Beer Duty Escalator

Sajid Javid Excerpts

Tuesday 5th March 2013 Westminster Hall

[The Economic Secretary to the Treasury (Sajid Javid)]

May I say what a pleasure it is to see you in the Chair, Mr Caton?

I thank my hon. Friend the Member for Nuneaton (Mr Jones) for, and congratulate him on, securing this important debate. I note with interest that he is holding this debate only 15 days before the Budget, so I congratulate him on his excellent timing. I thank all hon. Members—I counted seven—who contributed to the debate. I recognise the work done on this subject by institutions outside Parliament, particularly the British Beer and Pub Association, CAMRA and the TaxPayers Alliance. That work adds to the quality of the debate, and that quality is always welcome in our debates in Parliament.

My hon. Friend made some excellent points. One of the most interesting, which I recall from the debate in November, was that he met his future wife in a pub. That shows that pubs really are rich institutions that play an important role in social cohesion, a point that was well made by my hon. Friend the Member for Montgomeryshire (Glyn Davies). His focused point was on how the issue is about not just the economy or the cost of beer but the social contribution of pubs throughout the country, particularly in rural communities—like his and, I might add, mine—in which pubs are a key part of the local community. Pubs and brewers up and down the country should be assured that they have some passionate advocates in Parliament.

In the time available, I will try to respond to all the issues raised today about beer duties, the actions taken by the Government to help pubs and brewers in general, and the Government’s alcohol strategy. In response to the shadow Minister, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), my hon. Friend the Member for Burton (Andrew Griffiths) said that, understandably, he wanted this to be a cross-party discussion. I think that that is right, so I will not point out that I did not hear the hon. Lady apologise for introducing the escalator in the first place.

I will first focus on beer duties. The Government inherited the current rises in alcohol duties from our predecessors, as has been said. The 2008 Budget announced that alcohol duties would rise by 6% that year, and then by the retail prices index plus 2% in the next four years. The Budget in March 2010 extended those rises for a further two years, until 2014-15. If the Government were to cancel the planned 2 percentage point rises for beer, it would cost the Exchequer £35 million next year and £70 million the following year. Given the current public finances and the sums involved, it would be prudent for the Government to think carefully about the consequences of making any such tax changes. The Government continue to keep all taxes under review and regularly monitor the impact of alcohol duty rates on both the industry and consumers.

At present, our monitoring suggests that the decline in the nation’s beer consumption predates the increases in duty and is a reflection of how consumer tastes have changed. Beer’s share of the total alcohol market has declined by nearly 30 percentage points since the mid-1970s. More than 85% of the beer consumed in the UK is brewed in the UK, which was a point made by my hon. Friend the Member for Nuneaton, and we want to continue to support such business.

Brewers will benefit from a number of actions this Government have taken to support all businesses. The reduction in the rate of corporation tax and the temporary increase in the annual investment allowance, for example, will enable them to invest in new machinery. As my hon. Friend the Member for High Peak (Andrew Bingham) highlighted, the small breweries relief supports microbreweries by reducing their beer duty by up to 50%, and it has contributed to an increase in the number of such breweries. Both consumers and pubs benefit significantly from the diversity of products produced by the 730 microbreweries in the UK, and the Society of Independent Brewers estimates that small breweries relief has increased the number of jobs by 1,000 since it was introduced in 2002.

There are many ways in which the Treasury supports brewers. For example, my right hon. Friend the Chief Secretary to the Treasury recently helped to launch the Ginger Rodent beer at Aviemore brewery. Perhaps that is what my hon. Friend the Member for Nuneaton meant when he mentioned innovation in the industry. We must recognise, too, the contribution made by the right hon. and learned Member for Camberwell and Peckham (Ms Harman) in helping to promote and popularise that product.

[Andrew Griffiths]

I thank the Minister for giving way and for his support for the industry. He will know that beer and pubs pay £11 billion in tax, and that some brewers are paying 50% of their turnover in tax and duty. If we compare what those brewers are paying with what some UK businesses pay, perhaps he should consider scrapping the beer duty escalator and introducing a coffee tax.

[Sajid Javid]

My hon. Friend is always full of innovative ideas, but he makes a serious point about tax avoidance, which this Government take very seriously and will continue to do. Clearly, the more we clamp down on tax avoidance and tax evasion, the greater our scope to act more flexibly with measures such as beer duty. May I take this opportunity to thank him for the work that he does in chairing the all-party beer group and my hon. Friend the Member for Leeds North West (Greg Mulholland) for his work in chairing the all-party save the pub group?

The Government recognise the importance of brewers and the contribution that pubs make to our local communities and the wider economy. Unfortunately, the number of pubs has been declining for decades, but that reflects the changes in consumer tastes and in lifestyles. The number of pubs continued to decline in the early 2000s, despite relatively flat alcohol duties in real terms. None the less, we continue to support pubs through our policies. For example, the drop in the small profits rate from 21% to 20% in April 2011 has supported thousands of small businesses such as pubs. About a fifth of pubs currently receive a reduction in the business rates they pay. Small pubs can also benefit from small business rates relief or rural rates relief, and the Government have extended the small business rates relief holiday until March 2014.

The majority of pubs have also benefited from the reform of gaming machine taxation introduced on 1 February, and they have the opportunity to benefit from the Live Music Act 2012, which came into force last October, making it much easier for pubs to put on live music events. On top of that, in January the Government announced plans for a statutory code alongside the independent adjudicator to ensure fair practice between large pub companies and their tenants on issues such as rent and the price publicans pay for their beer. The Government will be consulting on those plans shortly, and I hope that Members present will make pubs and publicans in their communities aware of the proposals.

