Oral Answers to Questions

Richard Fuller Excerpts

Thursday 1st May 2014 Commons Chamber

[Mrs Grant]

I grew up in an area close to the north-east, and I know how fabulous it is. We have an excellent domestic tourism package, and VisitEngland has launched two brilliant “holidays at home” campaigns, which have generated millions of pounds of incremental spending. I hope that the hon. Lady’s constituency will benefit from that.

[Richard Fuller (Bedford) (Con)]

As chairman of the all-party parliamentary group on American football—and I declare my interest in that regard—I can tell the House that when it comes to sport-related tourism, I know of no sport that has the same potential. Will my hon. Friend join me in congratulating the National Football League on hosting three American football games at Wembley this year, and will she welcome the visitors who will come to support the Miami Dolphins, the Oakland Raiders, the Detroit Lions, the Atlanta Falcons, the Dallas Cowboys and the Jacksonville Jaguars?

[Mrs Grant]

I probably just need to say yes to all that—and many congratulations to all concerned.

Oral Answers to Questions

Richard Fuller Excerpts

Tuesday 11th March 2014 Commons Chamber

[Mr Gauke]

I have to remind the hon. Lady of the state of the public finances when we came to office and the very difficult circumstances that we face. The fact that 2.7 million people have been taken out of income tax as a consequence of our policies shows the emphasis by the coalition Government on supporting those in low-paid work.

[Richard Fuller (Bedford) (Con)]

The Minister is absolutely right about the commitment of our Liberal Democrat and Conservative colleagues in increasing the tax threshold. What consideration has my hon. Friend given to looking similarly to national insurance contributions?

[Mr Gauke]

My hon. Friend makes an important point. We have to look across the board, and what we see is a Government who, in difficult circumstances, while taking difficult decisions to reduce the deficit, have made every effort to ensure that work pays. I am sure that we will continue to do so.

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[Sajid Javid]

The failed regulation by the previous Government that led to Government ownership of RBS also produced a system of governance that is done on an arm’s length basis. Those are commercial decisions for RBS. If the hon. Gentleman wants to make representations to it, he can do so through me if he wishes.

[Richard Fuller (Bedford) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chief Secretary to the Treasury (Danny Alexander)]

The core purpose of the Treasury is to ensure the stability and prosperity of the UK economy. I can tell the House today that I am publishing the first review of compliance with the rules on tax arrangements for public sector workers. Compliance with those rules has been high, but details have been passed to Her Majesty’s Revenue and Customs in 125 cases where appropriate assurances have not been received, and I have imposed financial sanctions on two Departments that have breached the rules. The intention is to send a clear message that everyone should pay their taxes.

[Richard Fuller]

Since 2010, unemployment in Bedford has come down and average weekly earnings have gone from below the national average to above the national average thanks to the commitment of local people to making difficult decisions in tough economic times and the Government’s commitment to their long-term economic plan. Does the Minister agree that the biggest risk, given that the British Chamber of Commerce is forecasting higher growth next year, is for us to abandon that plan and adopt the policies of the shadow Chief Secretary to the Treasury, who has never had a proper job in his life?

Fairness and Inequality

Richard Fuller Excerpts

Tuesday 11th February 2014 Commons Chamber

[Jonathan Edwards]

In that regard, the Democratic Unionist party and Plaid Cymru share a common vision, in that we need to empower our respective Governments to deal with the economic and social challenges that our people face.

I want to set out how and why this inequality has been allowed to take a grip and, indeed, been actively pursued by the powers that be. I will also set out how that can be reversed, and how places such as Wales can become more prosperous and egalitarian societies. We have seen the over-concentration of power, status and influence in a narrow and unrepresentative financial elite over the past three decades. That has allowed greed, avarice and hubris to take hold among the elite’s own ranks, while poverty, destitution and exclusion have risen among much of the rest of society.

The uneven economic development of the UK and the concentration of so much wealth and power around London and the south-east distort much of the UK’s public life. They influence and shape many of the political, media and business perceptions about what is good for the entire UK, and lead to geographical polarisation and a super-concentration by Westminster politicians on certain sectors of the population whose opinion is seen as worth courting and listening to.

[Richard Fuller (Bedford) (Con)]

I am listening with great interest to what the hon. Gentleman is saying. Does he think that that concentration of power and authority in London and certain other parts of the country was a natural change that occurred as a result of global changes and that the Government did nothing to mitigate it, or does he think that it was a result of active Government policies over the past three decades?

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[Stephen Crabb]

I am not sure that I recognise the figures that the hon. Lady gives.

[Richard Fuller]

Will the Minister assure the House that he understands the figures even if the Opposition do not, and that between 1995 and 2010 the total indebtedness of the UK went from twice the size of the economy to five times the size of the economy, making us the most indebted major economy in the world?

[Stephen Crabb]

My hon. Friend explains it very well for the benefit of Members of all parties. Under the previous Labour Government, the trajectory of public spending was set on a reckless course, and when the banking crisis hit, the true consequences were felt by hard-working families throughout the country.

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[Mr MacNeil]

Very good, Mr Deputy Speaker.

It is a slight concern of mine, however, that the captains of industry, as they get called, or the high-bonus City bankers or hedge fund managers, have never had that experience at a young age and have not engaged meaningfully with sympathy for the situation that others may be in as they gobble all the chocolates of productivity that our economy has produced, believing instead that they are self-made men and self-made women who worship their own creators.

[Richard Fuller]

Before the hon. Gentleman moves on from his Milk Tray doctrine of equality, will he accept that very many of us do learn those lessons in school and do not necessarily need the Government to act for us to fulfil our responsibilities as individuals? What would he say about considering ways to exhort people who have wealth, regardless of the taxes they pay, to give more to others?

[Mr MacNeil]

The hon. Gentleman’s intervention is laudable, and I understand what he says, but I disagree. The consensus post the great depression of the 1930s showed the importance of regulation, and that lesson was probably forgotten by the 1980s in the era of the Reagan-Thatcher deregulation that led up to the precipitous problems that finally exploded six years ago. In the absence of regulation, people have to look into their own hearts, but sometimes we can spend far too long doing that. The rule of politics, Parliament and Government is to ensure that we have the structures whereby all can benefit and they are not just dependent on the whim of some well-meaning individuals who may be a minority among the wealthy and could direct their contribution in the wrong way.

Before I get to the body of my speech, I have a final example of something that I think informs the human condition, namely the observations of anthropologists on hunter-gatherer societies. I hope this will also inform the debate, because I think that inequality is essentially about human choices—perhaps even bias—whether they be conscious or subconscious.

Anthropologists note that hunter-gatherer bands did two main things: they hunted and they gathered, hence, of course, the name—there is no need to be a Nobel prize winner to spot that. The crucial observation is that they treated the products of the hunt and the gather very differently. The products of the hunt were shared out almost instinctively, with many people who might not even have been on the hunt getting a share. Anthropologists explain this as the sharing of luck and good fortune, with those on the hunt realising that they might not have had a successful hunt in different circumstances and that, given the way in which the society of the day was arranged, they might earn the good will of others who might be lucky on another day.

That sharing, however, was not mirrored in the gather, and anthropologists reckon that that was due to the labour and endeavours of the individual graft and application of the gather.

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[Guto Bebb]

Obviously, I do not accept most of the hon. Gentleman’s arguments; certainly, we should be careful about taking lessons from the Irish implosion. Ireland is probably one of the few countries to have a banking crisis even greater than ours. Many of the eastern European accession countries have managed to create vibrant economies by imposing low-tax regimes, and the whole of the UK should look carefully at those countries’ performance.

In the debate about whether we have a 50p, a 45p or a 40p tax rate, I remind Labour that it found the 40p tax rate completely acceptable for the vast majority of its 13 years in government. What is the purpose of income tax? That is a question that is often forgotten. Its purpose is not to bring down and punish the successful. If we believe in a more equal society, we want more money coming into the Exchequer, because that means we can do more to support the less well-off in society, but we have lost sight of that argument. If we reduce taxes and get more money coming into the Exchequer, that is something that should be welcomed. Time and again, it has been shown that when taxes are reduced, more often than not, the result is more economic activity and a greater success story.

[Richard Fuller]

Does it not strike at the economic illiteracy of the shadow Front-Bench team that they are far more interested in a headline tax rate than in raising revenue to pay for the public services people want?

