent track record of enabling smaller charities to benefit from gift aid, introducing a less complex audit process and helping at least some charities to get a proper advantage from the various changes that he introduced.

We will want to probe and challenge the complexity that has been written into this scheme by Ministers, which has been highlighted to us by the NCVO, the Charity Finance Group, the Institute of Fundraising, the National Association for Voluntary and Community Action and a series of other groups. I, like a series of other hon. Members, alluded to the fact that this complexity risks ensuring that a number of small charities miss being able to benefit from the changes implicit in these arrangements.

Ministers have highlighted this measure in the past as a big source of help for charities and proof of their ongoing commitment to the big society. The Chancellor made that point in one of his Budgets. In truth, this is a modest Bill, which risks being far more modest than it needs to be. It is, sadly, an isolated gesture of help amid a dismal funding and contracting environment for charities, entirely of the Government’s making. The Bill will, nevertheless, put back into charity coffers a small amount of the income that Ministers have collectively axed since they came to power.

The context for this debate is grim, as a number of hon. Members have said, and it bears spelling out as a reminder to the whole House and, in particular, to the Committee to do our utmost to maximise the benefit of the legislation to the maximum number of charities. As my hon. Friend the Member for Clwyd South mentioned, earlier this year the NCVO highlighted the “toxic mix of circumstances” facing charities: increasing demand for their services, rising costs, and an unprecedented fall in income. The NCVO argues that Government spending on the sector will fall by some £3.3 billion between the coalition’s taking and eventually leaving office.

A report by the Association of Chief Executives of Voluntary Organisations, which was commissioned by the Government—by the Cabinet Office—and which Ministers were eventually forced to release, revealed that charities would lose, in 2011-12 alone, at least £1 billion as a direct result of Government cuts, with two thirds of the charities most at risk of suffering being in the most deprived areas of Britain.

[Richard Fuller]

In a comment in his opening inquiries of the Minister, the hon. Gentleman referred to the transition fund and he is now referring to the same point about Government funding, so I would just like to pick up on the point. Does he accept that one of the underlying philosophical differences with this Bill is that it is using Government money to support the actions of individual citizens in supporting the charities they wish to help, rather than looking at charities as an extension of the state that should be supported by public moneys? Although there may be an issue to address about the quantum and how much we can afford to put into these charities, does he accept that this is a wise way for the Government to spend their money?

[Mr Thomas]

With the greatest respect, the previous Government and the one before had exactly the same approach. The difference between us is over the scale of the funding cuts that the hon. Gentleman and other Government Members have signed up to. As I said in my opening remarks, I accept that the Bill will make a small positive difference. We welcome it on that basis and we want to work with Ministers and, indeed, with all hon. Members to try to maximise its benefit. He does not serve his cause well by minimising the scale of the cuts which charities are suffering. According to the National Children’s Bureau in April, two thirds of children’s charities had cut staff last year and reduced the range of services they offered, with 25% expecting to have to close this year. That grim direct funding situation is hardly a sign of a commitment to charities and community groups, or indeed of Ministers’ professed commitment to the small platoons or the so-called big society.

I say gently to the House that not one of the more than 140 charities I have met over the past 12 months has said that reform of gift aid is the defining answer to the problems the Government are causing charities, despite the Chancellor’s enthusiastic claims in the Budget. Ministers, notably Cabinet Office Ministers, have failed in the past 12 months to offer serious heavyweight leadership in Whitehall for charities. The Work programme has become an iconic example of charities losing out on funding because of poor commissioning of major Government contracts.

Let us consider the example of just one charity, St Mungo’s. Given its skills at getting people in the most challenging circumstances back into work, one would have thought it was the perfect participant in the Government’s Work programme. However, having had no referrals in just under 12 months, St Mungo’s finally called it a day earlier this summer. You couldn’t make it up: record long-term unemployment, a Work programme that is not exactly going all guns blazing and a charity with huge experience not being used —not even once.

We have, of course, also seen charity after charity having to line up to demand that the Government withdraw their charity tax relief cap. For example, Cancer Research UK is seriously worried about donations to build a world-class centre drying up because of Ministers’ incompetence. It was a badly bungled Budget measure from Treasury Ministers—one of a number. One of the arguments originally used to try to justify that measure, until it was eventually pulled, related to the problem of “dodgy charities”. Although the Economic Secretary veered a little towards such language in her opening remarks, she certainly did not repeat that mistake. However, we need to be careful that the requirements that we set out in the legislation that is finally passed do not allow people to think that Members in all parts of the House share the concern that there is a huge problem with poorly managed charities engaged in fraud. We will certainly wish to probe her argument about the three-year relationship with HMRC that charities must have in order to benefit from the Bill.

We debate this Bill in the context of a dismal picture of substantially reduced charity funding and of Treasury Ministers who need to make amends for the charity tax relief debacle. The Bill nevertheless deserves a Second Reading and further robust scrutiny. We will want to explore carefully the Government’s arguments on a series of clauses, particularly to try to reduce the complexity of the new arrangements, which has been highlighted by the likes of Sir Stuart Etherington, Peter Lewis, the chief executive of the Institute of Fundraising, and NAVCA. Let me take just one set of comments as an example: NAVCA called the proposed system “overly bureaucratic” and “out of proportion”.

To be fair, the Economic Secretary hinted that Ministers would be flexible in Committee. I hope that her ministerial colleague will emphasise that Ministers are determined to be flexible and to see the discussions in Committee as an evolutionary process. That point was made by the hon. Member for Milton Keynes South in particular. We will want to probe the concerns about the eligibility criteria as there is particularly wide consensus outside the Treasury among voluntary groups that many charities will miss out if the Bill goes through unamended in that regard. We will want, too, to explore the thinking of Ministers on the connected charities rules, which risk creating an unnecessary barrier to recruiting high-quality trustees if they have similar roles in similar organisations.

