(12 years, 8 months ago)
Commons ChamberIn a second. I will answer the previous intervention before I turn to the next one.
The financial crisis hit every major country in the world, and bank regulation was not tough enough here in Britain or in countries throughout the world—[Hon. Members: “Ah!”] There is no doubt about that. The Chancellor of the Exchequer, who was then the shadow Chancellor, spent his whole time urging us to deregulate, complaining about “burdensome, complex” regulations—but there we are.
By spring 2010 the economy was growing, inflation was low and unemployment was coming down. More people were in work and paying taxes then, so borrowing came in £20 billion lower than had been forecast in the pre-Budget report of 2009. How things have changed in 18 months! Then borrowing came in lower than was planned; now it is coming in at £158 billion more than was planned. The country is tired of the Chancellor’s excuses, and it is time he admitted that his failing plan is hurting but not working. His reckless gamble has not made things better; it has made things worse.
As the shadow Chancellor’s soon-to-be replacement, the hon. Member for Leeds West (Rachel Reeves), rustles through her papers to find a data point to throw back at me, may I ask him whether he has had the opportunity to look at McKinsey’s debt and deleveraging report, which identifies that on his watch and under his Government we became the most indebted major economy in the world? Does he not bear some responsibility for the enormous pain that families are going through in order to remedy some of his excesses?
In the hon. Gentleman’s constituency 10,800 families are actually losing out as a result of the change in tax credits. We look forward to seeing that in his press release.
The fact is that we went into the global financial crisis with a lower level of national debt than France, Germany, America and Japan—
If the hon. Gentleman calms down and lets me answer his point he will be able to intervene again. I shall be happy to take another intervention.
The fact is that when we went into the financial crisis our level of national debt was lower than that in America, France, Germany and Japan—and lower than that which we inherited from the Conservatives in 1997. I will give the House one good reason why: in 1999, when we raised £20 billion from the auction of the 3G mobile spectrum and they urged us to spend the money, we used the entire amount to repay the national debt.
The shadow Chancellor makes potentially a fair point about Government debt, but the Government are responsible not just for Government debt but for the total indebtedness of the nation, and he fails to understand that under the previous Government the total indebtedness of this country grew to become the largest of any major economy in the world. That is his legacy, and that is why 10,000 people in my constituency will be hearing why his policies led to the pain that they feel today.
Over 1 million more homeowners than in 1997, and over 1 million more new businesses—with overdrafts and borrowing facilities—compared with 1997! The hon. Gentleman should be careful about giving the impression that borrowing in an economy is a bad thing for consumers, households and businesses. Many businesses want to borrow at the moment; it is just that the banks will not lend.
What did we get last week from the Chancellor? We got a cobbled-together package of growth measures which he knows, and the OBR forecast confirms, does not address the fundamental problem that his rapid and deflationary plan has choked off the recovery and pushed up borrowing. It is a so-called plan for growth that, according to the Treasury’s own figures, hits women harder than men, pushes up child poverty and delivers lower growth and higher unemployment.
I listened with great interest to the comments of the hon. Member for Penistone and Stocksbridge (Angela Smith), who spoke eloquently about the short-term pain that many families in her constituency and, I am sure, in mine are going through in these difficult economic circumstances. She also rightly pointed to the need for the Government to think about the long term. I hope that she will listen to my observations in the same spirit.
Under the previous Government, the United Kingdom became the most indebted major economy on earth. That was not the fault of the bankers alone, of Government borrowing alone or of companies alone; it was the fault of us all, although led by a Government who were at best asleep at the wheel and at worst systematically undermining our long-term finances for short-term political gain. These problems are so endemic that they cannot possibly be put right in one year, in one term or by one policy.
The absolute core policy that a massively indebted nation must pursue is the maintenance of low interest rates for as long as possible. The McKinsey Global Institute study on debt and deleveraging shows that the UK led the pack of the world’s largest economies in terms of its debt-to-GDP ratio and became increasingly more indebted from the mid-’90s and, in particular, from 2003. From 2000 to 2010, domestic, public and private debt as a percentage of our GDP rose by 182 percentage points to nearly 500% of GDP, making the UK the most indebted of all major economies—even more so than Japan at the end of the period.
In the 1930s, interest rates were close to zero, as they were in Japan in the 1990s. Arguably, that increases indebtedness because if people can borrow massively without having to pay serious interest rates, they might run up debts. I am just gently saying that the idea that one factor can explain the problem and that we should focus on that is wrong. We need a holistic approach.
The right hon. Gentleman makes a helpful point. It is precisely my point, although unfortunately the shadow Chancellor missed it when he seemed to think that the responsibility of the Government towards debt management was to do with Government debt alone. It is not. The responsibility of the Government is to look at the whole economy. The debt of a nation, whether taken on by the Government, households or companies, has to be repaid by the nation. That is what got so out of control over the past 10 years.
I assume that in his figures for debt, the hon. Gentleman is talking about secured debt as well as unsecured debt. Did he read the article in the Financial Times about three weeks ago demonstrating that the level of unsecured debt under the Labour Government actually lagged behind economic growth, which means that our boom was not led by unsustainable borrowing?
I thank the hon. Gentleman for his intervention. He makes one correct point but draws a false conclusion. It may well be true that unsecured debt did not rise as rapidly as secured household debt under the last, Labour Government, but it is absolutely not true that the last, Labour Government did not preside over one of the most massive increases in debt of any nation on earth.
In response to the right hon. Member for Rotherham (Mr MacShane), let me make four points. The first is about the potentially crushing impact of household mortgage debt. Let us compare a household deciding whether to purchase a house with a mortgage in 1997 with one making that decision in 2007, looking at the loan-to-value ratio and average house prices in those two periods, and ask how much money the average household will lose over the next 25 years because house prices were allowed to rise so much. The answer is that the average household will have £250,000 less to spend—it will be a quarter of a million pounds worse off—in the next 25 years precisely because the last, Labour Government thought that they were creating wealth by making average house prices escalate way out of the range of the average family.
