Oral Answers to Questions

Sajid Javid Excerpts

Tuesday 11th December 2012 Commons Chamber

[Mr David Hanson (Delyn) (Lab)]

13. What recent assessment he has made of the effect of the Government’s fiscal policies on the level of child poverty.

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

The Government have protected vulnerable groups as far as possible while undertaking the urgent task of tackling the record fiscal deficit that we inherited. Work remains the best and most immediate way out of poverty, and we have continued to prioritise work incentives through welfare reform and increasing the personal allowance.

[Yvonne Fovargue]

The total cost to a two-child family on the minimum wage of the freeze in child benefit, the 1% increase in working tax credit and the VAT increase over four years will be £5,033. The extra tax allowances and the child tax credit will save them only £1,770, leaving them with a net loss of £3,263. How many more children do the Government expect to be in poverty as a result of those cuts?

[Sajid Javid]

I know that the hon. Lady cares deeply about the issue and she has done a lot of good work with vulnerable families in the past. She will be concerned, as I am, that under the last term of the previous Government child poverty, as defined by the Department for Work and Pensions, increased by 200,000 to 3.9 million. This Government believe that there should be a relentless focus on the causes of poverty, such as worklessness, so I hope that she will join me in welcoming the fact that the number of people employed today in Britain is at a record high.

[Mr Hanson]

He cannot get away with that, Mr Speaker; it is complete nonsense. Will he confirm—yes or no—that people on the minimum wage will be worse off at the end of this Parliament because of the tax and benefit changes than they would have been from the tax savings my hon. Friend the Member for Makerfield (Yvonne Fovargue)mentioned a moment ago? Cuts on child benefit and on working families tax credit will make people poorer: will he confirm that?

[Sajid Javid]

I am not going to take any lectures on child poverty from the right hon. Gentleman—[Interruption.]

[Mr Speaker]

Order. The Minister must be heard.

[Sajid Javid]

The right hon. Gentleman was a senior member of the previous Government, who, over 13 years, presided over an increase in the number of workless households to a record 3.9 million. In his constituency, in the last Labour term, the number of youth jobseeker’s allowance claimants increased by 148%. I hope that he will join me in welcoming the fact that such claims are down by 19% under this Government.

[Charlie Elphicke (Dover) (Con)]

May I ask the Minister to confirm that the previous Government’s child poverty targets were missed by 600,000, that according to the latest figures child poverty fell last year by 300,000 and that universal credit will reduce child poverty further, by up to 350,000?

[Sajid Javid]

My hon. Friend is absolutely right. The Government are relentlessly focused on eradicating poverty and the measures he has talked about, such as universal credit, increase work incentives and help people back into work.

[George Freeman (Mid Norfolk) (Con)]

Is it not the truth that the best way to tackle child poverty is to have parents in work? Does my hon. Friend agree that the creation of 1.2 million new private sector jobs, the taking of more than 1 million of the lowest paid out of tax and the abolition of the rise in fuel duty planned by the previous Government make the average family more than £125 better off and does more for child poverty than any scaremongering by the Opposition?

[Sajid Javid]

That is right. If we can deal with worklessness, we can help deal with poverty. In the past two years, 1.2 million private sector jobs have been created—more than were created on a net basis by the previous Government over 10 years.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Last month, the Joseph Rowntree Foundation said that more than 6.1 million people in poverty are in working households. Does the Minister believe that a real-terms cut to in-work support for the lowest paid helps to tackle child poverty and will he agree to publish a child poverty impact assessment alongside the Bill on benefits uprating?

[Sajid Javid]

As I have said, we will not take any lectures from the Opposition on child poverty. I used the previous Government’s figures. She talks about workless households, but they increased by 200,000 during Labour’s last term in power and I believe that the policies the Government have in place to deal with the root causes of poverty are the right ones.

[Penny Mordaunt (Portsmouth North) (Con)]

5. What consideration he has given to the introduction of transferable tax allowances for married couples.

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[Nia Griffith (Llanelli) (Lab)]

14. What the level of public sector net borrowing was in (a) the first seven months of 2012-13 and (b) the equivalent period in 2011-12.

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

According to the Office for National Statistics, public sector net borrowing for the first seven months of 2012-13 was £73.3 billion, excluding the transfer of the Royal Mail pension assets. Public sector net borrowing for the equivalent period in 2011-12 was £68.3 billion.

[Nia Griffith]

Will the Minister explain to the many families in my constituency, who are very angry at an autumn statement that has left them with less money to spend in the local economy, why borrowing has been revised up by more than £200 billion compared with the Chancellor’s plans two years ago? What will it take for him to realise that we need jobs and growth before we can get the deficit down?

[Sajid Javid]

I think that the hon. Lady submitted that question before the autumn statement, not expecting the Office for Budget Responsibility to confirm that the deficit is going to keep on falling. She risks becoming, like her friend the shadow Chancellor, an economic arsonist. He has created an economic inferno but is more interested in throwing stones at the firefighters. What her constituents want to know is that the deficit is coming down, and it is down by a quarter. That is creating jobs and confidence, and that is what this country needs.

[Dr Julian Huppert (Cambridge) (LD)]

16. What assessment he has made of the importance of capital infrastructure projects in helping rebalance the economy.

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[Penny Mordaunt (Portsmouth North) (Con)]

T9. Unlike suppliers, who are in a position to judge whether to continue giving goods and services to a company in difficulties, many consumers are not so well informed. Is it not time we amended administration law to make savers and gift voucher holders preferred creditors?

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

My hon. Friend makes a good point about the protection of individuals using saving or voucher schemes, and I commend her work on raising awareness about that important issue. I know that she raised the issue recently during business questions and received a response from the relevant Minister. If it would be helpful, I will speak with the Minister and raise her ongoing concerns.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

T2. May I welcome the funding in the autumn statement for building future schools, or what we call Building Schools for the Future? May I also welcome the extra allowances for capital investment, or what we call capital allowances? Why did we have to wait two years and have a double-dip recession for those good Labour policies to return to government?

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[Duncan Hames (Chippenham) (LD)]

I thank Ministers for listening to the pleas of MPs explaining the plight of pensioners with self-invested pension plans that were affected by the cap on drawdown. Will the announcement in the autumn statement to lift that cap come into force in time to protect their pension income in this financial year?

[Sajid Javid]

I thank my hon. Friend for that question; I remember that he raised this issue last time at oral questions. He has been a great campaigner on it, and I commend him for that. I am pleased that he welcomes the decision to raise the cap to 120%. That will be in the next Finance Bill. We are consulting with stakeholders about the easiest way to bring it in, and we will try to do so as soon as possible.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

T4. Thanks to Jobs Growth Wales, an innovative start-up in my constituency called Boulders Climbing Centre, which I recently visited, has taken on a new member of staff. Will Ministers join me in congratulating the Welsh Government on their scheme and explain why they cancelled funding for the future jobs fund?

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[Greg Mulholland (Leeds North West) (LD)]

The beer duty escalator was brought in by the previous Government in a very different economic situation. Many CAMRA members will come to Parliament tomorrow. The Economic Secretary said that he would reflect on and consider the issue. How is he getting on?

[Sajid Javid]

My hon. Friend has been an assiduous campaigner on this issue and I welcome the strength of his campaign. I am still reflecting and considering. I am aware that campaigners will come here tomorrow and intend to meet a couple from my own constituency.

[Nick Smith (Blaenau Gwent) (Lab)]

T10. Eleven jobseekers are chasing every vacancy in Blaenau Gwent. Does the Chancellor think that the Work programme will prove to be good value for money?

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[Bob Blackman (Harrow East) (Con)]

The Government moved swiftly to compensate the victims of the Equitable Life scandal, who were ignored by the Labour Government. The one set of people who were excluded from the legislation were the pre-1992 trapped annuitants. I know that the Minister has been considering this issue. Will he update the House on what consideration will be given to those weak and vulnerable people who just want some safety for the rest of their lives?

[Sajid Javid]

My hon. Friend has campaigned well on this issue and I recently met representatives of the Equitable Members Action Group to discuss it. The Government are focused on delivering the current scheme efficiently and effectively.

[Several hon. Members]

rose—

Financial Services

Sajid Javid Excerpts

Tuesday 11th December 2012 Written Statements

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

UK Asset Resolution (UKAR) has identified certain Consumer Credit Act (CCA) regulated loans in the Northern Rock (Asset Management) (NRAM) portfolio where the loan documentation is not compliant with CCA requirements. In selected letters and customer account statements, certain paragraphs of mandatory wording were written incorrectly and compulsory information about the amount of credit was not included in the statements. The CCA provides that a lender is restricted in how it can enforce a debt and borrowers are not liable for interest, over the period during which the lender has not provided the specified information. The period of non-compliance originates from changes to the CCA implemented in 2008 before the separation of NRAM and Northern Rock plc.

UKAR has undertaken an internal investigation and has consulted with legal counsel, the Financial Services Authority (FSA), the Office of Fair Trading (OFT), UK Financial Investments (UKFI) and the Treasury. Following this, the UKAR board has recommended making proactive restitution to affected NRAM customers in receipt of non-compliant statements and default notices relating to CCA-regulated loans. Based on discussions with UKFI, the Treasury has no objections to UKAR’s proposed approach and UKAR will issue the corrected documentation and take steps to remediate interest and other charges to affected customers. Where redress is required, this will be made by correcting a customer’s account balance to reverse the consequences of them being charged any interest over the period in which the documentation is non-compliant. UKAR will contact potentially affected customers in writing with further information. NRAM will be writing to all existing customers in the next few days. There is no need for customers to take any action at this time.

Separately, the UKAR board has asked Deloitte to conduct an independent enquiry into the specific circumstances of the issue and to make recommendations on potential enhancements to the associated processes and controls.

The cost to NRAM of remediating the interest charges on affected accounts is estimated at £270 million. As a result of the reclassification of UKAR by the Office of National Statistics this year, UKAR was included within the OBR forecast for public sector net borrowing (PSNB) in 2012-13 in the autumn statement. The costs to UKAR from remediation were not included in this forecast. The impact of these costs on the public finances is a decision for the independent Office for National Statistics. This is likely to increase public sector net borrowing in 2012-13. However it remains the case that borrowing will continue to fall in that year.

UKAR has confirmed that NRA has the financial resources to make the remediation. NRAM’s interim financial results for the six months to June 2012 show a statutory profit before taxation of £305 million and NRAM is expected to remain profitable in 2012.

The remediation is not expected to delay materially the ultimate timing of the repayment of the NRAM Government funding, which stands at £19.6 billion as at June 2012. The Treasury continues to estimate that it will fully recover all the taxpayer support provided to NRAM.

Customs 2020

Sajid Javid Excerpts

Wednesday 5th December 2012 Written Statements

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

I wish to inform the House that the Government have opted in to the proposal for a regulation of the European Parliament and of the Council establishing an action programme for customs in the European Union for the period 2014-20 (Customs 2020).

This proposal establishes a customs co-operation programme to support the effective functioning of the internal market and operation of customs procedures within the EU by increasing co-operation between member states. The programme aims to contribute to the Europe 2020 strategy for smart, sustainable and inclusive growth, by strengthening the functioning of the single market and EU customs union.

The UK has benefited from participation in predecessor programmes, in particular through using Customs 2013 activities to reduce administrative burdens for compliant businesses. The programme also funds the maintenance and development of EU communication and information exchange systems. This is an area where spend on research and development can represent good EU added value by providing economies of scale in the development of cross-EU networks.

Fiscalis 2020

Sajid Javid Excerpts

Wednesday 5th December 2012 Written Statements

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

I wish to inform the House that the Government have opted in to the proposal for a regulation of the European Parliament and of the Council establishing an action programme for tax in the European Union for the period 2014-20 (Fiscalis 2020).

This proposal establishes a tax co-operation programme to improve the functioning of taxation systems within the EU by increasing co-operation between member states. The programme aims to contribute to the Europe 2020 strategy for smart, sustainable and inclusive growth, by strengthening the functioning of the single market. It also has the objective of driving technical progress and innovation in national tax administrations with the aim of developing e-tax administrations and contributing to the establishment of a digital single market.

The UK has benefited from participation in predecessor programmes, in particular through involvement in multilateral controls which can assist with the detection of tax fraud. The programmes also fund the maintenance and development of EU communication and information exchange systems. This is an area where spend on research and development can represent good EU added value by providing economies of scale in the development of cross-EU networks.

Public Service Pensions Bill

Sajid Javid Excerpts

Tuesday 4th December 2012 Commons Chamber

[Sheila Gilmore]

I thank my hon. Friend for her intervention, but I suspect that it might also be outwith the terms of the new clause, so I shall refrain from commenting.

Finally, there is a risk that we are missing something in Scotland and are not getting—or even trying to get—the powers we could have. That decision might be for purely party political reasons, so that people can lay blame, saying, “There is nothing we can do; we cannot make life better for you because we do not have the power to do so. It is all because of that nasty Government down in London and your only way out of this is to make that amazing leap so that with one bound we are free. Then, everything will suddenly be wonderful,” in the hope that that will persuade the people of Scotland that they should vote for separation. I am confident that the level-headedness of the Scottish people will mean that they will not be taken in by such proceedings.

