Oral Answers to Questions

Richard Graham Excerpts

Tuesday 16th June 2015 Commons Chamber

[Mr Osborne]

I never thought that I would hear the Member for Kirkcaldy and Cowdenbeath admit that the gold was sold off at the wrong price—I welcome the hon. Gentleman to the House. With the Royal Bank of Scotland we have a serious decision to make: do we continue to believe that at some point we might get back the money that the previous Labour Government put in, or do we take the advice of the independent reports that have been commissioned, and of the Governor of the Bank of England, which is that now is the right time to start selling RBS, and indeed that that might stimulate a higher share price? Above all, it will help to support the British banking system. We have had countless questions in this House about the impact on small businesses of what went wrong at RBS. I think that as soon as we can get that business back into the private sector, the more we can support the general economy, and indeed give a great future for the RBS work force.

[Richard Graham (Gloucester) (Con)]

The Government’s support for more, better and higher apprenticeships has been critical to the halving of youth unemployment in Gloucester over the past year. The other side of the equation is making sure that work always pays, and many of us want to play a part in ensuring that that happens. Universal credit is the key. It will come to Gloucester later this summer. What does my right hon. Friend think will be the tangible and intangible benefits of seeing people able to work longer than 16 hours, increase their income and reduce welfare benefits?

[Mr Osborne]

My hon. Friend is absolutely right that universal credit, the major reform of our welfare system that will be widely felt in this Parliament, will create a very simple system in which people know that if they work that extra hour, they will be rewarded for it. That simplicity, and the fact that people can keep more of their income by working that extra hour, will be a powerful incentive that makes work pay.

Tax Avoidance (HSBC)

Richard Graham Excerpts

Monday 23rd February 2015 Commons Chamber

[Mr Osborne]

These abuses happened when there was a Labour Government in office. That Government, and the former Chancellor, set in place the selective prosecution policy. We have increased the resources and, as a result, the number of prosecutions has gone up fivefold. There is still one particular barrier, however, to the potential prosecution of HSBC Swiss if it is found to have committed a crime. That barrier is the agreement signed by the last Government with the French Government, and we are currently in negotiations with the French Government to unravel that terrible agreement. Then, our independent prosecuting authorities will see whether there are any cases to bring.

[Richard Graham (Gloucester) (Con)]

It has recently emerged that the Gloucestershire-based business Ecotricity lent its founder £4 million on seriously tax-advantageous terms. Does my right hon. Friend agree that there should be an investigation into whether the transactions between Ecotricity and Dale Vince represent aggressive tax avoidance? Does he also agree that it is possible that Labour has not carried out appropriate due diligence on what might otherwise look like a naked attempt at a thank-you for the £37 million of taxpayer subsidies given to Ecotricity’s onshore wind farm business?

[Mr Osborne]

I am not going to discuss an individual’s tax affairs, but I would say this: the hypocrisy of the Labour party on this issue is simply breathtaking. Labour Members complain about Conservative party donors and then we hear all these revelations about Labour party donors; they complain about individual accountancy firms and then it turns out that Labour collects hundreds of thousands of pounds of donations from those accountancy firms; and they complain about the alleged tax evasion at HSBC Swiss and every single one of those offences happened when Labour was in government. It is time Labour Members got up and apologised.

Tax Avoidance

Richard Graham Excerpts

Wednesday 11th February 2015 Commons Chamber

[Shabana Mahmood]

My hon. Friend makes a powerful point. I entirely agree with him, and it is something I shall come to later.

[Richard Graham (Gloucester) (Con)]

I am grateful to the shadow Minister for giving way; she has been generous in taking interventions.

I think that everyone in the House agrees that every company should pay the tax it owes. The hon. Member for Chesterfield (Toby Perkins) is right that it is not encouraging for companies that pay the right amount of tax when others do not, but Labour first talked about introducing a general anti-abuse rule in 1997. It has taken 16 years and this Government to introduce one. Does she not agree that it is this Government who are implementing steps to prevent serious avoidance?

[Shabana Mahmood]

I shall deal with the substantive thrust of that intervention when I come to the general anti-abuse rule later.

In the context of what has been happening on the Government’s watch in revelations to tax avoidance, we have now had the shocking revelations about HSBC. We now learn that the Government were handed information about malpractice at HSBC, and that one of their first acts was to make the then boss of the bank, Stephen Green, a lord and then a trade Minister. Richard Brooks, a former HMRC tax inspector and BBC reporter, has said that the Treasury and HMRC

“knew that there was a mass of evidence of tax evasion at the heart of HSBC”

in 2011, but that they

“simply washed their hands of it”—

a damning indictment, if ever there was one.

The consequences are clear. More than 1,100 individuals were identified as allegedly guilty of tax avoidance or evasion, but we are led to believe that in only one case was there sufficient evidence to prosecute. In November 2012, a senior HMRC official told The Times that the Government had adopted “a selective prosecution policy” towards cases related to HSBC. Later that month, HMRC told the Public Accounts Committee that another dozen criminal prosecutions were to follow. However, there have been none since. It seems that HMRC adopted a deliberate strategy to minimise the number of prosecutions, rather than pursue them, which explains why just £135 million has been recouped, which contrasts unfavourably with France, for example, which has prosecuted more cases and raised more money on the basis of fewer account files being handed over.

Oral Answers to Questions

Richard Graham Excerpts

Tuesday 27th January 2015 Commons Chamber

[Priti Patel]

Let us be clear. There are a couple of points I would like to make. The Government have shown that the only way to improve and increase living standards is by tackling head-on the country’s economic problems, which are down to the legacy of the previous Government, and by supporting those who do the right thing and aspire to work. I hope the hon. Lady welcomes the fact that in her constituency things have improved, with employment down substantially by 47% and youth unemployment down by 52%.

[Richard Graham (Gloucester) (Con)]

Tax credits have helped many people, but it is also true that some have been prevented from taking a promotion or a salary increase because they would lose more in taxpayer-funded benefits than they would gain from their employer. That has to be wrong. Does my hon. Friend agree that as universal credit is rolled out across the country, so we return to the crucial principle that work always pays? I am afraid that that got lost under the previous Government.

[Priti Patel]

My hon. Friend is absolutely right. He mentions the very important universal credit roll-out. As it rolls out—[Interruption.] It is already being rolled out, and it is going well. As it rolls out, more and more people will benefit. He is right to point out that this is about both the value of work and aspiration. We are the only party that stands for aspiration and value in work, and inspiring people to get off benefits and back into work.

Stamp Duty Land Tax

Richard Graham Excerpts

Thursday 4th December 2014 Commons Chamber

[Mr Gauke]

I am keen that this does not become a Hertfordshire-dominated debate, but let me thank my hon. Friend, who has been tireless in campaigning on this issue. Indeed, she attracted attention to it in an Adjournment debate earlier this year, expressing her views clearly. In particular, she made the case for helping those who want to get on to the housing ladder, and I know that is a big issue in her constituency, as it is in mine, where house prices are above the average. She has made some important points in this area.