As a Government we need to look at building more houses and regulating mortgage lending to maintain sustainable norms. We need to look—as we are—at simplifying planning controls and removing obstacles standing in the way of house building. At some stage we also need to analyse the impact of the reintroduction of mortgage interest tax relief, should interest rates rise precipitously.
Should we not also consider regulating the overall debt in the economy, as was done until 1997, but then stopped?
My hon. Friend makes a good point; indeed, that is also an idea that we should consider.
The other thing that we are leaving the next generation that we need to consider is our pensions liabilities and how to resolve them. The happily titled “Project Armageddon” report from Tullet Prebon shows that the public sector pensions liability is £1.18 trillion, which is almost the same as the published, or “treaty”, Government debt of £1.11 trillion. I do not particularly want to dwell on public sector pensions, but this raises in my mind the way in which we have structured our pensions liabilities—that is, the pay-as-you-go nature of the basic pension scheme—such that we expect the next generation to pay for them rather than paying ourselves. Given that this generation will pass on such significant debts to the next generation in other ways, I have been considering various ways to change how we fund our pensions in this period.
In 2006 the Australian Government established the future fund, with 18 billion Australian dollars of seed capital. The goal was to invest in long-term infrastructure projects with a commercial return in order fully to fund the pension liability of public servants—that is, to move from a pay-as-you-go approach to an essentially self-funding system for public sector pensions. In the autumn statement my right hon. Friend the Chancellor talked about £21 billion of credit easing, which he will put through the banks via the national loan guarantee scheme. Let me suggest to the Minister that instead of putting that £21 billion of credit easing through the banks, perhaps we should create a UK version of the Australian future fund, essentially moving a portion of our pensions liability into what might be termed a hypothecated fund for that purpose. That is one thing that the Government could do that would significantly benefit the future generations that will have to pay off the debts racked up over the past 15 years.
Let me make two observations about job creation. There is nothing worse than people not having work to do when they are seeking it—hon. Members on both sides of the House think that is true. I am very pleased that the Chancellor has said that he will ask the independent pay review bodies to consider how public sector pay can be made more responsive to local labour markets. That would be a far more effective way of addressing wage-price rigidities than calls to scrap the minimum wage or other such measures. It is an issue—I listened to a speech by an Opposition Member about this earlier—that in certain parts in the north of our country, the public sector premium over private sector pay is 20%, whereas in other parts it is much lower, at 4%. In those areas the private sector should not be priced out of the market getting people to work for it because public sector pay is set significantly higher.
In closing, let me also gently suggest to the Minister that, with national insurance contributions at 13.8%, we have a significant tax on jobs. As we look to implement our policy to take the lowest paid out of tax, may I ask him perhaps to consider the national insurance tax on jobs too?
(12 years, 9 months ago)
Commons ChamberGiven the failed corporate strategy that led directly to the first run on a bank for more than 100 years, the nationalisation and now the capitalised loss for the taxpayer, is my hon. Friend satisfied that the original directors and chief executive officer of Northern Rock have been held sufficiently to account for their fiduciary responsibilities and will he welcome funding for the Serious Fraud Office to ensure that they are?
The directors of Northern Rock have been subject to enforcement action by the FSA, but I shall not go into detail about that. I recognise that the directors have their responsibility for the failure of Northern Rock, but the Labour party should also share some responsibility for the architecture of the financial regulation it put in place, which meant that no one was in a position to prevent Northern Rock from being an outlier when it came to its dependence on wholesale funding. It was a consequence of that dependence that led to Northern Rock’s being nationalised and we should welcome the fact that it is returning to the private sector.
(12 years, 9 months ago)
Commons ChamberI entirely agree with my hon. Friend. My constituency, which I shall come on to, is another centre for the road haulage industry. It, too, would welcome such a proposal.
Unemployment in my constituency is above the national average, and incomes are below the national average. Much of the available work is seasonal, and jobs can be many miles away. For many people, travel costs are compounded by the Humber bridge tolls, but that is a debate for another day. My constituency not only includes the premier resort on the east coast, also known as Cleethorpes, but the industrial and port complex on the Humber bank, including oil refineries, which are major employers. Indeed, they are good employers that provide the area with much of its wealth, but today I am speaking for my constituents, who are finding travel costs an increasing burden.
My constituency is a major centre for the road haulage industry, which, needless to say, suffers from the present levels of tax and duty on petrol and diesel. That, coupled with the fact that there are many small towns and villages in the vast, rural areas that are a feature of Lincolnshire, means that people do not live close to their place of work or to the essential services that they need to access. Walking and cycling are not realistic alternatives.
Motoring taxes are a greater burden for people living outside major conurbations. The Countryside Alliance has produced figures that show that people in rural areas spent £1.34 per week more in petrol at the beginning of this month than they did at the beginning of the year. They also draw attention to the fact that an-above average number of low-income groups in rural areas are car owners, and that accounts for a much greater proportion of their income. The people I represent think that paying 60% of the cost of a litre of petrol in tax and duty is too much—it is unfair. I have said before in the Chamber that it is a risky business for Governments to talk about fairness, because it is human nature for someone to regard as fair what is beneficial to them, but to regard something as unfair if it benefits someone else.
What people do regard as unfair is the fact that, based on the most recent figures available, £31 billion per annum is collected in tax and duty. Total annual expenditure by the Department for Transport is only £23 billion, so they regard that as unfair.
Does my hon. Friend agree that fairness is another reason people are animated by the debate, and support the motion? Too often under the previous Government, both with fuel duty and with council tax, people saw taxes go up year after year with no justification. It is the justification for the tax that is the source of the unfairness in this instance.
I entirely agree with my hon. Friend, who strengthens my case.
I was discussing fairness. In the two unitary authorities that cover northern Lincolnshire, it is estimated that constituents pay £167 million a year in motoring taxes, compared with the £95 million that is spent on roads infrastructure—again, that is clearly unfair.