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

I thank the hon. Member for Edinburgh East (Sheila Gilmore) for her speech. For the short time for which I have been a Minister so far, in every debate and in every Bill Committee in which I have been involved, no matter what the subject, she has spoken. I can always rely on her to quiz me and keep me on my toes, so I thank her for that.

Let me also thank all other hon. Members who have contributed to the discussions we have just had: the shadow Financial Secretary, the hon. Members for Hayes and Harlington (John McDonnell) and for Banff and Buchan (Dr Whiteford), the right hon. Member for Wentworth and Dearne (John Healey) and my hon. Friends the Members for Bognor Regis and Littlehampton (Mr Gibb), for Bromley and Chislehurst (Robert Neill) and for Finchley and Golders Green (Mike Freer). I shall try to deal with all the points that were raised.

I am glad that we are starting with new clause 2 and that we have started our debate discussing annual benefit statements. It is right that scheme members should be kept informed of their pension rights and provided with an annual update. I fully understand the case for doing more in that area and find myself in agreement with the arguments that Members on both sides of the House raised today and in Committee.

I agree that information should be provided for some members, without request, in one format or another. However, I cannot support the precise wording of the new clause. For example, it does not distinguish between active, pensioner and deferred members but we would need to take that distinction into account. I would also wish to ensure that any change was future-proof—for example, we should not inadvertently mandate paper statements when it might be easier and cheaper for schemes to implement online and perhaps mobile technologies in the future.

Although I respect and understand the spirit in which the new clause was tabled, and although I have listened carefully to what hon. Members have said, I would not propose to use its exact wording. I am now persuaded that there is a case for going the extra mile to ensure regular updates are provided for scheme members. That is why we will consider the matter further and propose an amendment in the other place to deal with annual benefit statements.

[Stephen Williams (Bristol West) (LD)]

I welcome the Minister’s statement. I had quite a lot of sympathy with the Opposition’s case, simply because many of the representations made to me as a constituency MP while the negotiations were taking place contained a mixture of misinformation that came, perhaps, from the trade unions or from a basic misunderstanding of the scheme. The Government and all the scheme employers definitely have a role to play in clarifying the terms and conditions of the scheme so that we do not have these misunderstandings again.

[Sajid Javid]

My hon. Friend makes a good point and I hope that he is also reassured by the commitment I have just given.

I also want to thank my hon. Friends the Members for Finchley and Golders Green and for Bedford (Richard Fuller) for their input on this issue in Committee.

[John Healey]

I welcome that commitment. The Minister said that the information should be provided “to some scheme members”. May I urge him to take a maximalist approach and make sure that the maximum reasonable number of members get the most regular and at least annual information that will allow them to understand the scheme better and to plan for retirement and manage it better as well?

[Sajid Javid]

I agree. All scheme members, one way or the other, should receive annual information. That is the type of amendment we will table in the other place. However, there are different types of members of schemes, such as deferred members and active members. That needs to be taken into account when they receive that information.

[Jim Shannon]

I seek clarification and perhaps also reassurance in relation to those who are members of small public bodies. They have been informed that their pensions will transfer to larger schemes where they feel that they will lose out more than anyone else. What assurance can the Minister give the House and people in small public bodies that their pension rights will be guaranteed or assured?

[Sajid Javid]

I thank the hon. Gentleman for the question. We will come to a related issue later, which may be a better point at which to discuss that.

We had a robust discussion of new clause 3. The Government have set out their commitment to retaining the fair deal, but reforming it. Staff who are transferred from the public sector to an independent provider will be provided with continued access to the public sector pension scheme. This commitment has been made on numerous occasions by my right hon. Friend the Chief Secretary, as my hon. Friend the Member for Bognor Regis and Littlehampton rightly mentioned in his contribution. It was announced on 20 December 2011 and confirmed in the Chief Secretary’s announcement on 4 July this year. We also reaffirmed this in our response to the fair deal consultation which was published on 19 November this year.

The Opposition say that the Government have not made a commitment to the fair deal in the Bill. That is not entirely correct. Both clauses 22 and 26 allow for the new fair deal policy to be implemented. The Bill has been deliberately crafted so that the new fair deal can be delivered under these provisions. Let me be clear. The current fair deal, which Members are rightly keen to retain, has never been statutory. The new fair deal does not need to be statutory to bind non-public sector providers to the policy. The contracts that independent contractors enter into when tendering will ensure that the fair deal is applied.

The right hon. Member for Wentworth and Dearne referred to my comments in Committee, and it is important to be clear. We are consulting on how the fair deal should apply to those employees who have already been transferred out under the existing fair deal, but we are not consulting on the commitment that we have already made, which is that public sector workers who are transferred out under the new fair deal will retain a right to public sector pensions. We are also consulting on what to do when an existing contract that has already been tendered out is retendered under the new fair deal. There is work to be done to determine how and when the new policy will be implemented. We want to be sure that the contracts put in place will safeguard the legal rights of employees and employers. As the Government, rather than the independent providers of the services, will be retaining the risk of providing these pensions, we need to get this right.

The amendment would also bind the local government pension scheme. However, the fair deal does not apply to staff transferred out of local government. It would not be appropriate to accept the amendment as the implications for local government and the LGPS need to be fully explored. This is work that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), is already doing. For all these reasons, we believe the amendment is unnecessary and would pre-empt the ongoing work on the local government scheme.

On amendment 11, we will no doubt look at Scotland in more detail later in the debate, but let me try to set hon. Members’ minds at rest on the issues raised in the amendment. Legislative competence for the local government pension scheme in Scotland sits with this Parliament. The approval of the Scottish Parliament is therefore not needed under the Sewel convention or the Scotland Act 1998 for primary legislation on Scottish local government pensions. This is a position accepted by the Scottish Government and emphasised by the Scottish Finance Minister on 28 November. He told the Scottish Parliament that the Bill does not contain any provisions

“over pensions for local government, the national health service, teachers or police and fire staff—that would trigger the Sewel convention.”—[Scottish Parliament Official Report, 28 November 2012; c. 14014.]

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[Cathy Jamieson]

The reason why we tabled the amendment is important. Notwithstanding the Minister’s comments on what the Cabinet Secretary for Finance said, concern has been expressed by the trade unions that the ability to make some of the regulations relating to the local government pension scheme in Scotland might change the relationship that had previously existed. We want to ensure that the existing practice is in the Bill and that there would be no change. That is what the amendment seeks to do.

[Sajid Javid]

I respect the hon. Lady’s intentions, but for the reasons that I set out, I do not believe the amendment is necessary. The situation as it stands is quite clear.

[Cathy Jamieson]

I thank the Minister for giving way once again. In all the correspondence that has gone back and forth between the Scottish Government and the Chief Secretary to the Treasury, did the Scottish Government at any stage ask for any amendments to be made to the Bill, either to clarify it or to give them further flexibility?

[Sajid Javid]

I have not seen all that correspondence, but to my knowledge the Scottish Government have not asked for any such amendments.

On amendment 12, I welcome the opportunity to reaffirm the Government’s commitment to the defined benefit structure of the new schemes. I would hate to think that the hon. Member for Nottingham East is unaware of the 85,000 or so public service workers who are already members of the current career average schemes. His amendment, which he says is designed to reassure public service workers about the nature of their pensions, refers only to final salary schemes. I can reassure all public sector workers, including those currently in career average schemes, that the Government are fully committed to implementing the defined benefit schemes that have been negotiated. I assure the House, just as I assured the Committee, that the Government have no intention of replacing these defined benefit schemes with different types of scheme designs.

There is no secret plot here. We have spent a long time in discussions with trade unions and member representatives to get where we are today. It would be foolhardy to throw away 18 months of work and do something entirely different. We do not intend to move away from defined benefit schemes in public services. Defined contribution schemes would not be the right kind of pension provision for many public servants.

[John McDonnell]

Will the Minister therefore meet with the War Graves Commission, because that looks as if it is planning to move from a defined benefit to a defined contribution scheme?

[Sajid Javid]

If the commission would like to have a meeting with me, I would be happy to do so.

However, we must not vilify defined contribution schemes either. There might be a small group of individuals who consider that their needs are better served by defined contribution schemes—for example, those spending a short time in public service roles who would prefer to use their employer contributions to maintain their existing defined contribution schemes. Approximately 7,000 people are already in that type of scheme by choice. There is nothing wrong with giving people such a choice. The Government believe that clause 7 already provides the right powers to allow the new defined benefit schemes to be set up while allowing alternatives types of scheme for those who want them.

I turn to amendments 19 to 28 to clause 16. I understand the concerns raised by the hon. Member for Nottingham East and others in Committee and this afternoon. We have provided reassurances on some of those concerns in correspondence. I hope that all hon. Members are now assured that the effect of the clause will not be to crystallise liabilities or to wind up any of the funded schemes. The amendments highlight those issues over which there are lingering doubts. As the hon. Gentleman set out, those relate to the extent and effect of the closure of the current schemes and the dates on which the changeover will take place.

[Ian Paisley (North Antrim) (DUP)]

I would like to thank the Minister for the clarity his letters provided on clause 16, which was helpful, because there was originally some confusion about that in the Bill.

[Sajid Javid]

I thank the hon. Gentleman for his kind remarks and hope that I can provide further such reassurance on the clause this afternoon.

Amendments 19 to 21 seek to provide that the reforms are made by replacing the existing regulations. The scheme regulations made under the Bill would therefore have to provide for both accrued rights and new service, which we do not believe is sensible. The hon. Member for Nottingham East has expressed concerns that the Bill, as drafted, could create two separate schemes and that that could create extra costs. The Local Government Association has further clarified its outstanding concern that members of existing schemes are treated as deferred members of the existing schemes when the new schemes are introduced. That is not our intention. We will look closely at that, with the Local Government Association and others, to see whether any changes are desirable or needed to put that beyond doubt.

With regard to amendments 22 to 28, the purpose of clause 16 is to prevent benefits from being provided under existing terms in respect of a member’s service after the schemes are reformed. It closes the existing schemes, but only by closing them to future accrual. Clauses 4 and 5 already provide for existing and new arrangements for each work force to be managed and administered together. The old and new schemes will be administered by the same scheme manager, who will be assisted by the same pension board. From a member’s perspective, the transition between their old and new pension rights and the administration of their pensions will be seamless.

The dates proposed in amendments 21 and 22 do not fit with the dates agreed for the reform of the schemes: 1 April 2014 for the local government schemes in England and Wales and 1 April 2015 for the other public service pension schemes. I appreciate that the date set out in clause 16(4)(b) might also look a little odd. It allows schemes that want to reform at the start of the public sector’s financial year—1 April—to do so while leaving the option open to make reforms at the start of the tax year instead.

Although I remain convinced that the Bill will deliver what we want, I am aware that others believe that the dates are confusing. It is a concern that I will continue to consider. I regret to say that we cannot accept these amendments, because I am afraid that they would not work. However, they are clearly well intentioned and we can see what they are trying to achieve. As I said in Committee, we will continue to work through the outstanding concerns. I will reflect further on the amendments and we might return to the matter in the other place.

I turn now to amendment 4, tabled by the hon. Member for Hayes and Harlington and others. I thank the hon. Gentleman for the amendment; its purpose is clear but the practical effects would be fraught with problems. First, in England and Wales the appointed person will be reviewing the valuation and employer contribution rates of 89 separate pension funds. The appointed person will not know who the employee representatives are for each of those funds. The clause already requires the appointed person’s report to be published. That is the appropriate course of action. We envisage that the appointed person will publish a single report covering each and every one of the local authority funds. The Bill rightly requires that a copy is sent to the relevant authority and to the scheme managers, because those persons might need to take action as a result of the report.

If the appointed person identifies a problem in a pension fund, under the Bill the scheme manager would be required to take remedial action. The Bill also allows the relevant authority to intervene if necessary. However, members and their representatives will not need to take any action. The management of local authority pension funds needs to be more transparent, and the clause achieves that. The information will be published and members, local authority residents, Parliament and others will be able to see and consider it. The amendment would add no value, but it would create unnecessary costs and burdens.

I will now speak to amendments 7 and 8. I have already reassured the House that the Government have no intention of replacing the current defined benefit schemes with different scheme designs. Clause 7 allows the necessary flexibility for future Parliaments and pension scheme members to decide on the most appropriate pension scheme design for future generations of public service workers in the largest schemes. Clause 28 allows the same flexibility for the smaller public body schemes made under clause 28(7) or other powers. The Government expect that in most cases employees of the bodies listed in schedule 10 will join the reformed civil service pension scheme and have the same choice that civil servants have now: whether to join a defined benefit or a defined contribution scheme. The amendments would deny the employees of the other public bodies listed in schedule 10 that choice.

[John McDonnell]

The Minister, as ever, is being generous with his time. On amendments 7 and 8, his response will have a chilling effect for trade unions representing members across the piece, because the Government are not adhering to the direction of travel indicated in their assurances on the 25-year guarantee—that we were moving to defined benefit, not defined contribution schemes. Will the Government at least monitor the process and report back to the House, because I do not think that it is their will—it is certainly not the will they have displayed up to now—that there should be a flourishing of defined contribution schemes which would undermine defined benefit schemes?

[Sajid Javid]

I hope that I have made the Government’s commitment to defined benefit schemes very clear; I do not think I can make it any clearer than I have already from the Dispatch Box today. That commitment clearly has not changed.

