Financial Services (Banking Reform) Bill
Richard Fuller Excerpts(13 years ago)
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Greg Clark
No. The right hon. Gentleman has not got it quite right. We are absolutely enthusiastic about creating regional banks, and the exchange that I had with my hon. Friend the Member for Hexham, and the changes made by the regulator to the approvals process, underline that. The right hon. Member for Wolverhampton South East (Mr McFadden) asks a specific question about whether RBS, in which we, of course, have a very substantial stake, should be broken up in that way. It is important that we have regard to value for the taxpayer. I suspect that we will talk about these things tomorrow, but I confirm that it is the Government’s view that we should not damage the potential value to the taxpayer in that way.
As members of the Bill Committee will recall, I made a commitment to introduce on Report amendments to implement electrification, and here they are. The amendments give powers to the regulator, with the consent of the Treasury, to require a group to separate completely its retail and wholesale banking operations. The regulator would be able to require the group either to sell its interests in ring-fenced or non-ring-fenced entities, or to transfer specified businesses to outside ownership. The regulator will be able to require separation if it is satisfied either that the group’s ring-fenced bank is not sufficiently independent of the rest of the group or that the conduct of any member of the group is such that it undermines the regulator’s ability to achieve its new statutory objective to ensure the continuity of core services.
The amendments set out a process for the exercise of that power. The first step is that the regulator must notify all affected members of a group that it is minded to exercise its powers and how it proposes to do so. The affected bank has the right to make representations following the receipt of each notice. Following that stage, the regulator is required to allow members of the group at least a year to take action to rectify the position. If, after that period, the regulator wishes to proceed it must issue a warning notice before a requirement to separate is imposed. The regulator would then allow five years to complete the separation required in line with the disposals required under competition law, particularly state aid interventions.
As the parliamentary commission recommended, the Treasury’s approval is required before that action can be taken. We agree with the commission that providing for a deterrent against any bank that seeks to game or evade the ring fence is a sensible reinforcement in keeping with the recommendations of the Independent Commission on Banking. Government amendments 11,12, 13 and 14 make technical adjustments to ensure that all the necessary components of structural reform comply with the ring fence and are brought within the scope of the ring-fencing transfer scheme.
Richard Fuller (Bedford) (Con)
I am grateful to my right hon. Friend for his clear explanation of how the ring fence will work. He is discussing time frames that make sense in benign economic circumstances, but some of the problems with the interaction of retail and investment banking came about in circumstances of great financial trauma. Is he confident that the measures he has proposed will work in those circumstances as well?
Greg Clark
My hon. Friend makes a good point. The use of state aid is often a response in the context of difficult circumstances. That was certainly the case in the financial crisis, and it happens in other industries as well. Five years is the standard period for these arrangements to be executed or completed, and that is the reason, anticipating an intervention from my hon. Friend, that period was chosen. I dare say, however, that that there can be reflection on that: my hon. Friend the Member for Chichester may have a different view that he may wish to share with the House later.
Government amendments 15 and 16 reflect concerns expressed both by the Commission and in Committee that the use of ring-fencing transfer schemes to restructure groups could provide unscrupulous banks with an opportunity to shirk their responsibilities, such as liability with past misconduct. The requirement for PRA approval is a substantial safeguard against that, but Government amendment 16 requires that before the PRA can consent to a ring-fencing transfer scheme it must commission an independent report to assess whether anyone other than the bank itself would be adversely affected by the transfer. Government amendment 15 requires the PRA to “have regard” to that report in deciding whether to approve a ring-fencing transfer.
The hon. Member for Nottingham East will of course have more to say about amendments tabled by the Opposition, but his first amendment was debated extensively in Committee. It requires a review of ring-fencing every two years. I am certainly not set against an independent review. Indeed, the Bill builds in future reviews, including the PRA being able to report annually on the operation of the ring fence, and being able to report every five years on whether the detailed rules it has made are still delivering the objectives of the ring fence. Requiring another review specifically to look at the case for full separation risks in many ways achieving the opposite of the Bill’s intention, which is to secure consensus, as far as that can be established, and to provide for a stable regulatory structure.
It would be paradoxical for such a review to be confined to looking at ring-fencing or full separation, but not any other remedy for deficiencies that the review might uncover. Amendment 18 is identical to an amendment that was debated in Committee. The Government’s position is clear: in the Bill, we are following the advice of the commission chaired by Sir John Vickers, which considered the case for full separation—that relates to the point made by the hon. Member for Brighton, Pavilion (Caroline Lucas)—and rejected it. It is a different policy. I know that it has some distinguished advocates, but it is a different policy. Of course, any future Government could adopt it, but they should do so properly, through thorough analysis and following parliamentary and public scrutiny.
It is worth reminding ourselves briefly of the history of the proposals before us. They were not invented during the past few weeks or months. They go right back to 2010, when the Government established the Independent Commission on Banking under the chairmanship of Sir John Vickers. The commission produced three reports, instigated two public consultations, considered 1,500 pages of written submissions and hosted more than 300 separate meetings. The Government produced a response and a White Paper, on which they again consulted fully before coming to Parliament. At each stage there was full cost-benefit analysis. Now in Parliament each detail of the policy is being debated—and has been debated in Committee—and in many cases improved.
Cathy Jamieson
The hon. Gentleman makes a useful and probing point—I wish I had had the opportunity to probe the Government’s proposals in the same way. The point is to look at patterns of behaviour and conduct. The important thing is that this change or anything that the Government introduce should be robust and should stack up. That is why I was particularly keen to know how the Minister sees this issue being taken forward. However, I recognise that there is a wider context, so if he could respond by giving me some assurances on this issue, I would probably be tempted not to press new clause 7 to a vote.
Let me briefly mention new clause 11, which deals with criminal sanctions. New clause 11 was also inspired by the work of the Banking Commission. It would require the Government to bring forward proposals for the new offence of reckless misconduct in the management of a bank covering the people licensed under the senior persons regime and would seek civil recovery of money from people found guilty of the offence. Although that might be controversial in some areas, it is important. I welcome the fact that the Government now seem to be moving on this, and I await the detail with interest. It is vital that bankers are held to account for their actions. That is important not just for any action after a future crisis, but as a deterrent, should any bank executives be tempted to take unnecessary or reckless risks.
Richard Fuller
I do not wish at this moment to be unduly partisan, but could the hon. Lady advise us on the evolution of the Opposition’s thinking? Was the imposition of criminal sanctions for the reckless management of banks discussed in the previous Government?
Cathy Jamieson
I am sure the hon. Gentleman will not be surprised to learn that I am not going to go into the detail of that case. He has had a career in the banking sector dealing with such issues, and he will be as aware as I am that looking at one case in isolation is sometimes not the best way to appreciate the overall picture. The overall picture is what I am interested in, and why I specifically mentioned LIBOR, because it is already a criminal offence to attempt to fix that rate. We need to seek to ensure that the SFO has the resources necessary to tackle this and to prevent any further scandals.
We have tabled new clause 13 to give Parliament a chance, once again, further down the line to discuss the creation of a new agency, and we hope it would send a firm message to those tempted to engage in criminal conduct. I hope that the Minister may be able to say something more on that in his response. He did not seem to be persuaded in Committee of the need for a new unit or even a subdivision. My recollection is that he took that view, “Its all fraud and there is no need to have a specific unit or part of an organisation dealing with it.”
I think I have covered a number of issues relating to these proposals. Once again, it is important to put on the record the fact that although we have had the opportunity to raise some of these issues in Committee and this evening, it is unfortunate that on Report we are not going to be able to scrutinise the detail of some of the new clauses—it is fair for us to assume that they might have been tabled at this stage. I seek the Minister’s further reassurance that we are going to get the important detail of how he intends to proceed, that we will see as much as is possible of the draft new clauses and legislation as things are taken forward, and that we will have an appropriate opportunity to discuss all that further in this place.
Richard Fuller
I am very grateful for the opportunity to catch your eye, Madam Deputy Speaker. I wish to discuss the proposals in this group, particularly new clauses 11 and 2. I am not a member of the Treasury Committee, I was not a member of the Parliamentary Commission on Banking Standards and I was not even on the Public Bill Committee, so I hope that other hon. Members will permit me to make a few perhaps less-informed commentaries about these proposals on conduct and remuneration, and the issues they raise, and perhaps come at this from a different perspective.
May I start by thanking the commission for its work on this issue and, in particular, my hon. Friend the Member for Wyre Forest (Mark Garnier), who made an extraordinarily strong contribution? Collectively, they have a much greater claim than Goldman Sachs to have been doing God’s work on financial services. I thank the Government and congratulate them on their speedy response to the recommendations. I also thank the Minister for allowing us to see the document ahead of today’s debate.
I remember the evening when the membership of the commission was established. It was a late evening, and quite warm. It might have been 10.30 pm, 11 pm or even later and hon. Members were keen to get back to their duties in responding to their constituents. I got up to speak with some trepidation, as hon. Members were hoping that the membership would go through on the nod, to make the point that for my constituents in Bedford and Kempston the commission would fail in its duty if, as a result of its actions, nobody went to jail. It is in that spirit that I want to comment on the new clauses today.
Richard Fuller
I am grateful for that intervention. A lot in the commission’s recommendations reflects the seriousness with which it considered that point, and rightly so. In the intervening 12 months, I have dealt with constituents whose businesses have been put at risk because of the fraud of interest rate swap mis-selling and whose lives have been rent asunder by payment protection insurance mis-selling, and the Government have also taken action on the fiddling and fixing of LIBOR. Beyond that, some of us have been dealing with regulatory failures on Equitable Life. My view is that jail for such bankers and for those responsible is the only fair outcome for the victims of those scams. Despite the intervention from the hon. Member for Edmonton (Mr Love), I must still ask where justice is to be found for the victims of those crimes in the recommendations and in the amendments tabled today.
Banking is full of honest and decent men and women. As my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) said, one of the attractions of new clause 2 is that it focuses like a laser beam on the individuals who are responsible and culpable. If we fail to do that and those people do not go to jail, where is the justice for all the other people who work in financial services honestly on behalf of their clients every day?
It is not a habit of this House to consider retrospective legislation, but I want to mention that in a minute. First, let me ask the Minister a couple of questions. In the senior persons regime and the actions that would be covered by new clause 11, the focus is on named individuals at the top. As we saw in the interest rate swaps, a lot of the decisions made by the senior ranks at the banks were translated into budgets and business plans and transferred down through the hierarchy of the banks. Perhaps the Minister, when he considers the issue of conduct, could answer the question of how those extensions beyond the senior persons regime will be handled.
Mark Garnier
I am grateful to my hon. Friend for his comments about my contribution to the Parliamentary Commission on Banking Standards. He raises a number of points and as the chairman of the sub-panel that considered below board level corporate governance I can say to him that the management structures of banks are so fiendishly complex that there is little way that the senior managers of banks can translate their wishes all the way down to the bottom. Other evidence gave reasons why the senior management in banks can effectively set up what amounts to an accountability firewall, thereby putting wilful ignorance between them and the activities that go on in the front line and absolving themselves from any responsibility for any misconduct at the bottom end of the bank. That is a very serious issue.
Richard Fuller
I am grateful for that intervention, but I do not want to attempt to get into the debate that the commission has considered thoroughly and much more knowledgably than I would be able to do.
The House does not frequently indulge in passing retrospective legislation, but if the senior persons regime is appropriate, is there merit in applying it retrospectively, if only in the form of an exercise through which to judge the conduct of those involved in financial services—in the banks and elsewhere? Whether that took the form of a self-audit conducted by the financial institutions themselves, or further work for the banking commission, to the extent to which that would be feasible, it would be welcome.
Stephen Barclay
Does my hon. Friend share my incredulity that when David Strachan conducted his review at the Financial Services Authority following the Legal and General case and brought forward his recommendations for a light-touch enforcement regime, the vice-chair of the FSA was Sir James Crosby, who is one of the three figures who are especially criticised in the banking commission’s report? We have a multi-layered, light-touch enforcement regime that often creates a disincentive to the regulator—this is why market abuse often involves criminal sanctions, not civil sanctions. One of the people criticised in the banking commission report actually designed the system that applies to the regulator.
Richard Fuller
I am appreciative of that intervention, which adds not only to my body of knowledge, but to the commonly held disgust that, following all these efforts involving the best minds we can put in place, no one is going to jail. In the absence of anyone going to jail, we have gone through all the fraud, all the mis-structured, light-touch regulation and all the mis-positioning of responsibilities without a single person being truly accountable. If there is a point on which I disagree with my hon. Friend, which I rarely do, it is that he said in his speech that financial penalties are likely to be more successful. He might have a point in saying that there will be more successful prosecutions, but the loss of one’s liberty cannot be put in a discounted cash flow—there cannot be a beta high enough. If we want to change behaviour, we have to show that people will go to jail and lose their liberty. If, having gone through the worst financial recession that we have experienced in our lifetimes, not a single person goes to jail as a result of all our work, I do not care that there is a cross-party consensus because, in my view, this is failing the people.
Jonathan Edwards
To what extent has the hon. Gentleman been influenced by events in Iceland, where the bankers were all purged? They were jailed, as were some very senior politicians, including the then Prime Minister.
Richard Fuller
I must admit that I am not particularly familiar with Iceland—certainly not as familiar as the hon. Gentleman is—but he makes an important contribution. Other regimes look at things differently, and are far stricter than we are. Normally, we would look at how United States regulations dealt with some of these things. In the past, they have been more successful than they have been recently as regards criminal prosecutions in financial services. Many people in the United States were held criminally responsible for their actions in the savings and loans scandal; the same has not happened in this financial crisis.
I respect the work of the commission, and I am nowhere near as smart as it is on these issues, but I have to say that no one has gone to jail, and that is not good enough.
Mr Love
I will comment on the commission’s thought processes on some of the issues that the hon. Gentleman mentioned. He will remember, as we all do, the evening on which we set up a special parliamentary vehicle in the wake of the LIBOR rate-rigging scandal. Since 2008, there have been a variety of critical events, including the credit crunch and the recession. All that led to a catastrophic decline in the reputation of the financial services sector. Trust in bankers sank to an all-time low, and frankly LIBOR was the last straw. This was truly shocking behaviour on an unprecedented scale. Something had to be done, and the focus was very much on our terms of reference on standards and culture.
As a result, the commission had to answer some tough questions, and the hon. Member for Bedford (Richard Fuller) has posed some of them: why had so few bankers been held to account for their failings? Why had it appeared that bankers pocketed the gains, but passed on the losses to the taxpayer? Why were customers who should have been treated fairly treated in the exact opposite way—a point that my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) raised? We tried to answer those questions through three themes that came out in our report. The first theme is individual responsibility.
When all the head bankers came before us, we were genuinely shocked to hear that they denied any responsibility for what happened in their banks. Whether it was ignorance of the serious failings happening under their noses, or because there was collective decision making, the result was the same: no one could be held to account. That, we discovered, was the result of the failure of the approved persons regime, which did not attribute responsibilities to senior staff, who, as a result, could not be held to account.