Let me talk about our wider economic policy, which includes the strategy to reduce the record budget deficit that we inherited. That strategy has led to lower interest rates, which benefit people who have mortgages. If interest rates were just 1 percentage point higher, the average mortgage would go up by almost £900 a year, which is money that could be spent in pubs, and companies up and down the country would pay another £10 billion in interest in servicing their loans. Clearly, low interest rates have been helping companies, especially small and medium-sized companies. Our record increase in personal allowances has also put more money in people’s pockets, which they can use in their local pub. My hon. Friend the Member for Amber Valley (Nigel Mills) mentioned the change in fuel duty, which means that rises that we inherited from the previous Government have not gone ahead, and that again has meant more money in people’s pockets.

I want to say a quick word about our alcohol strategy. Moderate alcohol consumption can be positive for people’s well-being, but the Government are committed to tackling cheap alcohol and irresponsible alcohol consumption. We have therefore reformed beer duty to support responsible drinking. In October 2011, duty was halved on low-strength beer, while duty on high-strength beer increased by 25%. That was warmly welcomed at the time by many hon. Members and by CAMRA.

The Government have also had a consultation on minimum unit pricing, and we will be announcing the results very shortly. My hon. Friend the Member for Burton made some excellent points about responsible drinking.

In the interests of time, I shall conclude my remarks. I am glad that we have had the opportunity to discuss beer duty, brewers, pubs and the alcohol strategy, and we have had, I think, a constructive debate. I hope that I have reassured hon. Members that the Government fully support pubs and brewers. As I have shown in some of the examples that I have cited, the Government have already taken action in that regard, and, despite our tight fiscal situation, I am keen for them to go further. Hon. Members will understand that I cannot make any specific commitments on action; we have to leave that for the Budget. None the less, as one of my hon. Friends mentioned, I like to be seen as a listening Minister, so please be reassured that I take the matter seriously, and that today’s debate has served to underline its importance.

Community Amateur Sports Clubs

Sajid Javid Excerpts

Monday 4th March 2013 Written Statements

[The Economic Secretary to the Treasury (Sajid Javid)]

The Government are committed to delivering and maintaining a real sporting legacy after the London 2012 Olympic and Paralympic success. An important part of securing this legacy is to encourage greater participation in sport at a community level, and local sports clubs have an important role to play in this.

The Community Amateur Sports Club (CASC) scheme provides a number of charity-type tax reliefs to support local sports clubs. In order to access these tax reliefs clubs must meet certain conditions and must register with HM Revenue and Customs (HMRC).

However, some of the eligibility rules in the legislation are unclear and cause confusion. This makes it difficult for clubs and HMRC always to be sure about whether a club is entitled to relief. Clearer, more certain rules would help existing and prospective clubs to be confident about what they need to do to qualify, and would help ensure that the scheme fully achieves the Government’s aim of supporting and encouraging sport at a community level.

Some areas cannot be clarified without legislation. To provide certainty as quickly as possible, the Government will include provisions in the Finance Bill, to be published on 28 March, allowing clearer detailed rules to be set through secondary legislation. HMRC will then publish a consultation document after the Finance Bill is published setting out proposals for these rules. These proposals will cover a range of issues, including:

The maximum annual fee, to include the costs of participation, which a club can charge and still be considered a CASC. The consultation will seek views on a range of maximum fees up to £1,040 (£20 per week). Recognising that some sports have higher costs, CASCs will be able to charge more than the maximum annual fee if they have measures in place to allow people on low and modest incomes to participate fully at a cost of no more than the maximum fee.

The rules and limits for CASCs on generating income from social and non-sporting activities will be updated to provide clarity. The consultation will explore a number of possible limits. Where clubs generate income over the limits, the consultation will also explore how clubs can separate this activity into a wholly-owned subsidiary company.

The consultation will include proposals for more generous rules for travel expenses, and changes to allow clubs to make limited payments to players.

Following the consultation, the Government would expect regulations to be laid in the autumn, setting out detailed rules, subject to the usual parliamentary processes.

As well as providing certainty for existing CASCs, the Government hope that the changes will encourage more clubs to apply and qualify for CASC status. Depending on the outcome of the consultation, it is possible that some existing CASCs may need to make changes to the way they operate if they wish to continue claiming relief. For example, they may need to make allowances for those on low or modest incomes. However, while the consultation is ongoing, CASCs will not need to make any changes.

While HMRC has been reviewing the CASC regulations, a number of clubs that have applied to HMRC have had their applications put on hold. The Government are sorry for the delays they have experienced.

HMRC is writing today to each of those clubs whose application has been put on hold to draw their attention to this statement. HMRC will write again to each club when the consultation document is published explaining how the proposed new rules are likely to affect the club and its application.

One outcome of HMRC’s review of the current rules that does not require legislative change is that clubs can offer junior memberships without voting rights and still qualify as CASCs. We are pleased to announce that HMRC will be applying this rule with immediate effect.

This Government recognise the importance and value of CASCs, and we hope the sports sector will welcome the measures being announced today.

Infrastructure

Sajid Javid Excerpts

Tuesday 12th February 2013 Commons Chamber

[The Economic Secretary to the Treasury (Sajid Javid)]

I am grateful for the opportunity to conclude this debate.

I have listened with great interest to the 11 Back-Bench contributions in the Chamber this afternoon. This is clearly an issue about which many Members feel strongly. It is also an issue that Members on both sides of the House seem to agree on in many ways. Both sides want to see a UK with world-class infrastructure and both sides recognise the importance of improved infrastructure for the nation’s economic future.

However, only one party ruined the UK economy after 13 years in government, hugely damaging the UK’s ability to invest in the very infrastructure that we all care about. It was the party that tabled the motion. That same party left the UK with the largest budget deficit in the G20. [Interruption.] Labour Members say that we should look forward. It is no surprise that they want the country to look forward, because they do not want us to remember their legacy, but the country must remember. They left a budget deficit higher than 11% of GDP. They borrowed £159 billion in their last year in government—£5,000 in each and every second of that final year.