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[Richard Fuller (Bedford) (Con)]

The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) brings to this House a wealth of experience and understanding from her previous work in the area of health, and I hope that the House listened carefully, as I did, to her comments about the interaction between differences in health and the perpetuation of inequality in our country. However, I did disagree with some points in her critique, which I shall discuss later; most importantly, there was an absence of a full understanding of the context in which this Government are taking actions to address fairness and inequality.

I, like many people, get somewhat concerned and uneasy when I hear politicians bandying around words such as “fairness”, “equality” or “inequality”. History has taught people that when politicians profess themselves in favour of fairness, they too often end up enriching themselves and those politicians who would rally people to the banner of equality too often end up repressing those same people once power has been given to them. So it was with some trepidation that I came to this debate, but the prospect of being able to listen to perspectives on those issues from Members of this Parliament from different parts of the UK attracted me, and I have not been disappointed, either by the opening speech or by those of other hon. Members.

Judgments about what is fair or not fair, or about the balance between equality and inequality, are best left to individuals and families. People are perfectly capable of making those decisions based on what they have learned from their parents and grandparents, on what they have been taught in school or, perhaps, on the lessons they have learned in their church, synagogue, mosque or temple. Politicians fall rather low down the list of people who can be persuasive on those topics. Nevertheless, we shall battle forth.

[Mr MacNeil]

I do not disagree in any way, shape or form that people can make assessments about what is iniquitous or unfair, but the hon. Gentleman needs to go further down the road, because when people see inequity and unfairness they do not have the power to do anything about it. That is when this place and national Parliaments around the world have to regulate, reform things and so on to make sure we have the situation we had after world war two: a better settlement for the greatest breadth of citizenry.

[Richard Fuller]

I am grateful to the hon. Gentleman for that helpful intervention. Let us assess the ability of Government today to fulfil that positive role. One of the most important aspects of fairness is the future that we bequeath to our children and grandchildren. It is a natural aspect of human behaviour to want to give the best start in life to our children and grandchildren. One of the worst aspects of the context in which we are operating today, as a Government and as a Parliament, is that under the previous Government, we built up the most significant amount of debt to pass on to our children and grandchildren. One of the most important aspects of what the Opposition call the cost of living crisis—my constituents think of it as trying to meet the family budget—is the debt that was left by the previous Government for this Government to deal with.

The Opposition like to talk about the level of Government debt at that time, but a Chancellor of the Exchequer is custodian not just of part of the economy but of the entire economy, and, before he makes a decision, he has to look at the strength of the economy. It is an incontrovertible fact that the level of indebtedness of this country in 1995—Government debt, household debt and corporate debt—was about two times the size of the economy, and when the Labour party left office, it was five times the size of the economy. We do not need to have a credit card to know that we have to pay off all that debt, and not just part of it.

[Debbie Abrahams]

Will the hon. Gentleman explain the decisions that were made in the Health and Social Care Act 2012, which had nothing to do with the debt? We recognise the economic context, although we could quibble about the causes and whether we reduced the level of debt. I believe that we reduced it while we were in power. None the less, the specific policies of the Act had nothing to do with that debt. They were choices that the Government would have driven through regardless of the economic context.

[Richard Fuller]

The hon. Lady is repeating the point that she made in her speech. I am sure that the Minister will want to address it now or later. Earlier on, she missed this major contextual factor, which is somehow the Government must be able to manage the economy while dealing with a substantial overhang of debt, and individual families are doing that as well. That is a root and crucial part of how we can achieve a more equal society. We cannot achieve an equal society if we permit Government to pass on massive debts to future generations without any liability themselves.

[David T. C. Davies]

My hon. Friend is making an excellent speech. Does he find it as extraordinary as I do that that debt was being racked up from 2001 onwards at an average rate of about £30 billion a year, long before the financial crisis struck?

[Richard Fuller]

I appreciate my hon. Friend’s intervention. He is drawing our attention to the Government part of the debt, but I have to tell him that the stewardship of the economy by the Government was worse even before then. We, as people who can vote in Governments and as citizens, have to take that responsibility ourselves, too. We are responsible for what this generation does, whether it is our Government, our corporations or any other aspect of society, but we pass on those consequences to our children and grandchildren and they will inherit either a more equal and more prosperous society or a less equal and less prosperous society because of the decisions that we make as individuals and the way in which we hold our Government to account.

[Sheila Gilmore]

rose—

[Richard Fuller]

With respect, others wish to speak, so I will move on now to specific parts of the motion.

Let me address the issue of austerity measures and why they are in place. First, there is the fact that we have accumulated too much debt. Another issue is the ripple effects of that debt crisis. As the Government deal with the overriding debt, individual families, especially those in vulnerable circumstances, are pushed to the edge and need to go to payday lenders and other high interest rate lenders to deal with the consequences of that macro-financial situation. The individual circumstances of individual households have to be taken into account.

The other issue—again, it is the legacy of what occurred in preceding years—is the way in which house prices have become detached from incomes. Shelter is running a campaign on the issue, and although it is an interesting point to raise, I think that it is about 10 years too late. In the Living Wage Commission report, to which many hon. Members have referred, there is an interesting chart—figure 1.21—which looks at the ratio of house prices to earnings for the years 1952, 1975, 1997 and 2012. For the entire period from 1952 to 1997, the ratio of house prices to income fell. In 1952, it was five times the average income, but by 1997, it was 4.1 times. In the period from 1997 to 2012, it rose from 4.1 times to 6.7 times; 100% of that increase took place in the period to 2007. If we look at the cost of living and the cost of housing—part of enabling people to own their own home, get on the property ladder and pay their rent—we see that the issue of inequality will take time to resolve, because it took us a long time to get into that mess in the first place.

The motion refers to women and relative pay. I want to draw to the attention of the House, not by way of answer but by way of contribution to the argument, the House of Commons economic indicators report for February 2014. It looks at the gender pay gap and it makes the broad point that the overall pay gap between men and women has decreased steadily from 1997, but in considering whether the gap will be perpetuated in the future, it examines the gender pay gap by age range. For women and men between 18 and 39, the pay gap oscillates between 1.4% and 0.3%. For women over 40, it oscillates between 12% and 18%, which raises a question for policy makers such as the Minister: is that issue to do with career breaks and will it persist over time, or is it the result of a fairly good news story, with younger women and younger men on average having access to the same sort of jobs and pay, so that in about 20 years’ time the differential will go down? I do not put that forward as an answer, because I do not know the answer, but as a contribution to the debate and to broaden understanding.

There have been a number of contributions about the working poor, poverty and the living wage. We have discussed raising wages from the minimum wage level to living wage levels, but too frequently that would result in a small pay increase for the individuals concerned. It is a transaction between the employer and the Government in terms of the interaction of benefits and compensation. To contradict my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), who discussed the free market in wages—it is a small difference—I would argue that if in the low-pay sector Government are topping up wages to the tune of £10,000 on a £13,000 wage, which is the case for a married person with two children earning the minimum wage, the free market is far from working. There could be a strong argument, not only from the point of view of public finances but in order to have a freer market, for urging the Government to increase the pressure on companies by removing that subsidy, which is supporting labour. However, I should be interested to hear more from my hon. Friend.

[Jacob Rees-Mogg]

Is my hon. Friend aware that someone working 40 hours a week in receipt of the minimum wage would pay over £2,200 a year in tax, which must be part of the problem? I include in that employers’ national insurance.

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[Richard Fuller]

My hon. Friend is absolutely right. This Government have sought to reverse the level of tax that people on low incomes pay, unlike the previous Government. In addition, with the employment allowance, the Government have a tool to encourage employers to increase pay for people on low incomes, and I hope that the Chancellor will do something about that.

We talk a lot about improving skills, which is important, but that does not work for everyone. Not everyone will want to take on additional skills. One aspect of pay that during my career in business changed dramatically was the recognition of tenure. It used to be the case that by doing the same job for two, three, five or 10 years, not improving one’s skills but just getting better at what one did, an increase in pay could be anticipated. We have lost sight of that too much over the last 10 or 15 years. We have said it is just one rate for the job, with no regard to tenure. I ask the Government to look at tenure as part of a more widespread response to the persistence of low pay in this country.

In addition to the promotion of a living wage by councils, there is an important point about the commissioning that councils do. There have been reports in the media recently about the commissioning of various types of service by local authorities that impact on the pay that can be earned by individuals, which is also an important point for the Government to consider.

I will not get into the debate about the rise of food banks under the last Government compared with now. Food banks provide a good service and I encourage people to support them as much as possible. I went to the food bank in Bedford and I pay tribute to the All Nations Church, to the Salvation Army and to the other Churches that run the food bank.