Two steps are proposed to try to address that problem. First, we have already mentioned the new senior persons regime, designed to ensure that the most important responsibilities are assigned to specific individuals, who will more easily be held to account for them. Secondly, for a much wider group—not every employee, but those who could do serious harm to the bank, or its customers, due to their customer-facing position—we propose a new licensing regime, with a set of banking standard rules that enable them to be held to account.
However, for people to be held to account, we need more effective sanctions, and that is the second theme of the commission’s report. Identification of those responsible under the new regime will provide a stronger basis for the regulator to enforce existing civil penalties, such as fines, restrictions and bans. One of the great difficulties was assigning responsibility; we hope that individual responsibility will address that.
Given the seriousness of the wrongdoings—an issue mentioned in earlier contributions—the commission is recommending two new, far-reaching powers. New clause 2 does not address this point, but under certain conditions, the regulator should be able to impose a full range of civil sanctions, unless the person can demonstrate that reasonable steps were taken to prevent or mitigate the failing. In effect, that does what new clause 2 suggests: it reverses the burden of proof, but only under certain conditions.
Finance Bill
Richard Fuller Excerpts(13 years, 1 month ago)
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Chris Leslie
I agree with the Minister about one thing—it was certainly a long and well-scrutinised Bill. To elaborate on that brief moment of cross-party agreement, I, too, pay tribute to all Members who served on the Committee, the Clerks, and the officials who helped pull together a substantial legislative moment in the parliamentary calendar—albeit that the Bill does not do much to help the economy or do much good for the country at large. I am afraid the Bill offers just more of the same: carrying on regardless of the urgent need for action to stimulate our economy.
We know that the Chancellor, scarred as he was from the omnishambles Budget in 2012, decided to go in the opposite direction this year and produce a Budget that contained so little of any import or substance that the Government’s Office for Budget Responsibility said on page 42 of its Budget report, that the Bill would have
“no impact on the level of GDP at the end of the forecast horizon…these measures reduce GDP growth”
in 2013. It is a Finance Bill that sees the economy moving backwards.
This is in the context of a great deal of humiliation for the Chancellor, including the downgrading by not just one but two credit rating agencies. The cherished prize that was supposed to be at the heart of the Government’s strategy—retaining and defending that benchmark triple A status—is gone. Then, of course, as we saw in the most recent figures, there was the humiliation of a rising deficit, not a fall in levels of borrowing.
This Finance Bill has its priorities all wrong. The lowlights include there being little on growth, but yet persisting with the cut to the top rate of income tax. It means that the fortunate 13,000 people who earn more than £1 million a year will get a lovely, juicy tax cut of £100,000, while typical families will be £891 worse off this year on average because of the changes to tax and benefits introduced since 2010. There are failures in a number of different ways, but it has been particularly piquant this evening to focus on the Government’s largesse and the City tax cut to the stamp duty reserve tax that gives £150 million to the investment manager community.
Chris Leslie
I am not sure whether the hon. Gentleman is a former investment manager, but I wonder what his view is of that change.
Richard Fuller
I am grateful for the shadow Minister’s indulgence in allowing me to intervene, and to answer his question, no I am not. The hon. Gentleman mentioned the cut to the top rate of tax and the house tax that Labour wants to introduce. Yesterday, I sat through the debate on Report, and the Opposition Front-Bench speaker was unable to say whether, if Labour get into government in 2015, it would increase the rate of tax and introduce a house tax. For the record, will the hon. Gentleman say whether that is the intention of the Labour party, or is it again just fine words but no real meat?
Chris Leslie
Fortunately for the hon. Gentleman, but unfortunately for the rest of us, there are still two years of this Parliament to go. He has probably two years of employment left in his parliamentary career and although we think there should be a Labour Member in his seat, we will miss him.
In two years’ time, we will set out the detail in our manifesto. When the Conservatives are in opposition after the general election, we hope to implement a radical manifesto that actually does something to benefit our economy. Today, we would implement a mansion tax that would raise a significant sum that we would give away as a tax cut for lower and middle-income households with a new 10p band of income tax. Government Members struggle with this, but we will judge what needs to be in the manifesto in two years’ time when we can judge the needs of the economy.
Government Members think they already know what their fate will be in 2015, hence the Chancellor coming forward with his cuts programme for 2015 when any responsible Chancellor would be rolling his sleeves up this summer and getting on with bringing forward capital infrastructure investment and doing something to stimulate the economy now. There is nothing in the Budget, nothing in the spending review and, more to the point, nothing in the Finance Bill to help growth. Indeed, the most interesting measures are conspicuous by their absence. There is no mansion tax, although there is provision for an annual tax on enveloped dwellings, which usefully illustrates that it is feasible to move in that direction.
Finance Bill
Richard Fuller Excerpts(13 years, 1 month ago)
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Cathy Jamieson
I find it astonishing that Government Members never seem to take any responsibility for what is going on under their watch. Under their watch, the deficit has not come down as much as they promised, borrowing is higher than planned, and the Government have failed to get growth back into the economy.
Richard Fuller (Bedford) (Con)
The hon. Lady made some important and passionate points about the impact of being worse off every year by £800, which is a big amount of money for many of my constituents. Given that we have just broadly agreed public expenditure figures for the next Parliament, does she feel that if this is a point of principle it is beholden on her to answer the question posed by my hon. Friend the Member for Nuneaton (Mr Jones) about whether a Labour Government would stick to their principles in the next election?
Cathy Jamieson
I can say to the hon. Gentleman that yes, we would stick to principles of fairness and equality, and we would not seek to advantage those who already have the highest incomes at the expense of those on lower incomes. Once again, I repeat what a number of Labour Members have said: at this point we do not know in what shape the economy will be two years from now, and as a responsible Opposition we intend to look in detail at where spend would be best put in the years ahead.
Cathy Jamieson
I always listen with interest to what the hon. Gentleman has to say, and I know from his contributions in the House and in Public Bill Committees that from time to time he scrutinises the Government fairly thoroughly. There is a difference between saying that the overall spending limit put on by the Government will be our starting point, and accepting their approach in full, which is not what the shadow Chancellor has said, of course. He has made it clear that we would look at that overall spend and see how we could allot resources more fairly.
Despite the fact that the Government tried to make much of fairness in the spending review, let us look at the millionaires who will benefit from the tax cut. First, 643 bankers earn more than £1 million and the combined tax cut will be worth £34.6 million to them—[Interruption.] There is a lot of grumbling and other muttering from a sedentary position by Government Members. If they wish to speak, they will be able to do so later.
My constituents want to know how the Government can justify that tax cut for millionaires at a time when those on middle and low incomes are being squeezed so hard. I can understand why the public are angry and why they do not feel that the Government are acting fairly. They see many people on massive salaries that ordinary people can only dream of and working in the very same banks that were bailed out by the taxpayer now receiving a handout from the coalition. People do find that difficult to understand. That is why our amendment would require the Chancellor to consider the effect that the tax cut will have on the level of bonuses in the financial sector. That is what the taxpayer—ordinary people trying to make ends meet when their living standards are being reduced—wants to know.
Richard Fuller
The hon. Lady makes a good point about the impact on bonuses. Does she welcome the recommendation from the Parliamentary Commission on Banking Standards, which the Prime Minister has accepted, which will change from very short-term bonuses to long-term ones? Would not that mitigate some of the very real concerns that she has mentioned?
Cathy Jamieson
I am glad that the hon. Gentleman recognises the points that I have made. He will, of course, be aware of some of the discussion that took place in Committee on the Finance Bill and the Financial Services (Banking Reform) Bill. It is unfortunate that the Government chose not to accept our amendments to those Bills, and so far we have not seen legislation to enact the change that he mentions. I look forward with interest to further debates on that subject at a later date.
Cathy Jamieson
I look forward to the hon. Gentleman’s contribution in our future debates about the possibility of a mansion tax and a reduction to a 10p rate. I always listen with interest to what he has to say, but on this occasion I have to say to him that the first year of the new rate is not a real basis for estimating the revenue raised, or likely to be raised, by the 50p rate.
The Government should be tackling tax avoidance. We all want to see that, and we will be debating it more when we discuss later clauses.
Cathy Jamieson
I will give way to the hon. Gentleman, as I know he takes this issue very seriously.
Richard Fuller
I wish to take the hon. Lady back to the impact of the bankers bonus tax on getting young people back to work, because I do not think she had the numbers to hand. May I just indulge you with some statistics, in order to help the Opposition, Mr Speaker? Last year, the bankers’ bonus total was £5.2 billion. There are 61,000 young people who have been out of work for more than a year. Much of that £5.2 billion would have been paid to taxpayers who are not UK-resident—they will work for a UK bank but not be resident here—but let us assume that it is all paid to UK residents. An increase in the rate from 45% to 50%, as the Opposition are proposing, would yield £260 million a year—the equivalent of £4,500 per young person out of work. Is the basis of her argument that £4,500 is enough to employ a young person who has been out of work for more than a year?
Cathy Jamieson
I thank the hon. Gentleman for his information; I gave way to him because I know he takes these issues seriously. As with a range of other issues, we would have to look—if the bankers bonus tax was brought in—at the circumstances at the time and how best to get young people into employment. Other hon. Members will have heard me speak about this issue before, but I can tell the House that we believe young people and those who have been out of work for two years ought to accept that there will be a compulsory jobs guarantee. From speaking to a number of small businesses and some of the larger ones, I know they believe that a range of things could be done to encourage them, as local companies and national companies, to take on young people and get them into employment.
Where the Government have done things that we think are helpful, for example, in relation to national insurance contributions, we have supported them. As has been said, we do not accept that the move away from the future jobs fund was the correct thing to do.
Sir Edward Leigh
I was going to go on to say that the Labour Government lasted 13 years, and that it was only in the last month that, under the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), they felt so strongly that they had to impose a 50% rate.
This is an important point. For their first 10 years, that Labour Government were led by Tony Blair. When he and Lord Mandelson were planning for that Government, they made a conscious decision not to replicate the old-fashioned language of class warfare that we have heard so much of today. They made a conscious decision that, if the Labour party was ever to regain the trust of the British people and regain power after 18 years in opposition, it would have to reach out to the centre ground. One of the principal ways in which they did that was to commit themselves, before getting into government, to accepting the spending plans of the then Chancellor of the Exchequer, my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), now the Minister without Portfolio. They accepted his spending plans and made it absolutely clear that they would not raise the higher rate of tax during their term of office. That was a very sensible thing to do.
In truth, the only possible justification for raising the higher rate of tax above 40% is a political one. It is political because it appeals to the argument, which we have heard repeatedly today, that a right-wing, vicious, unpleasant Tory Government are only helping millionaires. At first sight that might seem quite an attractive argument for the Labour party to adopt in opposition, but if it is so attractive, why did the right hon. Tony Blair, when he was in opposition and planning for the greatest election landslide in Labour’s history, not follow it? He did not follow it because he realised that it was nonsense economically and, ultimately, nonsense politically.
Richard Fuller
My hon. Friend is making the point, very cogently, that elections are won on the middle ground. The old Labour party, under Tony Blair, understood that. What we are seeing today, in this new clause, is the new Labour party moving to the left and seeking to introduce more taxes. When we turn over the page in the amendment paper, we see that its next new clause proposes yet another tax. Is not this just the start of a further leftward lurch by the Labour party to tax people more and waste public money?
Sir Edward Leigh
I do not know why we are bothering to give the Labour party this friendly advice. Why are we trying to help it, when it is so obvious that its approach is increasingly to remain in its comfort zone on tax?
The speech we just heard was littered with the word “millionaire”. It is the old language of Denis Healey, going back to the 1970s, when they wanted to tax the rich until the pips squeak. It does not impress anybody, and one reason for that is that people think it is fundamentally hypocritical. The point has been made again and again: the Labour party is not making any commitment to reverse the changes. If Labour Front Benchers really felt so passionately about this matter, they could say now from the Dispatch Box that it is iniquitous and make an economic case against it.
Throughout the speech that we have just heard there was virtually a complete absence—a desert—of economic facts and justification on how much money would be raised. All we heard, constantly, was the mantra about millionaires getting richer. The truth is that the top 5% pay 25% of taxation. There is no evidence—Tony Blair understood this—that if we tax them more we will increase tax revenues for the Exchequer. All we would be doing is increasing avoidance. It is bad economically, bad politically and it does not make sense.
Richard Fuller
I am grateful to my hon. Friend for his generosity in giving way. He has highlighted the precise premise of the Opposition’s argument: they like talking about millionaires and football players because they realise that people perhaps do not like footballers and bankers earning lots of money. However, does my hon. Friend agree that, once they have started with bankers and footballers, they will then move on to judges, teachers and regional sales managers—the middle-income people who earn the money that produces the highest tax yield? Should we not all be aware of the danger in allowing Labour’s new tax policy to harm the middle classes and working people in this country?
Sir Edward Leigh
Of course. There should be a huge health warning on Labour’s proposal. British people should be warned that it is not footballers or bankers who will suffer, but middle England—people who work really hard to create small and successful companies, who are halfway up the corporate tree and who are near the top of the public sector. Moreover, it is those precise people in the public sector whom we need to incentivise to make efficiency savings, if we are to have a successful economy.
People should not swallow the lie that this is only about bankers and footballers. They can look after themselves in any country—they always have and they always will—and if there is a Labour Government, I predict that they will get richer and richer. We should forget them and concentrate on middle England.
Finally, if the Labour party wants to get back into power it should remember what Tony Blair did. He was its most successful leader ever, because he realised that politics had to be won on the centre ground. At the moment, Labour is going nowhere.
Chris Evans
The tool that the previous Tory Government used, which this Tory Government are using as well, was value added tax. Indirect taxation has always gone up under a Tory Government. Value added tax went up from 12% to 15%, and then to 17.5%. It is now 20%. This Government have also given a tax cut to the highest earners in society. The problem with indirect taxation is that everybody has to pay it. That is why the tax take always goes up. Such taxation is regressive. It does not matter what people are earning; everybody has to pay it. People who are very rich and have means do not have to worry about it, but those who are struggling at the bottom, such as those who are struggling to get by on the state pension, have to pay it, whatever the rate is.
Richard Fuller
I am very interested in what the hon. Gentleman is saying. Would he therefore approve of a permanent reduction in VAT, compensated for by an increase in income tax?
Chris Evans
As I was saying, there is a problem with trying to impose a scientific discipline on something that has nothing to do with science. I do not believe in that kind of economics. We have to take stock of the situation that we find ourselves in. That might have been a way forward in the ’90s, given the economic situation that was faced then. However, we do not know what we should do until we are faced with the economic situation.
Richard Fuller
It is almost impossible to have a debate when Opposition Members talk about the past but when questioned about what they would do just say, “We don’t know. We have no idea.” Presumably the hon. Gentleman will at least accept that if he is proposing a reduction in value added tax, given the state of the public finances, a future Labour Government would have to increase income tax. He must also accept that the yield on income tax comes from middle-earning people up and down the country. That is what a future Labour Government would do.