Had the previous Government not messed up the regulation of the financial sector, they would not have had to carry out the biggest banking bail-out the world has ever seen, with £65 billion being put into RBS and Lloyds alone. Imagine how much new infrastructure that money could have been invested in. As if that was not bad enough, let us not forget the decision to sell off the nation’s gold reserves at record low prices. Had they not done that, the country would have been £10 billion richer. One thing that we did not hear from a single Labour Member this afternoon was an apology for the damage that they did to this country.

Despite that toxic legacy, this Government have restored economic confidence. We have slashed the record budget deficit by a quarter. We have restored economic credibility and opened Britain up for business again. That credibility has led to record low interest rates, with the Government’s 10-year funding costs having halved since 2010. Each of those steps has been crucial to creating an economic environment in which the Government can invest in infrastructure, and one in which investors feel their funds are secure.

[Sheila Gilmore]

Will the Minister explain to the House and the country why the OBR predictions at the time of the so-called emergency Budget and the comprehensive spending review have not happened, why growth has not happened, and why the deficit has not been reduced at the rate the Government originally promised?

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[Sajid Javid]

I direct the hon. Lady to read the OBR report, which mentions a number of reasons, not least the eurozone crisis. She might like to read that report for herself.

I should respond to the points hon. Members have raised in the debate. Many accusations were made by Opposition Members. They said that, had they won the election, they would have miraculously invested more. The reality is that, had they won the election, they would have continued borrowing recklessly, which would have led to much higher interest rates. They would probably have led this country into the hands of the International Monetary Fund once again, which seems to be their speciality.

Let us look at Labour’s March 2010 Budget. It shows that the previous Government planned to cut capital spending by 6% compared with our latest plans. In fact, in nominal terms, they planned to cut capital spending by 22% between 2010 and 2014. My hon. Friend the Member for North West Leicestershire (Andrew Bridgen) made a good point, which the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) dismissed. Let me read to her the words of the right hon. Member for South Shields (David Miliband). In July 2010, he said the previous Government would have halved the share of national income going into capital spending. That is the truth, and Labour Members want to deny it.

Meanwhile, this Government have overseen an increase in total investment in infrastructure from £29 billion a year, which was the level between 2005 and 2010, to £33 billion a year between 2010 and 2012. In the autumn statement, the Chancellor unveiled a further £5.5 billion of investment, including £1.5 billion for the strategic road network.

Hon. Members are aware that the vast majority of spending needs to come from the private sector. That is why we have taken measures to target and support investment—measures such as the UK guarantee scheme, which will provide up to £40 billion of support to critical infrastructure.

[John Healey]

In an answer last month on the guarantee scheme, the Financial Secretary told me:

“No project has been guaranteed under the UK Guarantee Scheme at this stage.”—[Official Report, 18 January 2013; Vol. 556, c. 981W.]

However, in the autumn statement, the Chancellor said:

“I can today confirm a £1 billion loan and a guarantee to extend the Northern line to Battersea power station and support a new development on a similar scale to the Olympic park.”—[Official Report, 5 December 2012; Vol. 554, c. 876.]

Does that not show the uncertainty and confusion at the heart of the Government’s infrastructure failures? Who is right: the Financial Secretary or the Chancellor?

[Sajid Javid]

The right hon. Gentleman rightly made a point earlier about the action the Government have taken to implement the guarantee scheme. Of the £40 billion of guarantees available, about £10 billion have pre-qualified but are not yet issued, and there has been an offer of a £1 billion guarantee for the Northern line extension project to Battersea. That is substantial progress since Royal Assent to the Infrastructure (Financial Assistance) Act 2012 in October 2012.

The Government are working tirelessly to encourage further investment, not just from overseas, but from pension funds. However, the debate should not focus solely on the amount of money we secure for projects. We should also focus on how to ensure the best possible return on those investments—a point made well by my hon. Friend the Member for St Albans (Mrs Main). That is why the Government are running a cost review to reduce infrastructure costs by a target 15%, and why we have reviewed and reformed PF1 and launched PF2. The Government are investing wisely, collaboratively and efficiently.

Some Labour Members would have us believe that our investment is resulting in no action. I found it strange to hear the criticism that our investment has resulted in no spades in the ground. As the Financial Secretary told us earlier, a number of projects are already up and running. For example, major flood risk infrastructure projects have been completed in Nottingham, Truro and Keswick, and four new major road projects and 16 local transport schemes are under construction.

This is a Government with a long-term strategy for infrastructure. Our national infrastructure plan—the first time a Government have set out such a plan—identifies 550 projects with a value of more than £310 billion. It has seen us publish an investment pipeline that gives certainty to investors, which is absolutely key; prioritise projects through the creation of a top 40 list; and utilise a dedicated Cabinet Committee to ensure infrastructure delivery. The Opposition motion alludes to Sir John Armitt’s review into long-term infrastructure. Given the important and valuable role he played in the Olympics, I am sure it will be an interesting read and I will look at his recommendations. I am also sure that his advice will be considered, balanced and politically neutral. I would be very surprised if it were influenced by the shadow Chancellor in any way.

We have recently appointed our own Olympic expert to the role of Commercial Secretary. Lord Deighton is overseeing a review of Whitehall’s ability to deliver infrastructure, to increase commercial expertise across Government. We are enhancing the mandate of Infrastructure UK, increasing its capability to make sure that projects are delivered. Those steps show that this is a Government committed to investing in infrastructure projects and a Government committed to delivering infrastructure projects.

Let me turn briefly to two points raised by my hon. Friends the Members for Halesowen and Rowley Regis (James Morris) and for Rochester and Strood (Mark Reckless). They talked about the importance of rail investment and alluded to making greater investment in regional aviation. They made powerful cases and that is something the Government will look at. My hon. Friend the Member for Rochester and Strood asked whether I would be happy to meet him to discuss the matter further—I would be very pleased to do so.

