Equitable Life
Robert Syms Excerpts(9 years, 2 months ago)
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Mr Robert Syms (Poole) (Con)
I congratulate hon. Members on bringing this debate to the Floor of the House. Since my entry to the House in 1997, this matter has come up repeatedly. I look forward to the day when we no longer have to debate Equitable Life. In 2004, I was one of the more than 100 Members who wrote to the parliamentary ombudsman urging her take up the case, following earlier failed attempts. We finally got a report and we finally got action, but unfortunately it took a long time, and in the meantime many constituents in their 70s and 80s have seen their prospects of a comfortable retirement disappear with this sorry saga.
In 2010, I argued that we needed to get a compensation scheme up and running to get money out as quickly as possible and that the question of how much was an argument for another day. I thought that if we got hung up on an argument about how many billions, it would probably delay the whole process again. As it was, the Government acted quickly in 2010: the scheme started operating in 2011, £1.5 billion having been allocated, and by the end of January 896,367 people had received some compensation. Given the complexity of these issues and the difficulties of tracing people, on the whole I think the Government have done a good job delivering those funds.
Nevertheless, 22.4% will have been a disappointment to many constituents. I do not want to get into an argument about the appropriate level of compensation, but like many Members I think the Government should contribute more as the public finances improve.
Annette Brooke (Mid Dorset and North Poole) (LD)
The last Government’s lack of action was described as “shabby”, and it would be a tragedy if this Government, having taken that brave decision in 2010, were to be regarded as shabby too, but unfortunately 22% sounds a bit shabby.
Mr Syms
I agree. For many of us, it is a start rather than the finish.
The constituents I see in my surgeries have a quiet dignity about them but still feel aggrieved and think that the Government ought to move some more. My main plea today is for the Treasury to consider the issue. The public finances are still a challenge and will be a challenge for the next Government, but I think that as things improve, the Government should be able to provide further funds.
Mr Syms
I will in a moment; I just want to make a few more points.
The reality is that most of those affected do not have the ability to earn money or to improve their particular circumstances. They made decisions predicated on certain estimates, and they have been badly let down. I am glad that the coalition Government have moved as they have. We have a good story to tell so far, but it could be an even better story if they listened to the concerns of Members on both sides of the House and made further movement.
The fact remains that £1.5 billion has been allocated, and we have heard that £1 billion has already been paid out to 896,367 policyholders, but that 140,000 have been untraced. On the assumption that many will inevitably remain untraced, it must leave a balance in the fund of £500 million. At what point, then, does the scheme conclude that it will not trace some of these people? At that point, will some of the £500 million be available for further distribution to the 896,000 or so who have already received some money? We can argue about whether there should be more money, but if £1.5 billion has been allocated and not all of it has been sent out, that provides quite a strong argument for making a decision at some point to allocate more of the money available in the Treasury to help these people. I hope that the Government will address that issue first.
The second issue is whether we could top up the £1.5 billion in due course to provide a much more satisfactory conclusion. Like many colleagues, I have retired constituents in my constituency—Poole—who are prudent and sensible people. Most of them made provision for their retirement in the best way they could. They did not go on gambling cruises and they did not go to Las Vegas: because they were responsible, they decided to invest. This provides a very strong case for a Government who believe in the ethics of people acting responsibly to stand by those people when they have been let down.
The Economy
Robert Syms Excerpts(9 years, 5 months ago)
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Stephen Hammond
The hon. Gentleman shakes his head again. This is not only deficit denial, but fact denial.
Mr Robert Syms (Poole) (Con)
My hon. Friend will, like me, remember sitting on the Opposition Benches and hearing the former Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), saying that the previous Government had abolished boom and bust.
Mr Brooks Newmark (Braintree) (Con)
Thank you, Madam Deputy Speaker. I am delighted to follow the right hon. Member for Oldham West and Royton (Mr Meacher).
Notwithstanding the opening remarks of the hon. Member for Nottingham East (Chris Leslie), the Government have made huge strides in cleaning up the economic mess they inherited in 2010. As the Governor of the Bank of England, Mark Carney, said on 9 September,
“There are now over one million more people in work in the UK than at the start of the crisis. Total hours worked are some 4% above their pre-crisis level. The recovery has exceeded all expectations. It has momentum. The Bank’s latest forecast expects real wage growth to resume around the middle of next year and then to accelerate as the unemployment rate continues to fall to around 5.5% over the next three years.”
Mr Newmark
Yes, my hon. Friend is absolutely right. I will get on to that a bit later on.
This Government have cut the budget deficit by a third. The International Monetary Fund says that the UK is achieving the largest reduction in the headline and structural deficits of any major advanced economy in the world. Furthermore, it is forecasting growth of 3.2% for 2014—the fastest-growing economy this year. Moreover, the Office for Budget Responsibility forecasts growth this year of 2.7%—the biggest upward revision between Budgets for at least 30 years. Employment is up by 1.7 million since the election. In the past year alone, long-term unemployment has fallen by 206,000 and youth unemployment has fallen by 244,000. I was especially delighted that, in the 2013 Budget, the Chancellor adopted the Million Jobs campaign manifesto idea of cutting national insurance contributions for under-21s, which will help young people get into work and open up opportunities for school leavers.