Chris Evans
The hon. Gentleman is not listening to what I am saying, if I may be so bold. I did not make any commitment to reducing VAT. I was harking back to the economic theory of the Laffer curve and supply-side economics, under which indirect taxation is used to cut taxes for those at the very top. When the top rate of tax is cut for people at the top, they have mobility and can spend the money in different countries. We have heard that already. That applies to footballers as well. However, when the tax rate is cut for middle earners, they tend to spend the money on the high street and stimulate the economy in that way.
I do not want anybody in this House to think that I have a problem with millionaires. Like the hon. Member for Gainsborough, I have a lot of friends who want to be millionaires. There is nothing wrong with aspiring to be something better. That is what the Labour party is about. I am sorry to hark back to his speech so much, but the hon. Member for Gainsborough said that that is what we understood in the mid-’90s. Human beings aspire to something better. There is nothing wrong with wanting to be a millionaire. My point is that if we could find the money to give a 5p tax cut to higher earners, why could we not do that for middle income earners? A 1p tax cut for people under the top rate of tax would have done more to stimulate the economy than a 5p tax cut for higher earners, because they will spend the money elsewhere.
I also sense that this is a moral argument. Whatever I believe about cutting tax for the very richest in society, a lot of the people I talked to when the top rate of tax was cut were very angry, especially constituents of mine. They said to me that it is the people who are riding in limousines who are getting the tax cut, not the ones who are driving white vans and keeping this country working. Those are the people who are feeling the pain. We should look at the level of anger.
If we look at a breakdown of the figures, taking into account all the changes to tax, tax credits and benefits that have been introduced since 2010, we see that households in the UK will be an average of £891 worse off this year, or £17 a week. A one-earner couple with children will be a staggering £3,995.65 worse off this year. For a multi-family household with children, it will be £1,723.88. It is all very well quoting statistics—I do it all the time, and everybody is guilty of it—but I am sure that every family affected aspire to something better for their children. Yet the message they are getting from the Government is that they should be worse off.
Chris Evans
I thank my hon. Friend for that wise intervention. Welfare reform is a warm and nice thing to say, especially for those of a right-wing bent who want to take out the scroungers and make them pay. But when benefits start to be cut and people are kicked out of their houses, it is a serious concern—I do not want to be melodramatic—that we could see the return of the workhouse.
In constituencies such as mine and those of my hon. Friends, I am fearful that we will see homelessness on a wide scale. The Government may have thought it was a good idea at the time to cap benefits and introduce the bedroom tax, but when we have a huge homeless population and emergency schemes need to be introduced to sort that out, I am afraid that it will be the taxpayer who picks up the bill.
Does the squeeze on benefits motivate anybody to go to work? If someone has arrears or debt and is seeing more of their pay go down the drain, why would they go to work? The Government should be motivating people to go to work; they should be tackling worklessness. Instead of cutting welfare, they should be stepping in to stimulate people to go to work, and talking to those people individually.
We talk about economics all the time, but it is not a scientific discipline—it is about people and how they react to certain circumstances. If I found myself out of work, my needs would be different from those of someone with a lower educational attainment or problems with reading and writing. However, we should be able to say to that person, “What is stopping you going to work? What are the barriers?” What can we provide to get people into work? Yes, that will cost money up front, but in the long term the country will win because of it.
Let me return to my point about putting a finger in the air and wondering which way the wind will blow. It has been estimated that 267,000 people who earn more than £150,000—including 13,000 people who earn more than £1 million—will receive an average tax cut of £100,000, according to figures from HMRC. In contrast, child benefit will be frozen for a third year, and tax credits and other working-age benefits will increase by just 1%, and these real-terms cuts will affect a shocking 9.7 million households. Can we understand that? My constituency has 56,000 electors, but 9.7 million households will be affected by this measure and each person will have an individual story and will have struggled.
The figure of 9.7 million in relation to benefits might conjure up an image of worklessness, but 7.3 million of those households—75% of all households claiming benefits—are in work. That is the crux of the problem we face. We talk about welfare reform and so-called scroungers, but the people suffering most are those we are trying to encourage—those who work hard and play by the rules but who are locked in an economic theory that has clearly failed. Some 2.4 million families will pay on average £138 more in council tax in 2013 as a result of cuts to council tax benefit. That is the ultimate failure of Government—six in 10 working people are claiming benefits. For all the talk of work paying, for many people work is not paying.
Let me return to what I said about the new clause. We need a report. I sat on the Finance Bill Committee with the Minister—I feel sorry for him, as I would for anybody who sat through that. Every day he felt as if he was batting off different reviews. However, this is such an important issue, and the coalition Government have made it such a cornerstone policy, that it needs to be reviewed. We have heard so much about it being wonderful, but we must test the theory: is it stimulating the economy, bringing money through and making work pay? We will not know unless we have a review. That is why it is so important.
I hope the Minister listens. I have a lot of time for him. As I have said, I was in Committee with him: he is sensible and takes a rational view of these matters—[Interruption.] That is the problem—we judge a man by his friends. This is such a cornerstone policy that I hope the Minister will give us some prospect of monitoring it.
I do not want to go into the history of the 1980s and tax cuts again, because I have touched on it already. But I am deeply concerned that we again face a Government who believe in an economic theory that ultimately failed the country. It was not just that we lost heavy industry in the valleys: I think of all the people in the 1980s who were motivated by the dream of starting a business or buying their own homes. By the end, their businesses went bust or they were forced into rented accommodation because they could no longer afford the mortgage. For all that Government’s lauding of their control of inflation, it was through the roof and interest rates hit 15%. We have heard recently from the Governor of the Bank of England that interest rates will go up next year, and I am deeply concerned that this Government will blindly follow the theory of supply-side economics, of Karl Popper and of leaving everything to the market.
Governments have responsibilities. They have a responsibility to create the environment for businesses to flourish and for people to achieve their dreams. I came into politics because I wanted people to aspire to something better, but the Government are giving the very rich a tax cut and everybody else is losing out—660,000 people will lose an average £728 a year under the bedroom tax. Why are the people at the bottom—the people we should be helping—feeling the pain?
I have said before many times that I do not want to knock the bankers. I worked in banking myself and I know how difficult the industry is. I have met my fair share of bankers and they are not all bad, and banking is the cornerstone of this economy, so I always tread carefully when we talk about bankers, but any industry has people who are guilty of criminal activity. In this case, the guilty have not been punished for their criminal activity. It is the Government’s failure that has allowed people to walk away.
Richard Fuller
The hon. Gentleman may be right about that, but the acts that he is complaining about happened under the last Labour Government, and it is the laxity of their regulation that means that people are not facing criminal prosecutions now.
Chris Evans
When Conservative Members were talking about the Laffer curve, Ronald Reagan came to mind. For some reason, when the hon. Gentleman stood up, Ronald Reagan came to mind again, as I recalled him saying to Jimmy Carter in the 1980 election campaign, “There you go again.” The person sitting tonight at their kitchen table, worrying about paying the rent, the mortgage, the gas bill or the electric bill, and watching this debate—although given the time they will probably be watching “Pointless”—[Interruption.] I walked into that one. They might be watching ITV instead—
Public Service Pensions Bill
Richard Fuller Excerpts(13 years, 3 months ago)
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Sajid Javid
We return today to the Public Service Pensions Bill, which will put public service pensions on a fair and sustainable footing for generations to come. There was broad support from all parts of the House for this measure, and I am grateful to all those who have voiced an interest in the Bill for their co-operative approach. I would also like to draw the attention of the House to the progress the Bill has made in the other place.
First, when the Bill left this House, the Opposition were concerned about the wide scope of powers to make retrospective changes and to amend primary legislation. The Government understand that concern. Pensions are an important part of scheme members’ future income in retirement. We therefore tabled amendments in the other place to give members or their representatives a complete veto over any significant adverse retrospective change to their pensions and to restrict the powers to amend primary legislation. Furthermore, any Treasury orders for negative revaluation of scheme benefits will now need to be made by the affirmative Commons procedure.
Secondly, the Opposition sought further assurances on the governance elements of the legislation, particularly a requirement in the Bill for employee representatives on scheme boards. Again, I am pleased to report that the Government tabled amendments in the other place to require an equal balance of member and employer representatives, along with an explicit requirement for national scheme advisory boards.
Richard Fuller (Bedford) (Con)
My hon. Friend is talking about some welcome changes that the Government have made, but there is another party to this contract on pensions. The taxpayer will foot the bill for the unfunded part of the obligations of public sector pensions. Will he assure me—
Mr Speaker
Order. Will the hon. Gentleman resume his seat? I do not blame him, in the first instance, because the trouble, the mischief, was started, however inadvertently, by the Minister, who is looking at me with an innocent expression belied by the reality of what he was saying in the debate. This is not a generalised debate; these are narrowly defined matters, and we are considering the relevant amendment, to which, to put it kindly, the hon. Gentleman’s remarks were not altogether adjacent.
Sajid Javid
The hon. Gentleman is asking those questions for all the right reasons. I still have a few more minutes in which to set out the Government’s case, and I hope that I shall answer them in the process. If anything remains unclear, however, I hope that he will come back to me. I will be happy to add to the information that I am giving the House.
Richard Fuller
Labour has accepted that it completely forgot about those workers when it was in government. Its spokesman has been noble enough to admit that it did not find the 350 people in the fire service and 3,000 people in the military police. Given that my hon. Friend the Minister now understands that fact, can he tell me why the workers did not bring the issue to the attention of the then Government? Were the unions involved in any negotiations at the time, or has this just become an issue now?
Sajid Javid
My hon. Friend raises a good point. I cannot answer on behalf of the previous Government, but I can say that the change was carried out by ministerial order. There was no open, ongoing debate on the matter like the one we are having today. A written ministerial statement was issued by the then Minister for the East Midlands, Gillian Merron, on 26 July 2007, and I can find no record of any Labour MP complaining about the change at that time. If my hon. Friend is making the point that the Opposition’s credibility is severely damaged because of this, he is making it very well.
Chris Leslie
I am grateful to the hon. Gentleman for making that point, because I think that is indeed the case, but my general point is about the physical demands on these individuals. Today we are debating whether their retirement age should be, as the Minister thinks, 67 or above, or whether it should be at 60—the same age as for other firefighters, police officers and members of the armed forces. It is a simple proposition and the House has the power to make a judgment on it today.
Richard Fuller
The hon. Gentleman makes the case on physicality for those three classes of public sector employees, but the crucial issue is that those people put their lives at risk, which other public sector workers do not. Can he advise the House why the issue was not raised, and why those people were missed, in earlier pension scheme reforms?
Chris Leslie
That is a very pertinent question. We heard from the Minister that 12 million people were affected by the various public service and civil service pension schemes. We heard that even Lord Hutton, in his detailed inquiry, was not aware of the 350 or so affected individuals, because it was a new scheme that started in 2007, and only some MOD firefighters and police will come into the age bracket. Given the complexity of pensions, it is not surprising that some issues were not spotted; apparently even some employee representatives and others were not aware of the anomaly at the time.
These things happen. Mistakes can be made, but it is really important that when a mistake is pointed out, people assess whether they are big enough to accept that it needs to be corrected and justice is done, or whether their pride is such—whether or not this applies to the civil service—that they try to retrofit their arguments to justify a clearly unjustifiable anomaly. That is what the question boils down to.
The only reason I can see for different treatment for those groups is that one set happens to be employed by the Ministry of Defence and the other is in the public service at large. It is such an evident anomaly that the House of Lords, when made aware of the lacuna, correctly sought to repair the fault in the Bill, but incredibly we heard from the Economic Secretary—I am delighted that he has been joined by the Chief Secretary; perhaps he can be lent on by more enlightened colleagues—[Interruption.] The hon. Member for Colchester (Sir Bob Russell) says he will have a go, but he does not have much time as the question will be put shortly. [Interruption.] Anyway, Ministers are not particularly interested in listening to the debate, so it might be useful if the hon. Gentleman could text the Economic Secretary to suggest that he pays attention.
In essence, the Economic Secretary said that the Government were too proud to admit that they had got it wrong. They are still defending the indefensible, but the arguments for admitting the error are overwhelming.
Chris Leslie
How much more of an answer can I give than the actions that we will take in the Division Lobby today? Instead of the party political games that the Liberal Democrats and the Conservatives are playing today, it is a responsible thing to do to try to help—[Interruption.] They laugh, but this is not a laughing matter. They expect these firefighters and police officers to work up to the age of 67 or above, and that is not the right thing to do.
Chris Leslie
I have given way enough to Conservative Members and I want to make some progress because it is important to bottom out these specious arguments that the Minister can barely grasp.
Lord Hutton said that the reasons for giving uniformed forces a lower normal pension age is the
“simple argument that the nature of their service is unique and should be reflected in the pension arrangements that we make for them. ”—[Official Report, House of Lords, 12 February 2013; Vol. 743, c. 520.]
In his report he recommended that the Government set a new normal pension age of 60 across the “uniformed services”. That was the phrase that he used. He did not refer to the type of pension they were in; instead he referred to “uniformed services”, and argued that they deserved to be singled out because of the nature of their work. The spirit of Lord Hutton’s recommendation clearly applies to MOD firefighters and police officers. Lord Hutton said:
“The nature of the work the uniformed services perform is unique and this needs to be reflected in their Normal Pension Ages. The modernised firefighters scheme has struck a balance between recognising these changes in life expectancy, but also recognising the unique nature of the service provided by scheme members. The Commission’s view is that the Normal Pension Age in this scheme, 60, should be seen as setting a benchmark for the uniformed services as a whole.”
We agree with Lord Hutton’s reasoning that the amendment was merely intended to correct an oversight that has occurred in drawing up the Bill. He supports the amendment and the reform is based on his idea. He said that
“if, during the course of my inquiry, I had known about the unique circumstances of the MOD firefighters, I would have referred specifically to them in my report…Sadly, this issue was not drawn to my attention, so it did not make any specific recommendations about the MOD firefighters or the MOD police. If I had known about it, I certainly would have done so.”—[Official Report, House of Lords, 12 February 2013; Vol. 743, c. 570.]
It is important to mention this. We are towards the end of the Bill’s passage and we have not had much opportunity to debate it. This has been brought to my attention during the course of turning the pages on the detail of this pension legislation. The Opposition say the same as Lord Hutton. This is just one of those anomalies that we should be big enough to admit was wrongly overlooked in previous reforms.
It is true that the last Government raised the normal pension age for the civil service to 65 for post-2007 entrants, and that included Ministry of Defence staff. However, I am now convinced that had we known then about the small group of firefighters and police officers who are technically on the civil service payroll rather than employed by police or fire authorities, we would have taken account of these groups, and an exception could have been carved out. There should be no embarrassment inside the Treasury in admitting that this was an oversight. Regarding this previous change, even the Defence Police Federation said that the
“Council of Civil Service Unions did not consult the DPF, and we did not have the opportunity to make the above points about the physical demands of being an MDP officer”.