(12 years, 10 months ago)
Commons ChamberI think the hon. Gentleman got the name wrong. He does not mean Norwich City—he means premiership Norwich City, which is more than one can say for any football team in Suffolk. I will back his campaigns to stop the cuts and to spend more, and I fully support the dualling of the A11. At last some Conservatives have persuaded some Conservative councils to do the right thing about these proposals, which is very good.
It is all very humorous here today, but in my constituency we already have above-average national levels of unemployment and unemployment has increased. It is always interesting to hear an economist debate with another economist. However, may I ask the shadow Chancellor what direct personal experience he has of working in business, helping to create jobs, and knowing what it is like to make payroll each week? If he does not have any of that experience, will he please undertake to this House that he will go out and get some?
I have worked in Government and at the Financial Times. I have never run a business, but I respect people who run businesses and I understand why they are so worried at the moment. In the hon. Gentleman’s constituency, where unemployment has gone up by over 400 in the past 12 months, there will be some very worried businesses, and it is important that we listen to them and hear what they are saying.
That is why now is the time for our oh-so-political Chancellor to put politics aside and start to do the right thing. Protecting our economy and protecting valuable businesses and jobs is more important than trying to protect a failed plain. We do not have to wait for another month of unemployment rising, or for 46 more days until we finally get the economic and fiscal forecast from the Chancellor, to know what he is going to have to say. He is going to have to downgrade his growth forecast for this year for the fourth time in 18 months and downgrade his growth forecast for next year. As I have explained, we already have £46 billion more borrowing in the pipeline, and unemployment is now rising. He is going to have to admit that borrowing will be billions higher still than at the time of his last forecast. The Prime Minister says:
“You can’t borrow your way out of a debt crisis”,
but he just doesn’t get it. [Interruption.] No, he doesn’t get it. Because with growth flatlining, and with today’s bleak news of rising unemployment, the Chancellor’s failing plan is leading to not lower borrowing but higher borrowing than he planned.
The IMF is clear that on its forecasts, which are some of the more pessimistic forecasts for the UK at the moment, it is not recommending a change in policy stance. That is what it says. It is what the managing director has said; what the article 4 report on the UK said; what the OECD is saying; and what all the business organisations in Britain are saying. That is why the path that the shadow Chancellor has laid out for the country is so incredible and does nothing to deal with the problems that he left to the country.
In response to the question from the hon. Member for Dundee East (Stewart Hosie), I would say that that is not the answer to a debt recession, because a debt recession relies on credibility. One of the key points in the motion is that the Labour party’s so-called plan would provide, through a temporary reverse of the VAT increase, a benefit of £450 for every couple with children. Has the Chancellor worked out the benefit to average families in the country of maintaining the credibility of our country’s finances and ensuring lower interest rates?
As I was just explaining, a 1% rise in interest rates—I am not talking about the level of interest rates in Spain and Italy—would mean £10 billion in higher mortgage bills for British families. That is the reality of what the shadow Chancellor is proposing.
I am afraid that I will not.
That woman told me that she uses the prepay meter key because of her fear of a large quarterly bill at the end of the autumn, even though she knows that it costs more. She is doing what the Government tell her to do. She is a single parent with four children who is working to support her family, but she lives in fear of the bills every day. There is the man who came to my surgery on Monday. He has a job offer, but he faces the choice between a job and a home because of the Government’s short-sighted approach to housing benefit.
Where are the private sector jobs? In my constituency and that of my hon. Friend the Member for Hackney North and Stoke Newington, most small businesses employ fewer than six people and they are struggling. I have been up and down my high street many times since the events of 8 August, but it is not just those events that have caused problems. Businesses are struggling with footfall and because people do not have disposable income to spend. They are worried about what will be down the road.
The Federation of Small Businesses has been very critical of the Government’s approach, as my right hon. Friend the Member for Morley and Outwood (Ed Balls) indicated. Businesses on the high street need quantitative easing, including those that are being incubated by entrepreneurs in my constituency. The Prime Minister is very fond of talking about creating a silicon valley when it suits him, but those high-street businesses are exactly the sort that could be creating jobs for young and older people in my constituency. However, they risk being throttled at birth, or if they do survive—I wish them well and hope they do—they risk not growing at the rate that they could with the right support from Government.
I am afraid I will not.
Families are being squeezed. Prices are going up, with food prices having increased by 6.1% in the past year. For those who drive, petrol has gone up. Energy prices have gone up, VAT is at 20% and we are seeing a huge hike in fare prices thanks to the Tory Mayor of London. If people have a job, they are worried that they will not have it in future, and they are worried because they will not be getting pay rises. Families in my constituency have nowhere to go to get the extra money: not for them the easy credit that is available to many or the bank overdraft that is available at the end of a phone call; not for them the rich family member who can help them out or a cushion that they have saved over years of work, because they have been living a difficult existence as it is and are now squeezing until the pips squeak. They cannot squeeze any more out of their household budgets.
This Government are cutting too far, too fast, and it is not working for families, for young people or for businesses. It is not working at all, nor, sadly, are far too many of my constituents.
The hon. Gentleman says “the Government this” and “the Government that”, but if we are talking about jobs, he ought to be talking, as I am sure that he is, to small business owners in his constituency. In those conversations, how many of them have said that they would put at risk low interest rates in this country to pursue some of the policies in the five-point plan, and how many said that they would welcome the job tax that the previous Government said that they would impose on businesses up and down the country?
Many of the businesses that I speak to in areas such as the Team Valley trading estate, which employs about 20,000 people in the private sector, complain about the pace and depth of the Government cuts. They are impacting on their order books because many of them provide for the public sector. Unemployment in the region now stands at 142,000, which means that 11.3% of the working population in the north-east are now unemployed. The only conclusion that we can draw from the rationale of the parties in government is that, for them, unemployment in the north-east is a price worth paying.
(13 years, 1 month ago)
Commons ChamberMy right hon. Friend, who has an excellent track record in raising many of these issues, is completely correct. The vice in which many of our poorest constituents find themselves being squeezed is very much apparent. The changes to the social fund that he mentions are part of the context in which we would want to review the circumstances in which high-cost lending takes place. That is the objective of our new clause 11: we want to examine the possibility of regulatory and/or tax measures to address this problem.