In conclusion, I thank all hon. Members for their contributions this afternoon. I am sure we all want to see improved infrastructure in our constituencies and in the UK as a whole. While the Opposition have no answers for the challenges our country faces, this Government are getting on with the job. I therefore urge Members to reject the Opposition’s motion and to back the Government’s amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

Equitable Life Payment Scheme

Sajid Javid Excerpts

Tuesday 5th February 2013 Written Statements

[The Economic Secretary to the Treasury (Sajid Javid)]

The Treasury can confirm that the Equitable Life payment scheme has made £535 million in payments and has paid nearly 80% of eligible individual policyholders. In addition, the scheme has today published a further progress report, which can be found at: http://equitablelifepaymentscheme. independent.gov.uk/.

In the coalition agreement published in May 2010, the Government pledged to

“implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.”

As of 31 January 2013 the scheme has paid nearly 80% of eligible individual policyholders with 370,867 policyholders receiving payments totalling £535 million. Payments to all the individual policyholders the scheme can trace are on track to be completed by April 2013 as planned.

Following receipt of payment, the scheme has continued to receive low levels of response from policyholders. The vast majority of policyholders continue to cash their warrants without further recourse to the scheme with 0.8% of eligible policyholders having complained to the scheme.

As stated in the last report, there are additional complexities in retrieving the contact details of those policyholders who bought their policy through a group (i.e. company) scheme which mean that payments to these policyholders are in a later phase of the scheme. The scheme has now written to the trustees of all 5,700 eligible company schemes and as a result of this payment to these policyholders will accelerate from April 2013.

The scheme has also confirmed that the estates of 5,760 deceased policyholders have been paid and the process of identifying, tracing and contacting the estates of deceased policyholders continues. As this is an understandably complex area with some cases going back many years, this verification work will continue over the coming months.

The Government are committed to drawing a line under the Equitable Life issue and the scheme remains on track to close as planned in 2014. As part of this closure process the scheme will publish more regular reports with the next one due to be published in early May 2013.

Oral Answers to Questions

Sajid Javid Excerpts

Tuesday 29th January 2013 Commons Chamber

[Barry Gardiner (Brent North) (Lab)]

8. How many households no longer eligible for child benefit have opted not to receive it.

[The Economic Secretary to the Treasury (Sajid Javid)]

The Government estimate that in the 2013-14 tax year over 1 million out of 8 million families are affected by the new charge. As of 24 January, over 340,000 recipients have opted not to receive the payment. The charge will raise over £1.7 billion each year to tackle the deficit.

[Ian Lavery]

The Government pride themselves on their fairness. Can the Minister explain to this House what is fair about a one-earner family making up to £50,000 having their child benefit cut while a two-earner family making up to £100,000—twice the amount—is able to retain their child benefit?

[Sajid Javid]

I know that the hon. Gentleman is a man of principle, and I have respect for him, particularly since he refused to work for the right hon. and learned Member for Camberwell and Peckham (Ms Harman); I do not blame him. I note that on his website he says that he has

“a strong commitment to supporting the…less well off in society.”

He is absolutely right and I agree with him, so perhaps he can explain why he is against a measure that is targeted at the 15% of people who are the highest earners in society. [Interruption.]

[Mr Speaker]

Order. Question Time must be conducted in an orderly way. It is not for a Minister to suggest that a Member should start getting up and answering questions. It is Ministers who answer questions, and that is the end of it.

[Barry Gardiner]

Will the Minister discuss with his colleagues in the Home Office and the Department for Work and Pensions the effect of the combined changes that those Departments and the Treasury have made, which mean that a young child in my constituency—a British child whose mother has leave to remain and work in the UK but who is estranged from their British father as a result of his domestic violence—will now not be able to receive child benefit for at least 10 years?

[Sajid Javid]

The hon. Gentleman raises a very specific issue. I think he will understand that I have not looked at that particular concern of his constituent, but I will be happy to look at it in more detail if he provides me with more information.

[Harriett Baldwin (West Worcestershire) (Con)]

Can the Minister explain why, at a time when we are having to make such difficult decisions on public spending, it is fair to argue, as Labour does, that we should pay child benefit to millionaires?

[Sajid Javid]

My hon. Friend raises a very important point. In the 13 years of the previous Government, the welfare budget went up by 62% in real terms; it was out of control. If we are going to deal with the problem that they left behind, we have to make sure that everyone makes a contribution.

[Mr Iain Wright (Hartlepool) (Lab)]

3. What recent assessment he has made of the effect of the Government’s fiscal policies on the level of long-term youth unemployment.

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[Mrs Mary Glindon (North Tyneside) (Lab)]

13. How many working households will be affected by the changes to the uprating of tax credits and other payments announced in the autumn statement.

[The Economic Secretary to the Treasury (Sajid Javid)]

The 1% uprating of working age benefits and tax credits is estimated to affect 1.65 million working age households in 2015-16. Of this total, around half of the households have no individual in work and half are households in which at least one individual works at least an hour a week.

[Mrs Glindon]

Can the Minister confirm that his Government’s own figures show that, shamefully, cuts to tax credits and other benefits will push hundreds of children in North Tyneside—and 200,000 children nationally—into poverty?

[Sajid Javid]

What I can confirm is that the Government are taking a very focused approach to welfare. Under the previous Government, nine out of 10 families with children were eligible for tax credits. No wonder our welfare budget was out of control. Through the Welfare Benefits Up-rating Bill and other reforms the Government have introduced, we are making our welfare system affordable and more focused.

[Andrew Bridgen (North West Leicestershire) (Con)]

Can my hon. Friend confirm that working families will be, on average, £125 a year better off after the announcements in the autumn statement?