The issue was not raised or considered when it should have been. Those staff should not be punished because of that particular oversight. If Lord Hutton is able to admit the oversight and if Opposition Members in this Chamber are able to admit the oversight, the Economic Secretary should be big enough now to do the same. Rather than just read out the brief provided to him, he should engage his brain, use his own judgment and discretion, and do the right thing. If he engaged the brain of the Chief Secretary, who is sitting alongside him, that might go some way towards a solution.
There is the cost to the public purse argument, but as I understand it, only 56 people have joined the Ministry of Defence police, and fewer than 300 have joined the defence fire and rescue service since 2007. So the anomaly could be easily corrected by bringing a small minority of pensioners back into line with the pre-2007 entrants’ normal pension age of 60. We are not talking about a large number of firefighters or police officers here. Sadly, we have had to get to the Floor of the House of Commons to put the pressure on the Government. What the Government have tried to present as a cost is in reality a reduction in the predicted saving from this overall package of changes. They overestimated the savings to be made by overlooking the existence of this particular group of fire and police officers and failed to include them in the definition of uniformed services.
The Minister might put up various arguments, but the question of physical burden cannot be overlooked. A worker for the Ministry of Defence police may be required to wear 11 stone-worth of kit, and a normal shift will involve wearing 5 or 6 stone-worth of equipment for up to 11 hours. Workers in the Ministry of Defence fire service carry out the already difficult and dangerous job of firefighters, but do so in war zones and other extremely hazardous conditions around the world.
The fact that these workers are labelled civil servants should not blind us to the reality of what their jobs entail. Along with the police and the armed forces, they are the only public service workers who have to undergo regular fitness tests. In fact, the majority retire before 60 because they are unable to meet the high demands their jobs entail. They are also recognised as uniformed forces in the civil service pension scheme, and there is a small reflection of that already. Unlike civilian police forces, there is no option in the MOD police for officers to move to unarmed work if they struggle to cope physically. Even when mainstream police officers are armed, they are not expected routinely to carry guns around beyond the age of 55.
Another point that has been brought to my attention today—I imagine that this is something none of us is massively familiar with—is that many MOD firefighters have to work alongside colleagues who will qualify for retirement at 60. Royal Air Force firefighters—I think that they are called Trade Group 8—will often be on similar operations with service colleagues, working in the field together. One colleague will retire at 60, whereas another standing next to him will be required to work to 65, 66, 67 or beyond. The same applies to Royal Navy firefighters, who are regarded in their classification as armed forces. This is riddled with anomalies, and it would be very simple for Ministers to overcome them. They really ought not to have allowed this to become such a large point of debate.
Richard Fuller
It is customary to say what a pleasure it is to follow the previous speaker, and in this case it is a great pleasure to have listened to the contribution from the hon. Member for Hayes and Harlington (John McDonnell). He asked precise questions and reinforced some of the points made by my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) in order to move forward what the Minister had said earlier. Thanks to those two contributions, we are beginning to get to the real meat of the issue of how we can ensure that this group of overlooked public sector workers can find an acceptable and fair outcome to their pension situation after all these years.
Within the overall ambit of the Bill, I speak as one who sits outside the cosy compromise between Government and Opposition Members on the principles set out by Lord Hutton. Our decisions on pensions must stand the test of time. People make decisions about contributions to their pensions based on the expectation that those contributions will have an effect 20 or 30 years later when they retire. My concern about the compromise relates to affordability, given that we are asking the taxpayer to foot the bill.
I want to draw the House’s attention to the specific costs involved in the measure. I am sure that the Minister will correct me if I am wrong, but I believe that the amount involved is £10 million per annum. I am a big admirer of my hon. Friend the Member for Stevenage (Stephen McPartland), but he said earlier that £10 million a year was not really a considerable amount of money. I believe, however, that it is indeed a considerable amount of money to be paid year on year. Under the previous Government, it was that attitude that £10 million here and £10 million there did not really matter that led to the grotesque financial situation that we found ourselves in in 2010.
Stephen McPartland
The point I was making was that, although £10 million is a lot of money at a personal level, I do not feel that it should be a reason to allow such discrepancies to continue. The House should be trying to create parity between all those who do that difficult job on a daily basis, and to focus on the overall package of measures rather than just on the pensions question. That £10 million could provide savings, as the Minister suggested earlier.
Richard Fuller
My hon. Friend has characteristically drawn us to the centre ground. When we consider our public sector workers, we should look not at their pensions in isolation but at the broader question of the compensation terms and conditions under which they are employed.
As I have said, we are talking about a relatively small number of workers. Those members of our public services have a physically demanding job, but it is also a requirement of their public service employment that they are at times asked to put their lives at risk to maintain public safety. It behoves us to take a special approach to such workers and to the way in which their pension conditions are treated.
Richard Fuller
I do not wish to disagree with my hon. Friend, but I may have to do so. Many jobs in both the public and private sector are physically demanding, but I would not advocate a different retirement age purely on the basis of physicality. The Opposition Front-Bench spokesman tried to make a specific point about physicality, but I believe that that is the wrong course to take. I believe that this group of workers—the MOD police force and firefighters—have an additional requirement placed on them by us, the taxpayers, whereby we ask them as part of their responsibilities potentially to put their lives at risk, or at least to put the safety and interests of the public ahead of themselves. If I may say so, that is a far more appropriate basis for our looking at this particular issue. People may wish to make the case for physicality, but there is a special case here that goes above and beyond that. That is, I think, the reason why the Minister has taken such great interest in trying to find a solution on this issue.
I welcomed hearing the Labour party admit that it completely forgot about these people when it was in office and raised the pension age. Hearing that was welcome, because all Governments make mistakes and people do get missed out in the transitions. Let me explain what I would like to hear from the hon. Member for Nottingham East (Chris Leslie) today. There is a chance in future—I do not think it will be in 2015, but it is likely at some time for these public sector workers in the MOD, the fire service or the police force—of there being a Labour Government.
Richard Fuller
I am pleased that the shadow spokesman raises that possibility. Is he therefore prepared to put his money where his mouth is—today? He has made a commitment, but is it just words? If he is so confident of being in office, will he pledge today to ensure that these MOD workers have the same conditions as he advocates? I give way if he wishes to make that pledge.
Chris Leslie
The hon. Gentleman knows, I hope, that we are not making this decision in 2015; we are making it here and now in 2013. We have to confront the issue. He is trying to find all sorts of reasons not to disagree with the Whips who are leaning on him, saying “Please do not vote with your conscience on this particular issue.” We have accepted that the issue should have been addressed in 2007. Now that there is no excuse for lacking awareness of it—it is being debated now—is he really going to vote today, in his full awareness of these facts, to say that this particular group of firefighters should not be entitled to retire at 60 when all the other firefighters are? Is that really what he is going to do?
Richard Fuller
The hon. Member for Nottingham East is a fine fellow, but I have to tell him—[Interruption.] “Fine fellow” will be the beginning and end of my comments to him. [Interruption.] I will come to the point, as this strikes at the credibility of the political class in this country. What the Labour party spokesman is trying to do is to use words to set up people’s expectations without taking the responsibility to fund them. That is why the political class is seen through by the public, who are fed up with politicians making up arguments that exist in the world of fancy but not in the hard reality in which people live. If I may say so to the fine fellow opposite, if he wants to be honest to the British people and, more importantly, to the people whom this amendment is designed to represent, it is his responsibility to pledge today to put taxpayers’ money where his mouth is if he is ever in government. I note that that is a commitment that he has very specifically missed out today.
John Hemming
The Opposition seem to be saying that the decision should be made today without negotiation, but does my hon. Friend agree with me that negotiation is the best way forward, and that to have such negotiation, we need to support the Government’s proposal for negotiation?
Richard Fuller
I am grateful for my hon. Friend’s second intervention, because it enables me to agree with him this time. As I said at the start of my speech, the hon. Member for Hayes and Harlington and the right hon. Member for Bermondsey and Old Southwark made the same point in pressing the Minister for more specificity. I, too, wish to ask him for clarification on that point.
Madam Deputy Speaker (Dawn Primarolo)
Order. May I remind the hon. Gentleman that the debate is time-limited? If he wishes to hear the Minister’s clarification, he must leave time for it before the debate ends at 5.37 pm.
Richard Fuller
I shall attempt to make my points speedily, Madam Deputy Speaker.
The hon. Member for Hayes and Harlington made two requests. He asked when the negotiations that may be conducted between the Ministry of Defence and the workers and their representatives would have to be concluded, and suggested a three-month time frame. I support that recommendation. He also asked for an indication from the Minister, today if possible but otherwise in a subsequent letter to Members, of what the legislative process would be for the reaching of a resolution. I think that both those suggestions are very worth while.
Will the Minister confirm that the assessment by MOD and the workers’ representatives will not specify a particular retirement age, and that the decision will be based on an assessment of the potential ability of members of those work forces to do their jobs effectively? Will he also confirm—I think he said this earlier, but confirmation would be helpful—that the scheme will be flexible enough to allow us to make the changes without any limit, but that it will be up to those in the scheme to make the recommendations? I hope that he will be able to make those two commitments today.
It is important for the Government to be able to maintain a dialogue about the retirement age of our firefighters, both in the MOD and outside it. We are embarking on unknown territory, and I think that a Government who listen to these workers will be seen to be truly putting their money and their heart where their mouth and commitments are.
Sajid Javid
I thank all who have spoken during the past hour. I also thank my right hon. Friend the Member for East Yorkshire (Mr Knight), who could not speak in the debate, but who has an interest in the issue and has made representations to me on behalf of his constituents. I hope that I shall be able to respond to the points that have been made in the time that is available to me.
Both my hon. Friend the Member for Argyll and Bute (Mr Reid) and the hon. Member for Banff and Buchan (Dr Whiteford) made a number of points. As they will understand, I could not agree with everything that they said, but they both made the sensible point that the Treasury and the MOD should take account of those who retire early on health grounds when considering the potential cost implications of the changes that we are discussing. I agree that we must bear in mind all the impacts on costs that the amendments might have.
My hon. Friend the Member for Stevenage (Stephen McPartland) also raised a number of issues, including the important issue of the Opposition’s credibility in this regard. Some MOD firefighters and police officers who are listening to the debate will already have a retirement age of 65 rather than 60 because of the changes made by the last Government in 2007. When the hon. Member for Nottingham East (Chris Leslie) speaks about such matters, his own credibility becomes somewhat shallow.
I do not often agree with the hon. Member for Blaydon (Mr Anderson). I again did not agree with much of what he said, but I know he believes passionately in what he says, and I respect fully what he had to say. He is a great advocate for his constituents, but he, too, did not address the issue of the change that was made in 2007, and nor did his party colleague, the hon. Member for Hayes and Harlington (John McDonnell). For the purposes of this debate, it would be useful to know whether the hon. Members who have spoken up today also did so when the retirement age was changed in 2007.
Section 5 of the European Communities (Amendment) Act 1993
Richard Fuller Excerpts(13 years, 3 months ago)
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Mr Cash
Absolutely, and one of the greatest pleasures I have had in the past couple of years has been to have my hon. Friend serving on the European Scrutiny Committee, with the diligence, knowledge and judgment he brings to all these matters.
It is also stated, at paragraph 2.19, that
“Brazil, Russia, India and China taken together were the destination for 6.5 per cent of UK exports in 2011.”
The real problem here is that our exports certainly have to go to the BRIC countries and also to the rest of the Commonwealth, which is where the emerging markets are, as well as to the United States.
I strongly recommend that this House of Commons and this Government start waking up a bit. I really mean that, as I am very concerned indeed, as any right-minded person in this country should be.
It is also argued in this paper that:
“Between 2009 and 2012 UK goods exports to Brazil increased by 49 per cent, to Russia by 133 pre cent, to India by 59 per cent and to China by 96 per cent.”
I have heard those figures before, but I asked what our actual import penetration into China was in relation to that of the rest of the world. It is 2%. The 96% increase is entirely relative, therefore. The real question is how much we are managing to export into China. Germany exports into China 45% of all the EU exports into China. I do not cite that figure in order to denigrate the expert efficiency, determination and political will of those who run Germany, but I do say that we had better get our act together. Continuing to be locked into these absolutely penalising treaties is causing us enormous damage, when we could gain so much by trading not only with Europe, but with the rest of the world on a much more enhanced basis.
There is far too much discussion and not enough action, and I was glad to note the campaign launched today by 500 business men and run by Matthew Elliott, and I also commend the book about the euro by the Institute of Economic Affairs, which puts its finger on many of the problems in the euro area.
Richard Fuller (Bedford) (Con)
I am very interested in what my hon. Friend is saying. Does he agree that this report has given us an opportunity to put an alternative argument against the strong argument about commonality? I know he will draw the House’s attention to the interesting comments about Europe by the Chancellor of Germany today. My hon. Friend talks about those other economies, and there is an argument against commonality and for the UK having an opportunity to be able to trade with the rest of the world, but that is being lost as a result of such statements. Is there an opportunity for us to make this case, because I am not sure we are making it strongly enough?
Mr Cash
I agree with my hon. Friend. We must be realists. T. S. Eliot once said,
“human kind
Cannot bear very much reality”,
but Britain has got to wake up. It is crucial at this stage that we understand—in a constructive, not a negative, sense—that we have both a problem and an opportunity, but that opportunity will not last much longer, and we must not simply repeat the recitations and mantras about section 5 while not tackling the intrinsic problems.
These papers were, no doubt, prepared by worthy civil servants, but they may well not reflect the real situation. Let us look at the question of the level of debt, for instance. I mentioned that in an intervention on my right hon. Friend the Financial Secretary, and I gave him the percentage figures. However, under the previous Government—I now turn my attention to those on the Opposition Benches—I repeatedly said, along with my right hon. Friend the Member for Wokingham (Mr Redwood) and one or two other Members, that the debt that was accumulating under them was causing so much damage to our economy. Furthermore, as I said at the time of the last election in my manifesto—or, rather, in my personal message to my constituents—the stated debt levels, which is the key issue, were based on what could only be described as a lie.
Budget Resolutions and Economic Situation
Richard Fuller Excerpts(13 years, 4 months ago)
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Ed Balls
Perhaps the hon. Lady should also study the book. The interesting thing is that the OBR is also forecasting that unemployment will rise, not fall. More jobs, unemployment rising—maybe there are more people in the country. Does she know what the OBR forecasts net migration to be in the next few years? Tens of thousands? No. Net migration of 140,000 every year. That is what is going on.