The hon. Gentleman mentioned the fourfold increase in payday loans. Would he acknowledge that a substantial amount of that increase occurred in the period 2007 to 2009, at the start of the recession, and that although the rate has subsequently increased, its growth has tapered off somewhat? Does he also agree that payday loans are but a sub-segment of the sub-prime, high-cost credit sector?
Yes, payday lending is indeed a facet of the broader problem. I am not sure about the trends and how things have been moving—the hon. Gentleman may have other statistics that it would be worth sharing if he makes a contribution to this debate—but there is no doubt about the trajectory of that growth, which has been quite marked, which I know is a concern for all Members, in all parts of the House.
I am interested in the hon. Lady’s impression that consumer credit is a bad thing, because I do not agree. I would also be interested in her views on research by the Office for Budget Responsibility, which shows that as a direct consequence of the Government’s Budgets an extra £10,000 of debt is being put on to households. Perhaps she would like to comment on the implications of that for family finances. No? Then I will continue.
The problem is not just the high-cost credit industry but the nature of the industry and the way in which it operates, which is causing so many problems. What most worries many Opposition Members is that so many families are struggling. Indeed, we know that 46% of families say that they do not earn enough in a month to pay all their bills. Crucially, of that 46%, 10% say that the reason they are struggling is the repayments on high-cost credit. It is those very products that are pushing them into financial difficulty.
For the avoidance of doubt, I say clearly that I am not trying to put Wonga and the other companies out of business. I do not hold with the constituent of mine who argued that we should learn a lesson from Dante and put them in the seventh circle of hell, but we can make the credit market fairer for all concerned. It is important to set out, therefore, the kind of companies we are talking about and just how quickly this industry is growing in the light of recent economic circumstances.
Many people know about payday lending—the form of credit whereby a borrower gives a creditor a cheque or an authorisation to make an automatic withdrawal from their bank account. That is used as security for a short-term loan to be repaid, supposedly on the next payday. It is a long-established form of credit in other countries, but it is relatively new to the UK—and it is growing rapidly. By 2009, the payday lending industry was worth more than £1.2 billion, and the figures I have gathered from the Department for Business, Innovation and Skills, which were released under a freedom of information request rather than being put in the public domain, show that it is now worth £1.9 billion. Indeed, in its “Keeping the Plates Spinning” report, Consumer Focus estimates that payday lenders are expected to quadruple the scale of their operations in the UK in the next few years alone.
The hon. Lady says that the payday lending market was £1.2 billion in 2009. According to the Office of Fair Trading review of the payday loan market, it was £600 million. To clarify the situation, and for my education, will she explain the difference between the two numbers?
I will happily explain the difference between the two numbers. The hon. Gentleman might have heard me say that I made a freedom of information request to obtain the most up-to-date data from the Department, and it is a source of concern that Ministers did not share the information with MPs. Research shows clearly that the market has grown to £1.9 billion. If I tell the hon. Gentleman that 5% of the population have taken out a payday loan in the last year, representing 2 million, perhaps he will understand the discrepancy. Perhaps he might like to account for why the Government did not want to put that information in the public domain.
I just wish to point out to the hon. Lady that I think there is a lot of consensus, which I hope she does not destroy in her passion for this issue.
As a point of clarification, the 5% figure in the OFT’s analysis came not from the payday loan market but from participation in the high-cost credit market, which includes credit unions and credit cards. Given that my source is the OFT, perhaps she will clarify that point too.
I am happy to share the figures with the hon. Gentleman, although I am afraid to say that his interpretation is incorrect. One of the things that I have done—perhaps I am getting a reputation for it in the House—is my homework on this market, and I have sought as much accurate information as possible. That was why I made the freedom of information request, and I would be happy to share the data with him. One of the challenges is that the Government have information about how quickly this market is growing, but they are timid about confirming it.
(13 years, 5 months ago)
Commons ChamberDoes my hon. Friend agree that the previous Government were the worst villains in fiscal drag that this country has ever seen? They failed to raise thresholds year after year, and dragged many taxpayers into higher income tax brackets.
My hon. Friend makes a good point. I welcome what the Chancellor has done with the personal allowance and the £10,000 target. If a central part of the Government’s plans is welfare reform, it is inevitable that we must reduce the tax on the lowest-paid. Otherwise, we will not get people off welfare and into work, which I think is what all of us want.
I will touch on one or two measures, but I do not want to take up too much time. I welcome the Government’s plans to assist the housing market. I wish they had gone farther, because there is a lot of capacity in the housing market, which could provide more jobs and help to get the economy going. However, what the Chancellor announced was very good.
I welcome the Chancellor’s proposals on charities. Poole has one of the biggest charities in the UK, the Royal National Lifeboat Institution, which raises a considerable amount of money from bequests. People getting relief on inheritance tax will be a major boost to that charity and to many others.
I welcome the move back to enterprise zones, because we have to become an enterprise economy. One lesson of the last decade is that we do not want to rely on an overheated south-east and London. We must ensure that future growth is balanced so that it occurs in greater Birmingham, Manchester, Leeds and many of our great provincial cities. What the Chancellor announced will assist in that.
The Government are doing what they can to help people, with limited room for manoeuvre, by putting off the fuel duty rises and freezing council tax. We have a difficult inheritance and the Chancellor has precious little room for manoeuvre. He started his Budget speech by saying that this is basically a neutral Budget. I think that it is right to have a neutral Budget. In some respects, it would be better not to have a Budget at all, but just to let the long-term plans of the Government roll on. That gives the best hope of getting the economy sorted, and of restoring growth to the British economy.
We have heard debate about the OBR forecasts. They are forecasts and will change several times before we know what the situation is. I think that we have an excellent chance over the next four or five years to get growth. I think that the Government’s strategy is right. They are concentrating on training and simplifying the tax code. Hopefully, when we can, we will start to reduce the rates.
Indeed, the bank levy will come down to just £100 million by 2015-16.