[Gordon Banks]

May I entice the hon. Gentleman to go into the matter of food banks a little? Has he seen the latest newsletter from the Trussell Trust, which somewhat contradicts the Minister’s position earlier? It says that 42% of all food bank users cite benefit-related problems as the reason why they use food banks.

[Richard Fuller]

I have not seen that report, but I have seen the data on those using the food bank in Bedford. For a large proportion of people the causes are related to benefit changes. I do not have the statistics, but within that group some people have been sanctioned for not complying with the benefit rules. Would the hon. Gentleman support policies that sanction people for not conforming with the benefit rules, or does he believe that they should not be sanctioned?

[Sheila Gilmore]

My constituents are not being sanctioned for not looking for a job, but for one-off incidents. One constituent rearranged an interview with the Work programme provider because of difficulties with her child’s school start times and was told that that was okay, but she was subsequently sanctioned. People are being sanctioned for minor infringements, almost on a whim.

[Richard Fuller]

I do not want the hon. Lady to conflate two things. If the 42% figure reflects the situation in Bedford, it is to do with the broader issues of benefits, which includes sanctions, changes to benefits and the specific examples that the hon. Lady mentioned, where the reason is fairly spurious or there is just a plain error. I do not believe such cases make up the 42% proportion, but they are part of it. But I am a Tory, so I understand that large bureaucracies forget the individual and people are caught by that. In my constituency—as I am sure the hon. Lady is in her constituency—I am creating a form with the local food bank provider so that when circumstances such as she describes occur, my office can be informed straight away. It is important that we as Members of Parliament use our power, when such spurious changes to benefits are made, to shorten the time that they take to resolve. For some of my constituents that can take six, seven, eight weeks or more, which is not correct if a sanction has been inappropriately applied.

[Gordon Banks]

I endorse what my hon. Friend the Member for Edinburgh East (Sheila Gilmore) said. I commend the hon. Gentleman on his work in moving things on for his constituents in respect of food banks. I do the same, as I am sure do many other right hon. and hon. Members, but I have had constituents who have been sanctioned because they have been ill and then, because they are sanctioned, they have no money to go to appointments, and are sanctioned again. That system is totally out of control.

[Richard Fuller]

I will not dwell on the matter. I have asked the hon. Gentleman whether he supports the process of sanctions. I would be interested to hear him explain in his speech what type of sanctions he supports and how he would implement them, if he had to take that responsibility.

The final part of the motion asks the Government to halt their spending cuts. If they halt that process, they have to look at increasing taxation. I am sure many hon. Members know that the ways in which we raise tax are moving more and more towards fewer people paying a larger proportion of tax, with 1% of the population paying 30% of income tax and 29,000 people paying 14% of income tax. On the one hand, this may be seen as an aspect of inequality. On the other, it may be seen as a fairly dangerous way in which a Government can raise money, in which case the shadow Chancellor’s proposal to increase tax rates again is probably inappropriate.

In some of the contributions from even those on the Government Benches, we convey the impression that the Labour Government were benign on tax. I draw the attention of the House and the Minister to what was going on between 2000 and 2010. It is in a House of Commons Library note called “Income tax: the additional 50p rate”, which looks at the top rate of tax, including social security contributions, between 2000 and 2010. It shows that in France that rate went down 10.6 percentage points, in Germany it went down by 5.8 percentage points, but in the United Kingdom between 2000 and 2010 that rate went up by 11 percentage points. So it is not fair to use the word that has been common in this debate or to maintain the perspective that somehow, under the Labour Government, the rich were getting off with low tax rates. The Labour Government were taxing people at a high rate. They started the process of a higher proportion of taxes being raised from fewer people, which results in a very difficult situation for people overall.

We have had an interesting debate and I look forward to hearing more contributions from hon. Members on fairness and equality. I have not yet been persuaded that politicians are best placed to determine that. I believe that individuals make their own judgments. I hope that by using some of the information that I have presented today, other contributions may be better placed to consider the issue.

Oral Answers to Questions

Richard Fuller Excerpts

Tuesday 10th December 2013 Commons Chamber

[Mr Gauke]

I am not sure that the hon. Lady heard the Chancellor correctly if that is what she thinks he said. The reality is that we have to get the deficit down and we have gone through two years of great challenges in the economy. Our argument was that because of those challenges it was more difficult to get the deficit down. Labour argued that the economy could not grow while getting the deficit down. We were right; they were wrong.

[Richard Fuller (Bedford) (Con)]

The record deficit left by the last Labour Government was, in essence, a tax on the future opportunities of our children and grandchildren, denying them opportunities that our generation was able to have. Will my hon. Friend assure the House that he will not repeat the mistakes of the last Labour Government and that he will prioritise further reductions in the deficit so that our grandchildren can have the same futures that we have enjoyed?

[Mr Gauke]

My hon. Friend is absolutely right. It is irresponsible to future generations if we do not take action to reduce the deficit. The approach we had from the party—[Interruption.] The shadow Chancellor has just said that the deficit is going up. He has been saying that all along, and I am afraid he is just plain wrong.

National Insurance (Contributions) Bill

Richard Fuller Excerpts

Tuesday 10th December 2013 Commons Chamber

[Richard Fuller (Bedford) (Con)]

If I heard the hon. Lady correctly, she said that she wanted the cut in the jobs tax to be brought in sooner, yet in 2010 she said in Committee that she was proud to stand on a record of increasing the jobs tax. Does that represent a flip-flop?

[Shabana Mahmood]

It does not represent a flip-flop, as the hon. Gentleman well knows. It would not be a debate on this issue if he did not make the point that he has made on a number of occasions. I would have felt as though I had missed out on something if he had not made that intervention, so I am grateful to him. He will not be surprised if I repeat my previous answers to him in relation to national insurance. I was very proud to stand for election on the Labour party manifesto at the 2010 general election and proud that the Labour Government had got the recovery under way at the time of that election—a recovery that was choked off by this Government as soon as they came into power. [Interruption.] Government Members might not like to hear it, but I am afraid that that does not stop it being true.

Let me clarify my point about the employment allowance. From the moment it was announced in the Budget, our immediate critique was not that it should not be introduced —we supported its introduction from the beginning—but to say, as we have continued to say, “Bring it in as soon as possible—why wait?” If there were compelling reasons for the wait, it would be understandable, but I am afraid that I find nothing compelling in anything the Minister has ever said about the delay in bringing these proposals forward. All the issues relating to IT and systems and getting software up and running could be sorted out, with a bit of will.

I understand that software developers are still waiting on HMRC to give them the full guidelines on what software they will need to produce to make sure that take-up of the employment allowance goes ahead with relative ease. I hope that the Minister has had sight of the submission by Mr Holloway of the Learn Centre to the National Insurance Contributions Bill Committee, which was submitted after the Committee had disbanded but was still made available to all its members, because it contains concerns about the delay in getting proper clarification and explanation to software developers on what they need to do in relation to the employment allowance. Given that it is December and they have to get ready for the employment allowance to come online in April 2014, they will not have a huge amount of time to get everything in place and ready. If that is the position on the employment allowance, then why not add in the proposal on NICs for under-21s and deal with both issues at the same time?

Given that we are speaking from the Opposition Benches—unfortunately—our amendment does not propose that the measure should be introduced immediately in 2014; otherwise Government Members would no doubt have shouted at us about the cost of doing so and the spending commitment entailed. However, we have asked for a review that would look at the level of youth unemployment now and the impact that introducing the measure in April 2014 would have had on the level of youth unemployment as it stands today. That is because the Government should not escape scrutiny for the impact that this measure may have had compared with what it will have, I hope, when it comes into force in 2015. If it is found that the measure would have had a significant impact, as we believe it would, that is an important bit of information and the Government would be put under pressure to introduce it sooner than they intended.

This Government found money in the autumn statement for the married couples allowance. They have always said that the recognition of marriage in the tax system is symbolic. However, government is about choices and priorities, and if money can be found immediately to do something that is symbolic and sends a message, then surely it should be found for a practical Government measure that helps to prioritise our young people who need jobs today and not on a date far from now. The choices and priorities of this Government are wrong and they should think again. The emergency presented to this country by the current rate of youth unemployment cannot wait to be dealt with on some future date. The Government should reconsider the start date of this proposal. We therefore intend to press our amendment to a vote.