It is groundhog day too because, as a result of the present stagnation, the Chancellor’s fiscal plans are even more wildly out of control than they were a year ago. No wonder his fiscal credibility is in tatters. The Chancellor used to claim that the national debt would start to fall in 2015 from a peak of 69.7% of GDP. He now expects it to rise in 2015, to rise in 2016, to rise in 2017 and to hit a staggering not 69.7%, but 85.6% of GDP. And the reason the national debt is rising is that, as the OBR said yesterday, the Chancellor’s deficit reduction plan has stalled. The deficit is now expected to be the same next year as it is this year and as it was last year. It is not a deficit reduction plan anymore. That is why the Chancellor is now set to borrow—[Interruption.] The Chancellor should listen to this. He is now set to borrow £245 billion more than he planned, vastly more than the borrowing he inherited from the Labour Government.
Richard Fuller (Bedford) (Con)
While the vast army of PAs behind the shadow Chancellor search for a bullet point on Bedford, let me say that his criticisms are not falling very strongly, in part because his hands are dipped in red—the red ink of years of borrowing and debt. Does he not think that the arguments would be stronger if he moved to one side and gave his seat to the fresh-faced young man sitting next to him, the shadow Secretary of State for Business, Innovation and Skills?
Ed Balls
The voters of Bedford might be disappointed to find out the truth: compared with a year ago, the Chancellor will borrow £29 billion more than he planned this year, £59 billion more next year, £73 billion more the year after and £77 billion more the year after that. Mr Deputy Speaker, if you want to know who the borrowing Chancellor is, it is him. Do you know what he managed to do yesterday in his Budget documentation? He fiddled around and managed to say that borrowing this year is lower than it was last year by £0.1 billion. We know why: as the OBR confirms, the Chancellor and the Chief Secretary to the Treasury, when one would think they would be working on a plan for jobs and growth or reform of the banking system, have been scrabbling around and hacking away at spending in this year in a desperate attempt to try to get the borrowing down.
The detail is set out on page 13 of the OBR document. It shows that, compared even with the autumn statement, tax revenues are down this year by £5 billion but that since December the Chancellor has found a further so-called underspend of £3.4 billion, which he says is not like normal underspends. What does the OBR tell us about that so-called underspend. It states:
“It is very rare for the government to under-spend the departmental plans it has set out less than a year ago by such a wide margin...Our overall forecast of under-spending has a number of elements: money that the Treasury has agreed to allow departments to move into future years;…money that departments thought they would spend this year, but which they do not now expect to spend either this year or in the future; and payments (for example to some international institutions) that were due to be made late in the current financial year, but which are being delayed into 2013-14.”
The cheque is in the post, but it will not arrive until after 1 April in order to massage the figures. Who does the OBR say has been hardest hit? The answer is the national health service, which has been cut by over £2 billion this year. At the same time the NHS is losing more than 5,000 nurses, the Treasury scrabbles around to try to save the Chancellor’s face.
Vince Cable
A CCS competition is taking place. As the Chancellor pointed out in his Budget, there is a recognition of the problems of energy-intensive industries in the north-east, Scunthorpe and south Wales. They will be given an extra year of support as a result of yesterday’s announcement.
Richard Fuller
I commend my right hon. Friend’s comments on exports—I have seen for myself UK exports to the Nigerian market. Does he agree that getting traditionally reluctant small and medium-sized business to export is key? Does he also agree that the employment allowance will enable some of our small businesses to take on those additional employees to attack those new markets?
Vince Cable
The hon. Gentleman is right on both counts. I was recently in Nigeria supporting that effort. If we are to have momentum, it must come through small and medium-sized companies. Frankly, the export effort in many emerging markets was neglected for most of the past decade—the relationships are not there and must be built up. He is also right that the employment allowance, which will help 400,000 micro-companies, is a big step forward and a big incentive to them to take on that extra member of staff.
In my concluding section, I shall address some of the big strategic choices made in the Budget. We can argue about temporary changes, but it is important that the country has a sense of direction. First, the industrial strategy gives a sense of direction; secondly, the changes in money and banking policy are fundamental after the crisis; and thirdly, the tax agenda creates a greater level of fairness.
On the industrial strategy, I was teased earlier about the “compelling vision” for the British economy, but we clearly need a vision of the economy that goes beyond one Parliament and Government, and that stretches decades ahead. That is why we have made the commitment to long-term planning and working in partnership with business in those sectors of the economy that need such a framework. We have produced agreements with the aerospace industry, and will do so with the automotive and biological sciences industries, and with the supply chains in renewable and non-renewable energy, which were desperately hollowed out in the years when manufacturing was neglected under the previous Government. We are trying to rebuild those supply chains.
A Back-Bench colleague made the point that we have an extra 70,000 jobs in manufacturing after 1 million were lost in the decade of the Labour Government. Of course, the industrial strategy is not just about manufacturing; it is about key service sectors such as education and higher education, and professional and financial services, which are equally important in driving exports.
George Freeman
I will develop my argument a little further, if I may, as time is limited.
We need a credible programme for deficit reduction, a fair burden of taxation and a long-term vision for the British economy, and that is what the Budget delivered. Simon Walker of the Institute of Directors said yesterday:
“We applaud this Budget. The Chancellor has stuck to his guns and held his nerve—which is exactly what we wanted to see. Deficit reduction is not an optional policy, it is an absolute necessity, and he is right to reject the siren calls to abandon it.”
Plan A is right for three central reasons. First, it tackles the appalling structural debt legacy that we were bequeathed by the Opposition. Secondly, it does so in a way that is fair in allocating the burden of taxation that must be paid. Thirdly, it is bold in setting out the platform at the base of an industrial policy for a sustainable economic recovery in which future generations—particularly the current young generation, who will have to deal with the debt crisis—can have confidence.
Let me remind the House, particularly Opposition Front Benchers, of the nature of the debt legacy we inherited. We started with the worst debt to GDP ratio of any country in the western world, worse than that of Greece and other economies that have been put into special measures by the IMF. The annual deficit when we started was running at 11% of GDP and is now 7%—that, for the benefit of Opposition Front Benchers, is a reduction.
In the situation we inherited, the interest on our debts was set to rise, if we had not acted, to £76 billion a year. We were spending £1 on interest for every £4 the Government were spending on public services. The national debt was just short of £1 trillion—roughly £15,000 for every man, woman and child in this country. As 1 trillion is a big number and people are baffled by big numbers, let me try to break it down. If it took 11 days to pay off £1 million, how long would it take to pay off £1 billion? Thirty-two years—[Interruption.] Opposition Members might think that it is funny, but I can assure them I do not, my constituents do not and the young people who will have to claw their way out of the crisis do not. If it takes 11 days to pay off £1 million and 32 years to pay off £1 billion, it takes 32,000 years to pay off £1 trillion at the same rate.
The truth is that we inherited not just an annual deficit but a structural deficit. For the benefit of Opposition Members who are not aware of the difference, the structural deficit is that bit of the Budget which, even when the economy is growing, continues to haemorrhage money. The biggest drivers of our structural deficit are pensions, benefits and the NHS. The IFS pre-Budget briefing yesterday, which was made available to all parties, makes it clear that the structural deficit continues to put a black hole at the heart of our public finances. The IFS forecasts that between 2011 and 2018 we will be spending an extra £5 billion on pensions, £20 billion on benefits and £15 billion on the NHS. That is after the sensible and pragmatic reforms we have introduced. It is a legacy the Opposition should be ashamed of.
Plan A sets out three key ways of dealing with that—tackling the deficit, a fair burden of tax and a sustainable long-term platform for growth. We have cut the deficit by 30%, from 11% of GDP to 7%, although the shadow Chancellor seemed unable this morning to accept that that is indeed a reduction. The IFS has made it clear that under the Labour party’s plan B we would incur £201 billion more debt by 2016-17. Who on earth could think that borrowing another £200 billion, given that legacy, is the answer?
On the second part of plan A, the fairness of the burden of taxation, the Opposition have been scaremongering about it and need to understand it. First, the Chancellor has decided, rightly, to pay off 80% of the debt through public spending reductions and 20% through taxation. The burden of taxation is powerfully shifted towards those with the broadest shoulders. I remind the House that 1% of taxpayers in this country pay 25% of all tax, and 50% of our income tax is paid by the top 20%. We have taken 2 million people out of tax altogether. The £130 billion funding to help new homeowners is the largest package of support—far larger than anything the Opposition were asking for. The £6 billion relief on fuel duty is a massive support for hard-working families, and coming from a rural constituency I particularly welcome its effect on the rural economy. The beer duty measure, too, is a substantial one for rural communities where pubs are at the very heart of rural life; substantial help is also being provided with child care.
This is a Budget to help the working poor. Taken alongside the universal credit and the welfare reforms, it will have a substantial impact on those who are striving to get on. In the remaining seconds, I want to pay tribute to the Government’s work in laying the foundations for a sustainable economic recovery. We cannot borrow our way out of this crisis. We will have to trade our way out.
Richard Fuller
I would be interested to hear what my hon. Friend thinks should be the foundations of that strategy.
George Freeman
I thank my hon. Friend for that intervention. I believe that this country has every reason to be optimistic about our ability to trade our way out of the present crisis. Around the world the emerging nations are growing at a phenomenal rate—7% to 8% for the BRIC nations and the 11+ nations following them. They have extraordinary needs, and in the next 30 years they will go through a revolution in medicine, food, energy, professional services, IT and leisure that we took nearly 200 years to go through. In all the areas where we have a strong and mature offering, these countries will drive phenomenal demand in the years ahead.
I applaud the work the Government have done to lay the foundations in science and research funding, skills and the industrial strategy, on which we heard from colleagues earlier. In my own sector—life sciences, food, medicine and energy, three of the largest markets in the world—today, Astra Zeneca has made a major commitment to this country, investing £300 million in Cambridge and making us its global head of research and development. With this vision, people can be confident that we are tackling the debt crisis in a way that is fair and that will allow their children to be optimistic for a better future.
Steve McCabe (Birmingham, Selly Oak) (Lab)
This is a Government whose central argument rests on the spurious claim that the economic crisis was national and all Labour’s fault up until 2010, and magically internationalised only after they came to power. With every passing day, the extent of that basic deception and the false conclusions drawn from it are exposed. We were told the pain would be worth it because the Chancellor would have the debt and the deficit under control by 2015. Now it will be 2017-18 and, according to PricewaterhouseCoopers, the current debt overshoot is likely to be £8 billion higher than predicted just three months ago.
This was the tomorrow budget for a tomorrow that never comes—almost anything of any value is put off until 2015 or beyond. With a Chancellor whose forecasts have proved worthless so far, just what kind of certainty does that provide? The Government’s claim is that the deficit is down by a third but the OBR’s figures show that it is down by less than a quarter, and there is no prospect of further cuts in the deficit in the next two years.
Steve McCabe
The answer can be to borrow some money for investment, but not to squander it on rising unemployment and wasteful expenditure, which is what the Chancellor is doing. All the pain will simply be to stand still. The OBR has also pointed out that the public debt in 2015, rather than being the £37 billion the Chancellor originally promised, will actually be a staggering £108.4 billion. Just when are this lot going to learn that they have lost all right to lecture anybody about debt?
I welcome the cut in the duty on beer, although the VAT rise added 5p to a pint of beer, and the likely benefit of the measure will be offset by the loss of jobs and sales in the whisky industry, so it is not quite the achievement that some people might think. I am also pleased that the Chancellor has offered some certainty by scrapping, rather than postponing for the umpteenth time, the planned rise in petrol. The £3 billion lift in capital spending is welcome, but we need it now, not in 2015. His own fiscal rules allow him to borrow to invest: why does he not do so?
We can all welcome the cut in national insurance for small employers as probably the one genuinely growth-stimulating measure in the Budget. Perhaps that is not surprising, as it was our idea.
The Chancellor has once again promised a cut in corporation tax in 2015. Just like the now-forgotten triple A rating, stimulating inward investment by cuts to corporation tax is a Government mantra. It is not working, however. Foreign direct investment inflows to the UK fell between 2010 and 2011, and are now about a third of what they were before the crash. Meanwhile our total investment rate is 15% of GDP—the lowest in the G7—and our current account deficit is now at its highest since the 1980s. We are stifling opportunities for investment.
Legitimate foreign students are worth approximately £8 billion a year to the British economy, and that is being lost in pursuit of the Home Secretary’s immigration target. Simultaneously, she is letting in 30,000 people a year on temporary student visas that require no entry qualifications, no evidence of income and no guarantee of qualification. As usual, it is the wrong target at the wrong time. Similarly, the lack of Chinese tourists means that the very people we need to attract and to encourage to trade with us are now four times more likely to take their spending to France.
As usual, this was a Budget of missed opportunities. Where is the plan for a properly capitalised British investment bank of the kind operated by every other G7 country? There is nothing in the Budget about a target to decarbonise by 2030, but that is exactly the message that would provide certainty for the renewables supply chain and create jobs. Only one in 10 wind farm components are directly sourced in the UK. Why is it that the Chancellor is unable to see what everybody else can see?
The Chancellor called this a budget for an aspiration nation; it sounds more like alienation to me. He is presiding over what Professor Arnold Blumberg calls a zombie economy where rising inflation and no growth eats away at savings, strangles enterprise and innovation, and deprives small businesses of the capital and opportunities they need to grow. We have yet to see who the real beneficiaries of the abolition of stamp duty on share trading will be, but we know who it will not be. This is an alienation budget because the vast majority of our people are into their third year of pay cuts and falling livings standards, and the only ones doing okay are the millionaires in line for a tax cut. There is alienation as it emerges that the mortgage assistance scheme is actually a second home subsidy at the very time when the bedroom tax threatens to throw others out on to the street.
I invite the Chancellor to try listening to real people, like I do. Of those I surveyed in Selly Oak, 50% said that creating jobs and the conditions for jobs should be his top priority, 39% were worried about the rise in domestic gas and electricity prices, and 29% cannot make ends meet and will be forced into debt by his policies. The people of Selly Oak are a good barometer and they know what needs to be done. When will this Chancellor start to listen to real people and do the things that the country desperately needs?
Richard Fuller (Bedford) (Con)
It is always a pleasure to follow the hon. Member for Foyle (Mark Durkan), who represents a very different part of the United Kingdom from the one I represent. It is always informative to listen to his contributions, and I always learn something from them.
There are some very good points in the Budget for the people of Bedford and Kempston. The cuts in national insurance rates—Labour’s job tax—are a welcome change, meaning that the people of Bedford are more likely to have a job. When they travel to work in their cars, they can look at the petrol pump and see that fuel duty has been frozen. When they arrive at work, they will know that at the end of the day, thanks to the increase in the personal allowance, they will keep more of the money they have earned. When they get home in the evening and go out to the pub with their mates, they can raise a pint to the Chancellor and say, “Thank you very much for scrapping that other iniquity of our tax system left by the last Labour Government—the beer duty escalator.” Those are all very welcome measures. On fuel duty, it is particularly important for everyone to realise that when they fill up their tank and look up at the price per litre, 13p of that is Labour’s price on fuel, which applies every time we fill up our cars.
