Equitable Life
Robert Neill Excerpts(9 years, 7 months ago)
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Robert Neill (Bromley and Chislehurst) (Con)
I, too, congratulate the hon. Members who secured the debate. Like my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton), I have signed the pledge. This is not a phrase that often falls from my lips, but that was the right thing to do under those circumstances and it is right for Governments to keep their pledges. I know that there are constraints in Government and having served as a member of this Government I am conscious of the economic pressures, and I understand the point made by the hon. Member for Coventry North West (Mr Robinson) about the fact that periodically civil servants come to Ministers with rather convenient escape clauses, but the job of Ministers is sometimes not to accept such escape clauses.
I am speaking on the basis that this is a Government who are committed to markets and to stability and confidence in our markets. I believe in that. The financial services sector and insurance sector are a critical part of our markets. I speak as secretary of the all-party parliamentary group on wholesale financial markets and services. For the markets to work efficiently, there must be proper and secure regulation and when there is a failure in regulation there must be genuine certainty of recompense to those who have done no wrong, because otherwise honest and sensible investment is deterred. That is the risk if we do not do justice to the Equitable Life policyholders. What message would that send? We all say that it is right to invest prudently and wisely for one’s future and any such message would be against the philosophy of my Government and, I hope, against the philosophy of any responsible Government. In the long-term, it is in the interests of good economics and good financial planning that we do justice to the Equitable Life policyholders.
The motion is sensibly and moderately phrased. We are not saying that everything can be done at once, but that in the course of the Parliament this ought to be done. It might be that the proposal made by the hon. Member for Coventry North West is part of that. I will not be tied to an exact time frame, but it is particularly important that the oldest—the pre-1992 people—are given priority. It is also important to recognise that although the Government are picking up something that did not happen on their watch, part of being in government is that one has to deal with the consequences of what one inherits and has to do so fairly. Happily, thanks to the policies of this Government, the economy is improving. It is not unreasonable against that background to expect those people who have made a sacrifice, in that their fair recompense has been delayed, to share some of the fruits of that economic recovery.
Mr Robinson
I know that the hon. Gentleman did not mean to interject any sort of difference between party or Government, but what he said was not right. The lack of regulation and the failure of the policies happened under a Conservative Government’s watch. We must get away from mentioning Governments, as this affects all parties and all Governments over the period of the failure.
Robert Neill
I am sorry to disagree with the hon. Gentleman, but he misunderstands what I was saying. Regardless of party, there is an obligation on Government, and I must say that the 13 years for which there was a Government of which he was a distinguished member cannot be entirely ignored. We all must pick up what we inherit from our predecessors, of whatever party, and we must put them right. That is the key and that is why I agree that having done the history we need to move on and find a sensible way forward.
Stephen Lloyd
One of our profound frustrations was that the ombudsman made the ruling under the previous Government, which was sitting on a heck of a lot more money than this Government.
Robert Neill
My hon. Friend makes an entirely fair point. This should all have been sorted out before the Government came on to the scene. The question of who was to blame and why ultimately requires almost a Crichel Down sort of approach—we must all accept responsibility for what happens under regulators who were not politicians. We must accept that it was done and must now resolve it. Had it been resolved sooner, there might have been more money around to deal with the issue. However, given where we are now and that the economy is improving, we can certainly do justice to people through a sensible series of staged payments, starting with those who are in the greatest need and who are most vulnerable. It is reasonable to ensure in the course of the Parliament that proper justice is done.
Let me give a sense of the impact on individuals. I have one constituent who makes the point that having invested sensibly his income has effectively been cut by some £20,000 a year. To a pensioner, that is an awful lot of money and they have had to downsize from their long-established family home. Another constituent has an acknowledged loss of £61,000 and is some £47,000 adrift with the payments out. That is not fair for somebody who has worked hard and is now in no position to supplement their income for the future.
Another very elderly gentleman had to wait some 18 months—because, frankly, of ineptitude and lost correspondence—to even receive acknowledgement of his entitlement. He should not have to come to his Member of Parliament to escalate these matters. That is something that any sensible and well-run compensation scheme should deal with as a matter of course. I am sure we all hope eventually to overcome the difficulties for our constituents, but they should not be happening in the first place.
Geoffrey Clifton-Brown
I am sorry to reiterate the point I made in an earlier intervention, but one member of the group of people who came to see me was elderly and, if he dies, his widow will get only 50% of the 22% he is entitled to, which is already pretty measly. Is it not incumbent on the Government to make payments now, in full, so that at least people can have that small amount of money to pass on to their dependants?
Robert Neill
On that basis, it is particularly important that we deal with the pre-1992 people, who are generally the oldest, but it is also important to have a proper, staged programme in place to deal with everyone.
When I was a lawyer, I accepted, as I think anyone would, that it was not possible to deliver for a client everything in their legitimate claim, because money might not be available or there might be delays. A settlement would be reached and a sensible discount accepted as a resolution, but I do not think that anybody would regard 22% as being a fair settlement of a claim. The Minister is an honourable woman and she must tell us today that she recognises that we are obliged, as a matter of honour, to give the people affected a sum much closer to that of their undisputed loss. As has been said, the quantum is not in dispute—it is a proven fact. We now need to say that, because of the improvement in the economy, we can do better than we were originally able to, for whatever reason. That is the honourable and legitimate thing to do, and it would also restore faith in an important element of our financial sector.
I agree with the hon. Member for Coventry North West and I hope there is enough that we can all agree on. The wording of the motion itself gives the Government the flexibility, provided there is good will—I am sure there is—to achieve its aims in a fair way for the people who have lost out through no fault of their own.
Tax Avoidance
Robert Neill Excerpts(9 years, 7 months ago)
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Robert Neill (Bromley and Chislehurst) (Con)
It is a pleasure to follow the hon. Member for Foyle (Mark Durkan), whose contribution, as always, was thoughtful. I did not agree with every word, but I sympathised with much of it, and it was in marked contrast to the Opposition’s “Alice in Wonderland” approach to history and policy. Theirs is a topsy-turvy view of recent history that ignores their repeated failure over 13 years to do anything about tax transparency and efficiency, and ignores the work of this coalition Government—but perhaps we should not expect anything more.