A record number of women are in work. In addition, the annual fall in female unemployment is the biggest on record. This Government have ensured that the UK now has more men and more women in work than ever, and the number of people claiming unemployment benefits has fallen at the fastest rate since 1997.
It is worth noting that the number claiming jobseeker’s allowance has declined. In relation to the previous speakers, it has fallen by 20% in the constituency of the hon. Member for Nottingham East, by 32% in the constituency of the hon. Member for Coventry South (Mr Cunningham) and by 34% in the constituency of the hon. Member for Bristol East (Kerry McCarthy). The right hon. Member for Oldham West and Royton will want to know that the number of JSA claimants has dropped by a whopping 50% in his constituency.
The Government have ensured a fall in borrowing costs to record lows, which has saved money for taxpayers, businesses, home owners and families alike. Inflation was down to 1.3% in October, helping to bring down the cost of living. By almost every benchmark, the UK has made huge strides in turning the UK economy around, and the Chancellor and his team at the Treasury should be congratulated on sticking with plan A and ensuring that the UK is on the path to recovery.
The Government have much to be proud of on the cost of living. I welcome the significant increases in the personal income tax allowance, which rose to £10,000 from April this year. As has been mentioned, that has ensured a tax cut for 25 million people, with individuals paying an average of £705 less in income tax than they did in 2010. Indeed, 2.7 million people have been taken out of tax altogether, thereby reducing their cost of living.
The Government have already reduced energy bills by £193 by removing the green levies originally imposed by the Leader of the Opposition. They are ensuring that energy companies offer the lowest tariffs to customers, thereby reducing the cost of living. The Government have frozen fuel duty for the longest time in more than 20 years, with pump prices 20p per litre lower than if Labour were in power, thereby reducing the cost of living. Indeed, the average motorist will save £11 each time they fill up their tank, as a result of the Government’s actions.
Councils are getting help to fund council tax freezes for a fourth consecutive year, through a grant for local authorities that could be worth more than £700 for average bill payers. The Government’s new tax-free child care scheme will provide 20% support on child care costs of up to £10,000 per child per year, meaning that parents will receive support of up to £2,000 per child per year.
The Government have introduced the triple lock, which means that pensions increase each and every year by the highest out of price inflation, earnings growth or 2.5%. Over the course of their retirement, the average pensioner is about £12,000 better off under the triple lock guarantee, thereby helping with the cost of living. The Government have introduced the warm home discount scheme, which gives pensioners a £135 rebate on their electricity bills, thereby reducing the cost of living. They have permanently increased the cold weather payment from £8.50 to £25, thereby reducing the cost of living.
In conclusion, the Government have much to be proud of. The Chancellor had to make some difficult decisions back in 2010 to ensure that the country could have a long-term sustainable economic recovery. Although we inherited an unemployment rate of 3.4% in Braintree, I am delighted to say that it has now fallen to 1.5%. There has been a marked improvement in youth unemployment too, with the figure falling from 6.3% in May 2010 to 2.6% last month.
As the Governor of the Bank of England said in September, the economic recovery “has exceeded all expectations.” We should not jeopardise all this by returning to Labour’s tax and spend policies which created the financial mess that we have finally begun to clean up. The Government must stick with their long-term economic plan as it is the only sustainable way to raise living standards, help families to manage the cost of living, and offer a better and brighter economic future for our constituents and for our country.
Mr Robert Syms (Poole) (Con)
I thank the Opposition for affording us the opportunity to laud the success of the Government’s economic policy. I do not think we debate economics and how the economy is doing enough, and this is a useful opportunity.
The trick in running an economy is to ensure, as the world economy goes up and down, that the downs are small and the ups are large. We had the biggest downturn in our history at the end of the Labour Government, some of it down to the facts of world economics but some of it down to the fact that you spent rather more than you should have done and did not regulate the banks as well as they should have been regulated—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I do not think I was responsible. Others might wish to take the blame, but I certainly do not.
Mr Syms
I am sorry, Mr Deputy Speaker. I have not been in the Chamber for a while, as I have been on a Bill Committee.
We have a coalition that has set out a firm framework for managing the economy and a long-term economic plan. The result is that we have pretty good employment figures, but we all know that many of those jobs are low paid. That is the start of a recovery. The main benefit of people getting jobs is that they are afforded the opportunity to upskill and move into better-paid jobs as the recovery takes hold.
The economy is healing, but it is a long-term project and it will take a while before we get back to what most of us would consider normal economics. Indeed, interest rates will have to go up at some point so that my retired constituents can also get some benefit from the economic recovery. Good progress has been made and the Government have taken a sensible point of view.
The reality is that it is difficult to export if one’s main export markets in the eurozone have trashed their economies by running stupid economic policies, and if the far east is going into recession as well. If we compare Britain and the United States with most of the world, we can see that we are doing better. We have created more jobs in the past four and a half years than the rest of the 27 European Union states combined. Clearly, there is more to do, but Britain has proved that it has an open and resilient economy. We still have some excellent companies. The car industry is reviving and we still have extremely good educational establishments. Ours is an open economy and the City of London is one of the major financial centres. So long as we provide the framework for a decent economy, I am sure the British public will rise to the challenge by producing jobs, wealth and prosperity.