Finally, on amendment 32, I am confident that the Scottish Government can achieve the 2015 timetable. Even more importantly, I have no reason to believe that the Scottish Government share the concerns expressed by the hon. Member for Banff and Buchan (Dr Whiteford). The Scottish Government’s Finance Minister, Mr John Swinney, has not requested that the Bill be amended to allow for a delay for implementation in Scotland. Indeed, such a delay would disadvantage lower and middle-income public service workers, who often benefit from a move to career average schemes. Furthermore, a delay in implementing the reforms would result in additional liabilities being built up in those schemes. These additional costs, running to hundreds of millions of pounds, would have to be paid for through the Scottish budget.

[Dr Whiteford]

Let me reiterate that I have no problem whatsoever with the move to career average schemes. Does the Minister accept, though, that this process has been subject to unnecessary prevarication and lack of clarity? In relation to amendment 11, tabled by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), does he accept that these proposals will roll back the existing provisions of the devolution settlement?

[Sajid Javid]

No, I do not. The Scottish Government have had plenty of time to look at the proposals, which originated with Lord Hutton’s report. They may feel that they should have acted earlier, but they clearly had control over that.

[Cathy Jamieson]

I heard the Minister say that the Scottish Government had not made any formal request to change the time scale, but the Finance Secretary referred to that in his speech in the Scottish Parliament when he indicated that he was not bringing forward a legislative consent motion. If the Scottish Government were to make such a formal approach, would the Minister, even at this late stage, be willing to consider amendments once the Bill moves elsewhere?

[Sajid Javid]

If the Scottish Government wanted to suggest any amendments, we would of course have a sensible discussion with them about that.

Over the past year the Chief Secretary has written on a monthly basis to the Scottish Government about the public service pension reforms, and we have asked many times whether they would like to consider amending the Bill. They have not requested any such changes so far, and it would therefore be inappropriate to accept the amendment now.

[Dr Whiteford]

Does the Minister think that nine days’ notice is sufficient time for the Scottish Government to be able to make those plans before the First Reading of the Bill?

[Sajid Javid]

As I said, virtually every month the Chief Secretary has written to the Scottish Government, and they have had plenty of opportunity to respond. As I said to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), if, even at this stage, the Scottish Government wanted to suggest amendments, those amendments would be given serious thought in the other place.

I commend Government amendments 35 to 39 to the House.

[Chris Leslie]

I will start with the good news that the Minister is willing to concede the principle, if not the words, of new clause 2 on member communications. That is an important change of heart. We wanted annual benefit statements to be sent out proactively to members of defined benefit public service pension schemes, as they are for defined contribution schemes. We encountered a bit of resistance in Committee, but the Minister has thought again, particularly in the light of the views of the hon. Members for Bedford and for Finchley and Golders Green, and of many of my hon. Friends who made the same argument. I welcome the fact that the Minister has been persuaded of the spirit of the amendment. We do not get many victories for common sense in legislation, but this is one of them, and I pay tribute to him. It is a mark of distinction for him that we have managed to have him think afresh about the argument, reflect on it, and bring matters forward in the House of Lords. When our constituents receive these annual letters in the post, they can thank him for that extra information, as well as the hon. Members who have argued for it. [Interruption.] The letters may of course arrive online as well.

The Minister did not say much about Government amendment 35, but that also feels like a famous victory. It means that existing members of final salary schemes in public bodies will definitely be able to stay in those schemes. We are sometimes grateful for small mercies in these legislative processes.

I turn now to the less good news. I heard what the Minister said about our amendment 12, which would ensure that defined benefit schemes that have ended are superseded by new defined benefit schemes. It is a moot point, and we have our disagreements about it. I shall not press the amendment to a vote at this stage, although I am sure that the issue will be revisited in the other place.

Amendments 19 to 22 relate to the closure of local government pension schemes and whether that means that they are really being closed or merely amended. We are worried about the potential for unintended adverse consequences in how the legislation is drafted. However, the Minister said that our amendments were well-intentioned, and that is good enough for me at this stage. They were, indeed, well intentioned and that is another issue that we will want to revisit in the other place.

We have debated the question of devolved responsibilities and amendment 11, which would clear up some of the confusion, particularly in relation to applications by the Scottish Government for legislative consent motions. We feel strongly that there needs to be some clarification on the issue, but the Minister was helpful in saying that the Government want to consider it, so I shall not press that question, although it is very important.

The new fair deal is a promise whereby existing members of public sector pension schemes will be allowed to retain their membership even if they are transferred or outsourced to the private sector, but we have still not received a commitment to that beyond Ministers’ verbal promises. The Minister has said that more work needs to be done, that they need to explore further the issues and that they do not want to pre-empt ongoing work, but that does not sound like the decision that we and many on the employee side thought had been made for a clear and unequivocal commitment to the new fair deal. It is integral to the deals that were agreed in the process leading up to this Bill. I cannot see what harm can be done by including the new fair deal in statute. It is a question of trust, so I want to press new clause 3 to a Division. With those words, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Fair deal

‘A member of a public service pension scheme is entitled to remain an active member of that scheme following—

(a) the compulsory transfer of his contract of employment to an independent contractor; and

(b) any subsequent compulsory transfer of his contract of employment.’.—(Chris Leslie.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

I believe that we should seek to avoid that, and the way to do so, as my hon. Friend the Member for Nottingham East has said through his amendment, is to ensure that those accrued rights are protected and that the Government do not have a vast array of powers retrospectively to interfere in people’s pensions. We can also protect pensions by ensuring that employees are, through their trade unions, properly represented and consulted—and, yes, their consent sought—on any changes that the Government might want to make in the future.

[Sajid Javid]

I thank the hon. Member for Nottingham East (Chris Leslie) for tabling amendment 10, which gives us the opportunity to discuss member protections again. This is a serious issue, and although we had some long debates in Committee, it definitely bears revisiting. We have a duty to consider how best to protect the interests of scheme members.

The Government have made a clear public commitment to protect the rights that people have built up in their current schemes. We have said clearly and on several occasions that past service in final salary schemes will not be affected by pension reform. The commitment to honour rights in old schemes is built into the Bill. The power in clause 3, to which the amendment pertains, could be used only for the purpose of setting up new schemes in scheme regulations or for transitional or consequential purposes.

Secondly, there is the umbrella protection in UK general legislation that restricts state interference with personal possessions such as pension rights, unless such interference is lawful and proportionate. This protection of property rights is also an area of the European convention on human rights. This Bill is compatible with that convention. Of course, Ministers and others making scheme regulations are always bound to act in a way that is compatible with the law. This will prevent scheme regulations from proposing unlawful changes to protected pension rights.

[Lady Hermon]

I am sorry to interrupt the Minister so early, but would he kindly explain for the benefit of the House the jurisprudence of the Court of Strasbourg that allows him to say with such confidence that this Bill is compatible with the European convention on human rights? What is the jurisprudence to support that contention?

[Sajid Javid]

I am pleased that the hon. Lady is asking for clarity on this important question. When the Government put this Bill together, it was important, as with any measure, to make sure that it was compatible with existing legislation, including the European convention on human rights. I mentioned it here not to raise the issue of compatibility—of that I have no doubt—but to say that the convention provides protection for property rights. It represents another layer of protection that should reassure people that high hurdles would exist if any future Government tried for whatever reason not to honour the commitments made by this Government.

[Chris Leslie]

I simply do not understand why the Minister refuses to put clearer unambiguous clarifications, protections and safeguards directly into the Bill. What is the purpose of leaving this as some sort of moot issue about whether there is sufficient jurisprudence to prove compatibility with umbrella protections in the European convention of human rights? That is not strong enough. The Minister must understand that people will be very anxious about this issue; why not clarify it and put it on the face of the Bill?

[Sajid Javid]

If the shadow Minister will allow me to continue my comments on this important issue, I shall, I hope, be able to give him some reassurance, but first I want to explain the reasons for the Government’s approach.

Since the courts could set aside unlawful scheme regulations, responsible authorities have strong reasons to respect pension protection rights.

There is a third reason for our approach. In order to provide the statutory protections that underpin our commitment on accrued rights, the Bill establishes a common set of member consent and consultation requirements. In the case of the new schemes set up under the Bill, any change in scheme regulations will require a prior, statutory consultation with all who are likely to be affected, or with their representatives.

Clause 20 provides that if any changes are made that could have “significant adverse effects” on members, consultation must be conducted with a view to the reaching of an agreement, and preceded by a report to Parliament or the relevant legislature. Any such changes will require explicit approval by that legislature under the affirmative procedure. They cannot simply be nodded through under the nose of Parliament. Taken together, the rule of law and the specific provisions in the Bill should give members the strong reassurance that there is already a very high hurdle against unlawful interference with pension benefits that have been built up.

As I have said, this is an important issue, and we must get it right. We are adamant that the application of universal consent locks is not an avenue that we intend to investigate. As a matter of principle, we do not believe that members, employers or anyone else should be given a ticket unreasonably to hold each other, or the Government, to ransom and to inhibit changes that are for the greater good. The Government feel strongly that it is right to prevent that scenario from occurring in the future, and that is why we cannot support the amendment.

Most retrospective changes in accrued rights are either minor and technical, or in the interests of the vast majority of scheme members. As I have said, however, it is vital that we strike the appropriate balance between member protections and the efficient operation of public service schemes. Although I firmly believe that the provisions in the Bill achieve that balance, I can tell the House that the Government do not have a closed mind on this serious issue, which has been raised thoughtfully by Members on both sides of the House, both today and in Committee. I can only reiterate that we are listening and do not have a closed mind. I am sure that the issue will be discussed in the other place, and we shall listen carefully then as well. I hope that, in the light of the reassurances that I have tried to give, the shadow Minister will consider withdrawing his amendment.

Amendment 3 would place a statutory requirement on the Government to seek the agreement of employee representatives when the data, methodology and assumptions to be used in pension scheme valuations is set. I agree that we must get those elements of the valuations right. We must be sure that a valuation accurately calculates the scheme’s costs. I understand that Members want to be certain that the Government will honour their commitment to ensure that stakeholders are involved in the process, and I can tell the House that they will be so involved.

I believe that the amendment is both unnecessary and unworkable. It is unnecessary because we have already made it clear that the Government will engage with stakeholders over the directions on valuations. Transparency and consultation are extremely important principles, and it is important for everyone to have a say in how the valuation process works, but that does not mean that we will allow the whole process to be stymied by a very small group of people. That would hardly be democratic, let alone a rational way in which to proceed, and it would mean that the employer contributions would not be set at the correct rate. I am sure that that was not the intention of Members when they tabled these amendments, but we think it right for discussions about the valuation process to take place within the normal scheme governance procedures. I am also sure that in the normal course of events the vast majority of the discussions will prove to be sensible and constructive, resulting in broad consensus between all parties. I hope Opposition Members recognise that if the worst happens and the talks break down without a full meeting of minds, it is important that, where necessary, the Government can make the final decisions.

On amendment 5, I understand why Opposition Members want to ensure there is meaningful consultation with scheme members before scheme regulations are made, and clause 19 requires precisely that. All scheme consultations on regulations will be conducted in line with the Government’s consultation principles, as set out by the Cabinet Office. As they make clear, the Government are committed to consulting on our proposals and to ensuring consultations are carried out proportionately. Clause 19 as currently drafted provides for a good and comprehensive consultation standard. It also recognises the genuine interests of the members and employers in how their scheme is run.

The clause ensures that whenever a change is proposed to the scheme regulations, the responsible authority must consult everyone whom the authority considers to be affected. Since this will be a statutory consultation, the authority must set out clearly on each occasion the matters on which it is consulting. It must provide enough information and time to allow for considered responses. The authority also needs to keep an open mind until the consultation has closed, and must give fair and proper consideration to those responses before making its final decision. It is worth setting all of that out in detail in order to reassure those who might feel clause 19 does not provide for meaningful consultation; on the contrary, it does precisely that.

Moreover, there are many reasons why the Government may wish to consult scheme members and other stakeholders when making scheme regulations. In many cases the Government will consult with a view to reaching an agreement for proposed changes. Clause 19 as drafted does not prevent that. As the Government have made clear, the enhanced consultation standard should apply to some elements of the scheme, and they are specified in clause 20. It is not necessary to extend this provision to cover every other possible element of scheme design.

[John McDonnell]

I am not trying to be obstreperous, but in a former life I drafted this stuff, so I would be grateful if the Economic Secretary clarified why the phrase

“with a view to reaching agreement”

is in clause 20 but not in clause 19, because I consider the scheme regulations and the aspects addressed in clause 20 to be of equal importance?

[Sajid Javid]

The hon. Gentleman has approached this issue in a very thoughtful way. We consider that the high hurdle of

“with a view to reaching agreement”

should not apply to every scheme change that might need to be made. I appreciate that the hon. Gentleman has a different view about when it should apply, but I think I have made the Government’s case clear.

[Lady Hermon]

The Economic Secretary has elaborated at great length on clause 19. My concern, however, is that clause 20 refers to consultation

“with a view to reaching agreement”,

rather than until consultation is reached. If agreement is not reached, what will happen? Will the changes be imposed on workers, in which case consultation will merely be an exercise and a formality?