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[Shabana Mahmood]

Given that I am still relatively new to my shadow Treasury brief, I am not yet—as hon. Members who served in Committee will no doubt be pleased to note—suffering from review fatigue. Both of the new clauses seek further reviews from the Government. New clause 1 envisages a post-implementation review, which was the subject of some debate in Committee, and I felt it was worth having a further discussion to push the Government a little more in relation to the impact that the employment allowance will have on jobs and wage rates, and the effectiveness of the promotion of the employment allowance to all those who are eligible for it.

New clause 2 envisages an administrative and compliance cost review—a one-off review to take place six months after the employment allowance comes into force. It was prompted by the evidence of Mr Holloway, which I mentioned earlier, and I shall go into more detail shortly.

In Committee, the Minister helpfully indicated that he would publish information on two of the elements that I have included in new clause 1—the overall take-up of the employment allowance and its geographical spread. I understand from his comments in Committee that the information on the geographical location of those taking up the employment allowance will probably be available on a regional basis. I hope that he will clarify that point when he responds to the debate. The Minister said that he would put information on both elements in the Library so that Members can raise questions about the effectiveness of the employment allowance and its take-up levels. We have in mind the previous regional national insurance employers’ holiday, which had difficulties from the start. We have made the point that those difficulties should have been dealt with sooner, and it is in that context that we think the Government should have a formal post-implementation review of the take-up of the employment allowance.

[Richard Fuller]

The hon. Lady earlier made the breathtaking assertion that although the Labour party was proudly in favour of increasing the jobs tax in 2010, its attempt now to reduce it was not a flip-flop. With the proposal of an annual review, businesses will be concerned that the Labour party is not committed to the employment allowance, as we are. The hon. Lady said in Committee that she could not commit the Labour party to supporting the employment allowance at the next election, so will she therefore admit that Labour’s support for employment allowance is at risk in their shuffle of policies before that election?

[Shabana Mahmood]

I will repeat exactly what I said to the hon. Gentleman when we had this debate in Committee: we have been unequivocal in our support for employment allowance since it was introduced in the Budget earlier this year. We have taken every opportunity to say to the Minister and his colleagues in the Treasury team that it should be introduced sooner. We could not have been more unequivocal in our support.

The purpose of the review is not to put the employment allowance at risk. The regional national insurance employers’ holiday scheme had problems with take-up from the start. They were raised with Ministers in this House at every available opportunity—in oral and written questions—yet we had to wait for the full three years of the scheme to run before the Government brought forward a proposal without the same problems. That is the context for tabling new clause 1. We want employment allowance to succeed and not suffer from low take-up—we want it to be taken up. The Government say that it will be taken up by 90% of eligible employers. I am sure that all Members want to see 100% take-up, and there seems to be no real reason why 10% should be missed off. We want to ensure that take-up is not affected by any unforeseen issues during roll-out.

--- Later in debate ---

[Richard Fuller]

I start by thanking the hon. Member for Birmingham, Ladywood (Shabana Mahmood), if I may, for her grace and courtesy in responding to my persistent and somewhat repetitive questions about her party’s commitment to the proposals on employment allowance, and on its continuing commitment to it in the lead-up to the next election. The reason for my persistence is that I think it is an absolutely fantastic measure. It will have a positive impact on employment, on wages and on the economy, and it should be embraced by all parties across the House, now and in the lead-up to 2015. I wish the hon. Lady every courage in talking to her colleagues to ensure that their support for it is maintained in the Labour party’s next manifesto. I wish her every success in that regard.

This small measure is so important because it has shone a light on a much broader and deeper issue—namely, the extent of Government intervention in the wages and living standards of people on low incomes. I should like to give the House some figures. Let us take the example of someone on the minimum wage earning £13,000 a year, and assume that they are the only earner in the household and have two children. Taking into account the impact of the tax and national insurance paid and the benefits received, that person’s take-home pay will be £25,000. Their wages will be £13,000, but their take-home pay including benefits will be £25,000, which is nearly twice as much. The difference will not be so significant for people without children, but even someone who is single and earning the minimum wage will see an increase on the £13,000 being paid by their employer to a total of £17,600 in pay and benefits.

I do not want to question the level of Government intervention in the labour market, other than to say that a better outcome could be achieved if it were the employers who were paying the higher levels of wages that people need to achieve an adequate living standard. That outcome can be achieved in a number of ways. There will be uplift in the economy thanks to the measures that this Government are taking to encourage growth and boost the economy, and wages should increase over time as a result. It can be achieved through measures to increase the skills of our employees, to ensure that people can aspire to take on more complex tasks and earn higher wages as a result. It can also be achieved through innovation among our entrepreneurs as they create new higher sector employment, and through action on the minimum wage. I hope that all the political parties will think carefully about their policies on each of those points, so that we can make progress.

In the proposals in the Bill for the employment allowance, the Government have found a tool to tackle the additional costs that we place on labour. The chart on page 18 of the autumn statement shows that, since early 2001, employers’ social contributions as a share of total employee compensation have increased from 13% to 17%. The employment allowance will start to make a change in that regard, and I encourage the Minister to see it as a first step, with more still to come.

National Infrastructure Plan

Richard Fuller Excerpts

Wednesday 4th December 2013 Commons Chamber

[Danny Alexander]

As RWE said at the time, its decision about the project was a commercial one taken for a range of reasons. It was aware of the timetable for setting out the strike prices. I know that my hon. Friends in the Department of Energy and Climate Change had conversations with that company.

[Richard Fuller (Bedford) (Con)]

I have listened to the many questions from hon. Members, but none has referenced the fact that, despite making progress on the deficit, the Government’s finances are still not in balance. Having listened to the scepticism of a former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), does my right hon. Friend think that the Government would do better by being more modest in their scope, more effective in their delivery and more stringent in their evaluation of the projects?

[Danny Alexander]

The evaluation of all the projects is very stringent, and I ensure that that happens, but we have also taken some very difficult decisions to constrain public spending in other areas to make more investment available for infrastructure projects. I think that that is the right balance, because infrastructure projects are so important for the long-term future of the country. Under-investment in infrastructure has been a British disease for decades, and we need to end it.

Cost of Living

Richard Fuller Excerpts

Wednesday 27th November 2013 Commons Chamber

[Sajid Javid]

I give way to my hon. Friend the Member for Bedford (Richard Fuller).

[Richard Fuller (Bedford) (Con)]

I was concerned that the shadow Chief Secretary to the Treasury did not seem to understand the difference between deficit and debt, which I thought would be a prerequisite for talking about economics. Will my hon. Friend explain to the House what the circumstances were when this Government came to office?

[Sajid Javid]

My hon. Friend tempts me and I will do just that in a moment, after I have given way to my hon. Friend the Member for Burnley (Gordon Birtwistle).

--- Later in debate ---

[Richard Fuller (Bedford) (Con)]

I listened with great interest to the hon. Member for South Shields (Mrs Lewell-Buck), as I have to many Opposition Members, but on the question of what we should do, I have not heard much. The honourable exception was the right hon. Member for Oldham West and Royton (Mr Meacher), whose speech had some coherence, but I guess he is far too moderate to be included in the Labour party’s Government-in-waiting, assuming that position remains—we hold out that hope.

The motion is a listing of some of the pain points that many of our constituents are feeling as they look to balance their budgets each week. “I feel your pain” is an important expression of empathy. Empathy is important for politicians of all parties; we have to be empathetic with the constituents we represent. However, empathy is no substitute for policy, and Opposition Members have shown a complete absence of policy in dealing with the points of pain that they can so lucidly set down in their motions. That is why I shall support the Government in the Division later.

When we have seen a policy from the Opposition, it has often been about ways in which they would seek to intervene in markets. I suggest to Opposition Members that Government intervention should always be used sparingly and where it can be effective. The Leader of the Opposition has chosen as his flagship intervention policy one where he cannot be effective, and nor does it make economic sense. As the hon. Member for Redcar (Ian Swales) pointed out, the consequence of the Labour party’s position on an energy price freeze has been to crater the willingness of energy companies to invest in effective energy in the long term. It is very sad that just a few weeks after the Chancellor had been to China to secure investment in our energy sector—something that the Labour Government sadly missed out on year after year—the Labour party came up with another policy designed to make our energy more inefficient, rather than efficient, in the long term. If we are going to address some of the issues about the cost of living for members of the public, we have to be honest about what the Government can and cannot do.