[Richard Graham (Gloucester) (Con)]

rose—

[Mr Gauke]

In an attempt not to keep this debate restricted to Hertfordshire MPs, let me give way to my hon. Friend.

[Richard Graham]

I stand to speak on behalf of my constituents of Gloucester, providing the geographical diversity the Minister was seeking, where the average house price is about £165,000—considerably less than the national average of £275,000. So the vast majority of my constituents buying houses will benefit from either a zero rate of SDLT or the 2% rate he has mentioned. Does he agree that it would be helpful if the Treasury were able to provide information to all of us as to what the savings will be for our constituents, based on the average house price?

[Mr Gauke]

My hon. Friend raises an interesting and important point, and we could provide information on the basis of local authorities figures. What I can tell him is that in the Gloucester local authority area—I am not sure whether it is coterminous with his seat—more than 99% of those who pay SDLT will pay less as a consequence of these changes.

It is striking to note the diversity of commentators who have been positive. Estate agents, professional bodies and others have all shown support. The Royal Institution of Chartered Surveyors has called it a “long overdue” reform. The director-general of the Council of Mortgage Lenders said:

“This fundamental reform has been a long time coming...the vast majority of mortgaged transactions will benefit from lower tax as a result of this move.”

The Building Societies Association has welcomed the announcement. It said:

“It will help individuals and families buy their own home, and smooth out the crazy tax jumps buyers have suffered around the top of each band.”

This is a principled reform that exemplifies the Government’s commitment to a fairer and more efficient tax system.

The previous SDLT regime created distortions in the housing market, imposed perverse incentives and made it harder to get on and move up the property ladder, or indeed move down the property ladder for those wishing to downsize. This major and, as some have argued, overdue reform demonstrates that even in the past six months of this Parliament, we are a Government who are continuing to make radical change for the benefit of the British people.

We realise that this is a big change, even for those who will benefit at such a significant moment in their lives. We have ensured that the changes have been properly explained. Her Majesty’s Revenue and Customs has produced full guidance on the Government website, including a calculator that compares the old and the new systems. As of 9 am this morning, that calculator had been used almost 500,000 times, with no significant delays reported, showing the level of interest in this reform among the public. Critically, HMRC’s specialist call centre was manned until midnight last night when the changes took effect, and is open now. HMRC specialists responded to around 250 inquiries by telephone and all but 3% were resolved immediately, and the remaining handful are being followed up.

The Economy

Richard Graham Excerpts

Wednesday 26th November 2014 Commons Chamber

[Richard Harrington]

Just to correct the hon. Gentleman, some of the tube fares for areas outside London are set by the owner of the stations, London Midland, rather than by Transport for London. I know that he did not mean to mislead us on that point.

The shadow Minister claimed that working people are worse off today than they were under the magical mystery tour of the previous Labour Government. I am not sure where that claim comes from, but I imagine that he, like the shadow Chancellor, bases his statistics on the retail prices index, comparing it to wages, which most credible economic sources no longer use as an indicator because it does not include the huge increase in the personal allowance and tax cuts of £700 per person.

To get back to reality, when somebody who has been unemployed for a long time, or indeed who has never worked, gets a job, it will not necessarily be a highly paid one. If the hon. Gentleman accepted my invitation to come to Watford, he could visit the local jobcentre—he might be hoping that I will be enrolling there next May—and see that long-term unemployment has fallen by 44% and youth unemployment has halved. Nobody could say that those working people are worse off than they were before 2010.

[Richard Graham (Gloucester) (Con)]

My hon. Friend makes a powerful point about getting people back into work and about youth unemployment, which has also been halved in Gloucester. Does he agree that the rise of apprenticeships provides an important opportunity for young people to develop skills sets that will enable them to have a bright future? There are 5,000 new apprentices in Gloucester, and I have no doubt there are many more in Watford.

[Richard Harrington]

Indeed there are. I totally agree with my hon. Friend and am fully aware of all the work he has done on apprenticeships in his constituency.

When I started running jobs fairs in Watford in 2010—I hope that the shadow Minister is listening—70% of the 2,500 people who came were unemployed and were looking for a job; the others were already employed but were looking for a better job. Last year, 70% of the 4,000 people who came were already in employment and were looking for a better job. To take a Watfordian lesson from that, those people’s real wages will go up in the normal progress of things, now that, as a result of the long-term economic plan, the economy is beginning to move and people are getting back into employment.

The Opposition have set a national minimum wage target of £8 an hour by 2020. Perhaps I have misunderstood —I hope the shadow Minister will explain when he winds up the debate—but on current trends the national minimum wage will be more than £8.10 by 2020 anyway. I do not think he is pledging to cut the national minimum wage in 2020 if he is in government. I recently met Julia Unwin of the Joseph Rowntree Foundation and John Cridland, a former member of the Low Pay Commission, and in fact, they seemed to think that Governments planning to set a minimum wage target is exactly against what the Low Pay Commission does. When they explained to me how they calculate what the minimum wage should be, after negotiations with employers and all the different interested parties, they said that they really wanted the calculation to be taken outside of politics and that they were quite worried about the shadow ministerial team’s proposal.

I wish I had time to go through each point in this rather lengthy motion, but as my time will be up in five minutes—and, indeed, as there is an election in five months—I do not think that I have time to do the task justice. I will instead focus the rest of my remarks on some key points. The real raising people’s wages is not done directly by the Government. Governments do not set wages in quite the way the Opposition imply. What really matters is making available the types of jobs that people are trained to do.

One Government policy that has not been mentioned today, but which I think is directly relevant to the debate, is the founding of the university technical colleges, one of which was recently opened in Watford. The good thing about the UTCs is that half the curriculum is set and designed by local employers, so jobs are available in those fields. Hopefully, the children graduating from those schools—it is early days yet—in addition to getting the more formal academic qualifications, will be halfway into a job and not on the ground floor, because they will already have had years of training. In Watford’s case it would be in tourism and events management—Hilton Hotels is very much behind this—or in IT. They will not just be leaving school, looking for a job and getting in at the bottom.

I hope we all accept that the real problem is the skills shortage, which has been a problem since the second world war, if not before, so it has not been caused by a particular Government. The Education Act 1944 tried to do something about that, but it never seemed to happen. The UTCs might seem a small step, but they are an important way in which more children can get into the right kind of employment from an early age. I realise, of course, that on its own, that really is not enough.

The real way to raise living standards is by having long-term stability and confidence in the economy. It might seem strange to hear me quote Bill Clinton. I do not think he has been to Watford, but if he happens to pick up Hansard and see my offer to the shadow Minister, I would be happy to make exactly the same offer to him—it is just off the M1. [Interruption.] Indeed, Mr Clinton probably has not been to Nottingham either. His speech to the Democratic party’s 2012 national convention in Chicago is one of the best political speeches I have ever heard, apart from the Minister’s response to the shadow Minister today. He said—you will be delighted to hear that I will not attempt an American accent, Madam Deputy Speaker—something along these lines: “So let me get this clear. You all agree that the last guys screwed it up. You may think that the current guys have made slower progress than you had hoped and have not done all the things they said they would do. It hasn’t happened as quickly as they wanted it to. So the answer is to bring back the guys who screwed it up, right?” That thought, for me and my constituents, is a very important one.