Even worse is the Opposition’s remarkably cavalier attitude not just to the facts—I will come to that in a moment—but to the UK financial services industry. We ought to remember that it employs more than 1 million people. I represent a constituency in Greater London. Some 340,000 people in Greater London alone are employed in the financial services sector. It is a world leader for the UK, and the dismissive and scornful attitude shown by some Labour Members to this vital contributor to the tax revenues that fund our public services is pretty shameful.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I also represent a constituency to which financial services are important, but should we not be defending and promoting the UK financial services industry, rather than those in offshore havens across the world?
Robert Neill
I am glad the hon. Gentleman raised that point. He and I agree about the importance of financial services, but ironically, the blunderbuss approach taken by the Leader of the Opposition in his extraordinarily inept intervention in relation to the Crown dependencies and overseas territories is a perfect example of the cavalier approach that we have seen from the Opposition. I noticed that the shadow Minister mentioned it only briefly towards the end of her speech, as if some kind of major triumph had been achieved by this statesmanlike international figure, the Leader of the Opposition. I might just dissect that a little in a moment. [Interruption.] If the hon. Member for Birmingham, Ladywood (Shabana Mahmood) wants to intervene, I will give way.
Madam Deputy Speaker (Dame Dawn Primarolo)
I agree with the hon. Gentleman. If the hon. Lady wishes to intervene, she should rise to the Dispatch Box and not shout across the Chamber.
Shabana Mahmood
I am sorry, Madam Deputy Speaker, you are quite right to admonish me. The policy of having a publicly available register of beneficial ownership is a policy of the hon. Gentleman’s own Prime Minister. Does the hon. Gentleman disagree with that policy?
Robert Neill
I am happy to quote the whole of the correspondence between the Labour Chief Minister of Gibraltar and the leader of the Labour party. I thought it amusing in this regard that the hon. Lady should claim that some success had been achieved. In fact, Gibraltar has already accepted the need to sign up for a register of beneficial ownership. There is an argument about the level of publicity, but this was conceded long before the cack-handed intervention of the Leader of the Opposition. Fortunately, the Chief Minister of Gibraltar was able to set the Leader of the Opposition right on a number of his other factual errors—never mind the fact that the OECD is not in a position to create a blacklist in itself. That is a pretty basic level of ineptitude in terms of policy, but it goes a little further than that.
This issue is important. Overseas territories Ministers were in London in December for the joint ministerial conference. Gibraltar’s Minister of Financial Services was meeting officials at the Treasury to progress the arrangements we need to make around tax transparency and a register of beneficial ownership. All the leaders of the overseas territories wrote to the Leader of the Opposition, asking if they could meet him to discuss this important matter. What did the Chief Minister of Gibraltar have to say? He said:
“We are unfortunately still awaiting a response.”
The Leader of the Opposition did not even have the courtesy to reply to the leaders of Britain’s Crown dependencies and overseas territories. What does that say about this man’s level of policy co-operation?
Let me turn to the matter that the hon. Member for Birmingham, Ladywood prayed in aid. She is quite right that the Chief Minister said that Gibraltar is
“specifically…committed to implement a Central Register deriving from the forthcoming adoption of the fourth Anti Money Laundering Directive...along with all Member States of the EU because, as you are aware”—
perhaps it was a mistake on the Chief Minister’s part to assume that the Leader of the Opposition was aware of something as basic as this—
the Treaties that form the EU apply to Gibraltar. As those advising you should be aware, we are unique in this regard when compared”
with other territories. He continued:
“only last week my Minister for Financial Services was at HM Treasury discussing”
this. The Chief Minister rightly went on to point out that this was important in Gibraltar’s case because we have responsibility for the defence of Gibraltar overseas. I shall come on in a moment to deal with the damage done by the Labour party in that respect.
The Chief Minister pointed out, too, that Gibraltar has
“a tax information exchange agreement…with the UK that is fully operational. Gibraltar has a further 26 TIEAs with other countries”
and that
“under Directive 2011/16/EU…Gibraltar has tax information exchange arrangements to the OECD standard”
with OECD countries, and
“132…exchange agreements with some 75 countries around the world…This was confirmed by the…Phase 2 report”,
and Gibraltar was given
“the second highest rating possible”
in its compliance, along with that well-known tax haven, Germany.
It is quite extraordinary that the Leader of the Opposition goes rushing forth into print without having checked facts as basic as that. He also forgot that
“Gibraltar has signed an automatic exchange of information agreement with the UK and the USA as well as its global counterpart being the Common Reporting Standard”,
along with some other 90 countries. The Chief Minister signed this in Berlin in October, together with our Chancellor of the Exchequer. I do not suppose that Google worked too well in the Leader of the Opposition’s office there.
Finally, the Chief Minister wrote:
“you should know that your remarks…have already been picked up by the Spanish press and are being used as a rod with which to beat us.”
The fact that the Leader of the Opposition, through a mixture of ignorance, bad manners and ineptitude, gave comfort to people who were persecuting the British citizens of Gibraltar economically in order to make a cheapskate and inaccurate political point is nothing short of a scandal, and is contemptible.
HMRC (Company Liquidations)
Robert Neill Excerpts(10 years, 8 months ago)
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Robert Neill (Bromley and Chislehurst) (Con)
I am grateful for the opportunity to introduce this debate on the behaviour of Her Majesty’s Revenue and Customs in relation to company liquidations. HMRC has cynically abused the system, which is a disgrace to any public Department. HMRC’s behaviour also indicates serious flaws in policy, which I hope Ministers will address.
I am conscious of the fact that HMRC is operationally independent of Ministers, so my fire is not directed at my hon. Friend the Exchequer Secretary; my fire is directed at HMRC officials. There are concerns about individual injustice and about the operation of policy and governance within HMRC, which I submit are found to be woefully lacking on these matters. The concerns stem from an understandable change of policy through which HMRC has, over a number of years, used civil proceedings to pursue allegations of evasion of duty against individuals and corporate bodies. The proceedings frequently involve allegations of fraud that are thought to be more advantageous to pursue through the civil courts, where of course the burden of proof is lower—the balance of probabilities—than for proceedings in the criminal courts, where the Revenue would have to prove the matter to the criminal standard. Dealt with proportionately and properly, I can see that that is a legitimate tool in the box for protecting public revenue. The difficulty is that if it is not used proportionately and properly we do not get the real offenders. That was precisely what happened in the case of a company run by constituents of mine, of my hon. Friend the Member for Old Bexley and Sidcup (James Brokenshire), who is in the Chamber today, and of my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith). I shall refer to a particular case, but there are general principles too. I am conscious that there are still some matters of litigation, but I do not think I will be trespassing on any of them in what I say about the history.