We have all seen an improvement, but there is more to do. We appreciate that many people are struggling on low pay and having a difficult time of it. We do not deny that, but we must set out that we need to stick with the economic policy, and people’s living standards will start to rise. Wage increases are picking up over and above inflation, which is the start of a slow march towards improving living standards.
We should stick to what we are doing, have confidence in our economic policy—
Mr Syms
I had better not, because time is limited.
The British economy will benefit from that confidence. I look forward to hearing the Minister’s reply. There is a good story to tell, but we are only part of the way there. There is more to do, and certainly more to do for the many of our constituents who have been hurting over recent years. That is the consequence of a pretty big downturn and a big adjustment. The British people have gone through the period of adjustment pretty well and have accepted the realities. Now, they are looking forward to a sunny upland, and I hope the Government can provide that as the economy strengthens over the next year or two.
Office for Budget Responsibility (Manifesto Audits)
Robert Syms Excerpts(9 years, 10 months ago)
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Mr Robert Syms (Poole) (Con)
I spent 13 years in opposition in this House, and I sat through several Budget speeches under the Labour Government. They were interesting, to say the least, because it usually took some weeks to find out, having read the small print, what they actually meant. At that time, we were told that boom and bust had been abolished. I very well remember the debate we had when it was revealed that the deficit was £164 billion.
This Government had a very tough economic inheritance. We would not be in coalition if we had not, because normally, the Liberal Democrats and the Conservatives enjoy fighting each other all the time, but the problems of the country were so damn serious that we had to get together to try to sort them out. That is the legacy of how the last Labour Government managed our economy.
One of the important things in 2010 was credibility. Confidence in the markets was very shaky, and the OBR was part of a range of policies that the Government introduced to add some degree of independence, so that people had more confidence in what the Government were going to do and in the figures and, indeed, so that the City and forecasters could see the direction of British policy. It was a limiting factor, because no longer could the Government adjust the growth factors or the tax take to show a rosier scenario, so that they could cut taxes. They had to live within the framework set by the OBR.
But I do not think the OBR is some kind of magic bullet. All forecasters are, by their nature, wrong. What we have seen throughout the last four years is forecasts from the OBR go up and go down with the economic cycle, and the Opposition, on many occasions, have accused us of having large deficits and putting up the national debt on the basis of OBR forecasts. As the economy is now growing and they are going the other way, no doubt we are praying in aid the OBR that things are getting better and we are getting on top of the problem.
The reality is that the OBR is a small body of public servants who do their best to give some independent credibility to Government policy. If I were to focus additional money or resources, it would be on having a few more people in the OBR rooting around in what our Government are doing, rather than in what the Opposition might do. Even today, when we look at budgets and financial statements, the reality is that there are still a lot of figures about tax avoidance and Swiss agreements to bring in more taxation that ought to be rooted around in by the OBR to see whether or not the Government forecasts are robust, because the OBR is dealing with matters of fact. It is dealing with the Government, with public spending and with how a country is being run.
I do not think that focusing on what the Opposition may or may not do is a terribly good way of spending money. Would it have been a good use of money for civil servants to spend a lot of time looking at what the leadership plans of my right hon. Friend the Member for Richmond (Yorks) (Mr Hague) were for the country? Simply on the basis of the 2001 election, no. Would there have been a lot of benefit in looking at the plans of my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) or of Michael Howard? The only time when there might have been some benefit would have been before 2010, when it looked like there would be a change of Government.
John Glen
Is the other lesson not that in government, decisions are made as a consequence of actions that are being taken in other parts of the Government and, in fact, the costs of delivering some programmes are very different when those decisions have to be taken? Therefore, any judgment would be somewhat qualified.
Mr Syms
Yes, and lots of assumptions would still have to be made. Clearly, my hon. Friend the Member for Chichester (Mr Tyrie), the Chair of the Treasury Committee, made some very good points about ground rules that ought to be discussed in peacetime. If this is an idea worth exploring, it is better to explore it in a relatively more peaceful political time post the 2015 election to see whether it has some merit.
I think that the greater benefit for public debate in this Chamber between the parties is a greater focus on what the Government are doing with their plans. That would give more information to the Opposition and Back Benchers to question and hold the Government to account, rather than focusing on the hypotheticals of what may or may not happen if, indeed, the Government change. Not least, if the focus is on manifestos—they come out in March before an election, at the last possible moment, so that there are nice surprises for the newspapers—how on earth could the OBR look at those and objectively give any kind of costing before the election?
Looking at the future programme, in the autumn, we have the autumn statement and all the spending plans. We are then immediately into the Budget, and just beyond that, we are into a general election. It is bad enough trying to predict what the Government are doing, let alone what the Labour party are trying to do at that time. As I said at the start of my speech, any kind of forecast is bound to be wrong, so the OBR would be wrong about what the Government are doing and wrong about what the Labour party is doing.
Madam Deputy Speaker (Dame Dawn Primarolo)
Order. Before the hon. Member for Poole (Mr Syms) replies, I point out that Government interventions are having the consequence of talking out any Members who are still waiting to speak, and there are quite a number. We will start the wind-ups at 6.40 pm.
Mr Syms
I conclude my contribution by saying that the OBR has a role. We should stick with its current role and perhaps look at changing it after the general election, but I do not think that this proposal has much merit. If it did have merit, would we be kicking it around on an Opposition day? I do not think so.