The change to the oil and gas charge has come as a bit of a shock, and it worries me. From looking at the Red Book, I am getting more and more worried about what the Chancellor has announced today. The Red Book states:
“The Supplementary Charge on oil and gas production will therefore increase to 32 per cent from midnight tonight.”
There was no warning, and it will have come as a big shock to the industry. The effect could be dramatic in my constituency. I only hope that the Chancellor has thought the matter through and had some discussions with the industry. I suspect he has not, and I am worried about what will happen.
I wonder what other nasties are lurking in the Red Book. Last time it was the 10% sanction on housing benefit when someone had been out of work for a year, which we did not discover until days afterwards. I am glad that the Government have backed down on that and that today’s Red Book shows that money again.
From a cursory glance at the Red Book, I discover something that comes as a bit of a surprise to those of us who were here for Prime Minister’s questions today. The Leader of the Opposition asked the Prime Minister why the Government were taking the higher-rate mobility component of disability allowance from people living in residential care. Those who were here will remember that the Prime Minister replied, “We are not”—a simple, straightforward answer. However, line d on page 44 of the Red Book is about the plan to
“remove mobility components for claimants in residential care from April 2013”,
with a figure of £155 million to be saved. That is different from the last Red Book, which stated that the change would come in in 2011-12 and save £135 million. All that the Government have done is delay it by two years. As the Leader of the Opposition pointed out, the change is still in the Welfare Reform Bill, and here it is in the Red Book. Perhaps the Prime Minister might want to come to the Chamber and apologise for not having been as accurate as he might have been.
For clarification, has the hon. Lady checked the following page, page 45, which mentions the disability living allowance reform gateway funds, which will kick in at £360 million in 2013-14 and rise to £1.45 billion? How does that match the figures that she has given, if at all?
They do not match, because they are totally different things. In fact, the Prime Minister did not quite understand that. The DLA gateway is about tightening up the criteria for those coming on to DLA. That will come in with the introduction of personal independence payments. The reform of the gateway is totally different from taking DLA away from people who live in residential care. By any criteria, such people would qualify to get through the gateway. The Government have decided that they will not get the money because they live in residential care, not because they do not fit the criteria.
I am grateful to the hon. Lady for that clarification. I am sure she will recognise that there are hon. Members on both sides of the House who share concern about the continuation of the mobility component of DLA. I believe that Ministers are looking for a way to both maintain the mobility component and expand personal payments, so that people with disabilities who live in care homes continue to receive the funding that they require for a decent living. If that is not included in the Budget, I will be very interested to talk to her about it.
What I have said is based on a cursory glance at the Red Book, but the evidence from the Welfare Reform Bill, which states that those in residential care will not get higher-rate mobility DLA, and from the Red Book makes it appear that the Government still intend to take the mobility element away from such people, albeit two years later. Those of us who said that the proposal was unfair thought we had won the battle, but it now appears that we have not won it at all. I am grateful to the hon. Gentleman for his intervention, because I know that Members of all parties objected to the proposal. I hope that he will put pressure on his Government to reconsider the matter.
I wish to say a wee bit about the merging of national insurance and income tax. It was trailed slightly in the press, but we needed to find out what it meant in reality. The Chancellor said it would not be the end of the contributory principle, but it is very hard to see how it cannot be. There needs to be a debate about the future of that principle, because other measures that the Government have taken have undermined it. People are quite shocked about what is happening, having paid their national insurance all their lives thinking that they were paying into an insurance scheme and that they would get money out of it when something went wrong. People get only six months’ jobseeker’s allowance of £65 a week as a result of their NI contributions when they are unemployed. Under the Welfare Reform Bill, people will get only one year’s sickness benefit under the new employment and support allowance as a result of such contributions. Most people assume that they get the basic state pension because of their NI contributions. That is the big one, because people are quite happy to pay their NI contributions for that, but the Government plan to introduce a flat-rate, £140 a week state pension. Such contributions pay for the basic state pension state and the earnings-related pension scheme as well as pension credit, and everything then gets divided out.
It is difficult to see how pensions can be based on a contributory record, as the Red Book says they are, if everybody gets the same. The Work and Pensions Secretary said a couple of weeks ago that he will introduce the flat-rate pension, and that that will help women, but it will do so only if it is not dependent on contributions. The Government cannot have it both ways. Either people get the flat-rate pension based on their working record and NI contributions, which will be part of income tax, or they get it because they have fulfilled other criteria, such as residency. The country and all parties in the House need a proper debate on how we fund welfare, the basis of our welfare system, and the future of the contributory principle.
There are problems when a country has a stock of debt as massive as ours. Even with the Government’s plans for fiscal consolidation, it will not start declining for some years to come. Under the Labour Government our stock of debt would have peaked at about 80% of gross domestic product, but under the current Government’s plans it will peak somewhere below 70%—69%, I think I recall. [Hon. Members: “71%.”] Either 69% or 71%. Such a massive stock of debt means that every year, we have to refinance several hundred billion pounds of Government debt. Even if it is not all the debt, that is still a very substantial amount of money.
Perhaps my hon. Friend will be interested to read on page 25 of the debt and reserves management report issued today that the gap in the five-year forward rate on debt borrowing is at its highest point for 10 years. That reflects the fact that the market is buying only short-term debt. One of the few assets of this country that the last Government did not sell down the river was the long-dated debt that we have compared with other countries. If we had carried on with their policies, even that would have been lost as a result of their profligacy and waste.
That is a very good point. Markets can turn on a dime if they detect backsliding, and that is not what they are getting from this Government.
Let me start by paying tribute to my hon. Friend the Member for Barnsley Central (Dan Jarvis) on making an excellent maiden speech. He talked about the spirit and aspiration of the people of Barnsley. I know that he will make a very good Member of Parliament and will certainly bring that spirit and aspiration to the House of Commons. Let me also say what pleasure I took in the election result in Barnsley. Seeing the good people of Yorkshire give the Liberal Democrats a real pasting—they put them in sixth place and made them lose their deposit—was enormously pleasurable.