The case concerns a company called Abbey Forwarding Ltd, a reputable and established bonded warehouse operation that operated in east London from 1971 until 2009. It employed 23 people. The directors were constituents of mine and my right hon. and hon. Friends. In February 2009, Her Majesty’s Revenue and Customs raised assessments against the company for a sum of just short of £6 million, alleging that excise duty had been evaded on the importation of alcohol. They went to an ex parte hearing and successfully applied to have the company placed in provisional liquidation on the basis that there had been participation in what was alleged to be a diversion fraud.
The court appointed Louise Brittain, a senior partner at Deloitte, as the liquidator. She apparently had a great deal of experience in the field, which might be surprising in the light of what comes later, and had been appointed in a number of other liquidations in which the Revenue had been involved. Of course, the Revenue says, “It wasn’t us but the court,” but we know that that is a play on words. The appointment was made and she immediately brought proceedings against the directors for breach of fiduciary duty, alleging fraud.
When that had been done the business was shut down with no forewarning, the staff were sacked and the business was effectively run down. The Abbey directors were not present at the ex parte hearing and as they had been dismissed as employees of the company they had no recourse to appeal against the allegations or the assessments, which they have contested from the very beginning. The liquidator, with the connivance of the Revenue, I would say, deliberately sought to shut them out from pursuing any avenue of appeal against those assessments.
It seems to me that the liquidator showed a remarkable lack of interest in pursuing the interests of the company or the creditors, and to that end she embarked on a fire sale of the company’s remaining assets to the extent that vehicles worth £38,000 were sold for £2,000 and alcohol stock worth £30,000 for £1,000. There was intimidating behaviour towards the directors and their families as friends and acquaintances were rung up, including on ex-directory phone numbers, and asked whether they were owed money.
That was all being done in a litigious war of attrition against the directors, funded in effect by the taxpayer as HMRC gave the liquidator indemnity from her legal costs and any damages that might be awarded against her should the directors be successful. That seems to me to be a very questionable use of public money.
Civil proceedings were used to pursue what might have been criminal matters, and two matters of concern arose. The first is the extraordinary conduct of the liquidator, as I have discussed already, and the second is the cynical conduct of HMRC in hiding behind the liquidator when things went wrong. That is exactly what it did. It might be legitimate to use such a device to deal with fraudsters, but my constituents were not fraudsters and were found not to be by the courts. Great care must be taken with the governance of this procedure, as HMRC can end up as judge, jury and executioner.
In this case, the claim was brought in due course on 30 July 2010, nearly a year or so later, before Mr Justice Lewison—now, I think, Lord Justice Lewison—in the High Court. The judge in the High Court dismissed the claims against the former directors in their entirety and said—one might have hoped that this would have sunken in with the Revenue, but it clearly did not—that the liquidator’s case had “crumbled to dust”. That is a very striking phrase. The case was not just thrown out on a technicality; it fell apart at the seams.
The allegation had been that there were 301 transactions amounting to a diversion. It became apparent that there had only ever been evidence of three potential diversions—interceptions, as they were called. As the judge observed, it was an exaggeration of a hundredfold. Even more extraordinarily, it became apparent in subsequent proceedings that the liquidator, Ms Brittain, had been aware of that throughout the 12-day trail, during which she gave evidence under oath, but at no point did she seek to correct the misleading information, despite signing a statement—it had a certification of truth on it—that included the inaccurate figure. She was thoroughly criticised by the judge, and rightly so. She consequently left Deloitte and no longer practises independently without supervision. Frankly, she should never be appointed as a liquidator again, because that ineptitude led to serious injustice for my constituents.
Unfortunately, rather than recognising that harm had been done and seeking to rectify it, HMRC sought simply, and disingenuously, to distance itself from the matter, saying, “All that was conducted by the liquidator. We had no more involvement once she had been appointed.” That is betrayed by the facts, even though the assertion is misleadingly contained in a letter sent to my hon. Friend the Member for Old Bexley and Sidcup and myself by Jennie Granger, HMRC’s operations director.
In fact, all the evidence that the liquidator relied upon, including the false allegation of 301 interceptions, came from witness statements provided by HMRC officers. HMRC officers and their representatives attended every single court hearing, and they were in regular correspondence with the liquidator throughout. E-mails that have come into my constituents’ possession indicate a social relationship between some of those officers and the liquidator, which some of us would raise an eyebrow about in a professional context. Against that background, it seems to me that Ms Granger—I do not doubt that she signed the letter in good faith—was seriously misinformed. I hope that my hon. Friend the Minister will ensure that HMRC’s management looks seriously at the conduct of the officials involved.
The situation has now progressed to a stage where all that remains—I will not talk about this, because litigation is ongoing—is a ruination claim brought by the directors against HMRC. Tens of thousands of pounds—the total cost is disputed—have already been awarded, either against HMRC or the liquidator that HMRC is identifying. In other words, the money has come from the public purse.
Some 30 years’ work of my constituents has been destroyed, their workers have lost their livelihoods, and to this day HMRC has sought—happily, unsuccessfully—to obstruct their obtaining a new licence to operate a fresh business and rebuild their lives. A disgraceful vendetta has been carried out against them. It does a public body no good to try then to pretend that that did not happen. I am sorry that my hon. Friend the Minister has to respond to a debate that must be cast in those terms, but my worry is this: what is a legitimate tool to be used that can be discredited if it is not used properly?