Amendment of the Law
Robert Syms Excerpts(10 years, 1 month ago)
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Vince Cable
Yes, indeed. I think that the apprenticeship model which we are now developing and expanding rapidly, in terms of both quality and quantity, is the remedy for the long-standing neglect to which my hon. Friend has rightly drawn attention.
Mr Robert Syms (Poole) (Con)
Is it not a fact that the British car industry will produce 1.6 million cars this year, and that Jaguar Land Rover alone will export 13.5 billion? Is it not also true that the Budget, with its help for manufacturing and exporters, is bound to help such industries and produce a good British success story?
Vince Cable
I had intended to say something about manufacturing incentives, but let me now emphasise a point that my hon. Friend has made very well. Some of our manufacturing industries, including the car industry, are expanding rapidly, and showing very high productivity and rapid export growth. The aerospace industry is another example. I was delighted to learn this morning that Hitachi, the leading Japanese company, is to establish the global headquarters of its railway manufacturing business in the United Kingdom on the basis of its existing investment in the north-east of England, and it is expanding and seeking business opportunities from the rail revolution that is taking place here. Manufacturing industries such as those, which were previously in decline, are now beginning to become resurgent in some key sectors.
Mr Robert Syms (Poole) (Con)
I welcome the Budget, not just in and of itself specifically, but because it is part of a long-term economic plan. It is important that Governments look at issues on a long- term basis. I think we sometimes forget the depth of the crisis of 2008. There was a 7.5% fall in output and it was the biggest recession in British history, significantly worse than that of the 1930s. On top of that, there was a major banking collapse and, following that, a euro meltdown and crisis. Therefore, the stability provided by the coalition Government’s steady plan to rebalance the British economy is a sensible and welcome development.
We have been blessed over the past three or four years by lower levels of unemployment than might have been predicted and we have started to see a recovery and higher levels of employment. The reason for that is that British workers have reacted in a rational and sensible fashion and have tried to price themselves into jobs. The consequence of that is that living standards have fallen and, as the Institute for Fiscal Studies has said, the fall from about 2007-08 until last year was about 7%. If there is a massive fall in output, it is inevitable that living standards will fall.
We are now starting to see much more evidence of a proper recovery, with pay picking up, inflation coming down—they should cross during the year—and the Government making a great priority of raising tax thresholds. If we are reforming welfare to encourage people to take jobs, it is both logical and sensible to make many jobs more attractive by reducing tax. I have heard some of the criticisms, such as, “What if you don’t pay tax?” Part of the problem of the Government taking 3 million people out of the tax system is that fewer people will pay tax at lower levels. However, it is good to provide more incentives within the British political system.
We are getting more growth, and we are starting to see a recovery in investment. If the eurozone, which could still be problematic, settles down, there is a prospect of higher exports. I welcome what the Government have done in providing more export credit. I also welcome what they have done for manufacturers by addressing some of the problems with the EU carbon floor price, which would have made many of our heavy or energy-intensive users uncompetitive. The key point is that the Government have listened to representations and made adjustments to help British business.
My principal point is that I welcome the changes in savings and pensions. Throughout most of my time in the House, people approaching the age of 65 have come to me to bemoan the fact that they are forced to buy an annuity, and that it will remain with the insurance company when they die. We are giving people the real freedom for which we campaigned in opposition and that we had in our manifesto, and it is absolutely right to do so. Moreover, we are allowing people to make their own decisions about how they spend their own money. It seems to me rather bizarre that people have a pension pot, but then have the problem of trying to calculate at the beginning of the year how much they can take out. I see no reason why we cannot just trust people, and ensure that they can make their own decisions about their retirement. That requires a bit of maturity and we will provide more advice, but it will be a very real freedom for many pensioners in Poole.
In addition, I welcome the Government’s proposal for the bond that, at least for a time, will give a higher rate to many pensioners who have not had a big rate of return on their savings. Quantitative easing has made life very difficult for pensioners with savings, and the bond is one way to offset that in these extraordinary financial times. Again, the Government have listened and have responded to that particular problem.
We are encouraging savings. We are giving pensioners more flexibility. We are addressing the needs of and helping exporters; we have seen many good examples in the car industry and aerospace. We are helping heavy manufacturers, who have real problems with the carbon floor price. The Budget will help jobs and growth. We are seeing the start of higher productivity and higher investment. I hope that that continues, and that our country goes from success to success.
Interest Rate Swap Derivatives
Robert Syms Excerpts(10 years, 6 months ago)
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Mr Robert Syms (Poole) (Con)
I, too, pay tribute to my hon. Friend the Member for Aberconwy (Guto Bebb) for his leadership of the all-party group on interest rate swap mis-selling. The issue is important for all Members, which is why the Chamber is so full.
We all know of a number of cases in which people were switching banks or wanted loans for a project, and one of the last products slid across the table to them was an interest rate swap. Many felt that they did not have much choice but to take it. The British economy is showing welcome signs of starting to recover, and the Bank of England is pushing cheap credit into it to get the banks to lend, which is having an impact. However, we should all reflect on the fact that 30,000 to 40,000 businesses run by serial entrepreneurs could well go out of business before the process that we are discussing is finished, which would have a cataclysmic effect on the businesses with which they deal, the people who work for them and many of our local economies. The issue is not just mis-selling but whether we maintain stable economic growth and create jobs and prosperity in future.