We go from Bill Clinton in Chicago to the shadow Minister in Nottingham. If both of them had been to Watford and seen the reduction in long-term unemployment, the doubling of apprenticeships and the 400 new businesses that have been created since 2010, they might both have cause to pause for thought. I hope that will be borne in mind when the Opposition wind up the debate.

--- Later in debate ---

[Steve Brine (Winchester) (Con)]

It is a pleasure to follow the hon. Member for East Antrim (Sammy Wilson), who spoke passionately, as always.

I do not pretend to be one of the great economists of the House, but in my four and a half years as a constituency Member of Parliament, I have seen at first hand what a healing economy means in practice on the ground. Interestingly, the motion is all but silent on jobs, as other Members have mentioned. The shadow Chief Secretary referenced the 2010 autumn statement in his opening remarks. Strangely, he did not touch on the response that was given by the then shadow Chancellor, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), which predicted a “jobless recovery” in this country.

My constituency of Winchester has seen a 50% drop in the youth claimant count in the last 12 months and an overall fall of 64% in the number of people looking for work since April 2010, so when the Chancellor talks about hard-working families and people who do the right thing—the Prime Minister repeated those words today—I firmly recognise my constituents in what he says. Yes, Winchester is a wealthy place in relative terms: house prices are well above the national average and we have some high earners working in law, medicine and financial services. That is fuelled partly by our proximity to London and the City. However, there is another Winchester where the average wage is £26,000 per year and where every penny counts.

My constituents are not fooled by political rhetoric. They know what they have seen with their own eyes over recent years. They know that being in work, not so that they can enjoy an extravagant lifestyle where it is a disappointment if they do not ski at least twice a year, but so that they can live their lives and provide for their families, is what actually matters.

The fact that the Government have made it possible for Eastleigh borough council, Winchester city council and Hampshire county council, working together, to freeze council tax over the five-year period is a big deal to my constituents. It has saved about £1,000 for a family living in an average band D property in my constituency. The fact that the Government have frozen fuel duty has not gone unnoticed, either. That move has hit the bottom line of family finances, in a positive way, to the tune of some £570 for those who fill up an average family car once a week. My constituents also know what security in retirement means. Again, it does not mean having the means to spend half the year cruising the world, perhaps from nearby Southampton; it means being able to enjoy good health and to help their grandchildren with their swimming or ballet classes on a Saturday morning. They know that it is those things that really matter.

The working families I represent remember the last Government. They see that it is a Conservative Prime Minister, a Conservative Chancellor and a coalition Government who have raised the personal income tax allowance to £10,000. In my constituency, that means that about 40,000 people on lower and middle incomes are keeping more of their money in their pocket each month. As we know, a typical taxpayer saves about £800 a year under that policy.

The decent retired folk I represent in places such as Chandler’s Ford remember the last Government, with the 75p increase in pensions and the £5 billion a year raid on their pension pots, which was one of their first acts in office. More than ever, those constituents are not tricked by the sleight of hand of politicians in Westminster. They have seen this Government introduce the triple lock pension guarantee, they have seen the largest ever rise in the state pension and they have seen that those important universal pensioner benefits have been protected throughout the lifetime of the Parliament, exactly as we promised.

I spent a year working at the Department for Work and Pensions with my right hon. Friend the Secretary of State for Work and Pensions and our superb Lib Dem Pensions Minister. I know, as do the people I represent, that this is a Government of work and pensions. That is very important. The employment figures that I read out earlier represent real people’s lives. The youth claimant count is especially pleasing because, as well as representing many people with families who are at the same age and stage in life as me, I represent many young people. There is a thriving university in my constituency and there are thousands of young people who need a bit of help.

The “dinkys”—dual income, no kids yet—are benefiting big-time from a growing economy that is creating jobs for them to find and settle into. They have the most to lose if this country goes backwards again next year. They have aspirations, such as owning their own home, driving a nice car and being able to afford a season ticket down at Southampton—although that would not be my choice—and I do not resent them for that. I do not scoff or sneer at their ambition just because that is not what everyone can afford.

Those people, whom I represent, are well educated, global in their outlook and highly mobile. They love the fact that Winchester is now the self-employment capital of England, according to a recent study. It is a vibrant place, where start-ups are at a record high. Centres such as Basepoint in Winnall, which I opened early in my time as an MP, are full of new businesses that are bursting with energy. People commute to London when they have to, but they recognise that the city council has an ambition to reduce outward migration each day for work by keeping big companies, such as Denplan, in the city. They do not dismiss out of hand the redevelopment of Station approach in Winchester because they know that it will provide new commercial space so that employers can come to the city and provide new jobs.

[Richard Graham]

Does my hon. Friend agree, as a fellow cathedral city MP, that there is a huge amount that can be done on the ground to help the growth in his city? He has done a lot to make the cathedral city of Winchester come alive with markets and skating rinks around the cathedral. Similarly, there were 200,000 people at Gloucester Quays last weekend for the Victorian market. Those are all ways in which growth can appear in our constituencies, but they are not recognised by speakers such as the right hon. Member for Oldham West and Royton (Mr Meacher).

[Steve Brine]

Absolutely. We have such a positive go-ahead outlook in the Christmas city, which is how Winchester has branded itself. Judging by the number of people skating and shopping at the Christmas market, it is the Christmas city. I urge Members to come.

We might have had some fun with the Opposition motion, but I applaud them for putting the economy at the head of an Opposition day. I would argue that every Opposition day that they have called during this Parliament has been about the economy. In my constituency, Help to Buy has helped 65 families to buy a home and get themselves on the housing ladder, which is fantastic. School places were the biggest issue in my constituency when I became the Member of Parliament. Some £10.2 million of investment later, we have Hampshire’s first all-through school and new primary places. The local NHS in my constituency has an investment of £25 million coming down the line, which will bring world-class, 24-hour consultant cover for my constituents.

None of that, as the Prime Minister said today at Prime Minister’s Question Time, would be possible without a growing economy. That is what is at stake in our country next year. There is a pledge of much more to come because we will further raise the personal income tax allowance and change the 40p tax threshold if we are re-elected next year. Finally, Bill Clinton has been mentioned once today and here is something else that he said. When he was seeking re-election, he said, “What is our opponents’ case against us? It is that we’ve only cleared up half the mess they left behind.” We know how he felt.

Oral Answers to Questions

Richard Graham Excerpts

Tuesday 4th November 2014 Commons Chamber

[Mr Osborne]

The whole United Kingdom has had to make difficult decisions because we inherited a record budget deficit, but I am willing to work with councils in the north-east to see whether we can build on what we have achieved in Greater Manchester. There is real potential to do that and to make key investments in the infrastructure of the north-east. For example, I think there is a strong case for the A1 north of Newcastle to be dualled.