[Sajid Javid]

The requirement of

“with a view to reaching agreement”

is a high hurdle. I cannot remember the phrase the hon. Lady used, but I can say that the requirement is not a tokenism of any kind—it is a genuine commitment. It is in clause 20, so where this is required it is a clear commitment that the Government will have to honour. The second part of her question was about what would happen if an agreement was not reached. I hope that such situations would be rare, but it is clear that if an agreement could not be reached the Government would have to make the final decision, as is absolutely right.

--- Later in debate ---

[Sheila Gilmore]

I want to address a couple of issues and reinforce some of the points made in Committee. It is not good enough to say that the normal retirement age does not matter because people can retire early if they need to, as they will retire on much lower pensions—that is what actuarial reduction means. Those with many chronic conditions might have several years of suffering with the condition that has made them retire. That is not good enough.

The way in which the Bill is formulated fixes the retirement age in a way that makes it very difficult to introduce the flexibility that might be required by some scheme reviews. There will be a battle every time a review shows that there should be a lower retirement age, as the Government will be able to point to the Bill and say that that age cannot be moved as that is what Parliament voted for. However, amendment 16, for example, would allow the degree of flexibility required. Many people already do not work in the years running up to the normal retirement ages, not just across the public sector but in the private sector, too. As many are living on reduced incomes and having to dip into any savings they might have put aside for retirement, they are much more likely to become dependent on other state support in older age.

We have the big issue of longevity, but underneath that lies the fact that a substantial proportion of the population cannot even work until the normal retirement age, particularly men between 60 and 65 in many private sector jobs. Those people are already living on reduced incomes, so if we keep increasing the retirement age more and more people will be in that position.

[Sajid Javid]

We have had a good debate on this set of amendments, but I am afraid that for reasons of time that are beyond my control I will not have an opportunity to respond on all of them. The main theme in this group is the link between the new normal and deferred pension ages and the members’ state pension age. That will help manage the financial uncertainties associated with longevity changes over the long term. It was a key recommendation of Lord Hutton’s report and is one of the foundations of the Bill.

The average 60-year-old is now living 10 years longer than in the 1970s. Although that is to be celebrated, it would be irresponsible not to react accordingly to ensure that pension provision is sustainable. Clearly, no Government can allow such a trend to continue unchecked.

In the short time I have, I shall deal with the amendments in the order in which they have been selected and I will start with 13, 14 and 15. The deferred pension age in the new schemes is vital given the vast number of public servants who claim deferred pensions. That is why the Bill sets the deferred pension age in all schemes as equal to the state pension age, including in the police, firefighters and armed forces schemes. As Members are aware, a normal pension age of 60 in the police, firefighters and armed forces schemes is in line with Lord Hutton’s recommendations and recognises the unique nature of the work involved.

The amendments proposed by the hon. Member for Nottingham East (Chris Leslie) cannot be accepted by the Government, for two reasons. First, it would be unfair to other hard-working public servants, both those in active service and deferred members whose pension ages would be the state pension age. Of course we value the work of all our police, firefighters and armed forces, but once those people stop doing those jobs, there is no reason for them to be able to take their deferred benefits earlier than everyone else.

[Lady Hermon]

Will the Minister give way?

[Sajid Javid]

I am sorry, I do not have time.

There is no reason for those workers to be able to take their deferred benefits earlier than everyone else because they are no longer exposed to the unique characteristics of their former employment and no longer need an earlier pension age in respect of them.

Secondly, we must consider the cost. As we are all aware, the costs of pensions are increasing owing to increases in life expectancy. The state pension age link for deferred benefits is a crucial means of getting those costs under control. For example, if a firefighter leaves service at the age of 30 to work, say, as a civil servant in an office for the rest of his career, should his pension still be available unreduced at the age of 60?

--- Later in debate ---

[Sajid Javid]

I beg to move, That the Bill be now read the Third time.

I would like to reflect on the importance of this Bill. First, I reiterate the debt of gratitude that this House owes to Lord Hutton of Furness for his comprehensive and adept work with the independent public service pensions commission. The consensus that his report and recommendations have engendered is testament to the care and thoroughness with which he and his team carried out that critical work.

For decades, successive Governments have failed to address the fact that the existing framework for public service pensions is unresponsive to work force and demographic changes. The simple and fundamental truth is that current schemes are not fit for purpose, and they have not responded effectively to the unprecedented improvements in longevity that we have seen over the last 50 years. Largely as a result of people living longer, the cost of providing public service pensions has increased by 40% over that period. At the same time, the number of active, deferred and pensioner members of schemes has risen significantly.

Since 1971 the number of active members has increased by 23% to 5.3 million. At the same time, pensioner member numbers increased by more than 260%, from 1.6 million to 4.2 million. Deferred member data are available only from 1991, when there were 1.2 million preserved public service pensions. There are 3.4 million today. Most of the people who entered public service when the schemes were last fundamentally assessed have now retired.

[Mike Freer]

I apologise for interrupting my hon. Friend’s flow, but will he clarify the application of the fair deal policy to the local government pension scheme?

[Sajid Javid]

We discussed that earlier. Transfers from local government are currently covered by an equivalent policy to fair deal. The Government are considering how most appropriately to apply the principles of the new fair deal policy to the LGPS, but our commitment on fair access to transferred staff stands and applies, including to members of the LGPS.

People are now expected to live significantly longer than the generation that went before them—an average of 10 years more than someone retiring in the 1970s. The increasing numbers of people with public service pensions and improvements in longevity have led to significant increases in the number of pensions that are being paid. Consequently, the cost of paying pensions has increased to £32 billion per year—an increase of a third in the past decade.

[Kelvin Hopkins (Luton North) (Lab)]

Other, similar European countries have a younger retirement age and more generous pensions. Why are we so different?

[Sajid Javid]

The hon. Gentleman perhaps has Greece in mind. Many countries that fit his description are suffering significant problems. To take another example, retirement ages in Germany, which is one of the largest countries in Europe, are in many cases higher than those in Britain.

The employer, and therefore the taxpayer, has borne nearly all the additional cost, which has led to an imbalance in the sharing of costs between members and other taxpayers. The imbalance will be corrected only by the reforms we have introduced.

[Richard Fuller]

The Minister makes an important point on tax, but this is the largest bill for the taxpayer that this Parliament will pass—we are passing a £1 trillion bill on to current and future taxpayers. I applaud him and the Government for protecting lower-paid public sector workers from pension changes, for protecting the retirement age, and for career-average schemes, but does he accept that we are still asking taxpayers working in both the public and private sectors to pay an enormous bill for public sector pensions?

[Sajid Javid]

My hon. Friend made passionate contributions in Committee, where he made that same point. I will say the same thing in reply. The Bill and other changes we have made to public sector pensions deliver significant cost savings for the Government and future taxpayers, but maintain our commitment to generous, fair pensions that are sustainable in the long term for people who serve in the public sector.

The Bill is not simply about bringing costs under control and ensuring that schemes are sustainable. We are also seeking to address issues of unfairness that exist within the current scheme designs.

[Andrea Leadsom (South Northamptonshire) (Con)]

The Minister mentions unfairness. Does he agree that one of the greatest unfairnesses was when the previous Government got rid of advance corporation tax relief on pension funds, which destroyed the private sector pensions industry and left many private sector workers much worse off than this excellent Bill?

[Sajid Javid]

My hon. Friend is absolutely right—the change to which she refers had a dramatically negative impact on private sector pensions.

The benefit structure of many existing schemes has led to benefits being disproportionately directed towards higher earners.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Further to the point made by the hon. Member for South Northamptonshire (Andrea Leadsom) on previous Governments, is the Minister aware that the previous Conservative Government’s decision to ensure that employers could no longer mandate their employees to be in occupational schemes had one of the single biggest impacts on the quality of occupational pensions in the round in this country? The Thatcher Government put that measure through in the 1980s.

[Sajid Javid]

The hon. Gentleman will know that this Government have introduced changes to private sector pensions that will help to increase take-up. I am glad that he has raised the policies of previous Governments, because I was about to come on to them.

Belated changes by the previous Government in the previous decade exacerbated the unequal treatment of members within schemes by introducing reforms that only applied to those who joined from a given date. Those same belated and limited changes also sought to limit costs increasing further in the future. It has often been stated—without foundation, I may add—that those reforms were sufficient to return public pensions to a sustainable footing. They were not. The reforms did not address the historic increases in the cost of providing public service pensions that had taken place in the preceding decades. Instead, they provided for any further increases from that point to be shared between employees and employers. That was simply not enough, and is why Lord Hutton concluded that the status quo is not tenable. His report states:

“Future costs are inherently uncertain”

and that

“the general public cannot be sure that schemes will remain sustainable in the future.”

Through the Bill, our reforms to public service pensions will make a difference. Through the framework we have set out, we will ensure that public service workers get a good quality pension that is among the very best available. Members will continue to receive guaranteed benefits with no exposure to investment risk or fluctuating annuity rates, unlike in many private sector schemes. We will also ensure that the taxpayer gets a fair deal by rebalancing the costs between the beneficiaries and other taxpayers, and by capping their contribution to the schemes, so that costs cannot again spiral out of control.

Until now, pensions have failed to keep pace with changes in longevity. This is without doubt the single greatest risk to the affordability of schemes in the future. The Bill will ensure that members continue to receive defined benefit pensions, and we will ensure that longevity changes are managed by linking scheme retirement ages to the state pension age.

[Lady Hermon]

Will the Minister give a commitment to revisit clause 9(2) to ensure that prison officers do not have to work to 65, particularly in the light of the brutal murder of prison officer David Black by dissident republicans on 1 November in Northern Ireland? Will he give that commitment this evening?

[Sajid Javid]

The hon. Lady spoke passionately in the debate about this issue and I am sorry that we ran out of time to deal with it. I will respond to it now, but I am sure that she will not be surprised to learn that I cannot give that commitment. There are exceptions to the link to the state retirement age for certain services—Lord Hutton mentioned the police, firemen and others—and that is what we have taken on board. If she will allow me, I will move on.

As Lord Hutton and others have sought, we have committed to review the appropriateness of that link as changes are made to the state pension age in the future. That commitment is important in ensuring not only that the link continues to remain appropriate in terms of members’ capacity to work, but that the costs of schemes are appropriately managed.

The Bill will introduce stronger governance, administration and transparency frameworks so that Parliament, the public and scheme members can be assured that the schemes are being run and managed properly. Taken together, the key changes will put public service pensions back on to an affordable and sustainable footing—a sound foundation that can prevail for the next 25 years, a deal that can endure for a generation.

Throughout the Committee’s consideration of the Bill and earlier in this Chamber, it has been clear that both sides recognise the urgent case for reform. The Opposition have set out their support on occasion. It is, of course, fair to say that there remain a few areas—we have discussed some today—where matters are not yet resolved to all parties’ satisfaction. However, I suggest that those areas of disagreement are few and do not detract in any way from what the Government are seeking to achieve with the reforms. We have committed to considering further how members and their representatives are engaged in the administration and future change to their schemes.

[Mr Gibb]

I am listening carefully to my hon. Friend. From the evidence session, he will be aware that even Kevin Courtney, deputy general secretary of the National Union of Teachers, which has not signed up to the agreement, said:

“We are strongly advising our members to opt in and stay with the pension scheme. It will still be a good scheme”––[Official Report, Public Service Pensions Public Bill Committee, 6 November 2012; c. 205, Q115.]—

even after the reforms.

[Sajid Javid]

My hon. Friend makes an excellent point. I thank him for the excellent contributions he made in Committee and the tremendous experience he brought to it. His point about opt-in is absolutely right. We all heard it in the evidence session. There has been barely any change to participation in public sector pensions, despite some of the changes the Government have already introduced.

We have committed to ensuring that scheme regulations provide for members to be regularly informed of their pension benefits, so that they understand their value and can better plan for their retirement.

[Katy Clark (North Ayrshire and Arran) (Lab)]

Given that these changes will reduce the average value of the benefit for all scheme members by more than one third and that many individuals’ contributions will increase, is he not concerned that many will consider opting out, whatever the advice given by people here and by trade unions?

[Sajid Javid]

As I said, in many cases, increased contributions have already taken place, and there is no evidence of increased opting out. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr Gibb) said, one very good reason given for that in the evidence session was that, despite the changes the Government have had to make in order to put public sector pensions on a sustainable footing, they remain among the best pensions available. That will ensure that people continue to take part.

Although we have not managed to reach a shared view on the exact protections that should be extended to members’ rights, all sides have recognised the common objective that rights should not be allowed to be unlawfully eroded. I strongly believe that the Bill we are sending to the other place is in very good shape. I give a commitment that the Government will return to each of the issues on which I have given assurances, and I commend the Bill to the House.

Humber Economy (Fiscal Support)

Sajid Javid Excerpts

Tuesday 27th November 2012 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Amess. I thank the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) for securing the debate and for taking a thoughtful and constructive approach to an important issue. I also thank the other hon. Members who spoke: the hon. Members for Kingston upon Hull North (Diana Johnson), for Great Grimsby (Austin Mitchell) and for Kingston upon Hull East (Karl Turner), and my hon. Friends the Members for Cleethorpes (Martin Vickers) and for Brigg and Goole (Andrew Percy).