There has been a failure ever since this began, which was nearly two years ago, despite a detailed request from my hon. Friend the Member for Old Bexley and Sidcup, supported by me, for the internal report on what happened in the investigation to be published. I hope that my hon. Friend the Minister will ensure that it will be made available. I hope that he will recognise that simply hiding behind the ongoing ruination litigation will lead only to the suspicion that it is a further attempt at delay and backside-covering, to put it bluntly, by those responsible in HMRC. This is not a case of there being a reasonable judgment and things going wrong in the course of litigation; the evidence clearly never justified the allegations made. If that was the case, one hopes that HMRC would say, in a constructive spirit, “We will carry out a full review, and we will be transparent about it and share the results with those who have been wronged as a consequence. We will apologise and ensure that appropriate arrangements for redress, such as there can be, are made.”
None of that has been forthcoming within, disturbingly, a culture of an unwillingness to engage realistically not only with the directors of the company but with their Members of Parliament. That does no credit to those involved. For the sake of those of us who do not wish the reputation of a public agency such as HMRC to be damaged, I hope that the management of HMRC—who are listening, I trust—will take serious action. Although the Minister does not have operational control, I hope that he will not only do what he can to facilitate ensuring that appropriate meetings take place with my hon. Friends and I, and others, to try to seek a resolution that does not needlessly cost the taxpayer any more money, but give us more detail on the changes in governance arrangements that I am told have taken place within HMRC since this case started.
I would like to say that this is an isolated instance, but I am afraid that other hon. Members have given me examples of a number of other instances where this tool—the use of liquidation to pursue claims—has been used and has been found wanting. Another well-reported case in 2013 led to another High Court judge seriously criticising the way in which HMRC had operated through this procedure. That suggests that problems still arise despite the changes in governance about which we were assured in the letter from Ms Granger.
The only way to reassure people that this will not happen in future is to be up-front about what happened, to make the report available, to make available to everybody the information about the changes in governance, and to instigate the fullest possible review to make sure that the vast majority of honourable and hard-working employees of HMRC do not have their reputations damaged by something that clearly went wrong and that, at the very least, demonstrates a high degree of incompetence. Even worse, it demonstrates a degree of complacency on the part of the senior management of HMRC. It is almost as though they said, “We will not admit that we were wrong. We have deeper pockets than they do. We will put them out of business, in effect, and hope that they go away.” That is what was happening, and they were doing it through the use of public money. That is not a proper and fair means of protecting public revenue.
Against that background, I hope that the Minister will insist that this is investigated within HMRC at the highest possible level. Although he does not have day-to-day operational responsibility, I hope that he will have passed to him the details of what happens, make sure that the details of any review are shared with my constituents and others, and make sure that my hon. Friend the Member for Old Bexley and Sidcup and I are given full details about the changes in governance arrangements so that we can be satisfied that the lessons that have been learned are genuinely acted on. I also hope that the Minister will prevail on those responsible to say that if an error has been made, the best thing to do is to recognise that lessons have been learned, apologise, and move on. None of that has happened so far.
As regards those who have been wronged, there should be a resolution of the claims they are seeking to make. I am not asking for anything as regards what those claims should be, because that is not appropriate in these circumstances. However, there should be a recognition that there needs to be some redress where it is clearly demonstrated that injustice has occurred. The High Court judge said that, prima facie, there was a strong case for injustice having been done to my constituents—and, ultimately, HMRC did not appeal his decision.
I hope that the Minister will take on board the fact that I do not raise this issue lightly or with any pleasure, but in the interests of the reputation of the public service, it needs to be addressed with more vigour than it has been so far.
The Exchequer Secretary to the Treasury (Mr David Gauke)
I thank my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) for securing a debate on this matter, which he has raised with me and with HMRC on a number of occasions in the past few years. As he pointed out, I can say the same for my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) and my hon. Friend the Member for Old Bexley and Sidcup (James Brokenshire), who is here today.
My hon. Friend made his case very powerfully in his capacity as a constituency MP. He also, in many respects, brought to bear on these matters his considerable experience as a barrister, and a criminal barrister at that. He rightly said that I am constrained by the principle of taxpayer confidentiality and the fact that Ministers and politicians do not interfere in operational matters; there is good reason why that is the case. I hope my hon. Friend will forgive me if I am not able to delve too deeply into this particular matter, given the principle of taxpayer confidentiality, although I will say what I can.
I can, however, discuss the use of provisional liquidations, which my hon. Friend has highlighted, and I hope it will be helpful if I do so. Liquidation is a court-driven process that takes time. It can take several weeks after the presentation of a winding-up petition for a liquidator finally to be appointed. Where the company is being controlled by fraudulent individuals, that delay can provide a perfect opportunity for them to destroy the evidence of their fraud and move assets out of the company. In such cases, any creditor, including Her Majesty’s Revenue and Customs, may petition the court for provisional liquidation. This allows the winding-up petition to be presented without any notice to the company. If the court is persuaded of both the company’s insolvency and the potential for fraud, it will appoint a liquidator to take immediate control of the company, its assets and its records. This protects creditors’ interests. The company directors will have a chance shortly afterwards to argue that the company is not insolvent and so should not be wound up. If they succeed, the provisional liquidator is removed. Where there is clear evidence that a company is perpetrating significant tax or duty fraud, HMRC will apply to the court for an order that the company be placed into provisional liquidation, to stop the fraud and recover assets.
Provisional liquidation orders can be made only by the court and HMRC applies to the court only in the most serious of cases, such as alcohol diversion fraud, whereby alcohol is purported to be exported lawfully without payment of duty or VAT to another European Union country but is then diverted unlawfully for consumption in the UK without payment of duty or VAT. The cost to the Exchequer of this type of fraud is estimated to be more than £1 billion. Provisional liquidation action stops the fraud continuing, because trade ceases, and allows assets to be recovered. It has also been used in cases of VAT missing trader fraud and ongoing pay-as-you-earn and national insurance fraud in the construction industry.
Provisional liquidation is an exceptional action and it is worth highlighting one or two statistics. In 2009, five provisional liquidations were instituted by HMRC. In 2010, there were just two cases and in 2011 there were four, while 2012 and 2013 had just one case each. In total since 2009, there have been only 13 applications to put companies into provisional liquidation, although in some of the cases, associated companies were liquidated simultaneously. In not one of those cases has any company successfully argued before the court that the provisional liquidation order should not have been made. Although my hon. Friend has raised concerns in this regard, I could, if I were so inclined, quote judges stating that HMRC’s behaviour in respect of bringing a provisional liquidation was entirely reasonable and well-evidenced.