[Richard Graham (Gloucester) (Con)]

This Government’s support for apprenticeships has hugely helped the 40% drop in youth unemployment in Gloucester. Will my right hon. Friend confirm that the Government will continue to look constructively at new and innovative vocational schemes in sectors where there are jobs available—such as HGV drivers, haulage companies, and electroplaters for the Poeton company—but a shortage of skills at the moment?

[Mr Speaker]

Order. I try to get in as many Members as possible, but I think some colleagues have forgotten—or perhaps never learned—that topical questions are supposed to be shorter. Please do not abuse the process because you are spoiling it for other people.

Oral Answers to Questions

Richard Graham Excerpts

Thursday 3rd July 2014 Commons Chamber

[Nicky Morgan]

It is a very good question. There is no doubt that more progress is needed. Earlier this week I was at an event for the 30% Club, which has been campaigning for a voluntary business-led approach, started by Lord Davies, to get more women in particular on the boards of companies. Part of that is about working with executive search companies and asking the chairmen of companies to think differently about appointments. Often the traditional and expected route of a CV is not something that women or others, particularly from black and minority ethnic communities, can put forward. We need to broaden the way in which chairmen of boards, and the boards themselves, appoint new directors.

[Richard Graham (Gloucester) (Con)]

6. The rise and rise of women in business is boosting growth and opportunity across the country. We have an inspiring role model in Gloucester, in the first female editor of the Gloucester Citizen in its 138-year history, Jenny Eastwood. The chair of the Gloucestershire local enterprise partnership, Diane Savory, is one of only three female chairs of the 39 LEPS. Will my right hon. Friend join me in recognising their achievements, and in encouraging both Jenny and Diane to do even more to promote new female “Gloucesterpreneurs” like Sarah Churchill of the award-winning Artisan Kitchen?

[Nicky Morgan]

I congratulate my hon. Friend on coining the new word “Gloucesterpreneurs”, and I hope that he will campaign vigorously under that slogan over the next few months. I am happy to join him in congratulating Gloucestershire Media on its Women in Business awards. Through the work of the Minister for Cities—my right hon. Friend the Member for Tunbridge Wells (Greg Clark)—and the Deputy Prime Minister, the Government are focusing on regional growth, city deals and the power of local enterprise partnerships, and on encouraging growth outside London. That is why I am particularly pleased to hear about the new female entrepreneurs in Gloucester who have set up businesses during the past few years.

Amendment of the Law

Richard Graham Excerpts

Thursday 20th March 2014 Commons Chamber

[Vince Cable]

The hon. Gentleman has anticipated the point I was about to make. One of the really positive announcements the Chancellor made yesterday recognises the difficulties facing the energy-intensive industries. I am aware that the Alcan smelter closed. I was there; I talked to the management about it and they acknowledged that although energy prices in the UK were one factor in their decision, it was by no means the only one. However, our energy-intensive industries are crucially important and it is not clever for them to close and migrate overseas, as we then simply get carbon leakage and do not do anything to improve the environment. It is therefore very important that they are protected from the increased costs that result from green taxation. The interventions the Chancellor made yesterday, which are very radical and meet the concerns of the industry, primarily centre on the renewables obligations and the feed-in tariffs and giving the industry effective compensation for those costs. I shall now be pursuing that with the European Commission, trying to ensure we get state aid clearance. The feedback we have had this morning from the engineering employers and other manufacturers suggests they are satisfied that the Government have taken a radical step that overwhelmingly meets their concerns.

[Richard Graham (Gloucester) (Con)]

The Secretary of State is making powerful points about the importance of supporting manufacturing. Under the last Government, the city of Gloucester lost 6,000 jobs. We have created 2,500 jobs since this Government came in, quadrupled the number of apprenticeships and seen manufacturing increase in a way that has not happened for about 30 years. Does the Secretary of State agree that the Opposition simply do not understand what manufacturing needs, and that the doubling of the capital allowance is a huge step forward?

--- Later in debate ---

[Richard Graham (Gloucester) (Con)]

Yesterday we heard a Budget which, as The Sun put it, we can all cheer—but not quite all, because the response from the Leader of the Opposition was a litany of class warfare slogans, along with the line “You’re worse off under the Tories”, which, as The Sun rightly concluded, could convince only those with the memory of a goldfish. Today we had another goldfish to entertain us. The shadow Chancellor was more entertaining than his boss, but there was little danger of the truth interrupting his cracks; for he has form, and—whether we are talking about his claim of an end to boom and bust, his prediction of a triple dip, or the flatlining gesture that we saw for nearly three years—the truth has consistently been the opposite of what he says. So when he claimed there was nothing in this Budget to help with the cost of living, he only confirmed to everybody listening that there was, in fact, plenty, and that the statement was consistent with his role as the best reverse indicator in politics.

My constituents in Gloucester will have been absolutely delighted with another axing of Labour’s hated fuel escalator. Some 25 million people around the country will keep £800 more a year from their earnings and 1.5 million lower-income pensioners will not pay 10% tax on their first £5,000 of savings: these things make a difference.

The Opposition is off the mark not just on those changes, but also in their response to some of the smaller, but symbolic, steps, like the changes in bingo tax and the beer duty escalator. I am sure the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) supports his constituents who play bingo and recognises the social benefits of that, but can he explain to them why his Government taxed bingo more than any other form of gambling throughout their 13 years in office?

The shadow Chancellor derided the cut in beer duty. I invite him to come to the second Gloucester beer festival on 4 April this year. The Gloucester brewery was created three years ago; for all 13 years of the Labour Government we did not have a brewery at all, but we do now. Let him come and meet the beer lovers in Gloucester and try to convince them we should get back on to his hated beer duty escalator.

The truth, too, is that we know what manufacturing needs, whereas under the previous Government manufacturing halved. My city, the city of Gloucester, has always made things. We have always manufactured, but manufacturing was the main loser when we lost 6,000 private sector jobs under the previous Government. Between 1997 and 2010 the number of apprentices went down so sharply that by the time of the change of Government there were only 25 people going into Gloucestershire engineering training. Today the figure is more than four times greater.

The changes in the carbon pricing for heavy energy users and the extension and doubling of capital allowances to £500,000 a year are incredibly important to a city such as Gloucester, because our engineering is close to capacity and it needs the stimulus to invest and the opportunity to expand and to grow. If it gets that, it will go on creating more jobs and more opportunities for the young people of my city. Already the numbers of new apprentice starts are four times higher than in 2009-10. This is not about cost of living in terms of energy prices miraculously suddenly being halved; it is about cost of living in terms of the opportunities for young people.