[Mr Stewart Jackson (Peterborough) (Con)]

On the subject of honesty and admitting the failures of the past, is it not strange that last week the shadow Chancellor told a National House Building Council lunch that a future Labour Government would deliver 200,000 new homes a year when, in their last year in office, the previous Labour Government presided over the lowest number of homes built since 1923? Is there not a huge chasm between Labour’s promises and its record in office?

[Richard Fuller]

My hon. Friend is absolutely right to point out the chasm between reality and certain things promised by Labour. There is also an absence of a basic understanding of economics. It is nice to see the shadow Chief Secretary in his place again. It was not clear from his opening speech whether he understood the difference between deficit and debt, which is quite an important thing to know for someone who wishes one day to hold an important Treasury position.

[Chris Leslie]

Will the hon. Gentleman give way?

[Richard Fuller]

I am very happy to give way. I recognise that the shadow Chief Secretary has been for his economic tutorial, so perhaps he can enlighten us.

[Chris Leslie]

That is very funny and droll, but does the hon. Gentleman know that borrowing accumulates and forms at the stock of national debt? Has he figured that much out? If he has, will he tell us whether it is true that, during his time in Parliament, his party has presided over the accumulation of £430 billion of borrowing? Is that not right?

[Richard Fuller]

Boy, has the hon. Gentleman picked the wrong person with whom to have an argument about debt and the Labour party’s record on debt. Let me enlighten the hon. Gentleman on that record. He will never be Chancellor of the Exchequer, but were he ever to achieve that position—

[Chris Leslie]

Answer the question.

[Richard Fuller]

I am answering the question. I know it is hard for the hon. Gentleman to follow the argument, but I will put it in bite-sized pieces so that he can keep up. It is important for a Chancellor of the Exchequer to look at not just the indebtedness of the Government, but at the way in which the entire economy is accumulating debt, which is one of the things that the previous Labour Government signally failed to understand.

If we look at the United Kingdom’s debt in the mid-1990s and take into consideration Government debt, household debt and corporate debt, we will see that that total indebtedness was, like that of many other OECD countries, two times the size of our national economy. Over the intervening 15 years—which in this country were spent mostly under a Labour Government—other OECD countries saw their total debt go from about two times to about three times the size of their economy, and that includes all of the impact of the financial crisis. One country in the G8—and only one—increased its total debt from two times to five times the size of its economy, and that was the United Kingdom under the previous Labour Government. It is the consequence of that pervasive debt in the economy that is the real cost of living crisis in this country.

Every family knows that when they have significant debts that they cannot avoid and that they have to pay, their monthly income will be less because they will have to pay back the debt of the past. They are paying the consequences of the Labour party’s failure when in office.

[Alec Shelbrooke]

Does my hon. Friend agree that, against that backdrop, it is commendable that under this Government and this Chancellor of the Exchequer, the gap between the richest and the poorest in society is the smallest it has been for 30 years? [Interruption.]

[Richard Fuller]

I see that the shadow Chief Secretary has left for more education on economics. My hon. Friend raises a point about income levels. There is an issue about how we increase the incomes of people at the low end of our economy. How do we make sure that work pays for those people who go out and work very hard?

Over the past 10 years, the United Kingdom has created a massive level of state intervention to support wages at the low end of the income spectrum. In order to try to improve living standards for people at the low end, we have to encourage employers to somehow pay higher wages. References have been made to the living wage. One of the issues about changing people’s income from the minimum wage to the living wage is that the change to their take-home pay, including any benefits they receive, becomes a very small change in their net income level, because the tapering of benefits takes away nearly all the impact of the increase in wage rates. A change to the living wage is therefore a transaction involving additional cost to the employer and additional benefit for the Exchequer; it does not result in additional pay to the employee.

We have to be clear about what we are truly promising people as we seek certain changes. It would be good to hear from my hon. Friend the Economic Secretary, who I presume will wind up the debate, what answer the Government can give people about their income and about making work pay. What are we doing about their tax and their benefits? For people in work who wish to take on additional hours or to increase their responsibilities and get more pay per hour, what are we doing to ensure that their benefits are not taken away so rapidly? If we do that, in the next period of Conservative Government we can continue the battle to make sure that work pays, which is the true answer to any cost of living crisis.

National Insurance Contributions Bill

Richard Fuller Excerpts

Monday 4th November 2013 Commons Chamber

[Mr Gauke]

My hon. Friend is right. The policy of providing a NICs break only for new employees raised all sorts of practical questions such as who constituted a new employee and what perverse incentives might have been created. That is not dissimilar to the point that my hon. Friend the Member for Stourbridge (Margot James) has made about Labour’s current policy.

I will turn to the other elements of the Bill. Clauses 9 and 10 relate to the general anti-abuse rule. The Government announced at last year’s Budget that they accepted the recommendation of the Aaronson report to introduce a GAAR targeted at abusive tax avoidance schemes. The GAAR was introduced in part 5 of the Finance Act 2013 and has been in force since July. This Bill will apply the GAAR to national insurance contributions.

Clause 11 relates to oil and gas workers. In this year’s Budget, the Chancellor announced that the Government would strengthen the legislation on offshore employment intermediaries. The Bill will address the non-payment of employer’s national insurance contributions in the oil and gas industry through the placement of the employer of oil and gas workers who are working on the UK continental shelf outside the UK. The measure has been subject to consultation. The consultation document, “Offshore employment intermediaries”, was published on 30 May 2013 and the consultation closed on 8 August 2013. The summary of responses was published in October.

The Government intend to address those offshore employment schemes largely by using existing powers contained in social security legislation. The Bill supplements those with a new certification provision for the oil and gas industry. That provision will apply where the national insurance obligations are fulfilled by someone on behalf of the person deemed to be the employer for national insurance purposes.

Clause 11 is part of a measure that, as a whole, is expected to bring in the region of £100 million per year to the Exchequer, without having a significant economic impact on the oil and gas industry. Staff costs for some businesses may increase if they had not previously been accounting properly for all tax and NICs. There will be little cost to the Government through additional administration, other than HMRC implementing the new certification system, and I hope hon. Members will agree that this is a straightforward and uncontroversial provision.

Finally, I wish to refer to provisions in the Bill concerning HMRC’s partnership review, which are contained in clauses 12 and 13. Following the Chancellor’s Budget announcement, HMRC carried out a consultation on two aspects of the partnership rules between May and August this year, and the Government are bringing forward measures in the Bill as a result of that review. The Government are proposing two sets of changes, the first of which was not part of the consultation proposals but resulted directly from information received during that consultation. It concerns a tax issue that can arise from the interaction of the alternative investment fund managers directive—AIFMD—and existing partnership tax rules. Only those alternative investment fund managers who operate as a partnership will be affected by the proposed changes in the Bill.

A provision in the Bill will allow regulations to be made to modify the class 4 NICS liability of partners whose profits will be deferred under AIFMD, which aims to improve investor protection and reduce risk. The regulations will be based on new tax legislation that will be included in the forthcoming finance Bill. Measures will be included in the NICs Bill, the forthcoming finance Bill and secondary legislation to reclassify certain limited liability partnership—or LLP—members as employed earners for tax and national insurance purposes, to tackle the disguising of employment relationships through LLPs.

The tax and NICs changes are expected to bring in approximately £125 million to the Exchequer in the first year, while the broader economic impact is expected to be negligible. There will be changes to the NICs liability for certain partnerships and individual partners in the alternative investment fund sector. The Bill will also result in some LLPs in certain industry sectors where disguised employment has been most prevalent paying increased amounts of NICs.

[Richard Fuller (Bedford) (Con)]

I greatly appreciate the Minister giving way. Before he sits down, will he or one of his colleagues respond on the financial costs of the employment allowance contained in the Treasury documents? What impact on the take-up of tax credits were included in the estimate of £1.25 billion impact on the Exchequer in 2014 through to £1.7 billion in 2017-18? I do not expect the Minister to have those numbers to hand, but if his colleagues could reply to that later, or send me a note, I would appreciate it.

[Mr Gauke]

I am grateful to my hon. Friend for that observation, and we will of course take a cautious estimate on the impact on tax credit take-up. Those numbers were signed off by the Office for Budget Responsibility, but I will ensure that my hon. Friend receives an answer on the detailed technical point before long.

This is an important and necessary Bill. Through the employment allowance it will allow us to support businesses with the cost of employing their staff, as well as small businesses that are aspiring to grow. The Bill also includes a package of measures aimed at activity that attempts to reduce the national insurance contributions payable to the Exchequer—an issue we are seeking to address.