It can take a long time to bring cases to a conclusion, but I am informed by HMRC that it considers that the 13 actions have prevented Exchequer loss of at least £150 million. I would not therefore wish HMRC to restrict its use of provisional liquidations in appropriate circumstances.
Before a case gets to court, HMRC has rigorous internal processes, which include the involvement throughout of an independent governance team that is separate from the case team. The specialist team challenges and considers the available evidence and strategy. It is made up of externally qualified insolvency specialists with a great deal of experience of insolvency matters. During the whole process, legal advice is provided by HRMC internal solicitors and, where appropriate, additional external insolvency specialist solicitors, and the final sign-off is at senior level. I hope that I have given a degree of reassurance about the general use of provisional liquidations.
Returning to the case that my hon. Friends have raised with me on several occasions, I will deal with the specific issue of the internal report referred to by my hon. Friend the Member for Bromley and Chislehurst. He is absolutely right that HMRC promised an internal review of the case. The review will be conducted by people separate from the operations directorate, and they will report to the HMRC commissioners. The litigation is still ongoing, as my hon. Friend has mentioned, so HMRC’s position is that it would be appropriate for the review to consider the entirety of the issue and to take into account the conclusion of the outstanding litigation. HMRC will consequently be able to respond not only on the litigation and court hearings that have already occurred, but on the one last outstanding piece of litigation. It therefore wants to undertake the review only once that point has been reached.
Robert Neill
Will the Minister help me on this point? In correspondence with my hon. Friend the Member for Old Bexley and Sidcup, HMRC indicated that the review had been commenced, but not concluded. My concern is that some factual matters that must be the subject of the review go back to the very early stages of the process, when assessments were raised in February 2009 or not long thereafter. One would obviously hope that investigations into those matters had taken place already, while the evidence was still fresh in people’s minds, rather than that they should be reviewed five years or so later. Will the Minister reassure me that work has already started on the review? If he cannot do so today, will he write to my hon. Friends and me about the progress, if not the conclusion, of the review?
Mr Gauke
The best thing that I can do is to take up his invitation to write to him to set out the exact status of the review, the evidence that needs to be assessed and the progress that has been made.
Notwithstanding the outstanding litigation on this matter, may I say to my hon. Friend that I am more than happy to facilitate a meeting of whatever type is appropriate so that his concerns can be raised at this stage? As I am sure was his intention, he has put his thoughts and concerns on the record very clearly and powerfully, and I know that HMRC will look at his every word with great care and attention. As I have said, there is a limit to how much I can say about such an operational matter, but I am grateful to my hon. Friend for raising the case. Let me assure him that his concerns will be taken most seriously.
Question put and agreed to.
Public Service Pensions Bill
Robert Neill Excerpts(11 years, 10 months ago)
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Robert Neill (Bromley and Chislehurst) (Con)
I am always delighted to follow the hon. Member for Hayes and Harlington (John McDonnell). He and I have been circling around issues of local government finance and pensions for—
Robert Neill
I have worked it out; it must be well over 30 years in chambers of one kind or another around London. We do not always come to the same conclusions, but I take on board the expertise that he brings to this topic. I agree with his point that it is important, when dealing with the schemes that he and I have been involved with, to give the members of the schemes an assurance that they will have a secure pension in future.
I have spent most of my life dealing with the local government pension scheme, and I am going to talk about that today. Indeed, I should declare an interest as a member of that scheme. I recognise that change often raises concern and creates a measure of insecurity, and it is the job of those of us who have governance of these schemes, locally and nationally, to deal with that. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr Gibb) pointed out, however, the biggest cause of insecurity and the biggest risk to scheme members would be the lack of a secure financial basis for the future of the scheme. That is why the Government’s reforms are necessary; that is the most important reassurance that we can give to people.
There are other important points that we can take on board in the context of the amendments, and I want to talk about the local government schemes in particular. It has already been recognised in the House that they fall into a different category because of their substantially funded nature, which places them in a different position, and because of the considerable diversity within the sector. There are a number of schemes involved, and they generally have a good management track record and a system of management that creates transparency and democratic accountability. I hope that we can ensure that the regulations that will finally embody the schemes will recognise those differences.
I agree with the right hon. Member for Wentworth and Dearne (John Healey) that we should take at face value the assurances given by those on the Treasury Bench, and I have no hesitation in doing so. I put it as gently as possible when I say that there has been a degree of needless raising of concern among scheme members, perhaps—dare I say it?—for partisan reasons. That is unhelpful.
John Healey
The hon. Gentleman is urging us to take at face value the statements from those on his Front Bench. Let me tell him what the Economic Secretary to the Treasury said in Committee about the concerns over the fair deal. He said that
“it is important that we consider in full the views of all stakeholders, including of course those who will be affected, through further consultation before making a final decision on the issue.”––[Official Report, Public Services Pensions Public Bill Committee, 22 November 2012; c. 459.]
I put it to the hon. Gentleman that, taken at face value, that suggests that the final decision has not yet been taken, contrary to the agreements reached with the trade unions on pensions reform.
Robert Neill
The right hon. Gentleman will know, as a former local government Minister, that there has already been considerable consultation and discussion on the shape of the local government schemes. In any event, there is to be a formal consultation as well. I do not read the same connotations into the Minister’s words as the right hon. Gentleman does. That is not my reading of the discussions to which I was party when I was a Minister. However, the right hon. Gentleman is right to suggest that we should be as transparent and upfront as possible in our discussions with scheme members.
Andy Sawford
I should have declared my interest as a member of the local government pension scheme when I first intervened. Does the hon. Gentleman acknowledge that one of the technical issues, as those on our Front Bench have pointed out, is that the language we use should allude to the amendment of the schemes rather than to their closure? If the local government pension schemes that are currently in deficit were to be closed, the employers involved would immediately become liable to pay those deficits. That could have a hugely disruptive effect not only on the people receiving pensions now and in the future but on the local authorities themselves and the public services that they provide.