The shadow Chancellor recently came to Gloucester. He did not stay for long and he did not visit a business—he certainly did not visit a manufacturing company and see the transformation that has taken place in that sector over the past four years—but he did make a speech to Labour party members and he spoke briefly to the press afterwards, telling them he was deeply concerned about the rate of youth unemployment in Gloucester. In one respect he was correct in saying that because we always need to do more—we must go on bringing it down—but actually the figures have come down sharply and are some 25% lower than they were at the last general election. Youth unemployment is coming down and will go on coming down.

Today we have been discussing a Budget for people who make things, and in a city that makes things, such as Gloucester, that is good news indeed.

--- Later in debate ---

[Mr Ellwood]

Again, my hon. Friend makes a valid point.

Finally, I come to the deficit, and how much the Government must borrow to balance the books. The OBR predicts that the deficit will continue to fall. We should remind the Opposition that when they took office in 1997, they inherited a sound economy. Up to 2002, the Labour Government made a surplus. Then the wheels came off, one by one. By 2004, the deficit was up to £33 billion, by 2008-09, it had increased to £69 billion, and in their final year of office, they had to borrow £156 billion to balance the books. Thankfully, a change in Government brought in a new economic strategy and our deficit has reduced to £108 billion this year, which will drop to £95 billion next year. If we stick to this economic plan, we will balance the books by 2018.

Of course, productivity, exports and savings figures are not what they should be, and the Budget addresses that. Time is limited and I cannot go into the details, but I welcome greater incentives.

[Richard Graham]

Does my hon. Friend agree that the remarks from the shadow Chancellor earlier, and indeed some of his colleagues, about the long-term unemployment situation, are important, but only as a proportion of the total unemployment rate in our constituencies, which has come down sharply in most cases since the last election? Those who are long-term unemployed were often not very well educated under the previous Government.

Annuities for Pensioners

Richard Graham Excerpts

Tuesday 7th January 2014 Westminster Hall

[Richard Graham (Gloucester) (Con)]

Today we are covering a subject that in many ways is both dull and important. “Annuity” is a difficult word, which lacks a simple definition, and it is not something that a man or woman under the age of 50 would wisely bring up in discussion with friends. However, 400,000 people this year will buy an annuity. That figure will grow substantially over the years, and anything that affects such a large percentage of our country’s population is therefore worthy of the first Westminster Hall debate in 2014. Annuities are dull, but important, and absolutely ripe for review and improvement. It is therefore timely that Mr Speaker has chosen the subject for the first Westminster Hall debate of the year, and it is a pleasure to participate in it under your chairmanship, Mr Dobbin.

I will first outline annuities and their market as it is at the moment, who buys them, for whom they are best and least suited, and whether we need them, before looking at specific issues raised by recent investigations and considering what more might be done to improve the world of annuities. Historically, pension structures have required individuals to bring certainty to our savings, effectively by exchanging whatever pool of savings we have for known income, by drawing an annuity or by having income draw-down—two technical terms already, which are perhaps better described as “income for life”. That is what an annuity was designed to deliver, and it is derived from a complex calculation that involves bond yields, longevity and charges. In due course, I will return to discuss the last especially.

The concept of an annuity is relatively simple: to provide older people with the certainty of knowing what their income will be in an otherwise uncertain world of costs and, perhaps, care. In a world of defined-benefit pensions, we had such certainty, but that world—outside the public sector—is going fast, so certainty of income is a bigger issue than it was, and in today’s world many people are searching for it. We might therefore imagine that an annuity is the product for today. As auto-enrolment expands, reaching about 8 million new pension savers, net of opt-outs, the number of new annuity customers will surely grow. It will be a slow burn, because most of those auto-enrolling over the next few years will not reach annuity-type age for some decades, but eventually the figure used in the media—the number of annuity customers doubling—will be reached. As a result, instead of more than 1,000 new customers a day in 2014, before long there will be 2,000 new buyers of annuities every day.

The annuities market will therefore soon have 500,000 customers a year, predominantly in their 60s and 70s, making what for most will be the second most important financial decision of their life—the first being their home. As Ros Altmann has pointed out, as things stand with an annuity, unlike buying a home, there is no going back: someone buys it and that’s it—no change, no transfer, no flexibility and no equivalent of renting out, moving on, selling or downsizing. An annuity therefore best suits customers who know exactly what they are looking for—because they are well versed in the language of annuities, such as open-market options, enhanced annuities or comparisons with income draw-downs—and perhaps already have a defined benefit pension and are looking to convert a smaller defined contribution pot, which is a modest percentage of their total savings.

Such customers use the comparison tables of the office of the Pensions Advisory Service, provided by the Money Advice Service. They shop around for alternatives offered by online and household-name providers. They know that they will keep the same wife, husband or partner for ever, that they will live long enough for the income draw-down to exceed the capital exchanged and the commission charges, and that, ideally, both partners will exceed the lifespan expectations of their current health and the geography of where they live—alternatively, perhaps they will buy their annuity in a poor city and thereafter move to an idyllic village where people live longer. Such a customer should do well in the current world of annuities. Unfortunately, he or she is as exotic and rare as a sacred ibis on the banks of the river Severn in my constituency.

[Alun Cairns (Vale of Glamorgan) (Con)]

I pay tribute to my hon. Friend for securing the debate and for the way in which he is presenting it. He rightly highlights the fact that the transaction is extremely complicated—that is exceptionally important—and he has used a range of phrases that are commonplace to financial advisers, but not necessarily understood by the clients. Does he accept that the retail distribution review, although perhaps painful in the short term, will deliver significant benefits over the longer term, but that the charging structure and the change in the culture might well put some people off seeking advice for annuities, thereby making this extremely complex transaction far more difficult for the average punter to decide on?

[Richard Graham]

My hon. Friend has spent a lot of time working in the sector and knows the issues well. He is absolutely right to highlight the unintended consequence of the retail distribution review, which in a sense is to put people off the idea of buying up-front advice on a complex product such as an annuity. For those who have a relatively small pot of savings, such as £20,000, £30,000 or £40,000—a lot of money for some people—the idea of paying £400 or £500 for advice is not attractive. My hon. Friend is right to highlight that, because it is one of the issues.

I drew attention to the perfect customer for an annuity; let me now give the other side of the coin. By contrast is the customer who is told by the provider of their direct contribution pension—his or her only modest source of savings—that they need an annuity, has no idea what an annuity is and asks the pensions provider what they can offer; who has no idea whether that offer is good, bad or indifferent, goes for the cheaper of the options available, probably leaving out any cover for his or her partner and certainly any provision for inflation, and forgets to mention perhaps a hereditary heart weakness; and who moves from a suburb to the inner city to be closer to shops and a hospital, lives for a few years and then dies, having drawn only a small percentage of income from a capital sum that has now disappeared, leaving their wife, husband or partner on the state pension. For what purpose did he or she save?

With longevity the way it is, we might argue that such a customer scarcely exists, as we would all hope, but the reality is that some of his or her characteristics are a reality—as the Pensions Advisory Service has confirmed—especially in the understanding of what they are buying. Ros Altmann has estimated that insurers will often keep between half and three quarters of a pension fund they take over and convert it into an annuity.