Richard Fuller
Does not my hon. Friend find it sadly ironic that the victims of mis-selling were people who had shepherded their money and built their businesses carefully over many years, while the people who benefited were those who were in it for a fast buck?
Mr Syms
I do, and many of the people who have been affected have a lifetime’s work in their business—more than one lifetime in the case of many family businesses, which are the bedrock of our constituencies. Those people have been key members of the community and employed many people. Today’s debate is therefore important, as we need to give the FCA and the Government a strong message that the authorities must get the banks to get on with it. Things are going too slowly. As we heard earlier, the banks have put forward some billions of pounds for compensation, but they have dealt with only 0.2% of cases. Of the £3 billion that is potentially available for redress, only £2 million has been paid out to 32 businesses, which shows that we need to speed things up.
In many cases, first the capital was sucked out of businesses and then the break clauses were such that many people could not afford to get out of the contracts. With most normal capitalist activity, if someone felt they could not make a go of it, they would sell their business on. However, nobody will buy a business that has the poison pill of an interest rate hedging product because they know that it is a major drag on the business. It is not free enterprise as we know it, and I rather agree with Members who have suggested that the banking system has not done itself any favours.
What is so tragic about the products in question is that people have no way out. We need to get on with achieving compensation. Members have made some good contributions today, and behind every story they have told is tragedy and worry. People cannot sleep at night because they are not sure how to deal with the problem. I say to Ministers and the FCA that we need to get some speed up and get compensation paid. We need to deal with people fairly, and to support and cherish serial entrepreneurs, who should be playing a major role in the economy’s recovery, rather than being put in a position of not knowing what will happen in a week, six months or a year. We need to give them our support.
Margaret Thatcher Day Bill
Robert Syms Excerpts(10 years, 10 months ago)
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Business without Debate
Robert Syms Excerpts(11 years, 4 months ago)
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Mr Speaker
I am not sure why the hon. Gentleman was hovering, although I am sure his hover was well intentioned. We shall move to the vote.
Motion made, and Question put forthwith (Standing Order No. 58), That the Bill be now read a Second time.
Question agreed to.
Bill accordingly read a Second time.
Motion made, and Question put forthwith, That the Bill be not committed.—(Mr Syms.)
Question agreed to.
Finance Bill
Robert Syms Excerpts(11 years, 10 months ago)
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Barry Gardiner
I accept your ruling, of course, Mr Deputy Speaker, and you are right. We have strayed wide of the initial focus of the amendment. It was not my intention. All I can say in mitigation is that I was led down the path by the interventions that I took.
Mr Robert Syms (Poole) (Con)
I welcome this debate because the decisions that we take on tax rates are critical. We have had a slightly more general debate than I expected. Opposition Front Benchers particularly presume that the Government can somehow control events. However, there is a big wide world out there and anybody watching television or watching what had happened in the eurozone knows that there is a limit to what any Government can do in the present circumstances, when confidence is low, countries are being bailed out and businesses, even those with money, are not investing as rapidly as one would like. All the Government can do within the global context is try to make the best decisions they can on the information that they have. We have a plan, which I think is a good plan, and by and large we are sticking to it. The deficit has come down by 25%. That is a start and we need to do more.
On the subject of income tax rates, I think we tax people at far too small a salary. We do not increase incentives to work. A key point of the coalition programme is to up the basic allowances to make work pay. We all know—I am sure even the hon. Member for Brent North (Barry Gardiner) knows—that the benefits system can be a big disincentive to people taking jobs. People act rationally, and if they are not going to be much better off or if they are going to lose money, they will not take work. A reform of benefits is needed, with the universal credit coming in, and we have to up the income tax allowances for those at a lower pay level in order to increase incentives for people to take jobs. Hopefully that will get more people into work over a period of time.
All the evidence suggests that work is good for people. It is better for their health, including their mental health, and it is a better way to bring up a family, and of course those in work have a better chance of gaining skills, reskilling and getting on in life. That is the key point about what the coalition Government are trying to do. Therefore, I commend them for what they have done to take many millions of people out of income tax and hope that they continue to make progress in that area so that incentives to work increase over the next few years.
Ian Lavery
The hon. Gentleman is very kind to give way. Does he agree with hitting pensioners hard with the £3 billion tax increase?
Mr Syms
About a quarter of my constituents are pensioners, but I have received only three or four e-mails on this subject. It is not a major issue in Poole, where most of my constituents pay tax. I do not think that it is the big issue that Opposition Members claim it is. It depends on how fast the basic allowance for all taxpayers overtakes the age-related allowance, which I presume is logically what the Government want it to do. Of course, it also depends on the level of inflation. If we freeze the allowance and have higher inflation, it will be eroded more quickly than if we have lower inflation. Thankfully, one of the good points about the past few months is that inflation is starting to crash back down towards 2%, and the sooner we reach that rate, the better.