Robert Neill
I congratulate the hon. Gentleman on his arrival in the House. I have been dealing with him in the local government world for many years. I did my best to prevent him from coming here, but it clearly was not quite enough! He anticipates one of the technical issues that I was going to mention, and it is perhaps the most substantial one. Chronologically, it is not the first in relation to the Bill, but I might as well deal with it now for the sake of completeness.
I read with care the assurance that my hon. Friend the Minister gave in Committee. I entirely accept that it is not the Government’s intention to create crystallisation. However, I note that the finer details of the proposals are being considered, and we should look carefully at that. The Minister said that there was no requirement for the funds to be wound up, and I accept that, but I hope that he will consider the issues that have been raised by the Local Government Association about legal ambiguity.
I do not doubt that the Minister has no intention of creating a closure that would crystallise the debts of a scheme. That was always the basis on which I approached such negotiations when I was a Minister, and I am certain that nothing has changed in that regard. However, this was one area in which some of the nuttiest legal advice needed to be obtained—[Interruption.] I should have said “knottiest”. There is sometimes a risk of legal ambiguity, and that must be avoided at all costs. I would therefore urge my hon. Friend and his advisers at the Treasury to take on board the work that has been done in the DCLG and other Departments to find a means of resolving this issue. We all know where we want to end up, and I am sure that there is a means of achieving that. I know that the Minister’s skills and abilities will get us there. It is right to point out that some issues still need to be addressed, but they are not insurmountable in the context of where the Government want to get to. It is an important area to clarify to the maximum extent.
The other issue I want to touch on is governance. I hope that the Minister will consider the concerns raised by the Local Government Association and the unions about the lack of segregation between the scheme manager and the scheme board. Again, I do not think there is any dispute between us about where we want to end up, but it is a fact that the local government schemes have a good record in their management and a good record on transparency. When experienced representatives of local government employers raise concerns that the two functions of the scheme manager and the scheme board are difficult to reconcile within the same body, those concerns should not, in my judgment, be lightly dismissed. I note that the Minister sensibly and properly took on board the fact that there are still developments going on here and that proposals are still being developed. I hope that that will continue to be the case, and when he responds to the debate, he may be able to update us and reassure us that continuing discussions will take place with the experts in the local government sector to make sure that we get the best possible design for those matters.
Finally and more generally, I ask the Minister not to be deterred by undue reference to Henry VIII clauses. When I was taking the Localism Bill and the Local Government Finance Bill through the House, if I had £5 for every time I was criticised about Henry VIII clauses, I would have retired to some tax haven as a very rich man. [Interruption.] I probably would not have not done that actually as I enjoy being here so much. However, it is part of the knockabout banter we get here that Oppositions always say that there are excessive Henry VIII clauses, but when one looks back, one finds that when the Opposition move into government, they construct Bills with exactly the same sort of clauses. That is why I urge the Minister not to be put off by that; it is necessary to build in the flexibility that such clauses provide in any piece of legislation of this kind. What are important are the statements of intent about the manner in which those clauses should be used. I am sure that the Minister will be able to reassure us on that.
Mr MacNeil
What the hon. Gentleman said gives me the opportunity to peg in as a general point the fact that this debate is set against a backdrop of mood music that pensions are spiralling and are actually increasing, but the effect of the Bill is not to arrest pensions, but to cut them and to cut net contributions to pension schemes by 0.1% of gross domestic product, which is what the Government are saving. That, of course, is taken out of the pockets of many people who have worked hard for many years in our public services.
Robert Neill
The hon. Gentleman and I once worked out that we might have a very, very, very—however many “verys” we put into it—distant relative in common, but with every gentleness and respect, I would have to tell him that we do no good service at all to our public services by being unrealistic about the affordability of pension arrangements.
I talked about the intent with which we approach these matters and about honesty, transparency and being frank about the financial realities that underpin the schemes. This measure is a critical part of that. The most important service we can provide is to be frank and to produce a scheme, which I am satisfied the Bill does, that is financially sustainable for the future. We have talked about the technical issues, but the overall thrust of being financially honest about the affordability of our public sector pension schemes is absolutely critical—and the Government have got that right.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
I begin by expressing my gratitude to the Clerks and to Mr Speaker for their forbearance in ensuring that the amendment tabled in my name is debated in the most appropriate group this afternoon. That said, there is but one lonely little amendment—amendment 32, which would amend clause 16—in my name in this group. In some ways, it is a very technical and practical amendment, but it would allow for the closure of existing Scottish schemes by 1 April 2016 instead of 2015. It would put these reforms on a much more realistic time scale.
I am sure Members will be aware that the Scottish Government have devolved executive competence for a number of aspects of a number of Scottish public sector pension schemes. There have been considerable delays in establishing exactly what flexibilities are open to the Scottish Government in those areas for which they have responsibility, and it has been difficult to gain clarity over what that process might look like. That has obviously had an impact on the negotiating process.
Gaining clarity has happened in an extremely piecemeal fashion. Back in March 2012, Ministers initiated partnership negotiations with employers and trade unions about the pension schemes of the NHS, teachers, police and firefighters. On 28 March, a letter arrived from the Chief Secretary to the Treasury—I am sorry he is not with us for this debate—setting out some new constraints regarding the links between normal pension age and state pension age, which we will debate later. In May, there was more communication from the Chief Secretary, who informed the Scottish Government that they would require explicit Treasury consent for cost-sensitive changes to the teachers or the NHS schemes, and in July the Scottish Government were informed that the UK Government wanted to extend the Bill to non-departmental public bodies and Scottish judicial offices. At that stage, there was still no clarity on flexibilities relating to the pension age requirements, which everyone knows is a key sticking point in the negotiations.
Public Service Pensions Bill
Robert Neill Excerpts(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Robert Neill (Bromley and Chislehurst) (Con)
I do not agree with the conclusions of the hon. Member for North Ayrshire and Arran (Katy Clark) about the Bill, or with some of the details of her speech, but I am sure that every Member of the House will agree with her warm remarks about the late right hon. Member for Croydon North, Malcolm Wicks. I knew Malcolm as a fellow London politician for many years. Indeed, I knew his late father, who was a former chairman of the Greater London council. I think that everyone would agree that it is a tragedy that Malcolm is not here, because his expertise in this field was recognised throughout the Chamber.