I did a quick reality check on the word “annuity” in a Gloucester pub last weekend. Of the 22 people I asked, six said it was a financial thing like a pension, one of those said it gave income and most of the rest said they had no idea. I accept that it was a bad weekend for Gloucester rugby, and trying to discuss annuities in a pub was pushing my luck, but I do not believe that the people of Britain know what an annuity is or that the average response would be any different. Why is an annuity useful? Do people have to have one? The answer is no. How do they go about getting one? An annuity is potentially the second biggest financial purchase of our lives, so the current state of information about them is worrying.

In any market that size—£12 billion a year is big—if a customer feels that he or she has to buy something but does not really know what it is, the definition of good value is elusive. Customers need a lot of knowledge to pick the right product and the market is dominated by a handful of big names, so there is a danger of high charges, a lack of transparency and inadequate protection. The annuities market more than lives up to all those risks. I rang the Pensions Advisory Service yesterday to get some initial advice—just one man in his 50s ringing in to ask questions about annuities. I got good general advice on a whole number of issues, but when I asked about charges, I was told confidently, “You will never be able to work out what the charges are.” I asked the helpful adviser whether he thought that was right. “Not for me to say,” he replied, which was fair enough. However, it is right for hon. Members to raise and challenge the situation on behalf of our constituents, who ought to know what they are being charged for a product as important as an annuity.

Almost 20,000 of my constituents in Gloucester are between 50 and 64. For all of those people, some understanding of annuities would be useful. It is not good enough to have a product for which people will simply never know the charges. The situation for annuities sits oddly beside that for their stepbrother or sister, the pension. Huge efforts are being made to clarify, and make as simple as possible, all the costs and charges for pensions; to estimate a management fee that is neither rapacious nor drives investment managers to the lowest common denominator; and, above all, to make charges transparent to the client. The status quo is tantamount to an insurance firm—everyone is under the same roof, in the same organisation—saying, “Right, over here is a team of investment managers managing pensions: you need to be squeaky clean, work out all the costs and charges and report them completely. Your margins will be tight. Over here, in this corner, we have the annuities guys: your pricing is roughly what you want it to be, and there is no need to explain or declare anything.” That has to be wrong. When such efforts are being made to ensure transparency about money coming into a pension, it is especially strange that, at the moment, the system does so little for moneys coming out of a pension and into an annuity.

For today’s debate, we have the benefit of the detailed investigations by the Financial Conduct Authority’s consumer panel and The Daily Telegraph. The latter found that differences between annuities offered amounted to as much as £1,444 a year on a pot of £100,000. The FCA’s consumer panel found that commission charges vary by up to £1,000, which might, for the cynical, explain why the industry is so shy when it comes to explaining what the charges are.

The FCA found in general that the industry was “very dysfunctional”, with “possible exploitative pricing”—up to 6% of a customer’s pot could go in commission. In a rebuke to any of us who thought that the answer might simply be to provide more information, the consumer panel found that customers are put off by the mountain of jargon and “information overload”. Frankly, I am irresistibly reminded of the endowment mortgage I was obliged to buy in the 1980s: however it was explained, it was absolute gobbledegook, and there were high commissions, often from one insurer to another. The consumer panel found that 3.5% commission for an introduction from Zurich to Legal & General seemed to be the going rate for annuities today. In the 1980s, if someone wanted to buy a house, they had to have an endowment mortgage. Later on, of course, the fabulous projected investment returns did not materialise, the mis-selling was investigated, fines were levied, the product was binned and the financial sector moved on. Will we see a repeat of that?

I chaired a seminar recently on annuities and asked the Association of British Insurers whether there was a danger of any of its members being sued for mis-selling. There was a long pause before the answer came: “Not yet.” It is therefore not surprising that the FCA consumer panel has recommended urgent regulatory and Government-led reforms to protect and benefit millions of our constituents.

I will turn now to what changes have already been made, and then move on to what could or perhaps should be done next. I start by recognising what the Government have already done. Some of the changes made by the Treasury should have been made a decade ago. For example, it has removed the default retirement age and the effective requirement to purchase an annuity by the age of 75. That is a vital change: it means people no longer have to buy an annuity, and, if they do not, they can take 25% of their savings tax-free and draw an income from the rest. That is a serious option for many people. The starting point of a debate on annuities for every individual should always be whether an annuity will be useful and helpful to them, and what the alternatives are.

There have also been changes to the capped draw-down rules—more jargon, I am afraid, but those rules have been reformed, and that matters within the sector. The Treasury has also encouraged the ABI’s new code of conduct for retirement choices, which has come into play and has made modest steps forward on explanations and general advice, but I do not believe that that is enough. At the same time, the Department for Work and Pensions has promoted open market options and obliged DC schemes to provide what it calls a “wake-up pack” of information, pre-retirement.

[Heather Wheeler (South Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Dobbin. On that point, when people previously received their packs on coming up to retirement, there was every chance that there would have been a standard form in the pack from a chosen insurer detailing a chosen product. That has now gone, and people are given a form listing their options and saying where they need to go for each. That is a great step forward.

[Richard Graham]

My hon. Friend is knowledgeable and absolutely right to highlight that all ways of giving people more options and widening the market to give them choice must be steps in the right direction.

The changes that the Treasury has made do not in themselves answer the nub of the issue, as highlighted so well by the FCA consumer panel. The uncomfortable truth remains that very few people understand annuities or make the informed choices that increased choice should enable them to make. They do not understand what they are buying or whether it is the right product for them, and they have no idea what charges are being levied and whether they are appropriate. As the consumer panel concluded, much more needs to be done. The fundamental issues that I flagged up at the beginning of the debate remain unresolved. An annuity is still something that is bought once and that lasts for ever; however, the circumstances of the buyer might change.

I will finish by touching on some of the issues that could and should be addressed. I do not want to make too much of the structure of the market, but it would be interesting to hear the Minister’s views. In a way, an annuity is an offshoot of the pensions sector—it is what happens after a pension—but because it is provided by the insurance sector, it is regulated by regulators that are ultimately responsible to the Treasury. The Pensions Advisory Service is DWP funded; the Money Advice Service is separately funded, and the appointments of its chairman and chief executive are approved by the Treasury, but it is answerable for its strategy to the Department for Business, Innovation and Skills. There is therefore a sense of different advice being offered by different agencies that are responsible to different Departments. That situation does not seem wholly satisfactory to me. It is interesting that the Opposition have today chosen to put up their pensions spokesman rather than someone from their Treasury team.

There is the structural issue of how annuities are regulated and whether the gap between increasing regulation on the pension side, especially in the context of defined contributions and auto-enrolment, could be mirrored by more regulation on the annuities side. I hope that the DWP’s consultation on charges will also shed light on the charges on annuities. Perhaps the Treasury will be able to absorb that when the FCA investigation gets under way.

The broader issues remain, and the nub of the problem is that annuities are unchangeable and inflexible. It is well worth considering the suggestion floated in The Sunday Telegraph by the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb)—that annuities might be changeable when circumstances change, so that they become more like mortgages that may be fixed for a period and thereafter traded or renewed.