If we look at what the Government have promised in their triple lock for pensioners—the increase in the basic state pension of over 5%—along with the winter fuel allowance, which we continue to pay, and free bus travel, we will see that their priority has been to support pensioners. We have been criticised over the reduction in the winter fuel allowance, but I point out that the previous Government put it up for the election year but made no budget provision for the year after, and we are faced with some very difficult problems. Unfortunately, it is an expensive item and the Government have been unable to keep it at the level it was for one year, but on the whole we have kept it at the level it was for most years at the end of the previous Government’s time in office, and that is a boon to many pensioners. I think that what the Government are doing on the age-related allowance is probably the right thing to do.
Ian Lavery
I am surprised to hear that only three or four of the hon. Gentleman’s constituents have contacted him on that point—I wish him good luck on that. Various figures have been bandied about and I wonder whether he disputes them. It has been suggested that 4.4 million pensioners will lose up to £83 a year and those turning 65 next year could lose up to £322. Does he support that?
Mr Syms
I am not sure that that is a massive loss of income. The most recent issue we debated was the 3p cut on fuel, which will make more of a difference to pensioners in my constituency than this minor change in tax allowances. I think that the Government’s policy towards pensioners is fine.
Let me turn to the top rate of tax. We all know that there is a lot of politics in this. The rate was 40p under the previous Government, except for the last 37 days they were in office, so the 50p rate was one of the wonderful inheritances from them. Clearly, if we want to stop people looking to avoid paying tax, we have to keep a competitive rate. At 40p we have a rate that was competitive with many western European countries, but at 50p we do not. If we have a country without exchange controls, a very mobile population, as we do, and people with highly tradable skills, there is a danger that if we start to put up the rates we will lose revenue and people will go abroad. As my hon. Friend the Member for Dover (Charlie Elphicke) said, having had a 50p rate which meant people started looking at how to avoid taxation, that might stay in the system for some time. I welcome what the Government have done by reducing the higher tax rate to 45p. I think that it is a pity they delayed it, because I suspect that the impact will be to reduce income tax take for the current year, but when the rate drops to 45p for the year after, we will see an increase in the income tax yield.
It is important to give a message. I was in this House when the previous Government put up income tax. In one of his last speeches from the Government Back Benches, Stephen Byers said that he very much regretted that the Labour party had decided to do that. If all the evidence suggests that that has not raised very much this year, it seems to me that it is being done for ideological reasons, rather than practical, economic ones. If nothing else we ought to be practical in how we do things. Therefore, the Government’s reducing the top rate, as a start, is the right thing to do which will have a beneficial effect in the long term. But let us not forget that the allowances for the lower paid have gone up this year. The top rate of tax will come down next year, by which time we will have had another Budget in which I hope the Government will have made more progress on assisting some of those on lower pay and taking more people out of the tax net.
The one thing that can be said about the Government is that their thinking is joined up. We have welfare reform, we are pushing up the tax allowances to increase work incentives, and we are dealing with a whole range of tax rates, including trying to make corporation tax more competitive, and I think that that will make us a much more competitive country in the world. We look like an island of stability, certainly compared with the eurozone countries. Let us hope that they sort out their problems so that we can start selling them our excellent goods, but let us face the fact that we live in a competitive world and unless our taxes are competitive we will not be able to generate the wealth to pay for all the things we want: health, schools, foreign aid, defence and all the things we need to do. I think that the Government are on the right track. Clearly, it is a very bumpy economic environment, certainly rather bumpier than we might have thought it would be when we came into office, but provided we have leadership and vision, we will get through.
Jonathan Edwards
It is a pleasure to contribute to the debate. It has been very interesting listening to the debate on income tax for the 2013-14 financial year. Hon. Members already know the position of the Plaid-SNP-Green group; we were among the handful of Members who voted against the inclusion of the new 45% additional rate in the founding principles of the Bill at the conclusion of the Budget debate earlier this year. Indeed, the official Opposition seemed to miss that debate, with the exception of two Labour Members, the hon. Members for Newport West (Paul Flynn) and for Bolsover (Mr Skinner). I also tabled amendments in Committee, which were supported at the time by the official Opposition, including some that they have chosen to table for this evening’s debate, which naturally I will support if they decide to push them to a vote later.
Much of the debate on Second Reading and in Committee focused on differing interpretations of, and often selective quotations from, a series of reports. Hon. Members attempted to argue that their party’s interpretation of the statistics was most valid, and we heard some of that again this evening. They were essentially making economic arguments about taxation—about the Government’s claim that the loss of tax revenue from shifting the 50% additional tax rate to 45% would be compensated for by the stimulus it would provide to the wider economy, and that given the amount of forestalling and income shifting that the 50% rate has apparently generated, we would be better off in future and, ultimately, more tax would be paid. That is the thrust of the argument.
I simply do not buy the idea that a tax cut will make those avoiding the 50% rate choose to contribute to society by paying at the 45% rate. What the Treasury should be doing, rather than giving a tax cut to those earning in excess of £3,000 a week, which is almost twice the average income in two months for most of my constituents, is closing down all the clearly aggressive tax avoidance schemes, some of which have been highlighted in recent weeks, and ending the tax havens that provide a nice bolthole for those who wish to hide their income.
For my party, however, the issue of taxation is one of principle. We believe that people should be proud to pay taxes and contribute to society. It should not be a game in which those who can afford to pay an accountant pay less and then consider it a triumph or a success. As I said during a debate in Committee, the Scandinavian model of taxation and social security is in my party’s DNA. Some might say that that is the difference between ourselves and the Labour party, which announced the introduction of the additional rate as a temporary measure, bringing it in literally weeks before the party left government. Where we believe that the additional rate is part and parcel of contributions to society, Labour remains unclear how long the now official Opposition intended to continue the additional rate.