Let me draw your attention, Mr Deputy Speaker, and that of Members to page 12 of the Red Book, which features an interesting chart—I see Members avidly reaching for it—showing the growth of debt in this country from the mid-1990s until 2010. It shows that the last Labour Government left this country as the most indebted nation on earth. They grew our debt—this does not include Government debt, which has to be added on top—from two times to five times the size of the economy. That is a massive debt that must be paid for by our children and grandchildren. I wonder whether the Economic Secretary would consider adding the Government debt to this chart and requiring to be displayed on a poster in every single school, so that our children know what they are going to have to pay back owing to the policies pursued by the last Labour Government. Their policies were an abject failure of economic management.
In the private sector, when companies have poorly performing management, we fire them and bring in other people. In the Labour party, they promote them.
Richard Fuller
The Leader of the Opposition and the shadow Chancellor were promoted, yet their fingers are all over this increase in debt. I must say that the hon. Member for Hartlepool (Mr Wright) has it right. Those two are acting as bed blockers for more talented people on the Opposition Front Bench. Let us hope there will be a change in that regard some day.
Let me say more broadly, if I may—I sometimes get a little controversial—that the debates I have heard in this place since becoming a Member of Parliament have reinforced my view that the political class has let down the people of this country, regardless of political party. The debt is not just the fault of the last Labour Government but of the country as a whole, which had got itself into terrible levels of debt.
There are two ways of looking at the problem. The Government are borrowing £1 billion every three days, the interest on which amounts to £15 million. So, every three days, £15 million has to be taken out of the budget for our schools and our hospitals. That is a very considerable burden that places pressure on the Government, and I say to the Economic Secretary that I am not sure the Government have done enough to bring public expenditure under control. We have to go further. We need to look at the Heseltine review of the way the Government spend their money—not as an end-point, but as a starting-point for a much more radical reform of how we provide our cherished public services, so that we can deliver on the promise of providing more for less money.
In my remaining time, let me mention the Help to Buy mortgage guarantee scheme. I have read the scheme outline and there are some interesting charts in it, but an important chart is missing—that for the loan-to-value ratio over time.
Andrew Griffiths
Does my hon. Friend share the joy of many first-time buyers in my constituency at the fact that this will give them a real chance to get on the housing ladder?
Richard Fuller
I appreciate my hon. Friend’s intervention, but I am not sure that I can share his joy. The impetus behind this Treasury document is the notion that enhancing loan-to-value ratios of 95% is somehow a good policy, and I need some more reassurance about that.
Let us compare the average house bought in 1997 at the average loan-to-value ratio of 80% with the average house bought in 2007—after all that price inflation—at a 95% loan-to-value ratio. Over the 20 or 25 years of their mortgage, the people who bought the average house in 2007 will have to spend £234,000 more than those who bought the average house in 1997. Increasing loan-to-value ratios depresses people’s ability to spend money on other things, because they are spending more on their mortgages. I want some more reassurance from the Treasury that this scheme will not have unintended consequences for their ability to spend money appropriately in relation to their incomes.
Mark Lazarowicz
Is not another possible unintended consequence of the measure the setting off of regionally based house price spirals, exacerbating some of the regional differences that other measures in the Budget are intended to address?
Richard Fuller
The hon. Gentleman makes a fair point, but I do not see that that would be a problem in this instance. In fact, the scheme might counteract the problem. However, it is clear that the issue needs to be sorted out as what is currently an outline becomes a fully developed scheme.
Let me end by making a fundamental point. Every politician in the House must recognise that our debt burden presents us all with a challenge to do more with less. The answer is not to continue kicking the can down the road. We must face up to our responsibilities, and we owe it to the generations to come to do that quickly, while interest rates are low, rather than waiting to see what—as was pointed out by my hon. Friend the Member for Folkestone and Hythe (Damian Collins)—may happen if they suddenly start to spike, and we find ourselves in a much more difficult position in trying to bring Government spending back under control.
Beer Duty Escalator
Richard Fuller Excerpts(13 years, 5 months ago)
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Mr Jones
I thank my hon. Friend for that extremely pertinent comment. I will come to that.
In my constituency, the sector accounts for 1,441 jobs, employing 431 young people. It also contributes £33.7 million in gross value added to the local economy. Nationally, the sector adds £19 billion to the UK economy, and it currently contributes £10 billion in taxation to the Treasury. Since the previous Chancellor introduced the beer duty escalator in 2008—my right hon. Friend the present Chancellor continued it in May 2010—beer duty has risen by a staggering 42%. If the planned increase is effected in April following the coming Budget, beer duty will have increased by an eye-watering 50% in five years.
Richard Fuller (Bedford) (Con)
I join others in congratulating my hon. Friend on securing this debate. He mentioned that the escalator principle of the beer duty was introduced by the last Labour Government. Does he not agree that there is something profoundly un-Conservative about having a tax that automatically increases year after year? Would it not be a mark of a Conservative Government to scrap that principle on both the fuel duty and the beer duty?
Greg Mulholland
The hon. Gentleman is absolutely right, and that is what I was alluding to when I mentioned the marketing claim that Magners Irish cider is made with Irish apples, when it clearly cannot possibly be.
A pint serving of beer is subject to 41p of duty, whereas cider is subject to 19p. I want to reiterate that when we are talking about those wonderful, small producers of cider and perry, they should have our support, but we cannot have a situation where the huge producers—as the hon. Gentleman has said, many of which are not using British or Irish apples—are being given the subsidy that they are getting, frankly, from overpriced beer. As well as protecting small producers, we need that issue to be looked at.
We need to remember that the beer duty escalator is not the only issue facing pubs, and I am delighted that the Government have now pledged to deal with the behaviour of large pub companies. I reiterate the message that the Minister must send to the large pub companies, which is that if the Government go ahead, as they must, and get rid of the beer duty escalator, pub companies need to pledge that they will pass on the reduction in duty and cost directly to their lessees on their so-called wholesale and list prices. That is fundamental, or frankly, those pubs will not see any benefit, because the money will simply deal with the debts that the companies have got themselves into. The Minister must put that message out, as well as listening carefully to the figures on investment that have been put in front of him, when considering the effect of his decision.
Richard Fuller
To help our hon. Friend the Minister, we know that money is short and that taking this action will cost the Treasury money, so what suggestions does the hon. Gentleman have on how the Government can make countervailing savings? It is unfair for us to go into a Budget discussion and ask the Government to make a cut in the duty that will be raised without coming up with suggestions on how the shortfall will be made up.
Greg Mulholland
The first point is that this tax does not make economic sense, because it is not bringing in what it is predicted to bring in. That simply is not sensible. A great deal of work has been done—this was a conversation that happened after last year—to show the effect that it will have on investment. In the end, we all agree that taxation is there to encourage. That is really what we would like taxation to do—to encourage positive decisions. What we are saying is, “Get rid of this tax and have fairer beer duty to encourage the sort of investment that has been demonstrated at the smaller end, where people do have lower and slightly fairer beer duty.” The prediction is that 10,000 new jobs would come from doing that. Then there would be the employment tax and the increase in business rates.
At the moment, instead of that, we have declining sales, which means lower duty and lower VAT. We have pub closures, which means a loss of business rates, council tax, employment tax and so on. We must turn this vicious circle into a positive one, and this is an opportunity to start to do that, but the hon. Gentleman is right to say that we must be focused on those economic issues. Let us look at the unfair subsidy provided to the huge producers of mass-produced cider. That would be one way of equalising things. We need to take the opportunity to look at that.
I have had conversations with the Minister about specific ways to assist pubs through the tax system. I hope that he has been looking at that. I hope that he has been trying to find a way, perhaps through rates, to have relief for the community value of a pub. I hope that he will continue to look favourably at anything that can encourage people to consume alcohol responsibly in pubs, as opposed to buying it from supermarkets.
I hope that this is the last time that we need to discuss this issue. It is great to see the faces supporting this campaign around the table, but I genuinely hope that the next time I see them will be with the Minister and that we will all be able to have a pint of excellent, locally produced British beer, knowing that it no longer has been subject, at the point of production, to the unfair, unnecessary and illogical beer duty escalator.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
It is a pleasure to serve under your chairmanship this morning, Mr Caton. I thank the hon. Member for Nuneaton (Mr Jones) for securing this important debate. As a number of hon. Members have suggested, there is a certain sense of déjà vu, given the number of debates that there have been on the issue, but the timing of this debate, ahead of the Budget, is critical.
I stress at the outset that a number of my hon. Friends have let me know that they would have liked to participate in this debate, but they were not able to do so because of other parliamentary business or commitments that they had already made. I hope that we can continue with the generous spirit in which the debate has been conducted, and focus on a number of issues that Members on both sides of the House would like the Minister to answer—although that is not to say that I will not make some reference to the previous Government’s position or press the Minister on some questions that I think all of us would like to be answered.
It is important to recognise, as many hon. Members have, the organisations that have briefed Members and allowed them to make visits and listen to representatives of the industry in their constituencies. Those organisations include the British Beer and Pub Association, the Society of Independent Brewers, the all-party groups on beer and on pubs and the Campaign for Real Ale. I have worked closely with CAMRA in my constituency; I had the joy of judging one of the beer competitions at a local real ale festival, for which I thank the local CAMRA organisation. We also heard about representations made by the TaxPayers Alliance and The Sun.
I always enjoy such debates, because they allow us to have, as one hon. Member suggested, not just a brewery bingo, but a pub bingo. They give us a list of places to visit when we travel around the UK when not involved in parliamentary business.
A number of hon. Members have talked about the importance of the wider brewing industry and of manufacturing. There is also, of course, the bottling sector, from which representations have also been received. We have discussed small and medium-sized enterprises, micro-breweries, the rural economy, and the focus of the pub trade as a base for the local community. The hon. Member for Montgomeryshire (Glyn Davies) recognised the impact on elderly people and the important social role that pubs play in the community. We also heard about the charitable events and the various activities that pub goers regularly get involved in.
In his opening speech, the hon. Member for Nuneaton praised the Minister as a listening Minister. He recognised the need to deal with the deficit and welcomed, as I have, some of the actions taken on fuel duty. He urged the Minister, as other hon. Members did, to assess whether the escalator was disproportionate. I will return to that issue with some specific comments for the Minister to consider.
My hon. Friend the Member for Stoke-on-Trent North (Joan Walley) talked about responsible drinking, which is important. Like her, I spent some time working in the voluntary sector before becoming a Member of Parliament. I have worked in a project that dealt with homeless people with drinking problems. I have also spent some time, when I was a social work student, working at a drinking problems unit in a psychiatric hospital. I have seen the difficulties and problems that emerge when people get involved in problem drinking. One theme that has come out from the discussion is the importance of the pub sector in providing a different ethos, culture and way for people to consume alcohol enjoyably and responsibly. We are all concerned to ensure that that continues.
Whatever regimes are put in place—this is where there is a VAT issue—to support responsible drinking, we all want to ensure that supermarkets are not given an unfair advantage over the pub sector. A number of hon. Members have talked about that. Regarding VAT, I do not think my hon. Friend the Member for Nottingham South (Lilian Greenwood) intended to make a hugely party political point—perhaps a slightly party political point. This important issue needs to be addressed.
The Opposition believe that the Government made a mistake in 2011 in increasing VAT, which had an impact not only on the pub trade, but more widely on families and businesses around the country. That rise, which was equivalent to a 12% increase in tax for the industry, was in the same year that the coalition introduced the biggest ever pence per pint increase in beer duty.
Richard Fuller
We all know that the last Labour Government left a crippling deficit for this coalition Government—I am being slightly party political—who have had to clear up the mess that they left behind. The escalator increases taxes on working people who enjoy a pint. Does the hon. Lady think that it was a mistake in principle for the last Labour Government to introduce that to our taxation system?
Economic Policy
Richard Fuller Excerpts(13 years, 5 months ago)
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Mr Osborne
Let me explain something to the hon. Gentleman. We inherited a 12% budget deficit, and the deficit is defined as the amount added to the debt every year. We are getting the deficit down in order to deal with the debt problem. His plan is to increase the deficit deliberately, borrow even more, add to the debt burden and repeat all the mistakes made by his colleagues when they were in charge.
Richard Fuller (Bedford) (Con)
Between the mid 1990s and 2010, the nation’s total indebtedness grew from two to five times the national income. The shadow chancellor and the Leader of the Opposition, who came to Bedford two weeks ago to advise that the country should borrow £200 billion more, were architects and supporters of a policy of indebting our children and grandchildren. Will my right hon. Friend tell me what the implications for the country’s credit rating would be if the Opposition’s policies were pursued today?
Mr Osborne
We are debating the decision of Moody’s credit rating agency, which said in its market notice on Friday that reduced political commitment to fiscal consolidation could lead to further downgrades of the United Kingdom. That is the verdict of the ratings agency. The verdict of the Institute for Fiscal Studies, an independent body, is that Labour plans would add about £200 billion extra to borrowing. That is the view of independent bodies about the Labour party’s economic policy.
Outsourcing of Public Services
Richard Fuller Excerpts(13 years, 7 months ago)
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Chris White
I appreciate both the point made by the hon. Gentleman and the CBI’s report. I will be coming to some of those issues later in my comments.
I support those five principles, which I am confident that Members in all parties support as well. The Government have been clear that they are seeking to increase the amount of public services delivered by independent organisations. Seymour Pierce has predicted that the value of the public services sector will increase to £140 billion by 2014. That is a huge amount of public money and, rightly, we should be concentrating on how that money is spent and on how we ensure maximum benefit for our community. A concern, however, is that the principles outlined in the “Open Public Services” White Paper, to make our public services more accountable, more transparent and more in the control of communities, have not been realised in practice.
One deep concern is explained in the Social Enterprise UK report, “The Shadow State”, which has highlighted a significant lack of transparency and accountability, with information from those delivering our public services hard to come by. It also highlighted the increasing dominance of our public services by a small group of large multinational businesses and the difficulties that small business, charities and social enterprises have experienced in accessing provision of our public services.
Richard Fuller (Bedford) (Con)
My hon. Friend is a champion of social enterprise in the House, and we pay great tribute to his work. He is making a point about large private sector organisations. Is he, like me, sceptical about the big state, but also sceptical about big private corporations? The Government are making some strides in promoting local organisations, but does he believe they are being somewhat timid in their agenda to promote social enterprise locally?
Chris White
My hon. Friend is also a champion of such issues. My speech is about that very subject: the change from public sector monopolies to, perhaps, private sector monopolies. We should be sceptical about that, as he said.
We need to be clear that, if we are opening our public services, we are doing so to achieve what is best for our communities, in a way that gives choice to commissioners and service users and that ensures appropriate levels of accountability. Unless the Government are able to deliver on their principles, we will not get the outcomes that we want from public sector outsourcing.
Over the past two years, through my work on the Public Services (Social Value) Act 2012, I have had the opportunity to speak to many community organisations and social enterprises about the Government proposals for opening up public services. Most are keen to engage in the process and to deliver services that are important to their local community. There appears, however, to be a number of obstacles to their involvement, some of which have been highlighted in the report.