A couple of hon. Members have highlighted advice. There is a strong case for believing that annuity brokers are not adding value for customers and that hidden commission should be revealed and consideration given to whether it is appropriate. More specific advice should be offered. When someone rings the Pensions Advisory Service to talk about annuities, they are told straight away that the service cannot discuss an individual’s specific circumstances and cannot access information about their pension or anything else. The advice, although good, is generic, but specific advice about people’s individual situations is most needed and least available.

[Heather Wheeler]

I am delighted that my hon. Friend called today’s debate because I have received a letter from a constituent, Mr Tejpal Singh of Stenson Fields, who asked me to ensure that the House had a debate on annuities, so a new year resolution has been kept. Mr Singh’s point was that people were given specific advice to save and were given to understand that when they took out an annuity at a specific age, the return would be £10,000 or £7,500 a year, but they are lucky to get £4,000 or even £3,000 now. That is difficult for people who have done the right thing on this important cost-of-living issue, but then the market has collapsed. I wonder whether the advice that my hon. Friend is referring to could help with that.

[Jim Dobbin (in the Chair)]

Order. Interventions should be short.

[Richard Graham]

I am grateful to my hon. Friend, who raises an important point. There is no doubt that annuity rates have dropped sharply from 10% to 5% over the last few years. Rather like charges on pensions and on investment management generally, it is only when a market becomes more difficult that it becomes more important to shine a light on charges and commission structures, because they become a much higher part of the total cost. If someone’s significant pension pot does not generate a significant income, they want to know where the money is going. My hon. Friend is absolutely right to raise that issue, which has propelled the annuities issue on to the front pages of newspapers from the business and financial sections.

I must sound a warning to the Opposition. We have heard from them over the last few weeks and months a sudden and dramatic cry that something must be done urgently. That rather prompts the question why they did so little during their long 13 years in office, with almost as many pensions Ministers. Some of the issues have been around for a long time. I am pleased that the FCA took up the issue of annuities relatively soon after its birth, put its consumer panel on the case and has now come up with research showing, I think without further question, that the annuities market is not working satisfactorily.

I want to make three points to clarify the matter. First, the annuities market is no longer working for many people in this country. It needs to be reformed, and if that is to be useful, it should be welcomed by everyone in the industry; otherwise, annuities will have no real role in future financial planning. Secondly, the opaqueness of the market stands in stark contrast with the increasing amount of light in the pensions industry as a whole and is therefore more of an anomaly than it was. Thirdly, the reports now coming in from regulatory bodies provide the Government with a wonderful opportunity to do something that millions of people throughout the country would be grateful for and reform an imperfect market so that it works much more effectively than at present. It falls to our Government to have that opportunity, and I hope we will seize it in the remaining 18 months of this Parliament.

--- Later in debate ---

[David Mowat]

That is absolutely the point that I am making. It is not a free market, and it behoves Government to do more than they have done so far to get it right.

One approach is to try to make the market work better—that was the subject of some of the points that have been made already. The other way of dealing with it is more dramatic. I believe it is reasonable that the Government think very hard and seriously about providing products that would compete in the market with the industry guys, because, in any event, the principal thing that annuity providers do is match Government bonds. One reason why QE has been an issue is that the industry is buying Government bonds in order to match income and liability. It is a classic middleman thing. It is entirely reasonable for the Government—a Government of either complexion—to look long and hard at that suggestion. I believe that will happen, because we cannot continue with the market abuse that has occurred over the past two decades.

[Richard Graham]

My hon. Friend makes an interesting point on which we will no doubt hear more from the Opposition spokesman, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont). Does my hon. Friend really believe that nationalisation of the annuities sector is in the overall interest of large numbers of taxpayers, who will in effect see the risk for their product transferred to them?

[David Mowat]

The point that has been made, I think, is that that risk is currently with the annuity providers; that seems to be the implications of that point. If that is my hon. Friend’s belief, it would be reasonable to say that their profits should be transparent, understood and not abusive.

[Richard Graham]

Does my hon. Friend not see that that is precisely the argument for reform? The case I have made is that the opportunity is there. The initial research by the consumer panel provides enough light to justify a more detailed investigation, which is happening. The Government can then make decisions to reform the industry. The mortgage sector was reformed, but the Government are not providing the country’s mortgages.

[David Mowat]

My hon. Friend is right that the Government do not provide mortgages, but they do provide people with interest rate products. There is an analogy with annuities, which are an extremely important transaction. In any event, the industry is an artificial one, because it is driven, as I have said, by tax relief. Annuities are not optional—we can draw down, but, broadly speaking, until very recently, everybody has had to buy an annuity.

By the way, I did not advocate nationalisation. I am advocating that the Government offer a product. They can compete with the existing market, rather like the National Employment Savings Trust competes with the existing market. That is not nationalisation. If the existing market is pricing things in a certain way and making very clever decisions on longevity and actuarial things and so on, it will win, and so be it; good luck to it. However, I suspect that that may not be the case. We must bring trust back. I agree that it is important to make the market work. I floated the point about national insurance because I think that that proposal will have to happen, but I also think that there are a number of things we could do to make the market work better.

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[Gregg McClymont]

The hon. Gentleman referred to the Turner commission. The thrust of its conclusions—and, indeed, of the auto-enrolment pensions policy pursued by the previous Labour Government and the current Government—was that inertia is a fact of pensions markets. Auto-enrolment is an attempt to use inertia for the good of the public and the consumer. That is the basis on which pensions policy is developing under the pensions Minister—a process that began under the previous Labour Government.

There is a massive lack of engagement and involvement in pensions. Leaving aside the ABI, there is general recognition in the pensions world that the open market option is simply not going to do the job. That is the thrust of the FCA consumer report, which has been mentioned several times. Having looked at the matter closely over two years, and based on the Turner commission consensus, which we wish to maintain, I am prepared to say that inertia in the annuities market is a reality that leads to excess profits. That is not only my description, but the description given by the pensions Minister, who said in a recent television documentary that excess profits were being made by insurers, which is a product of inertia.

[Richard Graham]

The interesting point about inertia is that that is precisely the context in which I recommended that a change be considered to the current requirement for an individual to buy an annuity for life, whatever their circumstances or however those circumstances change. That crucial change would affect the inertia about which the hon. Gentleman is concerned, because it would enable people to reconsider and change their annuity if circumstances demanded that. Does he agree?

[Gregg McClymont]

No, I do not agree. The problem in the market is that people do not shop around, but the hon. Gentleman suggests that we should solve that problem by creating an even more complex product, in which people will magically start to engage in trading and moving from one annuity to another.

[Richard Graham]

Will the hon. Gentleman give way?