[Sajid Javid]

I can confirm the figure used by my hon. Friend. Indeed, if we take account of all the tax changes we have made in the personal allowance, I can also say that an individual on the minimum wage and in full-time employment will see their tax bill halved under this Government.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

23. More than 50% of children in my constituency are living in poverty, with the Child Poverty Action Group warning that the Government’s tax and benefit changes will push 1 million children into poverty by 2020. Why did the Minister and his Department decide not to publish the child poverty impact assessment alongside the Welfare Benefits Up-rating Bill?

[Sajid Javid]

As a child, I lived in a two-bedroom flat with seven people, and I saw child poverty on my street every day. I know that the hon. Lady cares passionately about this issue—[Interruption.]

[Mr Speaker]

Order. The House must calm down. The Minister’s answer must be heard.

[Sajid Javid]

I respect the hon. Lady for caring passionately about this issue. She served as a commissioner on child poverty in London and has considered the issue deeply, so I hope she agrees that there is no sense in having a measure of child poverty that just looks at relative income. It is far more important that we all come together and look at education, jobs and access to health services, and have a proper measure of child poverty if we are to truly eradicate it.

[Richard Graham (Gloucester) (Con)]

The Minister is surely right to focus on the most important elements for our young people, which include considerable Government investment in apprenticeships and taking so many people, including many of those apprentices, out of income tax altogether. Four thousand people, including many young people in my constituency, will be taken out of income tax in April. Does he agree that it is extraordinary that no one on the Opposition Benches realises the importance of this measure?

[Sajid Javid]

My hon. Friend is absolutely right to raise this issue and the help it brings, particularly with regard to apprenticeships. In fact, in the constituency of the hon. Member for Bethnal Green and Bow (Rushanara Ali), there has been a more than 100% rise in apprenticeships because of this Government.

[Mr Andrew Turner (Isle of Wight) (Con)]

14. How much revenue will accrue to the Exchequer from the beer duty escalator in each of the next three years.

[The Economic Secretary to the Treasury (Sajid Javid)]

The Government have inherited plans to increase alcohol duties by 2% above inflation until 2014-15. The extra 2% is forecast to increase beer duty receipts by £35 million next year and £70 million the following year.

[Mr Turner]

What proportion of that money is collected through pubs? Is it a relatively small amount? Will my hon. Friend consider removing this tax from pubs, many of which are central to community life in our towns and villages?

[Sajid Javid]

My hon. Friend is right to raise this issue, and he has contributed to many debates on it in this House. Making the change would mean lost revenue, and we would have to find another way to cover that loss. He may find it useful if I point out some Government measures that have helped pubs, such as the changes in the annual investment allowance, the cut in the small profits rate of corporation tax and the extension of small rate relief holiday.

[Lilian Greenwood (Nottingham South) (Lab)]

Why does the Chancellor refuse to review the impact of alcohol taxation? Is he worried that it will show the effect of VAT on the prices in our pubs, and the impact that is having on our pub sector?

[Sajid Javid]

The hon. Lady will know that the beer duty escalator was introduced by her Government. This Government have inherited those plans and are carrying them out. If she does not like this tax, perhaps she could make a stronger case if she tells us how she would cover the lost revenue.

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[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

16. What progress has been made in making compensation payments under the Equitable Life payment scheme.

[The Economic Secretary to the Treasury (Sajid Javid)]

The scheme continues to make good progress. A detailed report will be published next week, which I am pleased to announce will highlight the fact that the scheme has paid more than £500 million to policyholders. I know that the resolution of Equitable Life is an issue that interests many Members, so I can announce that the scheme will now be moving to quarterly progress reports, with the next one published in May.

[Dr Coffey]

I welcome that answer from my hon. Friend. I am proud that our Government have started the payment scheme, although there are still some people who have not yet been assessed. I would encourage him to work with his officials to ensure that that happens as quickly as possible.

[Sajid Javid]

My hon. Friend is right to be proud of the Government’s achievements on Equitable Life. The previous Government had a decade to help victims of this scandal and did absolutely nothing. As mentioned, more than £500 million of payments have already been made. I can assure my hon. Friend that I am in regular contact with the scheme administrators, and I will work closely with them on a regular basis to ensure that things can be improved.

[Mr David Amess (Southend West) (Con)]

T1. If he will make a statement on his departmental responsibilities.

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[Steve Brine]

Thank you very much, Mr Speaker.

A number of my constituents have been caught out by the high interest rates charged on payday loans. At a time when many families are struggling with high levels of personal debt, what are the Government doing to ensure that consumers are protected against bad practices in that industry and the often extremely high interest rates that are charged on such loans?

[The Economic Secretary to the Treasury (Sajid Javid)]

I know that my hon. Friend is passionate about this issue, and he is right to raise it today. The Government are committed to ensuring that people who borrow from payday lenders are protected against bad practices. Last January, we announced our intention to transfer the regulation of consumer credit from the Office of Fair Trading to the new Financial Conduct Authority. The FCA will have powers and sanctions to address consumer detriment in the consumer credit market, and we will shortly be publishing consultation on this very issue.

[Mr Tom Harris (Glasgow South) (Lab)]

T2. May I take this opportunity to pay tribute to the Chancellor’s excellent judgment in supporting Labour’s spending plans up until November 2008? Will he therefore accept that the deficit he inherited was caused not by the spending plans supported by those on both sides of the House but by the worldwide recession?

[Kris Hopkins (Keighley) (Con)]

T5. The last Labour Government presided over a decline in manufacturing industry in west Yorkshire, which fell from 23% of local economic output in 1997 to just 14% in 2010. What steps is the Chancellor taking to reverse that trend and to support constituencies such as mine, which have relied on manufacturing for jobs and growth?