First, I will quickly give an overview of the Government’s priorities, using their fiscal capabilities, which have been set out in Budgets. We repeated them in the Budget of 2012, and they are the creation of a stable economy and a fairer, more efficient and simpler tax system, and the bringing in of reforms to support growth. The Budget and the national infrastructure plan that we published at the time of the autumn statement in 2011 set out the relevant steps and the priorities for the country as a whole, and included specific measures for the Humber economy.

Three areas in which the Government have acted to help the whole UK quickly are cuts in corporation tax from 28% in 2010 to 22% by 2014, which will benefit companies throughout the country, including the Humber region; changes in the personal allowance, which have already meant that 74,000 people in the Yorkshire and Humber region are being taken out of tax altogether, and 1.8 million will benefit; and increased spending in the Growing Places fund, which has been established to provide funding for infrastructure needs. We have heard much this morning about local enterprise partnerships and two in the region have already received almost £70 million.

Several hon. Members mentioned Lord Heseltine’s report “No stone unturned in pursuit of growth”, and I am pleased that it has caused excitement. Most people talked about it positively and that is welcome. I hope that they would agree that the Government deserve credit for looking at new ways to stimulate the economy and for commissioning the report. We are considering it, and I am pleased that hon. Members have taken note of it.

A number of Members mentioned unemployment in the region. They are right to be concerned about it; we all are, and the Government most certainly are. In the Yorkshire and Humber region, unemployment rose by 1.8% between 1997 and 2010; but so far under this Government, it is down by 0.6%, which I am sure all Members welcome.

I want to move on to some of the specific issues raised by the right hon. Member for Kingston upon Hull West and Hessle. He made three or four key points, and I want to address them all in the time that I have. First, he mentioned energy policy, and Siemens in particular. He referred to the fact that, last week, the Government announced an agreement for going forward on energy policy, which has, I think, delivered a clear and durable signal to investors, including Siemens. He is right that the Energy Bill will be published this week and, naturally, the Bill will bring a lot more information forward. The agreement and the Bill will show that the Government have taken a serious approach to the issue. We believe that they will bring forward up to £110 billion of much-needed investment in the economy, which will support up to 250,000 jobs, of which at least 700 will, we hope, be secured by Siemens in the Humber region.

When the energy Bill is announced, colleagues will see that we have taken a constructive approach. With that and the national policy framework that has already been announced, coupled with the strong support for renewables in the Humber region through the regional growth fund, companies such as Siemens and others in the region that might want to establish themselves in renewables will find some Government support.

The hon. Member for Kingston upon Hull North mentioned the possibility of having a branch of the green investment bank in her region. I will most certainly make that representation on her behalf to my colleague the Secretary of State for Business, Innovation and Skills.

A number of colleagues rightly mentioned transport, and the importance of that type of infrastructure investment in the region, both now, in creating jobs during the investment period, and in the longer term, in making the region more attractive for investment. The Government have made substantial commitments to improving major road connections in the Humber region. Two road schemes in the area are being developed by the Highways Agency, and construction will potentially start in the next spending review period: the A63 Castle street improvement and the A160/A180 Immingham scheme. I noted the comments of my hon. Friend the Member for Brigg and Goole regarding the A63; it is good of him to support a road that does not run through his constituency but that, no doubt, supports the wider region. Those are two of only six schemes in England that the Department for Transport announced development funding for in May 2012. In addition, on 20 November the Secretary of State for Transport announced that the A160/A180 scheme will be part of a programme of accelerated development for four major road schemes, which will aim to cut 18 months off the original construction timetable.

Work is under way on the East Riding of Yorkshire council’s A164 Humber bridge to Beverley route improvement scheme. The £10 million scheme, to which the council is contributing £2.3 million, was confirmed in the Chancellor’s statement last November.

Briefly, on a couple of other Government initiatives that have helped the region, I have already mentioned the local enterprise partnerships, of which there are two for the region, in a wider sense. There are also more than 24 enterprise zones throughout the country, two of which are in the Humber, and which will be allowed to keep the growth in business rates that are created in the zone over the next 25 years.

There is also the regional growth fund, worth £2.4 billion, which will help to grow private sector-led jobs throughout Britain. Winners from the first two rounds are expected to create more than 10,000 direct and 16,000 indirect jobs in the Yorkshire and Humber region, including a £25 million joint bid by East Riding of Yorkshire council and Hull city council to stimulate private sector investment in the constituency of the right hon. Member for Kingston upon Hull West and Hessle.

The right hon. Gentleman mentioned city deals, and he will know that the Government have agreed a set of ambitious city deals with eight core cities outside London, to help them to maximise their growth potential. Following that, the Government have taken forward what we call the second wave, and he will know that Hull and Humber is possibly one of the 20 other cities that have been invited to submit an expression of interest in taking the deal forward. A decision will be made in the early part of next year.

I noted the right hon. Gentleman’s request for a meeting with my right hon. Friend the Financial Secretary to the Treasury. I have already asked my right hon. Friend about that, and he would be absolutely delighted to meet the right hon. Gentleman. He wanted me to specifically point out that he takes a very keen interest in the Humber region.

My hon. Friend the Member for Cleethorpes was absolutely right to say that when we focus on cities we must not forget the provinces. The Government must ensure that our policies help all areas, including smaller towns and villages, and not just our great cities.

I want to talk a little about public spending. A number of Members referred to the changes in public spending and their potential economic impact, perhaps suggesting that local authorities in the Humber region have taken disproportionate cuts. It is fair to say that the previous Government left the public finances in—let us put it generously—a very difficult situation, and we have had to take necessary action to deal with that.

[Alan Johnson]

I am grateful to the Minister for his commitment to my meeting the Financial Secretary. We are all mystified as to why the A63 was not mentioned in the same announcement on 20 November. I do not expect the Minister to have an answer to that, but does he agree that since a junior Minister at the Department for Transport has twice cancelled a meeting with Hull MPs, the Secretary of State for Transport should now meet us as soon as possible?

[Sajid Javid]

I thank the right hon. Gentleman for that comment. I do not know why that meeting has been cancelled. I am sure that there is a constructive reason, but I will take his point to the Minister and ensure that he is aware of the strength of feeling on that issue.

[Karl Turner]

I can probably assist the Minister. I think that that Minister cancelled on one of those occasions because he was on holiday. Perhaps the Minister might want to visit Hull, to see the A63 and Castle street for himself. He would understand the need, if he did.

[Sajid Javid]

I do not know whether the hon. Gentleman is inviting me, but I would be happy to come to Hull. I love Hull. I have lots of friends there, and am happy to go and make some more.

It is only right that the Government protect the most challenging regions from public spending cuts, to the extent that they can. The formula grant in Humber was £609 per person in 2011-12, compared with an average of £372 across England and £190 in Richmond upon Thames. I am sure that Members will agree that that reflects, to a large extent, local needs.

The hon. Member for Great Grimsby rightly mentioned housing. I want to point to the Infrastructure (Financial Assistance) Bill, which has now received Royal Assent. Up to £10 billion of the £50 billion of guarantees are earmarked for housing spending, and if Members know sponsors of such projects in the region, I encourage them to make an application to the relevant Department to find out whether it is possible to take advantage of the guarantees.

In conclusion, I again thank the right hon. Member for Kingston upon Hull West and Hessle for securing this constructive debate, and I also thank all the Members who have taken part. I noted the right hon. Gentleman’s comments about the great Andrew Marvell, and if I understood him correctly, I think that he is basically telling the Government to get on with it. I think that it is fair to say that the Government have taken a lot of action, but I hear him loudly and clearly, and the Government will continue to take action and pay a great deal of attention to the region.

Small Charitable Donations Bill

Sajid Javid Excerpts

Monday 26th November 2012 Commons Chamber

I hope that, now that the Minister has shown his willingness to move on the Bill, we shall see some further movement tonight.

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

I will start by reflecting on the Bill’s constructive Committee stage, and I thank the Opposition for their continuing support. I also thank the hon. Members for Edinburgh East (Sheila Gilmore), for Clwyd South (Susan Elan Jones), for Banff and Buchan (Dr Whiteford), for West Dunbartonshire (Gemma Doyle) and for Foyle (Mark Durkan) for their contributions to today’s debate. I will try to answer as many of the issues raised as I can.

Proceedings in Committee, and now on Report, have provided an excellent challenge to and scrutiny of the Bill—as they should have done—and I hope it is clear from the amendments that they have tabled that the Government have listened to hon. Members from across the House. The amendments in this group cover mainly the eligibility conditions for charities that wish to claim under the small donations scheme. New clauses 1 and 2 would have a wider effect, as they require HMRC to publish certain details about the scheme as a whole. Amendment 21 would require HMRC to publish details of the connected charities and community buildings rules. Government amendments 28 and 29 are minor and technical and simply change the Government Department to which powers in clauses 7 and 8 are given.

In Committee we debated a variant of new clause 1 and the same text of new clause 2. I opposed the measures then, and I am afraid I shall oppose them again today, as I will amendment 21. As I explained in Committee, we need neither the new clauses nor amendment 21. We are already doing much of what they ask and it would not be a good use of civil servants’ time to duplicate that work.

Let me start with the annual report. As I said in Committee, HMRC publishes national statistics on the cost of various charitable tax reliefs three times each year. Once the gift aid small donations scheme is up and running, HMRC will include details of that in those national statistics. HMRC does not separately identify gift aid claims by types of organisation, regions of the UK, or their regulators. Those details are not published for gift aid claims and it would not be a good use of HMRC’s time to produce such information for this scheme.

HMRC does not collect information on whether a charity is exempt or excepted. Charities would have to provide that extra information, and HMRC would need to change its IT system to cater for that. Again, that cannot be a good use of resources for either charities or HMRC. HMRC does not publish details of fraud rates in particular schemes or tax reliefs, as that would be tantamount to advertising them to fraudsters. I therefore cannot commit to publishing such information. All information that HMRC can reasonably publish will be published, and interested Members will be able to find all relevant information on its website.

New clause 2 would require a review of the scheme two years after the Act comes into force. As I said in Committee, the Government are committed to a review of the scheme three years after it has started. That will allow enough time for the scheme to get up and running, and for charities to learn about it and get used to claiming. Any less time than that, and the review would not be representative of the scheme. A two-year review would be premature, but it would be wrong to think that no one will look at the scheme for three years. HMRC engages with charities every day through its helpline, outreach and audit teams. It will listen to what charities are saying and look for ways to improve the scheme.

HMRC’s charity tax forum has been discussing this scheme since it was announced in March 2011. The forum will share experiences of the scheme as it beds down, and identify areas for improvement. HMRC keeps all guidance under review and makes changes as necessary so that any issues raised can be responded to without having to wait for three years to pass.

Amendment 21 would require the Treasury to carry out a separate review of the scheme in relation to the community buildings and connected charities rules. As they currently stand, the community buildings and connected charities rules will affect only a few charities. For the vast majority who take advantage of the scheme, such rules will be irrelevant and can be ignored. Most charities are not connected with other charities, and do not operate within community buildings or collect more than £5,000 in small cash donations.

We will debate later more Opposition amendments on the community buildings and connected charities rules. The amendments would extend those rules—and their complexities—to a far larger number of charities. Whatever the outcome of that debate, I do not believe that amendment 21 is necessary. I have already said that we will review the scheme after three years, and that review will be wide ranging and look at all aspects of the scheme. It seems unnecessary and wasteful to hold another review 12 months earlier to look at just a small part of the scheme; it would be better to review everything at the same time.

The hon. Member for Harrow West (Mr Thomas) spent two Committee sittings setting out his concerns about HMRC, which he doubted would have enough resources to administer the scheme—if we go ahead with all these reviews and reports, he may well be right. I do not feel that the new clauses or amendment 21 are a necessary or effective use of public resources, and I therefore ask the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) not to press them.

New clause 3 was tabled by the hon. Member for Foyle, and amendments 32 and 33 by the hon. Member for Banff and Buchan. They are designed to support new and smaller charities and to mitigate the effects of a three-year eligibility period. I hope that hon. Members have noted the amendments that I tabled on eligibility requirements, and that my proposal to drop the eligibility period to two years goes some way to allaying their concerns.

We debated new clause 3 at length in Committee, but I am afraid the concerns that I raised still apply. HMRC would be expected to gather information from other agencies to check the credibility of small charities. That would place a significant administrative burden on it to verify each and every charity that applied through that route. HMRC would be required to make subjective judgments about whether a charity was in or out, and would be constantly at risk of a legal challenge to its decisions. The scheme would be impractical in operational terms and I ask the hon. Member for Foyle to consider not pursuing the new clause.

[Mark Durkan]

The Minister suggests that under the new clause, HMRC would have to check with all sorts of other agencies, but the measure clearly states that HMRC can provide for a scheme to which charities may apply. It would be up to the charities to produce and submit the verifying information. It would not be HMRC’s duty to verify information with other charity regulators or anybody else; it would be up to the charity making the claim to produce the necessary evidence as laid down in the scheme.

[Sajid Javid]

I thank the hon. Gentleman for that point. He sat on the Public Bill Committee and will understand from those debates—probably more than most Members in the Chamber today—the eligibility requirements. I know that he welcomes some of the Government amendments, but the remaining eligibility requirements provide a degree of protection for the public purse, so that charities that make claims and use the benefits introduced by this Bill are those that HMRC has good reason to believe are using the measure in the right way, and there is protection against fraud. I have looked closely at his new clause, which he has tabled with the best of intentions, but it is not a change that we can afford to make at the moment.