The Chancellor talked about the necessity for growth across sectors and across the country. He also said that growth should be properly shared across all parts of the country. I want to talk about growth and the impact on the regions, and particularly the Yorkshire region and the sub-region in the Humber. We recently had some good news in Hull, which is that Siemens will hopefully set up a manufacturing site in east Hull to build wind turbines. That will result in about 10,000 jobs, which is excellent news for Hull and the Humber region. Like all Members across the House, I want a growing economy, high-skilled jobs for all the people in this country, and a well-educated and well-skilled work force. We have a history in Hull, having lost the fishing industry in years gone by, and other historic employment issues that we still need to address, so growth is important for my constituents and my city.
However, it is important that we take an economic reality check and ask what the Budget will actually deliver. The key thing—this has been mentioned by many hon. Members across the Chamber—is that the growth forecast was down last year, it was down this year and it is down the year after. The hopes and aspirations of all my constituents have been dashed by what has happened since this coalition Government came into power.
I want to set this debate in the context of what it means for my city of Hull. Since last May, £20 million has disappeared from Hull’s local economy because of the coalition’s council cuts. We will see £25 million leaving the NHS in Hull, while £160 million has already gone because plans for the regeneration project in Orchard Park have been axed. Hull’s housing pathfinder funding has gone. There is zero decent homes funding for the next three years. Some £21 million has been cut from Hull’s Building Schools for the Future programme, and the university of Hull is getting a 5% funding cut.
There are major cuts to services across the piece in the public sector in Hull, which has a direct impact on the private sector. I fail to understand why the coalition does not see that cutting the public sector to the extent that it is will not help growth, but produce even more problems.
Does the hon. Lady acknowledge that the country has record debts, and if so, which public expenditure cuts would she make?
I am concerned that our economy should grow, and I am trying to set into context—
Will the hon. Gentleman just let me finish? I paid him the respect of listening to his question; I would appreciate it if he would listen to what I have to say.
One way of getting out of the problems that we have experienced as a result of the bankers’ problems—not the Labour Government’s problems, as the hon. Member for Southend West (Mr Amess) tried to suggest—is to grow the economy. I am with the coalition Government on the need for a growth strategy for the economy, but the measures that have been taken so far will not help to grow the economy in Hull and the Humber.
No, I want to carry on making the point about why there is a real need in Yorkshire and, in particular, the Humber to grow the economy. The measures that have been taken are not helping. The result of all that money being taken out of my city is that construction jobs are going and we shall not have the training or the apprenticeships that the Chancellor has talked about. For the first time, we have seen compulsory redundancies at BAE Systems, a major private sector employer just outside Hull on which many of my constituents rely for skilled jobs. It is a place where people want to work, but private sector jobs are being lost there.
The abolition of the regional development agency, Yorkshire Forward, is a huge loss to the region and to the building up of the regional economy. The coalition has introduced local enterprise partnerships to assist regeneration. We all agree that we need to regenerate areas such as East Yorkshire and the Humber, and Yorkshire Forward was doing a very good job of building up the economy. The Government’s answer was to remove the RDA and create a regional growth fund. Now, whenever a question is raised about where funding can be accessed, we are told to go to the regional growth fund. The housing pathfinder has been scrapped, and the Prime Minister told my hon. Friend the Member for Kingston upon Hull East (Karl Turner) to go to the regional growth fund for money. It seems to me that the fund must already have been spent about 100 times over. It is just ridiculous.
May I draw your attention, Mr Deputy Speaker, and that of other hon. Members to the Register of Members’ Financial Interests and to my interests in venture capital and small businesses? I would also like to join others in praising the hon. Member for Barnsley Central (Dan Jarvis) for his maiden speech, which I thought was eloquent, relevant and insightful.
Unfortunately, I cannot apply those three adjectives to the speech of the Leader of the Opposition, which is a great shame. When I listened to the right hon. Member for Doncaster North (Edward Miliband) during Monday’s debate on the UN resolution, I thought he spoke as a serious statesman on behalf of not only his own party, but the whole country. Today, however, I am afraid that his speech was more like a pantomime act than a serious contribution. I hope that the shadow Chancellor will provide a better and more insightful response tomorrow. It is a shame because the people of Bedford and Kempston want to hear not what is not going to be done, but what is going to be done. They heard very clearly from the Chancellor what he was going to do.
It is not my job to tell Opposition Members to do their job, but I think it is time that we heard from them what they would do, which I did not hear. Up until the last speech by the hon. Member for Wirral South (Alison McGovern), I had not heard that at all. If Members are challenged and accept that there is a deficit, it is important for them honestly to come forward and say what steps and measures they would cut. They should not just throw out the next unfunded commitment in response. That does not help achieve consensus in what are very difficult times.
In addition, we are done a disservice because Labour Members’ failure to atone makes their constant outcries sound like a masquerade of keening by discredited professional mourners of the past. It would be much more insightful if they were able credibly to engage in the issue of how to get the deficit back under control. As their own unofficial website, labour uncut says, their current strategy of
“Hang on, I haven’t decided”
does not answer the needs of the time.
I shall be interested to see how Opposition Members respond to what my hon. Friend has said.
I would subject the Budget to the tests specified by the hon. Member for Barnsley Central: the impact that it will have on the most vulnerable, and what it will do for growth. It is difficult to introduce deficit reduction measures that do not disadvantage the poorest. What the hon. Member for Wirral South said about the impact of rising prices on people who were not receiving increases in their pay packets was absolutely right. I say to Ministers that—not necessarily for the purposes of the current year, but certainly as we look forward to next year and the year after that—we must think very carefully about what we will do for public sector workers who have experienced a pay freeze in at least one year, and in some cases in a number of years. Members on both sides of the House will want to hear a little more about that.
As I said earlier when I intervened on the hon. Member for Aberdeen South (Dame Anne Begg), the issue of the mobility component of disability living allowance is also of vital interest to Members in all parts of the House. We must ensure that we protect the most vulnerable people in our care homes. I have met the Minister responsible for the disabled—the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller)—on many occasions, and I know that she shares my passionate interest in that subject.