[Sajid Javid]

That is a shocking reminder of the economic incompetence of the previous Government and of the damage that they did to our economic base. The revitalisation of manufacturing is important for the rebalancing of our economy. Keighley in west Yorkshire has an important manufacturing tradition, and it is benefiting from the manufacturing advisory service and from the £2.7 billion of regional growth money that is going to the entire nation. Also, the announcement in the autumn statement of more money for UKTI will benefit the help that UKTI gives in Yorkshire.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

T3. Today, we saw the Government unveil their “pile ’em high, teach ’em cheap” approach to child care, hot on the heels of cuts to tax credits for poor working families and cuts to child benefit. When is the Chancellor going to unveil his supposed plans for a tax benefit for child care? What are the Government doing to support working families?

--- Later in debate ---

[Jeremy Lefroy (Stafford) (Con)]

T9. A recent article in MoneyWeek suggested that raising the minimum wage would cut the cost of tax credits and benefits and increase employment. What work has the Treasury done on the interrelationship between the level of the minimum wage, the cost of benefits, tax revenues and employment levels?

[Sajid Javid]

It is not clear that tax credits are being used to supplement lower wages, but what I can say is that the Government have taken action to bring unsustainable levels of tax credit spending under control. It has already been reduced in respect of eligibility from nine out of 10 families with children to six out of 10. Our reforms are also making work pay. Universal credit will unify the current complex system of welfare and make sure it always pays for people to go into work. The withdrawal rate will aim to smooth that transition into work.

[Paul Blomfield (Sheffield Central) (Lab)]

T7. Last Friday, the Bishop of Sheffield, the Bishop of Hallam and other faith community and civic leaders came together to launch a campaign for a fair deal for Sheffield. Will the Chancellor recognise their concern that the combined effect of his austerity programme with unevenly distributed cuts and benefit changes that hit the poorest hardest is having a disproportionate impact on our urban areas and our big cities? Will he listen to those concerns?

EU Justice and Home Affairs Opt-in Decision

Sajid Javid Excerpts

Tuesday 15th January 2013 Written Statements

[The Economic Secretary to the Treasury (Sajid Javid)]

The Government have opted in to the European Commission’s proposals for a directive of the European Parliament and of the Council on insurance mediation (recast) (IMD 2) and proposal for a regulation of the European Parliament and of the Council on key information documents for investment products (KIDs).

The Commission’s objective in revising the IMD is to improve regulation in the retail insurance market in an efficient manner. The proposals for IMD 2 aim at ensuring a level playing field between all participants involved in the selling of insurance products and at strengthening policyholder protection.

The KID proposals aim to improve pre-contractual disclosure and the comparability of packaged retail investment products for consumers. They will do so by obliging manufacturers to produce a comparable and standardised disclosure called a KID, and requiring distributors to provide the KID before the sale.

Both sets of proposals currently include provisions on alternative dispute resolution which impose requirements on the UK’s civil justice system, in terms of the operation of limitation periods and the availability of interim remedies. On this basis the Government consider that the JHA opt-in protocol applies and that the UK can therefore choose whether to opt in.

The Government believe that in view of the wider significance of these proposals it is in the UK’s interests to participate, therefore we have opted in.

Economic Statistics

Sajid Javid Excerpts

Thursday 10th January 2013 Written Statements

[The Economic Secretary to the Treasury (Sajid Javid)]

Following public consultation, the national statistician has today announced that no change will be made to the formula used in the construction of the retail prices index (RPI). The UK Statistics Authority has endorsed this recommendation.

Under the arrangements set out in the Statistics and Registration Service Act 2007, the independent UK Statistics Authority is responsible for ensuring the quality of official statistics. As such the Government have had no involvement in today’s decision.

For gilt investors their future cash flows on existing index-linked gilts will continue to be calculated by reference to the RPI in accordance with the terms and conditions of those gilts. The Government will continue to issue new index-linked gilts linked to the RPI.

The Government will consider any implications of the national statistician’s announcement on their approach to RPI indexation across different policy areas in due course.

Outsourcing of Public Services

Sajid Javid Excerpts

Tuesday 18th December 2012 Westminster Hall

[The Economic Secretary to the Treasury (Sajid Javid)]

I am grateful for the opportunity to speak under your chairmanship, Mr Chope.

The outsourcing of public services is an area in which my hon. Friend the Member for Warwick and Leamington (Chris White) has a great deal of experience; he feels strongly indeed. I commend him for the successful private Member’s Bill that he pushed through Parliament with support across the Benches and congratulate him on securing today’s debate. I agree with a number of points that he has made this afternoon, and I hope that he will, in turn, agree with some of the sentiments that I will express.

My hon. Friend referred rightly to the biggest issue facing the country: the size of the public sector deficit. There are a number of ways in which we need to go about fixing that problem. One of the most important is that when we spend public money—the taxes of hard-working people—we receive the best possible value in return. The outsourcing of public services, whether to small and medium-sized enterprises, social enterprises or larger organisations, is an excellent way to achieve that. I want to lay out the broad principles behind the Government’s approach and then talk about some of the specific reforms. I also want to talk about some of the measures that we have taken specifically to help SMEs and social enterprises.

The Government are committed to improving the quality of public services and delivering them more efficiently. Last July, as my hon. Friend rightly said— I am glad that he welcomed this—we published the “Open Public Services” White Paper, which set out five key principles: choice, decentralisation, fairness, accountability and diversity. If we are going to be successful in achieving those principles, transparency, which my hon. Friend also mentioned, is key. He talked about it, rightly, at length. Transparency is important to achieving all those principles.

Key elements of our approach include increasing the amount of services that we commission out, taking advantage of efficiencies and real-world benefits that the voluntary and private sectors can deliver and ensuring a diverse provision of services to drive quality through competition. We are also making greater use of payment by results, which is good for Government, because the financial risk is taken by the investor, not the taxpayer. It is also good for the voluntary sector, as it opens up many more opportunities for social enterprises and charities to deliver public services. I am sure that our thinking is very much in the same sentiment as that of my hon. Friend.