This tax cut for the mega-rich leaves a bitter taste in the mouth. Public sector workers in my constituency face pension changes, meaning that they have to pay more in, that they get less out and that they work longer—that is, those who still have their jobs after spending several years with pay freezes and the threat of regional pay dangling over them. Living standards for private sector workers in my constituency are being squeezed, and many families struggling to make ends meet are being stigmatised by the Government, while the disabled and the vulnerable face tribunals to decide whether their pain is real. It is not acceptable that we are in a society which tells those at the bottom that they have a culture of entitlement, while those at the top get huge and unnecessary tax cuts. Why do we think that we can cut the poor’s income to make them work harder, but incentivise the rich through tax cuts? That is perverse thinking.
We support the aim of amendment 3, which would give those public sector workers earning less than £21,000 who have had their pay frozen a £250 tax rebate. They deserve it, as do many private sector workers who have lost out because of the Treasury’s austerity economics.
We support also amendment 1, tabled by the official Opposition, despite its effect of wiping out the additional rate altogether for 2013-14. Given their failure to vote on the inclusion of the 2013-14 rate in the Bill at the time of the Budget, we recognise that their intent is to show their belated support for maintaining current income tax rates. If the amendment is successful, we expect the Government to reinstate the top rate at 50%.
With last week’s figures confirming that the double-dip recession is deeper than first thought, and with the cuts now beginning to feed their way through the system, giving a tax cut to the mega-rich is a funny way of showing that we are all in this together.
Business and the Economy
Robert Syms Excerpts(11 years, 12 months ago)
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Mr Robert Syms (Poole) (Con)
I support the Queen’s Speech, which I thought was very good. I have an advantage over many Members, in that I came into the House in 1997. Within a matter of hours, the then Labour Government decided to make the Bank of England independent. They also changed the regulatory regime for the whole banking system from its historic basis in which the Bank of England presided over the banks. Without consulting the Governor of the Bank of England, they created the Financial Services Authority and a whole new system. It is somewhat ironic that, a decade later, that decision played a major role in what happened during the financial collapse, because our regulatory regime was not fit for purpose.
This Government, in contrast, have produced a draft Bill that has been widely consulted on. It has been carried over and will become legislation after hours of debate. The Bill will give back much of the regulation to the Bank of England. The proposal will have maximum transparency and scrutiny. The Queen’s Speech also contains a banking reform Bill, which is to be welcomed. We are starting to put back together a decent regulatory regime for the financial sector.
In 2010, we formed a coalition for the simple reason that this country faced a real crisis and the biggest peacetime deficit in its history. It takes quite a lot to get Liberal Democrats and Conservatives to work together, but the previous Government managed to achieve that through their financial irresponsibility. We have faced difficulties ever since; the financial crisis has continued because of what has happened in the eurozone and worldwide. This is not an easy environment for the Government to thrive in, but they have set out a clear long-term plan. They have kept interest rates low and allowed the Bank of England £325 billion of quantitative easing, which is substantially more than would be possible if we were spending public money to try to push the economy. Against that background, they have created an environment in which we should be able to export more, as markets improve, and rebalance the economy. That will take time, however, and it will not be an easy role to play. Clearly, the debate for this Chamber is that if Opposition Members are right, they will win in 2015; and if we Government Members are right, the coalition parties will benefit in 2015. That, essentially, is the narrative about how things will pan out.
The Government are doing substantial and good things in the realms of education in creating apprenticeships. The Queen’s Speech also referred to legislation on enterprise and regulatory reform. We all know that that is necessary to lighten to the burden on businesses where we can, so that they can recover.
The right hon. Member for Birkenhead (Mr Field) put his finger on an important point. We have a balance-sheet recession, as banks are shrinking their balance sheets, while companies have a lot of money which they are not spending, and individuals are trying to rebalance their individual financial circumstances. The recovery will be bumpy, therefore, and confidence is very important to it. In the world of 24/7 news, when one can switch on Sky or the BBC to find out about crisis talks in the Greek cabinet or what is happening elsewhere, it is difficult to engender confidence. If we hold to our proposals and our strategy, however, I think that things will eventually sort themselves out, and we will see success with higher investment, more jobs and a more prosperous economy.
I support what the Government are doing. They are setting the environment for more growth and a more enterprising country. We should not forget that our recent Budget included a £2.5 billion tax cut for the lowest-paid workers. There is a strategy behind what the Government are doing: on the one hand, we are reforming welfare with the universal credit and a welfare cap; on the other, we are taking many of the lowest-paid workers out of the tax system. That is intended to increase incentives to work. The crucial test of us as a country is whether we can make work attractive and get more people back into it over the next few years.
I believe that the Government are on the right track. I support what they are doing in a difficult world environment in which confidence is in short supply. It is interesting that our long-term interest rates are low and that in the current crisis, sterling is now starting to rise as this country is seen as a relatively safe haven in a very turbulent world. I am sure that if the Government stick to the course, this country will get the reward it deserves and that we all want—a prosperous and more dynamic country.