In the context of protecting the most vulnerable, let me first urge Ministers to continue to give full support to the welfare reform measures that are being pushed through by the Secretary of State for Work and Pensions. The universal credit will be of major, long-term, significant and beneficial advantage to low-paid and poor people in our country, and it is a measure that those on the Treasury Bench should support in the years ahead.
Secondly, I should have liked to hear a little more about support for our charities. I was very pleased to hear about the £550 million of support that the Chancellor was offering to them in the form of various benefits, but I should have liked him to be more radical. There are many steps that we can take to ease the rules and regulations and break down some of the barriers that prevent social investment from various sources. We should be a bit more open in relation to the way in which money can flow from social investment to outcomes and social impact bonds. I should have liked to hear about personal tax deductions for charitable donations, and I should very much like the Treasury—either directly or through the big society bank—to help charities to procure local government services. They need that support to arm them in their continuing battles with bureaucracies.
The Budget expresses strong support for those who wish to invest in our small businesses. It strongly supports angel investment and mentoring. Small businesses and entrepreneurs want support from people—from local people who may have started up their own businesses—and we will seek to provide it in Bedford and Kempston. We will seek to bring together successful local business people who can provide financial support through the advantages offered by the Budget in terms of angel investment, and through mentoring to provide guidance and advice so that small businesses can grow.
The Budget challenges us. As many other Members have said, we are about to be tested, and to go through very difficult times. It is important for Members on both sides of the House to argue constructively, but we should also rest on the great creativity and ingenuity of our small business people and entrepreneurs, because they offer the future that will achieve growth in this country.
I thank the hon. Gentleman for exercising time restraint.
(13 years, 7 months ago)
Commons ChamberI am very glad indeed to have the opportunity to raise in the House of Commons the vital issue of the effect of air passenger duty changes on the Caribbean.
I want to begin by outlining what is intrinsically wrong with the changes—namely, the way in which the duty is calculated. No one in the Chamber is against environmental measures designed to bear down on excessive airline travel, and no one wants the British Treasury to lose money, but the way in which the duties have been calculated, and the way in which the zones have been worked out, are indefensible. The zones are calculated on the basis of where a capital city is. For instance, because the capital of the United States is Washington DC, one would pay less duty under this system to fly to Hawaii or Los Angeles than to fly to the Caribbean. How can that be right? How can it be cheaper to fly those vast distances than to fly to the Caribbean? These are issues of fairness, equity and transparency.
The flight tax to the Caribbean increased by 25% on 1 November 2009. In November 2010, the tax on flights from the UK to the Caribbean increased by a further 50% in all classes of travel. At present, passengers travelling to the Caribbean pay £75 per person in economy and £150 per person in all other classes. There is a substantial amount of traffic between Britain and the Caribbean, particularly at holiday times. As a member of the Jamaican diaspora, I sometimes find myself on those planes packed full of people who are happy to go home and see their relatives. Many of them have saved for two years or more for their flights. I put it to the Minister that £75 might not seem much to the Treasury, but when people are paying for a family of four, five or six, it amounts to a lot of money. People have often saved up for their flights for years, and that sum is a big consideration.
I am appealing not only to the Minister’s humanitarian instincts, however. I know from talking to Ministers of whatever party that I would do that in vain. I also want to talk about the effects of air passenger duty on British business and on the economies of the Caribbean.
The hon. Lady is making some excellent points. Before she moves on to business, I would like to encourage her to talk more about the matter of equity, although she says that she would do so in vain. Many people from my constituency travel to destinations in the Caribbean, and many of them came to this country in the 1950s, ’60s or ’70s. They have often spent their careers working in the public sector on very low incomes, and many are now pensioners. For them, £75 is a very significant cost. They have siblings, perhaps aunties, and certainly nephews and nieces back on the Caribbean islands—not only Jamaica but many others. Does the hon. Lady agree, notwithstanding the excellent points that she has made about geography and is about to make about business, that there is a strong equity case for the Minister to review the question of air passenger duty?
I greatly appreciate my hon. Friend giving way. I have admired the rigour of her analysis as she has gone about her duties as a Minister as well as her powerful advocacy. If I may, I want to encourage her to use the second part of her talents—her advocacy. There is a strong equity case for people in this country to consider carefully the APD ratings for Caribbean islands. A significant number of people who have made their home here like to go home to their place of birth and origin. We all want to see the environmental goals that she has discussed accomplished, but there is a strong and powerful equity case. I ask her, through her rigour, to give due regard to that case as well as to the other competing pressures.
I am grateful for that intervention. My hon. Friend points out the impact on local communities but, in a friendly way, I would challenge the point about contradictions. In terms of our tourism industry and our need for links with other countries to drive economic growth, this is very healthy. Our relationship with the Caribbean and the role that aviation plays in helping us to maintain that more broadly is particularly important, so we are not necessarily faced with an either/or choice.
One of the most intractable problems we face, which underpins the whole approach in the Treasury, is the unavoidable challenge of tackling the fiscal deficit. We are faced with that while also making sure that the tax measures in place work effectively and do not have the sort of negative impacts that we do not want or need them to have.
(13 years, 8 months ago)
Commons ChamberOrder. The hon. Gentleman is to resume his seat. He has come in on the wrong question I am afraid; we are talking about bank bonuses.
While the Minister reviews the undoubtedly well-stuffed stockings of certain bankers to determine whether they have been naughty or nice, will he acknowledge the significant amount of tax that they pay, and the institutions that choose London as their domain? Will he recognise that, as far as their choice of domain is concerned, the airports of this country will not always be closed?
My hon. Friend makes an important point. At the time of the spending review the Chancellor made it very clear that we want banks to pay the maximum sustainable tax. That is why on 1 January we will introduce a bank levy, which the Opposition rejected when they were in government. That levy will raise £2.5 billion more than the net amount raised by their bonus tax.