I turn to amendments 32 and 33, tabled by the hon. Member for Banff and Buchan. Again, I am afraid I cannot support them. They would allow certain charities— those with an annual income below £25,000 and those set up for specific projects and events, such as she described—to claim top-up payments from the time when they were established without meeting any other eligibility requirements. I sympathise with the intention behind the amendments, but they would cost a lot of money—tens of millions of pounds.

Most small charities starting up have an annual income well below £25,000, and those set up in reaction to events such as disasters would also qualify for payments under the amendments, so nearly every new charity would qualify immediately. As I said, I sympathise with the intentions behind the amendments, but it is essential to have some eligibility requirements, otherwise the scheme will be wide open to fraudsters and the cost to the public purse will rocket.

[Dr Whiteford]

The charities in question would be registered with charity regulators on both sides of the border, and those are surely the bodies that decide whether their purposes are charitable. What benefit will the Bill bring to people raising money for a one-off or fixed-term good cause?

[Sajid Javid]

The Bill is intended to complement gift aid, because the Government received many representations from charities that when they received cash donations, such as in bucket collections, they were unable to take the information necessary for gift aid, such as whether the individual was a taxpayer and their name, address and other information. The scheme is intended to address that. One-off charities, including those set up in response to a disaster, are worthy causes but do not fit into how we intend the scheme to complement gift aid.

To answer the last part of the hon. Lady’s question, if a charity is created in response to a particular event or disaster, there is nothing to prevent it from registering for gift aid immediately and taking advantage of the gift aid provisions that already exist. If it stayed in existence for a number of years and therefore met the new eligibility criteria, it could also take advantage of what is available under the Bill. For the reasons that I have given, although she introduced her amendments with the best of intentions, I ask her kindly to consider not pressing them.

Amendments 8 to 16 would abolish the three-year start-up period and allow charities that have made a gift aid claim in the previous year to claim under the scheme. The maximum donations that could be claimed on would be £2,000, instead of £5,000. Proposals for a reduced rate for new charities have been put forward several times, and I am afraid that I cannot support them. Reducing the eligibility period to a year or less would increase costs, which would include a lot of costs caused by fraud. Requiring just one gift aid claim would leave the scheme open to unacceptable abuse.

The amendments would also make the scheme very complicated for some charities. Charities would need to know which other charities connected with them had claimed, and at which rate, because the rules would be different depending on those factors. The Government have listened to all the concerns that have been expressed about the eligibility rules, and we have put forward our own proposals. Our amendments are safe and affordable, and they will minimise complexity. I therefore ask Opposition Members not to press amendments 8 to 16.

I turn to the amendments that I have tabled on eligibility. Amendments 24 to 27 will reduce the eligibility period for the scheme to two years, and amendment 31 will introduce a power to enable us to amend the criteria in future if necessary. The eligibility criteria have been a key issue raised by the charity sector throughout the development of the scheme, and by Members in our earlier debates. The sector has welcomed the amendments since I tabled them last week, and I hope that hon. Members will support them, too.

[Nigel Mills (Amber Valley) (Con)]

Can my hon. Friend explain the logic of why amendment 31 will take away the Government’s power to amend the provision requiring a gift aid payment in a previous year, yet amendment 30, which we will come to later, will give them the power not to require any matching gift aid amount in the next year? The impact will be that a charity can make a claim without having any gift aid claims in the current year, but will have to have claimed at least a pound in the previous year. Is it not slightly perverse to table amendments with those two opposite intentions?

[Sajid Javid]

I believe that they fit together, and I hope that the purpose of the Government amendments will become clear.

Concerns were raised that the eligibility criteria in the Bill were too restrictive, that too many charities that did not already claim gift aid would be put off the scheme because it would take too long to become eligible, and that some short-lived charities would never reach eligibility. Balanced against those concerns is the fact that the Government have always been concerned to protect the scheme against fraud. I have looked again at where the balance lies between accessing the scheme and protecting it from people who would try to exploit and abuse it, and I have concluded that we can reduce the eligibility period to two years without undermining the integrity of the scheme. Eligibility for the scheme is defined by reference to successful gift aid claims made by a charity in the past, and I now propose that the minimum period should be set at two years.

I shall explain in more detail what our amendments will do. Four factors will determine the eligibility of a charity or community amateur sports club for the scheme, as set out in clause 2. The first is the start-up period—the number of complete tax years for which a charity must have been established before it becomes eligible for the scheme. We are reducing that period from three years to two years, so a charity or CASC will now be able to access the scheme a year earlier than was originally set out. The second and third elements are that a charity has to have made claims in two of the previous four years, and that there is a gap of no more than two complete tax years between the claims. The amendments will ensure that HMRC is guaranteed to see a minimum level of claiming activity by the charity or CASC in question, so that it can get to know that organisation and understand its ability to claim gift aid correctly.

The fourth element is the impact of a penalty on eligibility. If a charity receives a penalty, it will be excluded from the scheme for the tax year in which it makes the claim and the following tax year. Originally, the charity would have been excluded for the following two years, but amendment 26 means that the exclusion will be for only one year following the year of the claim.

That all adds up to a significantly more accessible scheme for new charities that have not claimed gift aid before, but we do not know exactly how the scheme will operate in practice. As I have said, we will review it after three years, when we might find that fraud rates are much higher or much lower than expected, so it is sensible to build flexibility into the Bill to amend the eligibility criteria in future. Many charities have asked the Government to do that. That power will enable us to vary the elements of the eligibility criteria up or down, depending on the evidence that we see on how the scheme operates and its susceptibility to fraud.

Those four elements interact with each other, and with the matching criteria, to provide safeguards for the scheme. We want to build the maximum flexibility into the Bill by allowing each of those periods to be reduced, increased, removed or reinstated. Any use of that power would be through the affirmative procedure, so it would be consulted on and subject to debate in the House. However, we do not want flexibility to undermine the integrity of the scheme or its important link with gift aid, so the requirement for a charity to make a minimum number of gift aid claims over a set number of years will always remain.

I now turn to the last set of amendments in this group. Since the Public Bill Committee, we have reassessed the distribution of powers to make secondary legislation in the Bill, some of which are conferred on the Treasury and some on HMRC. Broadly speaking, a power that changes the nature of the scheme in some way should be exercised by the Treasury. A power given to HMRC should be to allow the collection and management functions to be carried out correctly. The powers in the Bill are currently inconsistent with that approach, so we are introducing amendments 28 and 29 to change the powers in clauses 7 and 8. Those relate to running charitable activities in a community building and the definition of a community building. The powers are currently assigned to HMRC, but we now think it would be more appropriate to assign them to the Treasury. That is because they could be used to make significant changes to what is in or outside the scope of the rules. I hope that that helps explain why we have tabled those amendments.

I come now to my conclusion, Mr Deputy Speaker. [Hon. Members: “Hear, hear.”] The conclusion is very popular. I do not consider that there is any need for statutory reviews of the scheme at 24 months, and neither is there a need to require HMRC to publish certain data. There will be a full review of the scheme after three years, and HMRC will be publishing what data it has three times a year. New clauses 1 and 2, and amendment 21, would be wasteful and would require duplication of resource for no good reason. I therefore ask the hon. Member for Kilmarnock and Loudoun not to press those to a Division, just as I ask other hon. Members not to press new clause 3, amendments 32 and 33, and amendments 8 to 16.

I hope that hon. Members are comforted by the Government amendments that will reduce the three-year eligibility rules to two years. I am introducing a set of amendments that do what many charities and hon. Members have asked us to do, which is reduce the barriers to entry for this scheme and cut the eligibility period. I accept that some hon. Members wanted me to go further, but that would leave the scheme too exposed to fraud. These amendments represent an important concession by the Government, and I call on hon. Members from both sides of the House to support them. I am also introducing two technical amendments, Nos. 28 and 29. I commend the Government amendments to the House.

[Cathy Jamieson]

I will not take up much time. [Hon. Members: “Hear, hear.”] It is always great to be popular. The Minister has gone some way towards addressing the concerns we raised in the Public Bill Committee, but I feel it is important that we press new clause 1 to a Division.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Sajid Javid]

We have had a constructive and lively debate so far. I welcome the comments of the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) and, in particular, her decision not to press her amendments. I also welcome the comments of my hon. Friend the Member for Amber Valley (Nigel Mills) and his decision not to press his amendment. He has recognised that Government amendment 23 will reduce the matching rate by 10%, which is even more generous than the reduction proposed in his amendment. I cannot promise him that this generosity will continue into next week—we will have to wait and see what happens then—but he does tempt me.

I will say a few words about why the Government have brought forward these amendments. Although some hon. Members wanted to remove the matching rate altogether in Committee, I understand that they accept that the Government have listened and that a 10% rate is much more generous than what was offered when the Bill was first introduced.

Let me say explain why we have this matching provision. HMRC sees even the 10% rate as an act against gift aid fraud. Unfortunately, there are unscrupulous individuals who want to misuse charitable tax reliefs. They defraud the taxpayer and undermine the good name of the charitable sector, so we must be in a position to protect the taxpayer and the charitable sector. The lack of records also means that HMRC would have less evidence when a charity is claiming correctly under the scheme if there was no kind of matching principle. Gift aid is the closest proxy we can use to help ensure compliance under the new scheme, and the matching requirements will significantly increase protection against fraud and abuse.

Government amendment 30 introduces a wide-ranging power that will allow us to reduce or increase the matching rate. It will allow us to remove the matching provision entirely or reinstate it at a later date if it is removed. Removing the matching provisions altogether would remove the need for charities to claim a set proportion of their small donations claim in gift aid in that year. Even so, charities would always need to claim some gift aid in each year to ensure that they can claim under the scheme. That is because of the provision in clause 1(1)(b). That helps to retain the important link between this scheme and gift aid.

Any use of that power would be through the draft affirmative procedure, so it would be consulted on and subject to a debate in this House. That power means that the matching rule is fully flexible. We have no intention of using the power in the near future, but it will be there if we need it. It is something that many charities have asked us to introduce, so I am pleased that we have been able to do so. I believe that the Government’s approach is better than some of the other amendments that have been tabled, as has been recognised in the comments we have heard.

We debated the community buildings rules in some detail in Committee so, unless hon. Members have questions, I do not propose to go into much detail now, but I would like to remind Members that the purpose of those rules is to recognise that not all charities are structured in the same way. There are charities that, because of the way they were set up or for other reasons, effectively operate as branches of a master charity. We want to ensure that the proposals are as fair as possible and that branches of a bigger charity are effectively treated as individual charities and have their own £5,000 limit. The purpose of the community buildings rules was not to give more than £5,000 by allowing charities to have multiple claims, and I believe that the changes we are making to the Bill will achieve that effectively.

I again warmly welcome the support the House has shown for the Government amendments and thank the hon. Member for Kilmarnock and Loudoun for looking at them carefully and not pressing her amendments. I commend amendments 23 and 30 to the House.

[Cathy Jamieson]

I beg to ask leave to withdraw the amendment.

Amendment 4, by leave, withdrawn.

Amendment made: 23, page 2, line 1, leave out ‘double’ and insert ‘10 times’—(Sajid Javid.).

This amendment changes the gift aid “matching” rate from 2:1 to 10:1. In other words, to make a claim in respect of £5,000 of small donations, a charity would need to make successful gift aid claims in respect of £500 of donations, rather than £2,500.

Clause 2

Meaning of “eligible charity”

Amendments made: 24, page 2, line 12, leave out ‘3 of the previous 7’ and insert ‘2 of the previous 4’.

This amendment, and amendments 25 to 27, change the criteria for determining a charity’s eligibility for the small donations scheme. Under this amendment, the charity must have made successful gift aid claims in 2 out of the previous 4 tax years, rather than 3 out of the previous 7.

Amendment 25, page 2, line 16, leave out ‘3’ and insert ‘2’.

Under clause 2(2), earlier gift aid claims are ignored for the purpose of the eligibility rules where a charity doesn’t claim for 3 consecutive tax years. This amendment reduces that period to 2 consecutive tax years.

Amendment 26, page 2, line 22, leave out ‘2 tax years’ and insert ‘tax year’.

This amendment reduces the period for which a charity is not eligible where a penalty is imposed on the charity. Under the amendment, the period will be the tax year the claim was made and the next tax year (rather than that year and the next 2 tax years).

Amendment 27, page 2, line 26, leave out ‘3’ and insert ‘2’.—(Sajid Javid.)

This amendment reduces the “start-up period” for a charity to the first period of 2 (rather than 3) consecutive tax years during which it is at all times a charity.

Clause 7

Meaning of “running charitable activities in a community building” etc

Amendment made: 28, page 5, line 24, leave out ‘HMRC’ and insert ‘The Treasury’.—(Sajid Javid.)

This amendment makes the Treasury, rather than HMRC, responsible for making orders under clause 7(3).

Clause 8

Meaning of “community building”

Amendment made: 29, page 6, line 4, leave out ‘HMRC’ and insert ‘The Treasury’.—(Sajid Javid.)