Amendment of the Law
Robert Syms Excerpts(12 years, 1 month ago)
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Mr Robert Syms (Poole) (Con)
First, I draw Members’ attention to my directorship and shareholding in the Register of Members’ Financial Interests.
We have to understand that the coalition Government inherited an extremely difficult situation, with a massive deficit. The situation cannot be dealt with in one or two years; we are talking about a process over several years to get the public finances into reasonable order. Of course that would be easier with a benign world economy, but given the eurozone issue and higher fuel prices, there have been a lot of headwinds over the past 12 or 18 months. Nevertheless, the British economy has continued to grow and many jobs are being created, although the outlook is more difficult.
I welcome the fact that today the Chancellor has stuck to his plan—long-term fiscal consolidation. Clearly, there is very limited room for manoeuvre. I despair a little when colleagues are always trying to spend more money because, as we heard from the last Government, the money has run out. We are really talking about marginal changes to the tax system. Early in his speech, the Chancellor said that the Budget was fairly neutral in terms of its impact on the British economy, and that is probably right. Indeed, I am of the school of thought whereby I sometimes think it would almost be better to cancel the Budget and continue with the same policy rather than have to jump up and make lots of announcements and pretend that one is being hyperactive.
There are things in the Budget that I welcome. I certainly welcome the rise in personal allowances. It is vital that we increase incentives to work. Universal credit, when it comes in, will be vital in increasing those incentives, and the benefit cap is also significant. On the other side of the equation, it is important that people on low pay, who pay tax at higher rates than many people abroad, should be taken out of the tax system. We have made progress today, and I hope that we will make further progress in going beyond the £10,000 limit, because we have to get to a position in which people on relatively low wages really feel that there is an incentive to get out there, take a job and make a contribution for their family.
I welcome the Chancellor’s reiteration of his view that we should pay our way in the world by restoring the balance of trade, getting investment in, and trying to improve investment in the manufacturing sector, which has shrunk for too long. We need a good financial services sector, but it is vital that we nurse and increase investments in manufacturing. Recent announcements on the car industry are very welcome and bode well for future export levels.
One of the legacies of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) is that we have one of the longest tax codes in the world. We must simplify it because businesses and individuals spend an awful lot of time trying to deal with its complexities instead of running their businesses and selling their products. I welcome the Chancellor’s proposed tax simplifications, which are vital.
Over the past few months there have been negotiations about the European Union treaty on more fiscal consolidation and co-ordination of tax policy. That gives Britain a great opportunity. If we can get our tax rates below those of our competitors on the continent, we will get a lot more inward investment. I welcome what the Chancellor has done on corporation tax, because we must reduce the rate. Let us not forget that most British companies are owned not by multi-millionaires but by pension funds. This measure means that we will leave more money in businesses and create a better environment for investments and pension funds, and that we will all be richer and more employed.
I welcome the Chancellor’s acknowledgement of the fact that we need to do more about airport capacity in the south-east. I recognise that there are problems to do with noise at Heathrow, Gatwick and Stansted, but it is not sustainable in the long term to say that we cannot have another runway at any of those airports; we have to have it somewhere. I do not know whether a new magic runway somewhere to the east of London is the answer. If we are to compete in the world economy, we must have routes to the world so that we can sell our exports. Some continental airports, including Schiphol in Amsterdam, Frankfurt and De Gaulle, now have routes to centres that we cannot accommodate within our system. We must have regard to the environmental problems but we must also, as a forward-thinking Government, consider how we can get more airport capacity.
The 45p tax rate has generated a lot of heat, although it is not happening yet. At the end of the day, one should try one’s best to raise money. The existing rate is not raising sufficient sums, and those who pay themselves greater amounts are in a good position to vary what they are paid in ways that give them opportunities to avoid taxes. Today’s approach has been to see capital gains tax and stamp duty on very expensive properties as a more predictable way of raising money than trying to maintain a rate that is not doing the job.
Dan Byles (North Warwickshire) (Con)
Given all the hoo-hah about the 50p tax rate, does my hon. Friend find it interesting that in its 4,753 days in government, Labour had a top rate of 50p for only 37 of them?
Mr Syms
Absolutely. Most of our competitors have lower top rates of tax, and that is significant because it means that this is about how we compete with them. If we want to get more manufacturing and jobs in Britain, then it is important to remember that some of the people who are looking to invest in Britain are top-rate taxpayers. It is significant that the stamp duty changes will raise five times as much as would have come in from the 50p top rate of tax.
I welcome what we are doing to encourage the oil and gas industry. It is important that we do more to use those assets. The changes that we made last year were not very helpful. One of the components of GDP that has fallen the most over the past 12 months is oil and gas and quarrying. If we want to maintain the advantages of our oil and gas industry, we need to do far more to extend its life. The tax changes in that area are to be welcomed.
Overall, the strategy has to be “steady as you go”. We have to increase the incentives to work. The main aim is to leave latitude for the Bank of England. As the Chairman of the Treasury Committee said, low interest rates and, certainly in the short term, quantitative easing will have more of a direct impact on the economy than anything that the Chancellor could have done fiscally today. If we have increased the incentives for lower-paid people to take work, if we have stuck to the plan, if we have given confidence to the markets, if we have made a number of announcements that will help the economy, such as those about broadband and investments, it is a job well done. I welcome the Budget.