During my time in government I had a measure of responsibility for two of the schemes under discussion, namely the local government scheme and the firefighters scheme. I very much agree with my hon. Friend the Member for Bognor Regis and Littlehampton (Mr Gibb) in his analysis of the Bill, the overall pressures that need to be redressed and the need for reform of public sector pensions. I wholly endorse his analysis of how the negotiations—to which he, I and the Chief Secretary to the Treasury were, in varying measure, party—proceeded. There was greater realism and sophistication to be found in my dealings and negotiations with various public sector unions than in the analysis provided by Members on the Opposition Front Bench. That is a sad commentary.
I want to deal initially with the local government scheme. It has been observed, rightly, that this is the most significant of all the schemes in financial terms. It is hugely important and involves 81 funds. It is the biggest pension fund in the United Kingdom and the fourth largest in the world. We are talking about £145 billion in investments and assets, so getting the local government scheme right is critical for its members, many of whom I have worked with for years, going back to the day on which I was first elected as a councillor at the age of 21, about which all I can say is that I was keen.
Robert Neill
Yes, it was shortly after the Municipal Reform Act.
The scheme is important for its members and the council tax payers who fund it. We should also not forget—I will come back to this later—that it is important for the overall British economy, because of its investment potential. Getting it right is important. It is worth emphasising that it is different from the other schemes, because it is largely funded. The Chief Secretary to the Treasury recognised that significant factor, as, I am sure, will the Minister who responds to the debate. It will have consequences, once the Bill is enacted, for how we deal with regulations and secondary legislation with regard to the scheme’s governance and other related matters. There is nothing in the Bill itself—which I warmly support, because reform of all the public sector schemes is necessary—to prevent that from being achieved.
There is clear evidence that reform of the local government scheme is necessary. Reference has been made to the Audit Commission and, at the risk of taking a little longer than I had intended, it is worth quoting what it said in order to make the point. It accepted that the local government pension scheme had funds
“to cover about three-quarters of its future liabilities”
and that it had a positive cash flow. The commission then concluded that the current approach could not be continued indefinitely, the reasons for which included:
“The cost of providing pensions for local authority employees is rising in absolute terms and as a proportion of pay because of increasing life expectancy and action needed to recover funding deficits.”
It was not possible to fund the whole lot. There is no doubt that local government pension funds
“have been affected by lower than anticipated investment returns”.
At the time of the commission’s report in 2009, the value of assets was “about 15% lower” than had been anticipated in the previous revaluation in 2007. I have to say that Opposition Members cannot escape some of the responsibility that the previous Government have for the investment performance of the funds.
Mr Anderson
Given his long experience of local government, does the hon. Gentleman have any idea how many councils, including the one that he led, took pension contribution holidays?
Robert Neill
I certainly never took any pension contribution holidays. Indeed, I only became a member of the local government pension scheme in 2000, when I was a member of the Greater London authority, so I do not think that the hon. Gentleman’s point is realistic. The performance of the scheme is down to the investment climate in which it operates, and the investment climate is determined by the macro-economic policies of the Government. The hon. Gentleman does not accept the failure of his Government in this context. One of the by-blows of that failure was that the investment returns for the scheme were less than expected and that has added to the pressures on the scheme. It is not the sole pressure, but it has added to them.
The Audit Commission also noted that the cost of pensions affects the amount of money available for local authorities to fund services and it influences council tax decisions, so there were questions about whether the LGPS benefits were affordable in the long term. Although some of those matters have been picked up by prior reforms—I do not pretend otherwise—they were not adequate to deal with the pressures. The Audit Commission concluded that, despite the fact that the scheme had funding, unlike others, reform was needed none the less. It is not just the Audit Commission that has recognised that—so too have the professionals in the local government pensions world. In October 2009 Mike Taylor, the chief executive of the London Pensions Fund Authority—I declare an interest, having been a member of that body for a short period—said that the LGPS needed to respond to increasing longevity because it
“is not designed to pay benefits for ever increasing periods of retirement and, without change, will face extinction…Employer or taxpayer contribution rates currently take all the strain of increasing liabilities in the LGPS. This situation cannot continue and either those costs must be reduced, or employees bear a fairer share of the increasing costs.”
Chris Leslie (Nottingham East) (Lab/Co-op)
Will the hon. Gentleman discuss with the chief executive of the LPFA his opinion of clause 16, which will close the existing local government pension scheme and start a new one? As I understand it, closing it might trigger what are known as section 75 crystallisation of debt arrangements, and the burden could fall heavily on local authorities. Does he agree that the Economic Secretary needs to ensure that the crystallisation of costs does not fall disproportionately on local taxpayers?
Robert Neill
I certainly agree that the impacts of crystallisation have to be considered carefully. It is worth saying, however—I was going to come to this point later, but I will deal with it now—that the reason why we are dealing with the matter in this way is in no small measure the result of an agreement between the unions and local government employers. They agreed that it was desirable to have a single reform of the system to deal with both short and long-term pressures, which was referred to as a “single event”, and that it should take place in 2014. There is a technical debate to be had about how best to achieve that while avoiding the risk of crystallisation, and I hope that my hon. Friend the Economic Secretary and his ministerial colleagues will have that debate. However, that is certainly not a reason for opposing the Bill, and I do not think for one moment that it undermines the major thrust of the Government’s reforms. The structural issues that require reform in all the public sector funds, including the LGPS, need more radical work than that.
It seems to me that there is scope to reflect the particular circumstances of the LGPS within the parameters of the Bill, and I hope that Ministers will recognise that. It is still significantly funded, and at its best it has very high standards of governance. Many of us in local government have wanted to examine the capacity of some of the smaller schemes, and I believe that there is scope for the Government to encourage greater collaboration between some of them, or perhaps even mergers. The large and well run ones such as those in Greater Manchester, London and elsewhere have good governance arrangements, and I concede the point that was made about the Greater Manchester scheme. There is no reason why we cannot ensure that those arrangements are reflected in the secondary legislation that flows from the Bill. That will be a desirable outcome.