This amendment makes the Treasury, rather than HMRC, responsible for making orders under clause 8(5).

Clause 14

Power to alter specified amount etc

Amendments made: 30, page 11, line 5, at end insert—

‘(1A) The Treasury may by order amend this Act for the purpose of—

(a) amending the gift aid matching rule;

(b) abolishing that rule;

(c) reinstating that rule (if previously abolished), with or without amendment.

(1B) In subsection (1A) “the gift aid matching rule” means the rule that limits the amount of top-up payments to which a charity is entitled by reference to the amount of gifts made to the charity in respect of which it has made successful gift aid exemption claims.’.

This amendment gives the Treasury power by order to amend the gift aid matching rule (see clause 1(3), (4)(a) and (5)), to abolish the rule or to reinstate it. The order would be made by statutory instrument subject to draft affirmative procedure in this House (clause 17).

Amendment 31, page 11, line 5, at end insert—

‘(1C) The Treasury may by order amend section 2 (meaning of “eligible charity”).

(1D) Section 2, as amended by an order under subsection (1C), must as a minimum include a condition requiring the making of a successful gift aid exemption claim in a previous tax year.’.—(Sajid Javid.)

This amendment gives the Treasury power by order to alter the eligibility rules in clause 2. But the altered rules must include a condition requiring the making of previous gift aid claims. The order would be made by statutory instrument subject to draft affirmative procedure in this House (clause 17).

Schedule 1

Meaning of “small donation”: conditions

--- Later in debate ---

[Cathy Jamieson]

Many of us who served on the Bill Committee or listened to the Second Reading debate and have heard the representations made by the charitable sector have a degree of sympathy with the comments made by the hon. Members for Banff and Buchan (Dr Whiteford) and the for Amber Valley (Nigel Mills), particularly in relation to ensuring that the Bill does not become out of date before it gets under way.

The hon. Lady made some powerful arguments. Indeed, her case is reflected in our amendment 22, which relates to some of the difficulties involved in getting information from those who have made donations by means other than cheques, such as JustTextGiving, or—this issue was raised a number of times in Committee—if they have placed a cheque on a plate or in a collection box at an event such as a funeral.

We had hoped that the Minister would give an indication—he may well do so—that he would at least be minded to consider this proposal at some point in the future. I understand that there may be technical reasons against that at present and that the Cabinet Office is engaged in ongoing work on the different methods of making donations and on following up on gift aid. Although I support the principles of amendment 34 and want action to be taken—that is why we have tabled our own amendment on the issue—I understand that there may be some difficulties. It would be odd, however, if the Minister said that at no point would he consider moving in the direction suggested, particularly when the Cabinet Office is engaged in those schemes.

I hope that the Minister will be able to comfort us by saying that he will consider the proposal at some stage. I also hope that the order-making powers that the Government will adopt under the Bill could, if necessary, be utilised at some stage to extend the way in which donations can be made. It seemed odd during Committee that, while someone can donate using whatever currency they choose, donations by electronic means do not count.

I look forward to hearing what the Minister has to say. I hope that he will take account of the persuasive case that has been made and that he will take a further look at the proposals in the amendments tabled by the hon. Lady and in my amendment 22.

[Sajid Javid]

I thank the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) for her comments, and I also thank the hon. Member for Banff and Buchan (Dr Whiteford) and my hon. Friend the Member for Amber Valley (Nigel Mills) for their contributions. I will try to respond to their points, which they made very well.

The amendments would do slightly different things, but, in general, they all seek to broaden the gift aid small donations scheme to include not only cash donations but donations in the form of electronic payments. Amendment 2 seeks to do that by introducing a power to allow the Treasury, by order, to broaden the scheme, whereas amendment 22 and the group of amendments 34 to 37 seek to expand the scope of the scheme immediately. I thank my hon. Friend for his original amendment on the issue and for all his contributions on this particular topic in Committee.

It might be worth reminding Members of the scheme’s primary objective, which is to provide a gift aid-style top-up payment when it is difficult or unduly burdensome to collect a gift aid declaration from the donor. The most obvious examples are when a charity is making a street collection or when a religious group is passing around a collection plate during a service. In such situations it would be difficult to ask everybody who makes a contribution to fill out a gift aid declaration form. They would have to stop, confirm they were a UK taxpayer and then fill in a form with their name, address and other details. I think we would all agree that that would be unrealistic for a donation of just a few pounds. As a result, charities are missing out on potential gift aid on such donations. That is exactly why the gift aid small donations scheme is being introduced—that is what it is designed to tackle. It will fill the gap in gift aid for donations for which it is difficult or unduly burdensome to collect the necessary paperwork.

Giving by using digital technology means that the donor is already providing some or all of their details to the charity. If any extra information is needed to make a gift aid declaration, it will be relatively small. When a charity has an ongoing relationship with a donor, they should use gift aid, if at all possible. Compared with a bucket collection on a busy street, it is considerably less burdensome to ask someone to provide their details if they are donating through a website or a text message. It is easy to use gift aid when making a donation through a website and it is also possible to attach gift aid donations to a text message.

I want to sound a note of caution about complexity. Text messages and internet donations can be made from anywhere in the world, but I hope Members will agree that the UK Government should not make a top-up payment on donations made from outside the UK unless there is firm evidence that the donor is a UK taxpayer or resident. Introducing other forms of giving to the small donations scheme would make it more complicated. In order to make a top-up payment on UK donations only, charities would need to keep records of the donation’s origin. That is comparatively straightforward when rattling a tin on a UK high street, but it would become much more burdensome, if not impossible, for some charities if donations were made through texts and website visits from around the world.

Hon. Members mentioned the possibility of making the gift aid system easier via text giving. The hon. Member for Kilmarnock and Loudoun will be aware that the Government are in discussions with a number of charities and their representative organisations about how we can do just that. The discussions are going very well and have been constructive. The Government are open to the possibility that, eventually, we might have to pass legislation to make the gift aid system easier and we are working with charities to try to achieve that.

It is possible that new forms of electronic giving will be developed in the future that are completely anonymous. Indeed, my hon. Friend mentioned the possibility of using Oyster cards, which are anonymous. It is very early at this stage, however, to understand what technology might come along in a few years’ time, so it would be difficult to set out the circumstances in which the power he proposed could be used. Without complete knowledge of Oyster cards or other developing technologies for giving, it is difficult to know whether they would fall under the scheme’s scope and rationale. It is, therefore, possible that the power could never be used.

I understand my hon. Friend’s concerns and he has made some important points, so I want a review of the forms of giving to be undertaken when we review the scheme after its first three years. If people are able to make completely anonymous electronic donations, we shall look again at whether the scope of the scheme should be extended. That is the Government’s commitment.

It is harder for charities to collect gift aid declarations in the street or at a religious meeting than through other channels. That is why the focus of the scheme is on cash donations. I accept that things may change, so I am committing the Government to review the situation after three years. I therefore ask hon. Members not to press their amendments to a Division.

[Dr Whiteford]

Madam Deputy Speaker, I am sure that you will be as pleased as other Members to hear that I do not intend to detain the House for long.

We have heard a few contributions on this group of amendments. The hon. Member for Amber Valley (Nigel Mills) was on the same page as me in looking to the future and in considering ways of giving that are already developing in the charitable sector. The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) alluded to some of the technical challenges that the proposals might meet and pressed the Minister on amendment 22, which she tabled.

I have listened carefully to the Minister and heard his commitment to review the forms of giving after three years. I am sorry that he did not go further, but I do not intend to press the amendment on the basis that there will be an opportunity for the “Chip-in” pilot scheme to be evaluated. I suspect that the technology will have moved far beyond that by the time of the review. I urge him to recognise the technological advances in giving that have already taken place.

Making a £1 text donation is like throwing a pound in a bucket. That is how we will give in the future. It will provide a better way for charities to create an audit trail. We do not know whether the people who give to someone who is shaking a bucket are taxpayers. Many of them may not be for one reason or another, whether they be pensioners or overseas students. In the same way, people making text donations may or may not be taxpayers, but I am sure that it is not beyond the wit of humanity to work out where the phones are or where the numbers are registered. Just as we are allowing this scheme to work in a proportionate way for cash donations that are collected in a bucket, we should respect the spirit of the Bill for contactless payments.

I look forward to the review in three years and hope that the Minister will take those points on board. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Third Reading

[Sajid Javid]

I beg to move, That the Bill be now read the Third time.

It is a pleasure to move the Third Reading of the Bill. It has been many months in development through consultation, drafting and a fair amount of discussion in Parliament. In a way, I am sad to say goodbye as it heads off to another place, subject of course to Members’ support for its Third Reading.

I am sure that everyone will agree that the Bill leaves the Commons in good shape. We have considered a lot of amendments and the Government have introduced amendments where we have agreed that there was room for improvement. Not only have we introduced the amendments that Members have accepted today on reducing the eligibility period to two years and lowering the matching rate to 10%, but we were active in Committee as well. We have listened to the concerns of charities and Members, and have brought forward a number of amendments to reflect them.

I am pleased that the Bill has reached this stage and that we are able to move towards the introduction of the gift aid small donations scheme, for which the Bill provides the legislative framework. The scheme was announced as part of a significant package of measures in Budget 2011 to encourage charitable giving and philanthropy by donors from all walks of life, from the largest donors to those who give small amounts to charity bucket collections.

The gift aid small donations scheme is at the heart of that package. Its purpose is to enable charities and community amateur sports clubs to claim a gift aid-style payment on small donations of up to £20, for which it is often difficult to obtain a gift aid declaration. Eligible charities and CASCs will be able to claim top-up payments on up to £5,000 of small donations each year. The scheme does not require individual donors to complete a gift aid declaration, nor does it require the charity or CASC to collect and provide the donor’s details with their repayment claim, as under gift aid. The aim of the scheme is to complement gift aid, not to replace it. It is for donations for which a gift aid declaration is too difficult to collect.

Tax reliefs for charities and charitable giving are an important source of income for charities, totalling more than £3 billion a year. Gift aid is the single largest relief and is worth more than £1 billion a year to charities. We estimate that the gift aid small donations scheme could result in additional Government funding of about £100 million a year for charities and CASCs. That represents a significant boost in income for the sector and will be especially valuable to smaller charities.

We have worked closely with the charitable sector to try to get the scheme right. Concerns have been raised on the details of the Bill, and we have debated those points throughout the Bill’s different parliamentary stages. In developing the scheme, we have had to ensure that it operates as fairly as possible, but we have also had to ensure that it remains affordable and protected against fraud. We want the money to go to real charities that do good work, and not to fraudsters and others who would try to abuse the scheme.

That is why we have introduced safeguards—the community buildings rule is one such feature of the Bill. We want to ensure that charities that do similar work at a local level but have different historical structures get allowances under the scheme that are not hundreds or even thousands of times different from one another. That is why we have introduced the community buildings rule. The charity sector has raised concerns about the complexity of the rule. It is true that, to obtain a simple result, we have needed to introduce detailed rules, but I am sure hon. Members will agree that that is preferable to disadvantaging some charities just because of how they have been set up.

In conclusion, the Bill represents a potentially significant new opportunity for charities and CASCs. When it is up and running, it will give them a new stream of income and provide £100 million of new funding to the sector. It therefore represents an important part of our strategy to support charitable giving across the board.

I thank the Opposition and Members on both sides of the House for their support of the Bill, and for the constructive way in which they have scrutinised it. Together, we have improved the Bill. I hope hon. Members join in me in supporting this important new scheme and I commend the Bill to the House.

Fuel Duty

Sajid Javid Excerpts

Monday 12th November 2012 Commons Chamber

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

I beg to move an amendment, to leave out from “House” to the end and add:

“notes that as a result of the action this Government has taken to cut, cancel and delay fuel duty rises families will save around £159 on fuel costs by April 2013; further notes that under the previous administration’s plans, voted for by the Leader of the Opposition and the Shadow Chancellor, pump prices would be 10 pence higher than they currently are; also notes that motorists in island communities are benefiting from the fuel duty discount pilot scheme; recognises that this Government has introduced a number of other measures to support families including a £1,100 increase in the personal income tax allowance from April 2013, three years of council tax freezes and a cap on rail fares; commends that these measures have been in part affordable because of the Government’s record of success in tackling tax avoidance and evasion which is on track to raise an additional £7 billion per annum by the end of this Parliament; and welcomes the Government’s commitment to do more to help with the cost of living in the future subject to the constraints of the public finances.”

I see that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) has been abandoned by her boss—

[Rachel Reeves (Leeds West) (Lab)]

Where is your boss?

[Sajid Javid]

My boss is in Brussels on Government business. The hon. Lady’s boss is probably too busy cooking lasagne for someone. As usual, he is busy chasing the headlines and has left her to pick up the pieces.

Rising living costs have made life difficult for millions of households. I know that first hand. Like millions of others, I have lived under financial distress, so I know what it is like to worry about paying the bills and living within a tight budget, and the Government know about that, too. Times are tough. We inherited the biggest deficit in the developed world and the largest in our peacetime history, and international commodity prices continue to rise, raising the cost of living. Since May 2010, the price of wheat is up 72% and the price of Brent crude is up 31%. While talking about commodity prices, I note that the price of gold is up 40%. Had the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), not recklessly sold off the nation’s gold reserves, our country would be £10 billion richer. That is money we could have used to help hard-working families.