Let me turn to some of the key reforms. I know that it is easy for a Minister to stand on this spot and talk about theories and ideologies, so let me be a bit more specific and give some examples of concrete action that the Government have been taking. An example is the Work programme. The Government have taken tens of thousands of people off benefits and helped them into jobs. Figures released last month show that at least 56% of the scheme’s earliest participants have come off benefits, with 19% spending at least six consecutive months off them.

Another example is social impact bonds. My hon. Friend mentioned the importance of access to finance, particularly for SMEs, if they are to win contracts. Social impact bonds are a valuable new way to involve the voluntary, community and social enterprise sector in Government contracts based on payment by results. Already, almost 10 SIBs have been issued throughout the country, tackling reoffending, youth unemployment, homelessness and family breakdown.

We also have a big new opportunity for payment by results in probation, where we are testing a range of models with the private, public and voluntary sectors. As the Prime Minister said just a couple of months ago:

“With payment by results, your money goes into what works: prisoners going straight, crime coming down, our country getting safer.”

He has indicated that he wants to see payment by results spread right across the rehabilitation system by the end of 2015.

[Richard Fuller]

Regarding payment by results, I urge the Minister to be cautious about the difference between the desire to achieve improved performance based on payment by results in the short term and the provision of competitive tendering for Government contracts in the long term. One of the issues with privatisation is that it was a good way to make a substantial amount of money in the short term, but there have been competitive results in the long term. I think that part of today’s debate is about ensuring that the Government have the right balance between large corporations that can deliver in the short term and providing more availability for small and medium-sized enterprises to provide that competitive tendering in the long term.

[Sajid Javid]

My hon. Friend makes an excellent point about the tensions that sometimes exist between short-term goals and long-term goals, and he has used the excellent example of previous privatisation programmes. The Government will indeed take that into account.

With regard to prison procurement, we currently have five new contracts in train, bringing the total number of contracted-out prisons to 14. Let me move on to another example. In health care, we have seen an increased volume of treatments being delivered via independent providers. We heard an excellent example from my hon. Friend the Member for Woking (Jonathan Lord), who referred to Virgin Care in his own constituency. In 2010-11, 17% of hip replacements were delivered by independent providers—a rise from 0% in 2003-04. By outsourcing the services that I have highlighted, we are not only driving up the quality of services available and saving the public’s money, but increasing the public’s choice about the services that they receive.

My hon. Friend the Member for Warwick and Leamington spoke eloquently about the importance of social value in procurement. He is passionate about improving access to contracts for SMEs and social enterprises. I hope that he is pleased that the Government share that passion. In fact, every Department in Whitehall has a nominated SME Minister who is responsible for delivering an SME procurement action plan for that Minister’s Department. In the case of my Department, that Minister is me, so he will know who to harass if he believes that the Treasury is not making suitable progress in this area.

Thanks to the provision that I have described, more than 2,000 of the 5,700 contracts awarded through the Government’s contracts finder website have been allocated to SMEs, and we are taking steps to give SMEs greater opportunities to bid for contracts. The Government’s procurement pipelines give forward visibility of future potential public sector procurement opportunities, providing greater confidence for industry to invest. The Cabinet Office is tracking a pipeline of about 100 developing and established projects, worth £84 billion in total.

I thank my hon. Friend the Member for Warwick and Leamington not only for allowing us the opportunity to discuss this issue today, but for his tireless work in this area during the past two and a half years. “Procurement” and “outsourcing” are rather dry words that can, if we are perfectly honest, force more than the odd eye to glaze over. I am sure that my hon. Friend would agree, though, that discussions about procurement and outsourcing are crucial to ensuring that public money is spent wisely. I thank all hon. Members for their contributions today and I thank you, Mr Chope, for your chairmanship.

Question put and agreed to.

Credit Union (Maximum Interest Rate Cap)

Sajid Javid Excerpts

Tuesday 18th December 2012 Written Statements

[The Economic Secretary to the Treasury (Sajid Javid)]

The Government have today published a consultation on raising the maximum interest rate cap for credit union loans. This consultation seeks views on the proposal to increase the maximum interest rate that credit unions can charge, from 2% per month to 3% per month.

The rationale for this proposal was explained in detail in a feasibility study commissioned by the Department for Work and Pensions (published in May 2012), which found that credit unions are currently unable to break even on small, short-term loans. This leads to a lack of stability in the sector, which is damaging for the long-term future of credit unions.

Allowing the maximum rate of interest to increase will enable credit unions to become more stable over the long term. This means that low-income consumers will have greater access to reliable, affordable credit, without having to resort to more expensive means, such as home credit or payday lenders, or worse, illegal lenders. Even with a 1% increase in the monthly rate of interest, credit union loans will still be substantially cheaper than the alternatives for consumers with no mainstream options. It is important to note that this increase in the interest rate would be permissive; it does not require credit unions to increase the interest rate they charge but simply permits them to do so if they judge that the benefits outweigh the costs. As such, the measure eases an existing regulatory burden on credit unions.

Many credit unions are strongly embedded in their local communities and are committed to assisting those on low incomes. Research shows that credit unions often appeal to low-income consumers as bodies which are local, accessible and convenient, and which are community based. Giving credit unions more flexibility in their lending will enable them to recruit new members, and further establish their role in helping the financially excluded.

The Department for Work and Pensions, HM Treasury, and the Department for Business Innovation and Skills will continue to work closely on all aspects of the credit union expansion project including this consultation, and any consequential legislation.

I am placing copies of this consultation document in the Libraries of both Houses.

Small Business Growth (Hazel Grove)

Sajid Javid Excerpts

Monday 17th December 2012 Commons Chamber

[The Economic Secretary to the Treasury (Sajid Javid)]

I thank my right hon. Friend the Member for Hazel Grove (Andrew Stunell) for securing this debate and for presenting his case so eloquently.