First, the size of many contracts is a problem. I appreciate that commissioning on a large scale can create efficient economies of scale, but those are not the only economies that we should be focusing on; the most useful economy is secured through successful outcomes. Large contracts do not always lead to better outcomes, and can increase costs in the long term. For example, the UK Border Agency issued £1.7 billion in contracts for asylum-seeker services in March this year, but each of the contracts was for more than £100 million, completely locking out our charities, social enterprises and small businesses. The Work programme, in which £3.3 billion of contracts were awarded, saw one quarter of the contracts go to one company. That is not the opening- up of public services. Only a handful of organisations can bid for contracts of such size. More accessible contract sizes would go a long way to change the situation, as well as enabling a larger degree of social value, as such contracts are able to target additional benefits to be created through the commissioning process.
Secondly, there is an issue of governance and transparency. Despite extensive research, it is difficult for the public to access information about many public sector contracts. If I or my constituents have questions about state-delivered public services, we may ask questions in this place or through correspondence with Departments to get the appropriate answer. Private companies, however, are often not so willing or forthcoming with information, leaving a sense of unease among the public. Only greater levels of transparency and accountability can change that. I fully support the Government’s efforts to provide details on public spending over £100,000 at both central and local government level. That transparency should and can be extended to all public service providers. We cannot have one rule for public sector organisations and another for private sector providers. I appreciate that some information will be commercially sensitive, but I am confident that we can find a method that balances the public’s right to know with commercial privacy.
There should also be a central register of public sector contracts, both local and national, that are being provided by independent organisations, whether private sector companies, social enterprises, or charities, both past and present. That should outline the size of the contracts, their length, the expected outcome, and information about their success. All that should be online for ease of public access, and would not involve significant cost, because such information should be collected by commissioners in the regular course of their work. That would enable the public to see not only who is providing what services, but how successful providers have been, and could be a useful tool for commissioners.
The Government have rightly championed the cause of transparency to improve our public services, but that must be carried out across providers. I hope that the Government will work with commissioners, private businesses, charities and social enterprises.
Richard Fuller
My hon. Friend is making a good point about the role of national Government and supporting local commissioners. Is there a role for national Government to name and shame commissioners who are too slow in opening up to local providers, and to name those who are doing a good job and are at the forefront of the breakthrough of social enterprise, but shame those who just want the default of taking what had been a public service and giving it to the large national contractors?
Chris White
Absolutely. Naming and shaming is always a useful tool in such circumstances. Our commissioners should be encouraged to have a greater sense of urgency in dealing with such matters.
The Government have rightly championed the cause of transparency, and public sector commissioners should take a closer look and a closer interest in the corporate structure of the organisations they are commissioning from. Traditional large multinational companies may have some advantages, but the social enterprise model may also have the potential to deliver better outcomes for our communities. At a time when we are seeking to spend every penny possible on better outcomes, there is concern that traditional private sector models that seek to deliver large returns for shareholders may lead to money seeping out of our public services that might otherwise be spent on improvements to those services.
Social enterprise combines the need to deliver profitability, to innovate and to deliver better outcomes with a sense of community purpose. Not only that, but most social enterprises reinvest their profits either back into the services they provide, or into the communities where they are based. Moreover, through the structure of community interest companies, which are a model that many social enterprises are adopting for public service delivery, communities are directly involved in the governance of the organisation. That gives communities greater levels of accountability than if those services are provided by larger organisations with less accessible governance structures such as multinational corporations. Sometimes that will not be possible, but the Government should encourage commissioners to be creative and to experiment with differing governance needs.
Thirdly, the Treasury can help directly by ensuring that small businesses, social enterprises and charities can have access to the finance they need to bid for these contracts directly. The creation of Big Society Capital has been an excellent example of the Government taking a direct approach to stimulate the social investment market, and social impact bonds also have great potential. However, those methods do not resolve all the issues that are in the way of civil society organisations, which is why the Treasury’s internal review of social investment is so important.
We must ensure that we create a new climate of confidence in the social investment market, so that mainstream lenders and institutional investors feel that they can participate. Big Society Capital is an important step forward, but on its own it will not be able rapidly to expand the social investment market. That will take place only when our banks, pension funds and venture capitalists take a full part in the market, so I hope that the Minister will give us an update on the progress of that internal review, and the main policy areas that the Government seek to address. Broadening community investment tax relief into social investment tax relief that gives incentives for direct investment into social enterprises and their intermediaries could be transformational, and relatively inexpensive.
The report—“The Shadow State”— highlights a number of key policy areas, such as child care, prison, welfare to work, and adult social care, which need to be addressed. The report is constructive and proposes solutions. I hope the Minister will take the time to read the report, and I am happy to give him a copy if he has not already read it.
As we embark on a change in how we deliver our public services, it is vital that we do so in the right way so that the public feel engaged in the process and we deliver services not only with the best outcomes, but in the right manner. Confidence in our public services is important because, without confidence, there is a danger that people will not access the services they need, leading to more expensive interventions down the line. Communities need to feel a strong relationship with the provision of those services, and that is why social enterprises, charities and small businesses are often better placed to deliver them.
The Government have rightly identified a problem in our banking sector about institutions that are too big to fail, yet there is a danger that by relying on a small clique of large multinational organisations to deliver our public services, we end up creating the same problem in public service delivery. The way to combat that is through changing the contract process so that we make contracts more winnable for smaller organisations, helping to build supply chains that are resilient and have a plethora of providers. That will not only reduce costs in the long term through proper competition on costs, but will spur forward innovation and enable greater personalisation and localisation of services.
The White Paper, “Open Public Services”, was a step in the right direction, building on a set of principles that have wide-ranging consensus. All parties went into the election promising to open the door for delivery of our public services, particularly to social enterprises, mutuals and charities. We must now all work together to ensure that implementation matches the rhetoric.
“The Shadow State” report has been useful in helping to refocus minds in this debate, and we must consider the issues now, while we are in the process of reform. We have a fantastic opportunity to change our public services for the better, to realise a future in which people feel ownership of the services they are using, and to spur innovation and creativity. The Government have rightly seen the need to reform public services, despite a period of considerable economic difficulty, but we now need to deliver on the principles that we have outlined.
The Economic Secretary to the Treasury (Sajid Javid)
I am grateful for the opportunity to speak under your chairmanship, Mr Chope.
The outsourcing of public services is an area in which my hon. Friend the Member for Warwick and Leamington (Chris White) has a great deal of experience; he feels strongly indeed. I commend him for the successful private Member’s Bill that he pushed through Parliament with support across the Benches and congratulate him on securing today’s debate. I agree with a number of points that he has made this afternoon, and I hope that he will, in turn, agree with some of the sentiments that I will express.
My hon. Friend referred rightly to the biggest issue facing the country: the size of the public sector deficit. There are a number of ways in which we need to go about fixing that problem. One of the most important is that when we spend public money—the taxes of hard-working people—we receive the best possible value in return. The outsourcing of public services, whether to small and medium-sized enterprises, social enterprises or larger organisations, is an excellent way to achieve that. I want to lay out the broad principles behind the Government’s approach and then talk about some of the specific reforms. I also want to talk about some of the measures that we have taken specifically to help SMEs and social enterprises.
The Government are committed to improving the quality of public services and delivering them more efficiently. Last July, as my hon. Friend rightly said— I am glad that he welcomed this—we published the “Open Public Services” White Paper, which set out five key principles: choice, decentralisation, fairness, accountability and diversity. If we are going to be successful in achieving those principles, transparency, which my hon. Friend also mentioned, is key. He talked about it, rightly, at length. Transparency is important to achieving all those principles.
Key elements of our approach include increasing the amount of services that we commission out, taking advantage of efficiencies and real-world benefits that the voluntary and private sectors can deliver and ensuring a diverse provision of services to drive quality through competition. We are also making greater use of payment by results, which is good for Government, because the financial risk is taken by the investor, not the taxpayer. It is also good for the voluntary sector, as it opens up many more opportunities for social enterprises and charities to deliver public services. I am sure that our thinking is very much in the same sentiment as that of my hon. Friend.
Let me turn to some of the key reforms. I know that it is easy for a Minister to stand on this spot and talk about theories and ideologies, so let me be a bit more specific and give some examples of concrete action that the Government have been taking. An example is the Work programme. The Government have taken tens of thousands of people off benefits and helped them into jobs. Figures released last month show that at least 56% of the scheme’s earliest participants have come off benefits, with 19% spending at least six consecutive months off them.
Another example is social impact bonds. My hon. Friend mentioned the importance of access to finance, particularly for SMEs, if they are to win contracts. Social impact bonds are a valuable new way to involve the voluntary, community and social enterprise sector in Government contracts based on payment by results. Already, almost 10 SIBs have been issued throughout the country, tackling reoffending, youth unemployment, homelessness and family breakdown.
We also have a big new opportunity for payment by results in probation, where we are testing a range of models with the private, public and voluntary sectors. As the Prime Minister said just a couple of months ago:
“With payment by results, your money goes into what works: prisoners going straight, crime coming down, our country getting safer.”
He has indicated that he wants to see payment by results spread right across the rehabilitation system by the end of 2015.
Richard Fuller
Regarding payment by results, I urge the Minister to be cautious about the difference between the desire to achieve improved performance based on payment by results in the short term and the provision of competitive tendering for Government contracts in the long term. One of the issues with privatisation is that it was a good way to make a substantial amount of money in the short term, but there have been competitive results in the long term. I think that part of today’s debate is about ensuring that the Government have the right balance between large corporations that can deliver in the short term and providing more availability for small and medium-sized enterprises to provide that competitive tendering in the long term.
Sajid Javid
My hon. Friend makes an excellent point about the tensions that sometimes exist between short-term goals and long-term goals, and he has used the excellent example of previous privatisation programmes. The Government will indeed take that into account.
With regard to prison procurement, we currently have five new contracts in train, bringing the total number of contracted-out prisons to 14. Let me move on to another example. In health care, we have seen an increased volume of treatments being delivered via independent providers. We heard an excellent example from my hon. Friend the Member for Woking (Jonathan Lord), who referred to Virgin Care in his own constituency. In 2010-11, 17% of hip replacements were delivered by independent providers—a rise from 0% in 2003-04. By outsourcing the services that I have highlighted, we are not only driving up the quality of services available and saving the public’s money, but increasing the public’s choice about the services that they receive.
My hon. Friend the Member for Warwick and Leamington spoke eloquently about the importance of social value in procurement. He is passionate about improving access to contracts for SMEs and social enterprises. I hope that he is pleased that the Government share that passion. In fact, every Department in Whitehall has a nominated SME Minister who is responsible for delivering an SME procurement action plan for that Minister’s Department. In the case of my Department, that Minister is me, so he will know who to harass if he believes that the Treasury is not making suitable progress in this area.
Thanks to the provision that I have described, more than 2,000 of the 5,700 contracts awarded through the Government’s contracts finder website have been allocated to SMEs, and we are taking steps to give SMEs greater opportunities to bid for contracts. The Government’s procurement pipelines give forward visibility of future potential public sector procurement opportunities, providing greater confidence for industry to invest. The Cabinet Office is tracking a pipeline of about 100 developing and established projects, worth £84 billion in total.
I thank my hon. Friend the Member for Warwick and Leamington not only for allowing us the opportunity to discuss this issue today, but for his tireless work in this area during the past two and a half years. “Procurement” and “outsourcing” are rather dry words that can, if we are perfectly honest, force more than the odd eye to glaze over. I am sure that my hon. Friend would agree, though, that discussions about procurement and outsourcing are crucial to ensuring that public money is spent wisely. I thank all hon. Members for their contributions today and I thank you, Mr Chope, for your chairmanship.
Question put and agreed to.
Public Service Pensions Bill
Richard Fuller Excerpts(13 years, 8 months ago)
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Richard Fuller (Bedford) (Con)
In Committee, we also talked about the risk of people with public sector pensions making the perverse decision not to contribute to their pension because they feel that the contribution rate is going up significantly, missing the fact that a significant contribution is being made to their pension scheme by the taxpayer. Does the hon. Gentleman feel that the new clause would assist members of public sector pension schemes in identifying what a large contribution the taxpayer is making, and therefore help to reduce the number of people who take the irrational step of opting out of the pension scheme?
Chris Leslie
Even though the quality of the scheme has been eroded, as we saw with the unilateral imposition of the average 3% increase in employee contributions—that might even have been before Lord Hutton reported—they are still good defined benefit schemes and we encourage public sector members to stay in them. We have debated our concerns elsewhere over whether the viability of the schemes will be jeopardised by employees being deterred from joining or deciding to opt out. However, we encourage members to stay in the schemes. Unfortunately, the 3% additional contribution is not part of this legislation, so it would be outwith the scope of the Bill to table amendments on that or to debate it. That is a great shame.
It is important that annual benefit statements include not only the employee’s contribution, but the employer’s contribution, as set out in the new clause. If the defined benefit schemes are good, there is no reason not to have that level of clarity and transparency. I have no problem with accepting that that should be part of the information that is given to scheme members. I hope that the Minister will accept that.
New clause 3 is one of the most important proposals in this group. The Government promised to implement what is known as the new fair deal, which is one of the most important aspects of the agreement that was reached in the negotiations between the employee side and Government or employer side of the scheme. The new fair deal would ensure that all public service workers who were compulsorily transferred to an independent contractor, be it a private company, a charity or another third sector body, would be entitled to remain an active member of their public service pension scheme. That is a basic requirement and it was a core part of the agreement. We were glad that the Government committed to it.
The Chief Secretary to the Treasury confirmed the Government’s commitment to the new fair deal in a written statement in July, which stated that
“the Government have reviewed the fair deal policy and agreed to maintain the overall approach, but deliver this by offering access to public service pension schemes for transferring staff. When implemented, this means that all staff whose employment is compulsorily transferred from the public service under TUPE, including subsequent TUPE transfers, to independent providers of public services will retain membership of their current employer’s pension arrangements.”—[Official Report, 4 July 2012; Vol. 547, c. 54WS.]
That is an improvement on the current fair deal arrangements, which ensure that outsourced staff receive broadly comparable arrangements to those under the public service schemes. The Government’s promise to implement the new fair deal was central to the rationale and at the heart of why many public service workers agreed to support the new proposed pensions reform, even though aspects of it were detrimental to them.
Richard Fuller
I am intrigued by the hon. Gentleman’s point. He is absolutely right that firefighters, prison workers, doctors and nurses contribute to their pensions, but so do taxpayers. Indeed, a considerable amount of most public pensions is paid for by the taxpayer. If he wishes to push the point about certainty, does he agree that the Government should have considered a fully funded pension scheme, rather than rely on future taxpayers to pay for future pensions, with all the uncertainty about whether they will be able to afford it? Should the Government not have grasped the nettle and gone for a fully funded pension scheme now?