This is another Bill that will help to create a system of low taxation that is properly enforced. It will continue to help businesses help our economic recovery, and it will help jobs and job creation. I commend the Bill wholeheartedly to the House.

--- Later in debate ---

[Shabana Mahmood]

That was a valiant effort to change the subject, but today we are talking about this Minister’s record and the regional national insurance holiday plan. I note that the Minister could not bring himself to admit that the Opposition were right and that he was wrong about that. Perhaps we can return to that point later.

The Minister sought to focus as much as he could on the employment allowance and desperately tried to forget its predecessor scheme that the Government introduced in their 2010 emergency Budget—the regional national insurance holiday, which was enacted in the National Insurance Contributions Act 2011. The national insurance holiday was an abject failure, so I am not surprised that he wants to pretend it never happened, but it did, and it failed utterly. He has wasted three years clinging to that policy rather than doing what Opposition Members told him to do, which was to rip it up and design a new scheme that took account of the criticisms made by us and others.

The Bill introduces the employment allowance, which we support, so perhaps we should give the Minister credit for getting there in the end, but it is somewhat difficult to do so, because it has taken him far too long to rectify the flaws of the previous scheme, which we warned him about from the beginning, as my hon. Friend the Member for Nottingham East (Chris Leslie) has reminded him. As a result, businesses desperate for help have struggled in the meantime.

Those businesses, particularly small and medium-sized enterprises, which are the engine of our economy, have continued to suffer. Bank lending to SMEs is still contracting, and analysis published by the Department for Business, Innovation and Skills shows that tightening credit has disproportionately affected low and average-risk SMEs. Last year, Project Merlin missed its target for lending to SMEs by more than £1 billion. In 2010, the Office for Budget Responsibility predicted that lending to businesses would have risen 34% by now, but in fact it has fallen by 10%.

Given this climate of the past three years, action has been necessary to support business, but, on national insurance, it has taken the Government too long to get there.

[Richard Fuller]

The hon. Lady is making some fair criticism of the national insurance holiday, but does she agree that one problem with the holiday was that it was a one-off, and that businesses are so smart in their planning that they ignore one-off schemes and go on previous predictions? Does she agree that a steady basis for policy is better than one-off, one-year schemes?

[Shabana Mahmood]

The hon. Gentleman makes a fair point, but there were many other problems with the national insurance holiday, which I shall return to later.

--- Later in debate ---

[Shabana Mahmood]

The hon. Gentleman is somewhat confused. As was pointed out earlier, we always said that one of the problems with the scheme was the regional element, and I am coming to that point.

During the passage of the National Insurance Contributions Act 2011, we told the Minister that he should drop the regional condition attached to the national insurance holiday and expand it to areas of the UK that had been excluded. Today, he brings to the House the employment allowance, which does exactly that. In fact, the Government’s analysis, published this morning, shows that more than 40% of the expected total number of employers who will not pay any NICs under the employment allowance are based in regions excluded from the previous scheme. At the time, the Minister said that extending the national insurance holiday across the UK would increase the cost by approximately £600 million to a total of £1.6 billion over three years. Today, his employment allowance is predicted to cost £1.3 billion in the first year, rising to £1.7 billion by 2017-18. We said that the national insurance holiday should be extended to cover all businesses, rather than simply new ones. Today, the Minister is introducing an employment allowance that covers all businesses, not just new businesses.

[Richard Fuller]

I am delighted to hear the hon. Lady talk about the virtues of expanding reductions in national insurance across the country and extending it in terms of time. Does she therefore think it was wrong for her, in the previous election, to stand on a manifesto that advocated an increase in national insurance?

[Shabana Mahmood]

I was proud to stand as a Labour candidate at the general election when the economy was starting to grow, but that recovery was choked off by the hon. Gentleman’s Government.

During the Committee stage of the National Insurance Contributions Act 2011, we tabled amendments to extend the national insurance holiday to charities. The employment allowance will do just that. This is effectively our policy, so we are of course delighted to support the Bill. Since the policy was announced in the Budget, we have been calling for it to be enacted immediately, rather than waiting until April 2014.

--- Later in debate ---

[Richard Fuller (Bedford) (Con)]

It is truly a great pleasure to follow my hon. Friend the Member for Stourbridge (Margot James), who is a mighty champion for our small businesses that are trying to access international markets. It is no wonder that her region leads the country in increasing exports to developing and developed nations around the world. She spoke most eloquently about the benefits for small businesses and echoed some of the points made by my hon. Friend the Minister about the impact of the Bill on the willingness of employers to add to their labour force.

I want to focus on the Bill’s impact not on the quantity of people who will be employed but on the price of labour, and on how the Bill might be used to implement some of the efforts to create a living wage across the United Kingdom. The Treasury team have come across a useful tool in implementing that change, and it is up to them to see how much courage they might have to move forward with this initiative to achieve it. That marks the difference between those on the Opposition Benches, who wish to posture over changes in the economy on employment and wages, and Government Members, who are interested in taking action to achieve change.

If I may, I shall consider the record of the previous Labour Government. As we have heard often today, the Labour Government were interested in increasing the tax on employment, and indeed went into the general election calling for increases in the jobs tax. Despite the words we have heard today, we have not heard one word of apology from the Labour party for saying at the last election that the right way to increase employment was to increase the tax on jobs. Still no apology on that, but it was part of a pattern that impacted negatively on the price of employment.

Labour abolished the 10p tax rate. It created a tax credits system that was an incredibly complex way to give people a post-tax income on which they could live. Any of us with constituents who have been caught up with tax credits when they went wrong knows how hard it is for families when the tax credits office claws those tax credits back and savings have to be found. Why on earth was that system a good system? Underpinning it—

[Sheila Gilmore]

rose—

[Richard Fuller]

I will give way in a second; I would love to hear from the hon. Lady.

Underpinning that system was Labour’s creation of a benefits system that discouraged work. We had hundreds of thousands of workers in our country going out to work on the minimum wage or a little more and seeing people living on benefits when they could have worked and ending up with a lifestyle that those people in work could not afford. Labour has not apologised for that policy and has opposed even the benefits cap.

[Sheila Gilmore]

Does the hon. Gentleman accept that the intention behind tax credits was indeed to encourage people to enter employment and that 350,000 single parents entered employment as a direct result of the introduction of the tax credits system?

[Richard Fuller]

The hon. Lady makes a point, but not a particularly good one. If the economy was borrowing so much money to stimulate employment, it was not a particularly outstanding outcome to achieve an increase in one part of the labour force of 350,000, especially when we consider the fact that every Labour Government have left office with unemployment higher than when they came to office.

[Sheila Gilmore]

rose—

[Richard Fuller]

That is the bigger picture to which I guess the hon. Lady wishes to return, as she is one of, I think, just two Labour Back Benchers in the Chamber.

[Sheila Gilmore]

I thank the hon. Gentleman for giving way again and being so generous with his time. That myth about every Labour Government leaving office with unemployment higher than when it came to office is not entirely accurate. For example, unemployment was extremely low at the end of the period in office of the 1945-51 Labour Government. Under the Tory Governments of 1979 to 1997, unemployment was more than 10% in the majority of those years.

--- Later in debate ---

[Richard Fuller]

The hon. Lady is digressing significantly from the Bill to talk about 1945, but in any debate I am more than happy— [Interruption.] Labour Front Benchers want to make an argument about how good the Labour party is in office at reducing unemployment. The facts are the facts: Labour comes to office and when it leaves, unemployment is higher.

To return to the impact of the Bill on improving wage rates, let us consider the record of the coalition in government. We are in the process of raising the personal allowance to £10,000. I shall return to that point. We are targeting and simplifying tax credits and other benefits. We have introduced a benefit cap, making work pay. With this Bill, we are introducing an employment allowance, which will provide greater opportunity for us to improve wage rates. The living wage is a crucial issue that Members on both sides of the House should embrace. We should all endeavour to find ways to improve wages for those who are unskilled or on low pay. For many decades, real wages for people who are unskilled have been stagnant, or rising at a very low rate. One benefit of the introduction of higher wages is the potential that many businesses will see for higher productivity. Most importantly, if very small businesses are able to pay higher wages, there is reduced staff turnover. That is particularly important where there is low pay across a profession.