All hon. Members are keen to see successful businesses in our constituencies, whether in Hazel Grove or Bromsgrove. We recognise the importance of businesses. Whether they are small, medium or multinational, they provide jobs for our communities. Indeed, only with the help of successful British businesses will we be able to deal with the economic challenges that our country faces. I am therefore glad to have the opportunity to discuss retail banks and small businesses, and business finance more generally.

My right hon. Friend has shared some interesting case studies of the difficulties that some of his constituency companies have faced. He mentioned four companies, including Isaac Hirst Fine Furniture, JD Hughes and Tribourne Catering. I am sure he understands that it would not be appropriate for me to try to address the company issues he has, but his message comes through clearly from the illustrative examples he has picked.

I would like to start by talking about some of the action that the Government have already taken, and then to answer some of the excellent questions that my right hon. Friend has asked. The Government have taken a number of steps, and the first that they took on coming to power was to set up Project Merlin, which began in 2011. In that year, UK banks lent a total of £214 billion to British businesses. That represented a 20% increase on 2010, exceeding the lending target by £24 billion. On top of that, the national loan guarantee scheme enabled businesses to receive a 1% discount on loans, compared with the price of loans outside the scheme. As a result, over 28,000 cheaper loans, worth over £4.6 billion, have been committed to businesses. Of those loans, over £2.7 billion has already been used by businesses to help them to invest and grow.

One of the Government’s most ambitious schemes is the funding for lending scheme. Also referred to as the FLS, this joint project between the Government and the Bank of England was launched in July this year. It works by reducing banks’ funding pressures in return for increased lending to businesses and households. The FLS creates strong incentives for banks to increase lending to UK households and businesses, and as a result of the scheme, we have already seen a number of participating banks launch new and discounted SME loan products. The scheme is transparent, and the Bank of England will publish data on the amount that each bank has drawn from the scheme and how much they have lent to UK households and businesses.

Other Government measures include the enterprise finance guarantee scheme, which enables lenders to provide debt finance to small businesses that can demonstrate that they have capacity to repay the loan in full but do not have sufficient security. The EFG has already supported £300 million of lending in 2011-12 and, subject to demand, is due to provide over £2 billion in total over the next four years.

My right hon. Friend mentioned the newly announced business bank, which is in the process of being created. A number of the bank’s functions will be operational from spring 2013, with the institution becoming fully operational by the following autumn. The bank aims to address gaps in business finance by drawing together the Government’s existing initiatives under one roof in an integrated service to all firms, and £1 billion of additional capital has been allocated to the business bank to stimulate the market for long-term capital. At least £300 million of that will be co-invested over the next two years in channels that will diversify the sources of finance available to SMEs, such as non-bank lenders.

As my right hon. Friend has rightly pointed out, the public want to know that the money from all those schemes is finding its way from banks to businesses, so let me say a word or two about the importance of transparency. I believe that we are going further than any Government to ensure transparency in lending, especially in relation to the lending that the Government are helping to provide. The Government will be working with industry—through the British Bankers Association and other interested parties—to get a commitment from the banks that they will publish more granular data. We have agreed to work with industry to collate and publish lending data that are disaggregated by institution and presented on a postcode-level basis. The Government will take this forward as an urgent and pressing matter.

In reiterating our commitment to make progress in this area, I confirm tonight that, should our negotiations with industry fail to deliver for any reason, the Government will introduce amendments to the Banking Reform Bill to ensure that the data, in disaggregated and postcode-specific form, are published. That will enable my right hon. Friend to see exactly how much the banks are lending to small businesses in Hazel Grove. Indeed, it will allow all Members to see similarly detailed data. I hope that my right hon. Friend agrees that that will be a welcome development.

I want to say something about the appeals process, which I do not think is given enough air time and which is not as well known as it should be. It is important for businesses that fail to secure loans to be given clear and honest information about the reasons for that. In April 2011, the major UK banks established the appeals process as one of the 17 commitments of the business finance taskforce. The process allows any business with a turnover of up to £25 million that has been declined any form of lending to appeal against the decision, for any reason, to the participating bank concerned. If an appeal is raised, the decision will be reviewed by a second person from the bank who was not involved in the original decision. The results of the first year of the process show that in 40% of cases in which a decline was appealed against, a lending agreement with which both parties were satisfied was reached.

I am not sure whether the four companies in my right hon. Friend’s constituency have tried to use the process, but if not, I certainly recommend it. He said in his speech that he had raised the issue with some of the banks, and mentioned the “ambassador to the north” from Lloyds TSB. I hope he agrees that it is worth while for the Government to advertise the appeals process and ensure that enough people know about it. Better promotion is needed, so that every firm knows that it has somewhere to turn.

We must bear in mind, however, that banks and other lenders must make sensible decisions about whether to lend, how much to lend and on what terms to lend. Lenders consider a number of factors when making such decisions, including the cost of obtaining funds and the risk that some borrowers will default. Both these factors have been heightened by the financial crisis in the eurozone, and that may have contributed to changes in the way in which some banks have approached their lending activities. Decisions about whether to lend to specific businesses remain commercial decisions for banks to make. It is important for them to have in place the correct lending criteria, so that we do not see a return to the excessive balance sheet growth that we saw during the financial crisis.

Towards the end of his speech, my right hon. Friend suggested that a meeting could be convened between him—along with, perhaps, some representatives from his constituency—and members of the British Bankers Association, including some of the banks that he mentioned this evening. I would be more than happy to write to the BBA and try to convene such a meeting on his behalf, because I believe that it is a sensible idea. Perhaps we can take that up directly later.

The Government believe that it is important for viable businesses that want to invest and grow to have access to the finance that they require in order to do so, and we are therefore pursuing a substantial agenda. I thank my right hon. Friend again for raising this important issue. The Government are well aware that banks play a vital role in serving the economy, and I assure him that we take this issue very seriously.

Question put and agreed to.