John McDonnell
The local government scheme is fully funded, yet the Government seek to interfere with that, too. If we are to open up the debate, let us do so; however, the Government seem to be making piecemeal reforms for their own economic objectives and then not even standing by them. The problem is the uncertainty.
Let me turn to the detail of amendment 4. As those of us who have been involved in pension negotiations will know, one of the most important elements is ensuring that the valuation process is right, because that is what determines not just the future payouts from the scheme, but its future security; there are also probity issues. I am concerned that the legislation as drafted would give no role to employees or their representatives in the revaluation system. My amendment 4 is a mild-mannered amendment to provide that the valuation report should be sent not just to the scheme manager and the employer, but to the employees’ representatives. That would promote at least some openness and transparency, which might reassure participants in the scheme.
Few pension decisions are more important to employees than the contribution levels, which stem from the valuation process. We have seen a unilateral change in contribution rates, which I think, to be frank, will deter many people from participating in those schemes and may throw the long-term future of those schemes into jeopardy. If there has been a valuation, the report should be sent to the employees’ representatives. It should be open and transparent, and it should then be possible to have a discussion about the valuation. That is what amendment 4 seeks to do. It simply says that the report should be sent not just to the scheme manager, but to the employee representatives, and that the terms of the revaluation should be mutually agreed. It is simply about participation.
Richard Fuller
Would the hon. Gentleman, like me, put this issue in the same area as transparency and giving information to people in pension schemes, which will help people to make better judgments? Just as we heard when new clause 2 was being moved, the provision of information about what is in their pension or how that is assessed helps people to make rational decisions.
John McDonnell
That is exactly right. There has to be openness and transparency. The point has already been made, but some of us will now have to go out there and campaign to keep people in these schemes. The way to do that is by having openness and transparency about what they are paying in, the benefits being made and, I agree, the overall contribution made by taxpayers.
I fear for the future. We have seen the Fire Brigades Union survey of what would happen if there were increases in pension contributions to those workers’ scheme and also a reduction in benefits. Some 30% told the survey that they would question whether they wished to continue in the scheme. A 30% withdrawal rate would undermine some of those schemes. That is why openness and transparency are important. One of the key areas for openness and transparency is in the valuation process, with the terminology and methodology agreed with the employee representatives, so that they have confidence that the process is being conducted fairly, openly and, to be frank, professionally. In addition, once the revaluation is done, the report should be provided to the employee representatives. I can see nothing in that with which the Government could disagree.
Richard Fuller
To press the hon. Gentleman on his point, he has made the assertion—it may be a fact—that the sole criterion for the exemption of these professions from the normal retirement age is the physicality of the job, but does he accept that there are other differences between those types of public sector workers and others and that that might be why they have been given a different retirement age?
Chris Leslie
I wonder what the hon. Gentleman is alluding to; perhaps he should elaborate. The Minister has not said that there are considerations other than the physically demanding nature of being a firefighter, a police officer or a member of the armed forces. Is the hon. Gentleman suggesting that there are different categories of public sector workers beyond some of those physical issues?
Richard Fuller
I will clarify my view, although I cannot speak for the Government. One criterion that differentiates these workers, other than physicality, is that they put themselves in danger in their public service, perhaps not routinely, but as an important aspect of their work. A firefighter will run into a burning building to rescue someone, a member of the police force will stop altercations and put themselves in physical danger, and members of our armed forces routinely put their lives on the line for our country. Does the hon. Gentleman not accept that that is an important point of differentiation and that it is not just to do with physicality, which is the basis for amendment 16?
Chris Leslie
That is why amendment 16, which I urge the hon. Gentleman to look at, does not prescribe different pension ages for different categories of worker. We are looking only to give power to the Secretary of State, who
“may by order specify following the publication of a scheme specific capability review”,
to allow disapplication in relation to categories of public service worker for provisions in clause 9(1).
If reviews are ongoing—the Government have undertaken the working longer review in the national health service, and the fire service review—we must ensure almost as an issue of drafting that any conclusions of those reviews can be enacted and reflected in legislation, if the Secretary of State agrees. That is the extent of the amendment; it would simply ensure that if there are technical reviews of the capability of certain classes of employee, the Government will be able to create exemptions from any arrangement. That is why the amendment is narrowly defined. I accept there is a theoretical or philosophical argument about risk and physicality, but to return to the practicalities of our arrangements, we must look at how the legislation is drafted. That is our duty as a loyal Opposition.
Richard Fuller
The hon. Gentleman is being generous in giving way. He may regard the amendment as narrow, but I regard it as a broad generalisation that seeks to introduce uncertainty in an otherwise specific Bill. If his principle of physicality is an important test for public sector pensions, is it also an important test for private sector pensions or the state retirement age?
Chris Leslie
If a private sector scheme rules to make its own arrangements, it has the flexibility to do so. We are simply saying that in future, some degree of latitude and flexibility should be placed in statute to allow Secretaries of State to take account of the outcome of any reviews. We are not saying there should be a requirement for exemptions to be made; we want to give the Secretary of State the power to implement the findings of any reviews should that be deemed fit.
Mike Freer
My hon. Friend makes a good point, but if he revisits some of the private sector schemes, he will find that they rely on actuarial and physical evidence provided by various medical boards, and that the retirement age in certain private sector schemes already reflects the physical demands of certain roles. In an intervention, I mentioned, rather light-heartedly, people such as steeplejacks and jockeys, but there are other roles whose physical demands are reflected in certain private sector pension schemes, which already have mechanisms in place.
Richard Fuller
Does my hon. Friend not accept that those pension schemes are fundamentally different from the types we are debating? The former tend to be defined contribution schemes rather than defined benefit schemes. Does that not have an impact on the flexibility of those schemes and their ability to take account of those issues?
Mike Freer
My hon. Friend makes a good point. He knows my views and is tempting me down the path of debating the future of defined benefit schemes. I have been entirely consistent on this point: for many years, I have said that all defined benefit schemes are no longer sustainable, whether in the private sector or public sector. That is a debate for another time and is certainly not pertinent to the amendment, but I share his view that perhaps we need more wholesale change and a larger debate.
In supporting specific exemptions where physical demands can be proven, I am not undermining the broad thrust of ensuring that our public sector pensions are sustainable. I have long argued that the contribution rates of both employee and employer do not match: what goes in does not match what comes out. That has driven my long-held view that defined benefit schemes are no longer fit for purpose. Having said that, this Bill is a major step forward in making sure that our public sector pensions are sustainable. We have a duty, however, to protect those who protect us and we ought to revisit this point where there is hard empirical evidence that physicality, in certain roles within those categories, can be proven to be detrimental to people’s health after retirement. I am not suggesting that I will support the amendment, but I am urging my ministerial colleagues to revisit the matter.
I have rehearsed at length the point about physicality. I am sad that the Minister is no longer with us, but I hope that he will address that point when he winds up. Should empirical evidence emerge, I hope that we can revisit this subject.
Richard Fuller
It is a pleasure to follow the hon. Member for Banff and Buchan (Dr Whiteford), who made some important points about Scotland.
I oppose Opposition amendments 15 and 16. It was absolutely right for the Government to continue to recognise the specific nature of the roles played by our fire and rescue workers who are firefighters and members of our police forces and armed forces, and it is right that that is reflected through having a lower retirement age. I pay tribute to the Government for recognising that and for pursuing it through legislation.
Members have talked about the issue of physicality. I agree that it is an important issue, but we should not have a specific provision on it in this Bill. In setting pensions, we have a hope that masquerades as a realistic assumption: people are living longer and we are increasing the retirement age, and we hope that people will perform their work as easily in their later years as in their younger years. We hope that is the case, but it cannot be assumed. If people do not save, they run the risk of having a period of poverty, because they might not be able to continue their work until their pensionable age, so there will be a gap in their earnings. As a nation, we have indebted ourselves over the past 20 years far more than any other country. People in this country have not saved to protect themselves financially.
I do not think this specific issue is pertinent to the Bill, however, as it covers all types of employment and all regions—not only Scotland, but the rest of the United Kingdom, too. I therefore ask the Opposition not to push their amendment to a vote as I believe a broader debate would be more appropriate.
Lady Hermon
What justification does the hon. Gentleman think there could possibly be for excluding from clause 9(2) prison officers, and in particular those in Northern Ireland, who live daily with a deadly threat from a brutal enemy called dissident republicans?
Richard Fuller
The hon. Lady has spoken eloquently and passionately about that point. I do not know whether she was present earlier when I expressed my personal view, but her point may fit in with it. In addition to the issue of physicality, in undertaking their work the people employed in the careers identified in clause 9(2) put their lives at risk. If that is the case for prison officers in Northern Ireland, too, they should be included, and I would be interested to hear what my hon. Friend the Economic Secretary has to say about that.
Richard Fuller
Other Members want to contribute to the debate, so I will not give way to the hon. Gentleman. He might have an opportunity to speak later.
If we are to change the retirement age for the careers in question, we must undertake those physical tests as well. My hon. Friend the Member for Finchley and Golders Green (Mike Freer), who is of a similar age to me, has said that he is going to do the police test, and I have agreed that I will do the firefighter test. I reiterate his challenge to the shadow Minister and to the Minister, both of whom are at least a decade younger than us, to sign up to do those tests if we are to proceed with the Bill at the end of Third Reading. I would be very grateful to hear them accept that challenge, and indeed to hear the Government Whip, the hon. Member for Chelsea and Fulham (Greg Hands), do so.
John McDonnell
I wish to speak in support of amendments 1, 2 and 9. Amendment 2 is straightforward: it seeks to ensure that people are not forced to retire beyond the age of 65, as most of our work force have planned to retire then. On the argument that the amendment is unaffordable, let me remind hon. Members of what Hutton said about the 2007-08 changes. He said that they are likely to reduce costs to taxpayers of the pension schemes by £67 billion over 50 years, with costs stabilising at around 1% of GDP or 2% of public expenditure.
The other issue involved here is what our priorities are. The last figure I had for how much the unfunded public sector pension schemes were costing us was for 2009-10, when it was less than £4 billion. Some 60% of gross tax relief on pensions goes to higher rate taxpayers—that is £22 billion. The cost of providing tax relief to the 1% of our population who earn more than £150,000 was double the amount we are funding with regard to the public sector unfunded pensions—that is £8 billion. So the fact that we are willing to subsidise the higher paid—the rich—while forcing others to work longer and cutting their pensions at the same time reflects our priorities. That is why I have tabled the amendment: I do not accept the settlement or the Government’s rationale for these proposals.
Amendment 1 was eloquently discussed by my hon. Friend the Member for Wansbeck (Ian Lavery), and I must declare an interest at this point: I am an honorary life member of the Prison Officers Association. One point that the POA made, which we made on Second Reading, is that if we increase the pension age for prison officers, we lose money because more of them will become injured and more will go off sick, and more cost will be incurred in compensation. The actuarial figures are there almost to prove it, so it is anomalous not to include prison officers. The point about psychiatric nurses is the role they play, particularly in institutions such as Broadmoor, where they are dealing with the most difficult cases—physical challenges—within the NHS. I find it bizarre that we are expecting police officers to retire “early” at 60—I hope we do not go to that—because of the physical nature of their jobs in dealing with criminals, yet when those criminals go into prison it appears that they no longer provide a physical challenge to the officers dealing with them then. The situation is anomalous, which is why I support the amendment to include psychiatric nurses.
I also tabled amendment 9, and this is specifically for the Fire Brigades Union. As my hon. Friend the Member for Nottingham East (Chris Leslie) has said from the Front Bench, the Government have set up, in agreement with the unions, the working longer review in the NHS and the physical assessment in respect of the fire service. Evidence is piling in to those reviews—independent academic evidence, and details of physical tests that have been undertaken—to demonstrate that it is tough to do the job at 55, let alone at 60. I have seen some of the evidence put forward in the fire service review. When the previous Government increased the retirement age to 55 it was on the basis that there would be more firefighters doing preventive work and people could be redeployed into that work. This year, only 15 posts nationally have been available for redeployment, so redeployment is not an option. These people are still out there doing that physical job, and it is unacceptable to push the retirement age to 60. That is why amendment 9 would ensure that the pension schemes would be able to take into account the reviews currently taking place and that we would be able to adhere to a lower retirement age, particularly for firefighters and others as they are justified.
I am interested to hear what the Government’s responses will be, so I shall finish on this next point. Overall we seek to ensure that there is justice in the Bill, and that is certainly not the case at the moment. I reiterate that the Bill is increasing the contributions and increasing the length of time that people will be working. Given the life expectancy in my constituency, a large number of my constituents will not reach retirement age. Already, a third of all members across the schemes retire within three years of when they should normally do so because they cannot physically continue in the job. They therefore live on reduced pensions and in some poverty. My constituents will contribute more, work longer, most probably have a reduced pension at the end of it and have to retire early. That is an unjust deal when we are subsidising the wealthy through tax relief on their pensions.
Richard Fuller
The Minister makes an important point on tax, but this is the largest bill for the taxpayer that this Parliament will pass—we are passing a £1 trillion bill on to current and future taxpayers. I applaud him and the Government for protecting lower-paid public sector workers from pension changes, for protecting the retirement age, and for career-average schemes, but does he accept that we are still asking taxpayers working in both the public and private sectors to pay an enormous bill for public sector pensions?
Sajid Javid
My hon. Friend made passionate contributions in Committee, where he made that same point. I will say the same thing in reply. The Bill and other changes we have made to public sector pensions deliver significant cost savings for the Government and future taxpayers, but maintain our commitment to generous, fair pensions that are sustainable in the long term for people who serve in the public sector.
The Bill is not simply about bringing costs under control and ensuring that schemes are sustainable. We are also seeking to address issues of unfairness that exist within the current scheme designs.
Richard Fuller
There is one other amendment, which I tabled in Committee, but which we did not push to a vote. Perhaps the shadow Minister can say whether he would be interested in having it proposed in another place. Constituents of mine in Bedford and Kempston are being asked to cough up to pay for the pensions of judges and others on salaries of £150,000. It seems particularly unfair that those on £24,000, which is the average income in Bedford—they are also on a pretty high tax rate—should be asked to contribute to a pension scheme for a judge who will retire on a pension that is two or three times larger than such an income. That has not been changed in the Bill so far. I was not sure in Committee whether the Labour party thought it was fair for my constituents to pay for judges’ pensions. Perhaps the shadow Minister can clarify whether he would like that amendment to be moved in another place.
Chris Leslie
We did not table any amendments on judicial pensions. I suspect that the question of relative taxpayer support for private pensions might come up tomorrow in the autumn statement. I am intrigued that hon. Members have castigated previous Governments for changes that have affected private sector schemes. It will be interesting to see what the effect will be on the sustainability of some of those pension pots, but we can only speculate at this stage and see what happens. However, this question is certainly of the moment. It is only a matter of hours before the Chancellor stands up and—undoubtedly—makes his announcement on pensions tax relief. We will see what happens at that point, but we felt that some significant proposals needed to be made.