[Gregg McClymont]

No, let me continue. It is simply not feasible or credible. The idea of tradable annuities is a non-starter, and I will set out the response to it from across the industry. Phil Loney from Royal London said they had not been thought through by the Minister. Mark Wood from JLT Employee Benefits described it as misleading to compare annuities to mortgages. Tom McPhail, who is present in the Public Gallery, said that the Government

“should not try to invent products which…aren’t likely to be…value for money.”

The Actuary magazine described the wider response from the industry as “scathing”. The idea is a non-starter.

[Richard Graham]

Will the hon. Gentleman give way?

[Gregg McClymont]

We have heard from the hon. Gentleman, who gave a long and interesting speech, and it is now my duty to respond. I shall make a little more progress and then I will let him back in. He diagnosed the problem effectively, but provided no solution. The airy-fairy, half-baked suggestion that we should think about tradable annuities does not deal with the reality, which more than one Conservative Member has set out this morning, that hundreds of thousands of people are annuitising every year, right now. What are the Government doing about that now, in real time?

Interestingly, the hon. Member for Gloucester diagnosed the problem very well, and understood that transparency will not solve it. The solution cannot be based on a utopian hope for greater individual engagement; it must be like what the OFT report did more widely for pensions. The demand side—the buy side—is too weak; how can we strengthen consumer weight or consumers’ ability to get a good deal? My view is that although individual engagement is a good thing, and anything that encourages it should be welcomed, it will not solve the problem, given that inertia is a central fact of the pensions marketplace.

The Opposition tabled a sensible amendment to the Pensions Bill which would at least have begun to tackle the problem, by ensuring that in the existing market—in the real world, right now—those who annuitise would get access to properly regulated, independent brokerage. That is not a panacea, but it is a reasonable starting point. It bears positive comparison with the Government’s lack of action. They have done nothing on annuities; there are no clauses about them in the Pensions Bill. That may or may not be an indictment of Government policy. No one says that the problem can be solved overnight, but surely an amendment of the kind tabled by Labour is a reasonable starting point.

More widely, the only answer is more purchasing power on the side of the consumer. That means we need to move to mandatory independent brokering, ideally in-house rather than external. [Interruption.] The hon. Member for South Derbyshire (Heather Wheeler) looks puzzled. In 2012, the National Association of Pension Funds, which is represented in the Public Gallery, rightly suggested that the annuity-buying process should be part of a pension scheme—that goes to the point that building up a pension pot is entirely part of the same process as producing an income at the end. Pension schemes should have a role in providing annuity brokering advice—that is what I mean by “in-house”.

Of course, that leads us into the argument about pension schemes being big enough for that to happen. I know that the hon. Member for Gloucester is aware, although it was not mentioned in the debate, that the market is fragmented. There are hundreds of thousands of pension schemes, but the providers of annuities are four or five insurance companies and three or four specialists. It is worth asking why market entrants do not emerge to compete with the giants. It is probably to do with the amount of capital needed, and the fact that on the insurer side it is possible to cross-subsidise products, because of being involved during the phase of building up the pension pot, as well as in the creation of a retirement income at the end. We need pension schemes to be involved as a matter of course in ensuring that their members get the best possible annuity at the end of the saving process. That seems a sensible way to proceed.

The hon. Member for Warrington South, who has done doughty work in the area we are debating, suggested that there should be a Government-backed annuity provider, and the hon. Member for Gloucester intervened and said that that was nationalisation. If it is, then so is the National Employment Savings Trust, which the Government support. NEST is a Government-backed scheme intended to bring down the benchmark for charges during the phase of building up a pension pot, and it has been very successful. That is not nationalisation, and nor is the suggestion of the hon. Member for Warrington South.

[Richard Graham]

The hon. Gentleman’s earlier reluctance to give way is uncharacteristic, especially as 45 minutes were left in the debate for Front-Bench spokesmen. He has two or three times confused issues, especially on my exchange with my hon. Friend the Member for Warrington South about nationalisation. My hon. Friend clarified that and explained that he was looking for participation in the market, not domination of it. Members on both sides of the House have an opportunity today to express their views and reach a consensus; the review by the Financial Conduct Authority and the consultation by the Department for Work and Pensions provide an opportunity for the House to move forward on an issue of concern to all our constituents. Does the hon. Gentleman agree? He should surely reach for consensus, not political division.

[Jim Dobbin (in the Chair)]

Order. I remind hon. Members that interventions should be short.

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[Mr Gauke]

I suspect that my hon. Friend will not be surprised to learn that I am not inclined to be drawn into specifying what I believe is a reasonable charge for an annuity. What I will say to him—I will expand on this in a moment—is that we want to ensure that the annuities market works. We want to ensure that there are competitive pressures in that market. In the light of the consultation that we have undertaken on pension charges, the work undertaken by the FCA and the analysis of the evidence that has already emerged on the ABI code of conduct and so on, we want to ensure that the spotlight remains on the market, so that we do everything we can to ensure that it works effectively for consumers.

We are committed to ensuring that consumers have access to retirement income options that provide a reliable and decent income throughout retirement. That is an agenda to which ministerial colleagues in the Treasury and the Department for Work and Pensions and I are committed. We are working together to ensure that consumers have appropriate options, value for money and support when they come to turn their hard-earned pension savings into a retirement income. As the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), who has responsibility for pensions, has recently suggested,reforms will be considered in the context of that work. That is why the Treasury and the DWP are currently considering the broad range of research and evidence on decumulation and how the market is working—to explore the impacts and interactions between market and consumer behaviour and Government policy.

I thank my hon. Friend the Member for Gloucester for securing and opening this debate. It has allowed us to discuss important annuities issues that are crucial for consumers if they are to secure the best from their savings at retirement.

[Richard Graham]

Will the Minister give way?

[Mr Gauke]

I will certainly give way to my hon. Friend—I can assure him that I am not about to conclude my remarks in the next sentence or two.

[Richard Graham]

I will be very brief, and I am grateful to my hon. Friend for his very measured reply to the debate. When the FCA review is published and when the ABI one-year review of the code of conduct comes out, the Treasury—as the Minister was saying—will look closely at how well the market is working. Just so we can be absolutely clear, if there is evidence that it is not working as well as it should and that there are hidden commissions, unnecessary charges and all the rest of it, will they be taken into consideration and reviewed and changed if need be?

[Mr Gauke]

Let me put it this way: the industry, the Government, the regulator and consumers all have roles to play in ensuring that consumers get the best deal. So far, action by the Government, the industry and the regulator has focused on ensuring that the market works more effectively to ensure that consumers shop around; identifying conduct risks that prevent them from doing so; and ensuring that they have the right tools and information to make informed choices and provide competitive pressure on the market. However, as I said earlier, those measures are only as effective as the changes they bring about, and they should not stop here.

The Government look forward to the results of the ABI’s evaluation of the effectiveness of its code, and to the FCA’s findings following its thematic review of the market and how consumers are being treated. They will complement the Government’s review of the evidence on how the market is operating and whether improvements are necessary. However, to answer directly the question put by my hon. Friend, the Government are serious about ensuring that the action already under way has a clear and positive impact. We have not ruled out further action in future.