(13 years, 9 months ago)
Commons ChamberI thank my hon. Friend for making that very good point. We are talking about many hundreds of thousands of policyholders throughout the United Kingdom, but we know that there are about 37,000 or so post-1992 with-profits annuitants. We think there are about 10,000 pre-1992 such annuitants, but the further back we go the fewer there will be, so if it was a difficult, time-consuming exercise to work out relative losses for all policyholders, which it certainly was, which is why Sir John Chadwick was engaged, it will surely be a much easier exercise for the far fewer people who are with-profits annuitants prior to 1991. My hon. Friend’s point goes some way to answering the question.
I thank the hon. Gentleman for giving way again. This has been a long-standing issue, and perhaps he can help some of us who are new to the House. He mentioned a total of £100 million from subsequent years’ Budgets, plus £100 million from reserves to be allocated to pre-1992 annuitants who are not covered in the proposals. Is he making an estimate, or is that sum firm is in his mind? That is a key issue. The concerns expressed about computer records do not stand up against a point of principle, but it is important that we have a sense of how firm and solid the hon. Gentleman’s understanding is of the sums that might need to be paid.
The hon. Gentleman makes a very good point, and I cannot give him a precise answer. The figures that I have quoted are estimates I obtained from the Equitable Members Action Group, which has quite a lot of good people working for it—people who have been in the financial services industry. I go on their expertise. This is the best estimate that we can gain.
The reality is that many of the annuitants are quite elderly. It is unlikely that in five years we will have the same number we have now. We already know, for example, that every single day since the disaster happened 15 policyholders throughout the entire spectrum of Equitable policyholders have died. We can therefore assume, unfortunately, that more will no longer be with us in the years to come, so the amount of money will be a diminishing sum. The best estimate that we can gain is £200 million, and that estimate comes from EMAG.
The hon. Member for Leeds North East (Mr Hamilton) made an impassioned and moral argument for amendment 1, to which I shall return later.
I have taken a very keen interest in this issue. It has affected a significant number of people in Stratford-on-Avon, to the extent that I have had hundreds of letters and e-mails about it. Like many other Members, I signed the EMAG pledge before the election, and I believe that backing the Government to get the Bill through is delivering on that pledge.
It is probably worth our spending just a few moments thinking about the economic landscape in which we are operating. We are borrowing about £500 million a day. Every time we go to sleep and wake up in the morning, we notch up another £500 million. To service the debt costs about £120 million a day—that is not to pay it down, but just to stand still. It is against that background that we must try to resolve the tragedy of Equitable Life.
Let me spend a couple of minutes on the timelines of the events. In 1988, Equitable Life stopped selling its guaranteed annuity rate policies and, in 1990, those policies became too expensive to honour because of the falls in interest rates and in inflation. In 1999, after the 1997 election, Equitable cut its bonus paid to 90,000 GAR policyholders. In July 2000, the House of Lords ruled that Equitable Life must meet its obligations to its GAR policyholders, thus leaving it with a £1.5 billion liability.
In February 2001, the Halifax agreed to pay £1 billion for the assets. In July, with-profits policyholders saw the value of their savings slashed by 16%—by almost one fifth. In August, Lord Penrose announced his investigation. In October, the then Economic Secretary to the Treasury told the Treasury Committee that the previous Labour Government might consider compensation for some victims if a grave injustice had occurred.
In January 2002, policyholders backed a compromise package. In March 2004, the Penrose report blamed Equitable Life’s management for the whole affair. Following the report’s publication, the Government ruled out compensation and were accused in this House of abandoning policyholders. In April, the parliamentary ombudsman announced that she would reopen her investigation.
In 2007, the European Parliament called on the UK Government to compensate policyholders. In January 2008, Equitable agreed to pay an undisclosed sum to 407 with-profits annuitants who launched proceedings in 2004. The ombudsman’s report was published in 2008. The previous Government said that they would respond by the autumn. When the deadline was missed, the then Prime Minister said that they would respond before Christmas. However, they did not respond until the new year.
In August 2009, Sir John Chadwick published his first interim report, and in March 2010—more than a year after his appointment—he published his third and final interim report with a promise of a final report in May 2010. That date was subsequently extended to July.
I go through these events in chronological order to demonstrate the pain that the victims of Equitable Life have had to go through. This is a true human tragedy. The hon. Member for Leeds North East talked about the e-mails and letters that he has received from his constituents, and the same is happening in all our constituencies.
The Government’s offer is a very good one. My hon. Friend the Member for Cardiff North (Jonathan Evans) said that, at best, he expected them to offer up to £1 billion. Many colleagues and I voiced our concerns the last time we debated this matter in the Chamber. When one makes a pledge, one must try to honour it.
Like many of us, my hon. Friend is wrestling with this question of fairness and with the political obligation to find a fair payment scheme that was mentioned in the Public Administration Committee and that many of us have signed up to. Hon. Members from both sides of the Committee are caught between wanting to praise the Minister for the swiftness of his recommendations—we praise him for that—and finding, in these difficult times, £1.5 billion. We often talk about that figure in comparison with the Chadwick number. However, does my hon. Friend not accept that we should view the figure with respect to what the Government themselves have said about policyholders’ relative loss, which Towers Watson estimated at, I think, £4.3 billion? Does £1.5 billion represent meeting our obligation of fairness if it is set against the relative figure of £4.3 billion that the Government themselves have accepted?
(14 years, 1 month ago)
Commons ChamberThe Government are committed to tackling unacceptable bonuses in the financial sector, and we have put forward a series of proposals on that. We have talked about increasing the disclosure of remuneration, we have asked the Financial Services Authority to examine ways in which the link between risk and remuneration can be investigated, and we are taking forward work on the financial activities tax. Also, we have today published a consultation on a bank levy, which will raise an extra £2.5 billion in revenue from the banks.
T10. Average wages in my constituency are below the national average, so the rise in the income tax threshold announced in the Budget was most welcome. Can the Minister please give an assurance that he will maintain a focus on increasing the personal tax threshold, as the prospect of being taken out of tax altogether is far more appealing than the prospect that the previous Government offered, which was the non-stop filling in of forms to claim back just a fraction of the money that people had already earned?