On community buildings, there is a risk that some charities could lose out, as other Members have highlighted. Ministers would be wise, given the scale of the Government’s failure to help and support charities, to recognise the limited scope of the Bill. It is a worthwhile Bill with the potential, if Ministers are open-minded, to offer even more significant benefits. It builds on the reforms Labour introduced when we were in power. It needs amending in Committee, and Committee members, particularly Ministers, will need to show further flexibility to maximise the benefit it could have for the charity sector. We will support the Bill tonight and I commend it to the House.

Professional Standards in the Banking Industry

Richard Fuller Excerpts

Thursday 5th July 2012 Commons Chamber

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

The sole argument advanced today by the Chancellor as to why there should not be a thorough, comprehensive, judge-led inquiry is that it would not report quickly enough. Despite the enormous bluster and noise of this debate—I very much agree with the hon. Member for Harwich and North Essex (Mr Jenkin) about that—that argument has been overturned by the Leader of the Opposition’s proposal for a two-tier inquiry, with the section on LIBOR to report by the end of December and the second part, which is the more important part, to report within 12 months.

We have to answer the question that has not been answered: why are the Government so coy about a genuinely independent inquiry? Is it because of their fears over what a Leveson-style inquiry into banking might expose? After all, the City, which is a pretty hard-nosed institution, does not give half the Tory party’s total income to it year after year for nothing. It expects, and undoubtedly gets, a great deal in return. Is that why the scams that repeatedly tumble out of the City under the false pretence of financial innovation, such as the mis-selling of private pensions in the 1970s, which has not yet been mentioned, and the recent mis-selling of payment protection insurance and credit default swaps, have always been treated so lightly?

Is that why the Vickers recommendations, which were already weak since the City will always get around Chinese walls by regulatory arbitrage, have been watered down further through the lobbying of the banks? The crucial rise in capital ratios was initially set at 4%, which is certainly the minimum that is necessary. That was reduced by the Chancellor to 3% and even that feeble reform has been postponed, almost unbelievably, until 2019.

[Richard Fuller (Bedford) (Con)]

I appreciated the right hon. Gentleman’s support for my efforts in January to secure a Back-Bench debate on criminal prosecutions in financial services. He asked why Government Members want a parliamentary inquiry. Does he not accept that our constituents have a visceral attitude towards the misdeeds in the financial services sector, and that one problem with a judicial inquiry is that it is the equivalent of a snooze button and the people disengage? A parliamentary inquiry would not suffer that fate.

[Mr Meacher]

I think the exact opposite is true. The Leveson inquiry has aroused and maintained intense public interest. Yesterday’s Treasury Committee sitting showed what happens on such occasions. Unfortunately, it became very personalised about what each Member had been saying and drew attention to the degree to which Bob Diamond was not put under serious threat. There are therefore very good reasons for a judge-led inquiry.

Is the close political-financial nexus that exists in this country the reason why the demands of Germany and France for a financial transactions tax have been swept so cavalierly under the carpet by the Prime Minister and the Chancellor? Is that why the pressure from Germany and the US to wind down the egregious tax avoidance that is largely centred on Britain’s Crown dependencies has been flatly rejected by the Government at the behest of the City?

Why are the complex derivatives that lay at the heart of the crash in 2008-09 being retained by the Government within the ring fence? Why has the incestuous relationship between the credit rating agencies and those whose creditworthiness they are supposed to be assessing been left untouched by the Government, when it allowed junk derivatives to be sold around the world with a triple A rating? What is the answer to all these questions? I think that they are very significant. Why has the colossal scandal of tax avoidance on the industrial scale of £42 billion a year, in which the City is so intimately involved, been ignored so unscrupulously?

I shall give an example. The Government set up the Aaronson group to consider the issue, led by a lawyer who has always represented the tax avoidance industry and never Her Majesty’s Revenue and Customs. On the first page of its report last November, that group said that a general anti-avoidance rule was not necessary. It produced the preposterous proposal that if there were such a rule, HMRC would have to seek the permission of an external body before it could be used. It gets worse, because there would have to be a majority of tax avoidance industry representatives on that body. Not surprisingly, the Government have accepted those recommendations in full. That shows the inordinate lengths to which they will go to protect the City by appearing to do something but in reality elaborately constructing a paper aeroplane in the sure knowledge that it will not fly. Those are just some of the reasons, and I believe a lot more remain hidden, why the Government do not want a judge-led inquiry at any price. They are exactly the same reasons why a systematic, wide-ranging inquiry is now so necessary.

I agree with many Members that in the last analysis, this is not about personalities or even about the corrupted culture of banking. It is much more about the deeply flawed structure and role of banking in Britain. The banks are far too big, and the big five control up to 90% of the money supply, which is far too much. We need smaller, more specialised banks that focus on key areas such as infrastructure, relational banking like that in the German mittelstand, the knowledge, science and research and development industries, the green economy, small and medium-sized enterprises and all the rest.

Above all, we need to regain public control of the money supply, which was privatised as a result of deregulation in the 1990s, so that—this is the crucial point—the nation’s financial resources are focused not on the banks’ interests of profiteering from overseas speculation, tax havens and property, in which they specialise most of all, but on the national interest of putting the nation’s resources primarily into industry, manufacturing and export. That is why the whole House should unite behind the Opposition’s motion.