I looked at the Bill with great interest to see how it could provide a solid basis for an answer to the question, “How do we implement the living wage in practice?”. Tomorrow, we will hear from the Leader of the Opposition about his approach. It was interesting that the shadow Minister, the hon. Member for Birmingham, Ladywood (Shabana Mahmood), said that one-off policies were a bad idea when it came to persuading businesses to take up a new Government scheme, but a one-off policy is precisely what the Leader of the Opposition will propose tomorrow as his approach to the living wage. If it does not work for national insurance contributions, how on earth will it work for substantial wage changes by employers? The problem with the Leader of the Opposition is that he just does not understand business.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I have allowed the hon. Gentleman to range quite widely, but his comments must relate not to what might happen tomorrow, but to the Bill and its contribution or otherwise to the living wage; I think that was the point that he wanted to develop. I would be grateful if he stuck to that.

[Richard Fuller]

You read my mind, Madam Deputy Speaker. I shall return directly to the implications of the measure for the living wage and wage rates. Let me give some numbers showing the impact of a change from the minimum wage to the living wage, and say how the Bill can help to achieve that change for the long term.

Let us consider what happens when a married person who works 40 hours a week, has two teenage children, and earns the minimum wage, which is £6.31, moves to the living wage, which today went up to £7.65. I am using the numbers for outside London, because I represent Bedford, which is outside London. The employee’s gross pay would increase from £13,125 to £15,912—an increase of 21%. After the changes to their tax, national insurance and tax credits, their net take-home pay, which is what matters to them, increases from £15,067 to £16,483—a welcome increase, but an increase of only 9%. That is the impact on the family of the change from the minimum wage to the living wage.

Looking at the cost to the employer, there is an increase in salary of £2,787, and an increase in the employer’s national insurance contributions of £385; that is essentially a 23% increase in the cost of employing that person. Then there is the impact on the Exchequer. It benefits from an increase in income tax of £557, and an increase in the employee national insurance contribution of £335. The reduction in the payment of tax credits benefits the Exchequer by £479, and the increase in employer national insurance benefits it by £385. The Exchequer ends up increasing its tax take by 32%. The change from the minimum wage to the living wage means a modest but welcome increase for the employee, has a high cost for the employer, and brings a substantial benefit, on my calculations, for the Exchequer.

In that context, let me say this about the Government’s use of the employment allowance to give something back to our hard-pressed employers and small businesses: £2,000 is a start, but we have found a tool here, if we have the courage to use it, that we can use to encourage—not compel—our private sector employers to accept a living wage. Her Majesty’s Revenue and Customs could act as a compliance officer for those who seek to pay the living wage, as it does for the minimum wage. We could pay back some of the significant gain to the Exchequer that my simple calculation has brought up, though I am sure that there are more complicated numbers out there. There is a useful tool here, and this is a small start. Let us have the courage to see how we can improve living conditions and wages for our low-paid workers, and use the Bill as the start of a better future for all of us.

--- Later in debate ---

[Catherine McKinnell]

It is interesting that the hon. Gentleman raises that point, because the Opposition will set out clearly that we very much support and welcome this measure. It is something we have been proposing for the past three years, so we greatly welcome its introduction through the Bill.

We have had a wide-ranging debate. We have touched on the living wage, the economy, employment, unemployment, self-employment—many forms of employment. We have strayed far from the core subject and, I think, strained the patience of the Deputy Speakers in the Chair today. At times, we have been on a magical history tour in which the history of this country and its economy has not only been airbrushed, but at times rewritten. In my concluding remarks, I hope to bring back a bit of realism to the discussion. I know that the hon. Member for Skipton and Ripon (Julian Smith) finds that somewhat depressing, but I am going to do it anyway.

I am disappointed that the Exchequer Secretary is not in his place for the winding-up speeches, as it is important to take a little step back in time and recall how the Bill was introduced. Until recently he was my opposite number, and it would have been good to have him in his usual place. The hon. Gentleman has the dubious privilege of being one of an ever-diminishing number of junior coalition Ministers who have been in the same job since 2010. He therefore finds himself in an unfortunate position because we can measure the ambitions that he set out for supporting small businesses and job creation against his actual record of delivery in government.

As we have heard, although this was not included in the draft Bill published on 16 July, the main purpose of the National Insurance Contributions Bill is to implement the employment allowance announced by the Chancellor in the Budget 2013. Given the apparent importance of the policy—which accounts for clauses 1 to 8 of this short Bill—perhaps when she concludes the Minister will say why the employment allowance was not mentioned in the draft legislation. It would be useful to clarify that.

As my hon. Friend the Member for Birmingham, Ladywood made clear in her excellent opening speech, the Opposition support the introduction of this measure and this Bill. It might be painful for the Exchequer Secretary—although he is not here to pained—but it could be helpful to cast our minds back to why we support this Bill. Let us think back to 2011 and the similarly entitled National Insurance Contributions Bill of that year.

[Richard Fuller]

Before the hon. Lady casts our minds back to 2011, may I ask her the question I asked her hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood)? In 2010 she stood on a manifesto that planned to increase the jobs tax. People want politicians who are honest, so will the hon. Lady say that that was a mistake?

[Catherine McKinnell]

I will repeat the words of my hon. Friend, who said that she was proud to stand in 2010 on a manifesto for a Labour Government who were committed to reducing the deficit but had an economy that was growing. Since then we have seen three years of stagnating growth, wages rising slower than prices, and borrowing not coming down anywhere near the amount the Government promised. I would caution Government Members against trying to rewrite in this Chamber the history of what they have achieved over the past three years.

On that point, let us return to 2011. The Bill taken through this House by the Exchequer Secretary—I welcome him back to his seat—included the introduction of the three-year national insurance holiday, worth £5,000 for employers. The scheme, which was originally announced at the Chancellor’s first Budget in June 2010, was not aimed at supporting just any employers, however, because it was restricted. It did not apply to businesses in London and the south-east or east of England, as we mentioned earlier, and it extended only to new business start-ups, and then only to the first 10 employees of those firms—but, of course, only to those first 10 employees who had been hired in the first year of that business. I hope hon. Members are still with me. [Interruption.] I am sure the Minister is still with me as he designed the dubious policy.

Indeed, serious concerns about the scheme’s complexity were raised at the time by Robert Chote—then at the Institute for Fiscal Studies; now at the Office for Budget Responsibility—who told the Treasury Committee that the policy

“might be a little too complicated to offer best value for money.”

Interest Rate Swap Derivatives

Richard Fuller Excerpts

Thursday 24th October 2013 Commons Chamber

[Guto Bebb]

I agree that 16 months is a very long time. Even when cases are accepted into the redress scheme, they seem to be taking a long time. The banks would argue that businesses need to engage with them, but I believe we still need to look carefully at this matter. The sophistication test should be more flexible, and the discrepancies that I have described need to be acknowledged.

Another discrepancy involves the asset value. A business could be excluded from the scheme because of the asset value that it holds. In effect, it could be argued that a business that had been lucky enough to invest in property at the right time should be excluded from the redress scheme because of that piece of luck. If the asset value had increased to a certain level, that could result in the company being excluded from the scheme.

There is also a lack of consistency. In some cases, the banks are ignoring the sophistication test because they believe that a customer would fail it and therefore be eligible for the redress scheme. Instead, they are moving the customer straight into the assessment of redress. If they can ignore the sophistication test in some cases, where is the consistency? A member of the all-party parliamentary group argued strongly on behalf of a constituent who had a £12 million swap and, lo and behold, the constituent was subsequently allowed to become part of the redress scheme. That was an excellent result for that business, but again, where is the consistency? The FCA needs to look carefully at the sophistication test.

My final point on the sophistication test is that, if a business spends six months waiting to be assessed, those six months will be lost in regard to the statute of limitations for taking legal action. The FCA needs to recognise that, because it is potentially dangerous for the businesses concerned.

A further concern relates to the alternative products on offer. It has been said time and again that if these complex products are unsuitable, it cannot be right to introduce a redress scheme in which a swap can be substituted by a slightly less complicated swap. It is also important to note that a business will be offered an alternative product only if it has failed the sophistication test—that is, if it has been deemed to be unsophisticated. I find it difficult to understand how any alternative product other than a cap could possibly be suitable.

Another reason why the cap is the obvious alternative product is that if businesses had been told clearly of the cost of the products they were taking on board back in 2006-07, they would have seen that a cap would have offered them significantly better value for money. Why was the cap not offered? Probably because of the financial imperative of the banks to sell something more complex and more rewarding. It is thus important to highlight the fact that having a complex derivative rather than a cap as alternative product is a real concern. If businesses have been classified as unsophisticated, that issue should be recognised and we should try to ensure that we provide a cap as the only acceptable alternative product.