I hope that there will be democratic local accountability through elected members serving on the boards of schemes. I do not think it is necessary to impose a one-size-fits-all approach on the governance of schemes in order to achieve the important financial and structural reforms that are needed, which I support the Government in taking forward. We can reflect the particular circumstances of the local government scheme within the parameters that the Government have rightly set. That also applies to certain aspects of the scheme’s design, because there were constructive negotiations on the LGPS on the basis that the key point was to achieve the required cost envelope, which, as I recall, was 19.5% of salaries. Particular parts of the scheme enable us to do that while reflecting the particular nature of the local government work force and the scheme’s governance arrangements. I hope Ministers will ensure that the commitment to do so is maintained, and I have no doubt that they will.
I referred earlier to the investment potential of the local government scheme. It is already a significant player in many investment markets, but it could do more. I support the Government proposal to lift the cap on the amount that local government schemes can invest in local infrastructure schemes, which is currently an arbitrary 15%. When I was a Minister, I believed passionately in ensuring not only that local authorities had more resources of their own to put towards local investment but that they made the best use of their current assets, so it does not seem unreasonable that we should remove that cap. The professionals in the field have suggested that something like 30% would be a more realistic cap, and I am open-minded about the exact amount.
I recognise that Brian Strutton, from one of the public sector unions, has some concerns about that idea. If I may say so, I regarded him as a responsible interlocutor in my dealings with the trade unions. He rightly recognises that it might be possible to achieve our objectives either through changing the cap, which I think the unions are wary of, or through the creation of a new asset class for infrastructure. I hope that my hon. Friend the Economic Secretary will consider how we can achieve the important objective of giving local schemes a greater ability to invest in local infrastructure. We should not miss that important opportunity.
I turn now to the firefighters scheme. Again, I accept that it has differences from other schemes. A particularly important issue in all my negotiations with the Fire Brigades Union was the retirement age. The final agreement that was achieved, on which I reported to the House shortly before the summer recess, provided us with adequate and proper flexibility to take on board the concerns of our firefighters, whom I greatly respect. Two matters were put forward in that agreement. The first was that there would be a review of contribution levels from 2013-14 onwards, taking into account the impact of opt-outs, to which the hon. Member for North Ayrshire and Arran referred. I am sure the Economic Secretary will confirm that that remains the position.
Secondly, it will be recalled that I commissioned Dr Tony Williams to examine the evidence base for the case that was made about the physical impact of a firefighter’s job and its relation to the retirement age. The new firefighters scheme has had a normal pension age of 60 for new entrants since 2006, so the situation will not change for many firefighters. In addition, the retirement age of 55, or 50 after 25 years’ service, has been protected for entrants from before 2006. There are significant protections built in for long-serving firefighters. Dr Williams is extremely reputable in this field. He is the medical director of Working Fit and has 15 years’ experience as an occupational physician in the NHS as well as experience of firefighting. I hope that my hon. Friend the Economic Secretary will be able to confirm that the Government will look very closely at the outcome of his review.
Mr Russell Brown
The hon. Gentleman is absolutely correct in saying that there is some element of protection for firefighters, but we need to look forward, because that is what pensions are about. The new retirement age will keep firefighters working to 60 years of age in future. Are we about to breed supermen and superwomen who will be able to withstand such work at the age of 60?
Robert Neill
We need to look with care at the evidence, but that does not mean that we should keep the current generous—I use that word with care—retirement age. Firefighters work very hard, but the nature of jobs changes, and there is a case to be made—I put it no stronger than that—that the job of a firefighter is less physical than it was in some respects, because of the amount of technology and kit that they happily have to assist them. There is also a case to be made that increasing health levels in the population should not be taken out of account.
Equally, although I take on board the point raised by the hon. Member for North Ayrshire and Arran, it is realistic to accept that there are generally fewer “light duty” jobs in the fire service than in the police service. That is because fire authorities generally operate within a lean and flat structure, and there are fewer civilian-style jobs to which people can be moved. We must take all those important considerations on board, which is why the report was commissioned.
Margot James
My hon. Friend speaks with considerable authority on the firefighters’ situation, but is he as surprised as I was to hear that increases in longevity have meant that the average policewoman now spends more of her life drawing her pension than she did earning it, which is surely unsustainable? That situation will pertain to male police officers in a few years’ time if nothing is done about the retirement age.
Robert Neill
I take on board my hon. Friend’s point, and we must be realistic in all areas of this discussion. Longevity creates a pressure on the scheme, as well as providing greater life opportunities for people who have retired. It is, in part, a result of greater fitness and better health among the population, which can—among other things—enable people to work for longer. That applies in pretty much every other kind of activity, and we cannot regard any scheme as exempt. I accept, however, that there are particular pressures on firefighters, although I suggest to the House that the Government’s proposals recognise that and provide a sensible and evidence-based mechanism for dealing with it.
Grahame M. Morris (Easington) (Lab)
I am grateful for the informed contribution from a former Minister. Does he acknowledge that, besides the pressures of longevity, there are risks in increasing contributions for employees? For the firefighters fund, 7% is the magic figure in terms of opt-out. I understand that a poll by YouGov, commissioned by the Fire Brigades Union, indicates that a larger number—12% —of people are very likely to opt out, and that 25% are likely to opt out when the new contributions come into effect.
Robert Neill
When I was a Minister, it was precisely for that reason that I included in the agreement a provision for a review of opt-outs in the firefighters scheme before decisions were taken on increases in years 2 and 3. That was in accordance with the proposals set out by the Chief Secretary to the Treasury. We have built in a mechanism to review that risk, but I hope we will find that it does not materialise. I come back to my point that we must probably move away from our slightly entrenched positions on this issue, and be prepared to look sensibly at how to strike an appropriate balance based on the evidence.
We all want the strongest possible pension schemes for those in our public services. I have referred to the two sectors with which I have been most closely associated, and to which I feel the strongest personal commitment, but one could say similar things about many other sectors. If there is a Division tonight, I would not support the Bill without hesitation if I did not believe that we had put in place a framework that will enable us to deliver on our obligations. There are technical matters to address, but I am confident that we will be able to do so as the legislation proceeds. The Bill deals with an important and necessary reform, and I commend it to the House.