[Richard Fuller (Bedford) (Con)]

My hon. Friend mentions the omission of information from the sales process; does he also accept that the information needed was introduced late and that only opinions were offered? What was really going on was a sophisticated sales process to dupe people who may have been financially unsophisticated for the financial benefit of the banks. Does he believe that that should mean that the people in charge of that process should face criminal sanction, not just financial redress for their customers?

[Guto Bebb]

That is certainly a call that some of the organisations campaigning on this issue have made, and I am sure that other hon. Members and members of the all-party group will expand on that theme in their speeches.

We thus need to look carefully at the alternative product issues. It is fair to argue that businesses might have been looking for interest rate protection, but it is difficult to argue that they would have been tempted by an expensive product in 2006-07, when a cap offered such good value for money at that time. I am unpersuaded of the arguments for a complex derivative.

--- Later in debate ---

[Mark Garnier]

I will try to explain the issue as simply as I can now.

Imagine a second-hand-car dealer. He may buy a dodgy motor on his own books and try to make as big a turn as he can, but he risks not getting his money back. Now imagine a car dealer with a valuable vintage car who aligns a seller and buyer at exactly the same time. He takes a turn with no risk at all, and that is how a swap behaves. Now imagine that, having lined up that trade, he takes the money from the buyer, so has a contractual agreement with them, and agrees a sale with the seller. However, on the way to deliver the car, he writes it off in a crash and is not insured. He still has liabilities on both sides—he still has to deliver a car to the buyer and has to pay the seller. That is the mess that the banks are in. They have caused themselves a massive car crash and have to look after the other side of the trade.

We are fully aware of the losses to the banks on the financial redress scheme—plus, obviously, the consequential loss scheme as well. We have heard about how much has been put aside, and there will be debate about whether that is the right amount or not. However, we have heard nothing yet about the value of the liability on the other side of the swap—the liability to institutions, most likely to be pension funds, that still needs to be honoured. That has implications for the stability of the banks and shows why it is important for banks to keep the redress scheme running for as long as possible.

[Richard Fuller]

rose—

[Mark Garnier]

I see that my hon. Friend wants to intervene, but may I develop my point?

The financial redress scheme has a specific value, based on a number of factors—including, crucially, interest rates and time. Similarly, time to run is a key component of the value of the other side of the swap. With interest rates so low, the longer the time to run, the higher its value to the customer and the higher the liability to the bank. As a result, we get a built in incentive for the banks to delay settlement for as long as possible. With each day that goes by, the liability on the other side of the swap is reducing.

Harry Wilson, of The Daily Telegraph, has put in freedom of information requests to the Financial Conduct Authority to find out exactly what the loss on the other side of the trade will be. Amazingly, nobody seems to have the answer. It seems inconceivable that the banks would not have the information. Any derivatives trading room team, especially on a swaps desk, will have detailed information on the extent of the liabilities; they have to know that. Even if the swaps team does not, the risk or treasury department should know it—loads of people should know it. It is extraordinary that nobody is coming forward with the information.

The issue has been dragging on for far too long. Too many businesses have failed as a result of it and it is likely that too many more have fallen into that twilight zone of bad forbearance by banks, which sometimes keep otherwise dead institutions alive simply because it is in their interests.

I spent the best part of the last year on the Banking Commission considering the matter. It is worth noting that this crisis happened before the Banking Commission, the financial crisis and the rest of it. However, today the banks have to prove that they have moved on, that they should now be allowed to come into polite society and will do the right thing by the consumer.

--- Later in debate ---

[Richard Fuller]

My hon. Friend is a defender of a system of true free-market principles. He has identified the twin problem mentioned by my hon. Friend the Member for Wyre Forest, which is that, in addition to the unfunded liability cause, we have now booked the profits and paid the bankers for going through the process that duped the people. Those involved should face criminal sanction.

[Steve Baker]

My hon. Friend makes an interesting point. I want to live in a free society with a free and commercially successful banking system, but we have to ask ourselves whether the current system has incentivised behaviour that is fraudulent under the law as it stands. The last thing we must do is allow ourselves, in a frenzy of condemnation, to start criticising a system on which our civilisation depends, when that criticism is unjustified. We should be looking at the law as it stands and checking—carefully investigating—whether individuals have broken the law. I am particularly concerned about IFRS. I do not think it complies with UK company law and think it has incentivised behaviour that is probably fraudulent.

Banking ought to be simple. It ought to be about connecting depositors with those who wish to borrow in order to invest for productive purposes, such as buying a house or even going on holiday, but predominantly it should be about investing to create real resources and real wealth, and to increase productive capacity and the balance of capital invested per head, so that real wages increase and the cost of living goes down. Instead, we have ended up with a system in which poor state intervention from one end to the other has created so much moral hazard and so many perverse incentives that it has become abundantly clear that a small number of individuals—far fewer than 1% of the population—have captured the state in order to turn implicit and explicit taxpayer guarantees, or bail-out funds, into personal remuneration. It is a disgrace.

The banking system needs to be made honest, and quickly, and part of that is a system of compensation for people who have been treated extremely badly.

--- Later in debate ---

[Mr Robert Syms (Poole) (Con)]

I, too, pay tribute to my hon. Friend the Member for Aberconwy (Guto Bebb) for his leadership of the all-party group on interest rate swap mis-selling. The issue is important for all Members, which is why the Chamber is so full.

We all know of a number of cases in which people were switching banks or wanted loans for a project, and one of the last products slid across the table to them was an interest rate swap. Many felt that they did not have much choice but to take it. The British economy is showing welcome signs of starting to recover, and the Bank of England is pushing cheap credit into it to get the banks to lend, which is having an impact. However, we should all reflect on the fact that 30,000 to 40,000 businesses run by serial entrepreneurs could well go out of business before the process that we are discussing is finished, which would have a cataclysmic effect on the businesses with which they deal, the people who work for them and many of our local economies. The issue is not just mis-selling but whether we maintain stable economic growth and create jobs and prosperity in future.

[Richard Fuller]

Does not my hon. Friend find it sadly ironic that the victims of mis-selling were people who had shepherded their money and built their businesses carefully over many years, while the people who benefited were those who were in it for a fast buck?

[Mr Syms]

I do, and many of the people who have been affected have a lifetime’s work in their business—more than one lifetime in the case of many family businesses, which are the bedrock of our constituencies. Those people have been key members of the community and employed many people. Today’s debate is therefore important, as we need to give the FCA and the Government a strong message that the authorities must get the banks to get on with it. Things are going too slowly. As we heard earlier, the banks have put forward some billions of pounds for compensation, but they have dealt with only 0.2% of cases. Of the £3 billion that is potentially available for redress, only £2 million has been paid out to 32 businesses, which shows that we need to speed things up.

In many cases, first the capital was sucked out of businesses and then the break clauses were such that many people could not afford to get out of the contracts. With most normal capitalist activity, if someone felt they could not make a go of it, they would sell their business on. However, nobody will buy a business that has the poison pill of an interest rate hedging product because they know that it is a major drag on the business. It is not free enterprise as we know it, and I rather agree with Members who have suggested that the banking system has not done itself any favours.

What is so tragic about the products in question is that people have no way out. We need to get on with achieving compensation. Members have made some good contributions today, and behind every story they have told is tragedy and worry. People cannot sleep at night because they are not sure how to deal with the problem. I say to Ministers and the FCA that we need to get some speed up and get compensation paid. We need to deal with people fairly, and to support and cherish serial entrepreneurs, who should be playing a major role in the economy’s recovery, rather than being put in a position of not knowing what will happen in a week, six months or a year. We need to give them our support.

Oral Answers to Questions

Richard Fuller Excerpts

Tuesday 10th September 2013 Commons Chamber

[Mr Speaker]

Last but not least, I call Mr Richard Fuller.

[Richard Fuller (Bedford) (Con)]

Worse than the shadow Chancellor’s talking down of the British economy is the Labour party’s love of the jobs tax, which reduces employment, depresses wages and discourages enterprise. Will my right hon. Friend think about what he will do with the employment allowance next year, and see whether he can reduce it further so that we can reverse those trends?

[Mr Osborne]

I well remember my trip to Bedford with my hon. Friend before the 2010 election, when we were campaigning against the jobs tax which was the Labour Government’s solution to rising unemployment. This Government are adopting the opposite approach. We are taking taxes off jobs, and from next April there will be a new employment allowance that will help the many businesses in Bedford and throughout the country. That is just one example of what we are doing to fix what went so badly wrong.