To clear up the mess left by the Labour party, we have had to make tough decisions, but we have prioritised the cost of living wherever we can. We have cut income tax, frozen council tax, capped rail fare increases and, moving on to the Opposition’s motion, we have delayed and cancelled the fuel duty rises that they supported.

[Mr MacNeil]

The Minister states that the price of wheat has gone up. Bread and butter prices have clearly increased dramatically. Is this not exactly the wrong time for the Government to put 3p on the price of a litre of fuel?

[Sajid Javid]

That is exactly why the Government have taken action on the cost of living, which I will move on to shortly. Let me first talk about the Labour party’s record. It will not admit that it delivered the biggest deficit in the developed world. The shadow Chancellor said only three weeks ago that under Labour

“there was not a structural deficit”.

In fact, there was a structural deficit of £71 billion in 2007-08—more than 5% of this country’s GDP. We should thank him. Whenever anyone might need reminding why the Labour party must never be allowed to run this country again, the shadow Chancellor steps up to the plate—and this motion is another reminder.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does the Minister accept that it is misleading constantly to give a cash figure for the size of deficit and say that it is higher than in countries with a far lower GDP?

[Sajid Javid]

I think that the hon. Lady needs to study the figures and understand what “percentage of GDP” means.

[Andrew Selous]

On tax avoidance, will my hon. Friend confirm that this Government have done far more than Labour ever did to reclaim tax due to the Exchequer, and does he agree that the Opposition should give credit where it is due?

[Sajid Javid]

As always, my hon. Friend is absolutely right. I will come to that later.

In the Budgets of 2009 and 2010, the shadow Chancellor and his colleagues endorsed seven rises in fuel duty between 2010 and 2014.

[Dan Rogerson (North Cornwall) (LD)]

The Minister finds himself in a strange set of circumstances whereby he is having to take the Opposition’s advice to abandon the policy that they pursued in government. What does he think it will be next—returning the top rate of income tax to the 40% that it was for most of their time in office, or perhaps reintroducing the 10p rate?

[Sajid Javid]

My hon. Friend is absolutely right to point out that the Opposition are all over the place.

If we had found a way to halt all the rises that Labour had planned, we would have done so, but if we had gone ahead with its plans, fuel duty would have continued to rise. Fuel would be 10p per litre more expensive by now, costing the average Ford Focus driver £159 extra by April 2013. Let us put to bed once and for all the idea that Labour is the party fighting to support people on the cost of living.

[Mr Donohoe]

As the Minister was in his place earlier he will have heard me ask what is the amount of tax on a litre of petrol. Does he agree that, for the first time, a Government should allow that figure to be displayed on the forecourts of all our petrol stations?

[Sajid Javid]

I can tell the hon. Gentleman that because of the policies of the Government he supported, there were 12 rises in fuel duty, so it is a lot higher today than it would have been otherwise.

This Government are taking action. Since the coalition came together, our economic plans have won international credibility. We have cut the deficit by a quarter. Because of this, we have secured record low interest rates and opened up Britain for business once again.

[Andrew Percy (Brigg and Goole) (Con)]

The Opposition’s motion has absolutely no credibility given their record in government, and that is why I certainly will not support it. My hon. Friend is right to point out that the Government have done some good things in this respect. May I send him a message from the people of Brigg and Goole, which is that we welcome what has been done thus far but desperately want this rise to be cancelled or delayed again?

[Sajid Javid]

My hon. Friend makes himself absolutely clear. He has been an avid campaigner on this issue, and his point of view is certainly being taken on board.

These low interest rates have helped hard-working families up and down the country with their cost of living. With interest rates low, mortgage bills are also low. If interest rates rose by just 1%, average mortgage bills would increase by almost £1,000 a year.

[Bill Esterson (Sefton Central) (Lab)]

The hon. Member for Brigg and Goole (Andrew Percy) said that his constituents want the planned rise in fuel duty to be cancelled—as do my constituents—and the Minister said that he agreed with him, so why does he not support our motion?

[Sajid Javid]

If the hon. Gentleman is patient he will hear about the action we have taken to help with the cost of living.

[Mr Marcus Jones]

Who is trying more to help hard-working people with the cost of living—a Government who have frozen council tax for the past three years or a Government who doubled council tax during their term in office?

[Sajid Javid]

My hon. Friend knows that the answer to that question is that it is this Government who are on the side of hard-working families.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

As my hon. Friend knows, many of my constituents live in sparsely populated rural areas, and the cost of fuel has an immense impact on their family finances, yet they realise that running the country with massive deficits puts their children’s futures at risk and means that money that could have been spent on public services is instead spent as Labour wants—on interest.

[Sajid Javid]

My hon. Friend is absolutely right.

[Charlie Elphicke]

There is opportunism not only on fuel duty but on tax avoidance. Under the previous Government, income tax paid by hard-working families in the working nation rose by 81%, but Labour Members let business off the hook, with corporation tax receipts going up by only 6%, because they were so obsessed with the prawn cocktail circuit.

[Sajid Javid]

My hon. Friend has done a lot of work in this area and speaks with great knowledge. He is absolutely right to point out Labour’s inaction.

[Guto Bebb (Aberconwy) (Con)]

I speak as a Member of Parliament representing a Welsh constituency. Is my hon. Friend aware that this Government made available to the Labour Administration in Cardiff money to freeze council tax in Wales, but they declined to do so?

[Sajid Javid]

That is a shocking disclosure, but what more could we expect from Labour?

[Dr Whiteford]

We all know that the Government inherited a mess, but does the Minister accept that the increase in fuel duty will harm recovery by holding back businesses and households?

[Sajid Javid]

I think that the hon. Lady would welcome the action that the Government have already taken on the cost of living and on fuel duty.

This Government have also been working hard to get people into work. There are more people in employment than ever before. Unlike Labour, we have no problem in welcoming the fact that the private sector has created over 1 million jobs over the past two years. That equates to more net new jobs created in the private sector in two years than were created in 10 years under Labour. With this support in place, we have strained every sinew to cut taxes where we can to ease the cost of living. We have cut fuel duty—a cut that Labour opposed—and frozen it for nearly two years. Fuel is now 10p cheaper than it would have been under Labour, helping family budgets. We have cut income tax for 25 million people and lifted 2 million people out of income tax altogether. We have frozen council tax for two years and announced that we will do it again next year. This Government have saved families £220 per annum on the average council tax bill. We have capped increases in rail fares so that commuters do not face substantially above-inflation rises.

[Gloria De Piero (Ashfield) (Lab)]

Can the Minister explain how tax cuts for millionaires helped hard-working families?

[Sajid Javid]

If the hon. Lady is referring to the previous Budget, the changes we made to the top tax rate were covered more than six times by other changes that we announced. This Government want to create a tax system that is both efficient and helps to create jobs.

[Ian Swales (Redcar) (LD)]

Does the Minister share my surprise that the previous Government thought it was fine to give tax relief of £250,000 a year on pensions contributions, and may I confirm that not one of my constituents has complained about the cut to £50,000?

[Sajid Javid]

My hon. Friend makes a good point and shows again where this Government are taking action to balance the nation’s finances.

We are doing a lot more to try to help those in need. We are investing more than £4.5 billion over this Parliament in affordable housing, delivering 170,000 new homes. We have replaced Labour's ineffective stamp duty relief with schemes that work, such as Firstbuy and NewBuy, helping more than 25,000 first-time buyers to find their way on to the first rung of the housing ladder.

Let us look at Labour's claims on tax avoidance. It wants us to clamp down on a scheme that uses a specific tax relief around travel expenses—a relief about which in 2008 the Labour Government, when presented with the facts, chose to do nothing.

[Lyn Brown (West Ham) (Lab)]

Will the Minister give way?

[Sajid Javid]

I will in a moment.

The Labour Government, when presented with the facts about this tax relief in 2008, chose to do nothing. They declared:

“The Government has considered—

[Lyn Brown]

Will the Minister give way?

[Sajid Javid]

If the hon. Lady is patient, I will give way in a moment—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I do not need an answer back; I am just saying that the hon. Lady does not need to keep jumping to her feet. The Minister has promised to give way, but I do not know whether he is giving way now.

[Sajid Javid]

Not yet.

The hon. Lady does not want me to tell the House what the Labour Government did when they looked at this tax loophole. They declared:

“The Government has considered all the consultation responses and believes that on balance the negative effects of changing existing legislation outweigh the benefits"

To address just this issue, this Government have already strengthened HMRC's enforcement and compliance teams, and protected tens of millions of pounds of revenue. So the nub of today's debate is a call to clamp down on avoidance of a relief that the Opposition declared they could do nothing about, to pay for a cut in fuel duty that they supported. Mr Deputy Speaker, you couldn't make it up.

[Stewart Hosie (Dundee East) (SNP)]

The Minister said he wanted to talk about tax avoidance, so let us talk about it. Why did the Chief Secretary to the Treasury promise at his party’s conference last year thousands of extra tax inspectors, and why have the Government failed to deliver any of them?

[Sajid Javid]

I thank the hon. Gentleman for that question; I will come on to it.

[Bill Esterson]

It would be great if the Minister spoke to the fuel duty motion—[Interruption.] The fuel duty part of the motion. He talks about tax avoidance. Many of my constituents used to work at HMRC—they do not any more because his Government got rid of them. How can he be serious about tax avoidance when he has not provided the new inspectors he promised and has cut some of the staff who were there when the Government took office?

[Sajid Javid]

The motion mentions tax avoidance—he really should read his own party’s motion. The number of HMRC employees went down from 96,000 to 66,000 under his Government.

Labour Members had 13 years to clamp down more widely on tax avoidance. They had 13 years to do what they are calling for today. Did they take that chance? No. There were 13 years of inaction, and a consultation gathering dust in the Treasury archives. Even then, their figures simply do not add up. They claim that clamping down on this tax relief would bring in £650 million, but figures released while they were in power show it would bring in significantly less. If they ever want to regain credibility on the economy, they need to apologise for the mess in which they left the economy and learn to stop making irresponsible, unfunded promises.

[Christopher Pincher (Tamworth) (Con)]

Only the deluded or those who want to avoid tax will oppose the closing of tax loopholes. Many people have criticised some companies for avoiding tax, but a company called Stemcor pays only £163,000 from the £65 million of profits it makes each year—about 0.1% of its revenues. If companies are to be criticised, should not Stemcor be criticised?

[Sajid Javid]

I thank my hon. Friend for that point. It would not be appropriate for me to talk about any individual company, but he makes a good point. Any company that is engaged in aggressive tax avoidance needs to explain itself.

Tax avoidance ran rife under Labour. We have taken action. We are investing £900 million to tackle tax avoidance and evasion, which will deliver £7 billion a year by 2014. We have already signed a groundbreaking agreement with Switzerland to make it much more difficult to evade tax. In March this year, HMRC closed a business property loss scheme within a week of its disclosure. At the G20, the Chancellor and his German counterpart announced concerted co-operation to close gaps in international standards and to crack down on international tax avoidance. Labour's former City Minister, Lord Myners, was on the radio only this morning welcoming this progress.

Underpinning all this progress, we are introducing a general anti-abuse rule so that no one can follow the letter of the law but abuse the spirit and get away with it—something else on which the Labour party never delivered. This is what real action on tax avoidance looks like.

[Fiona O'Donnell (East Lothian) (Lab)]

If it is all going so well, why cannot the Minister do something to help my constituents who cannot afford to fill up their cars?

[Sajid Javid]

This Government do not shy away from making tough decisions. We are getting on with cleaning up the mess left behind by the previous Government, and we are doing everything we can to help hard-working families with the cost of living and putting money back into their pockets. Our action on fuel duty is a part of this. Fuel duty is currently 20% lower in real terms compared with its peak in March 2000, and 7% lower compared with May 2010. If we had continued the policies of the previous Government, pump prices would, quite simply, be higher—fuel would be 10p more expensive per litre. I know that some hon. Members will call for a further freeze in fuel duty today. I can assure them that the Government understand the financial pressures that hard-working families are facing. Subject to the constraints of the public finances, this Government are determined to keep helping families with the cost of living.

I urge hon. Members to reject the Opposition's motion and to support the Government's amendment.

[Several hon. Members]

rose—

--- Later in debate ---

[Bill Esterson]

I am always happy to be guided by you, Mr Deputy Speaker. I wonder whether the hon. Gentleman is aware of the research—

[Sajid Javid]

Reading!

[Bill Esterson]

Thank you. I wonder whether the hon. Member for Ipswich (Ben Gummer) is aware of the research by FairFuelUK that points out that a 3p increase in duty would deliver a 0.1% drop in GDP and the loss of 35,000 jobs. Does he accept those figures?

Oral Answers to Questions

Sajid Javid Excerpts

Tuesday 6th November 2012 Commons Chamber

[Mr Philip Hollobone (Kettering) (Con)]

3. What recent assessment he has made of the level of employment in (a) Kettering constituency, (b) Northamptonshire and (c) England.

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

The number of people in employment in the year to June 2012 was 47,000 in Kettering, 347,000 in Northamptonshire and 24,497,000 in England. I am pleased to tell my hon. Friend that the number of people employed in each of those three areas is higher than when the Government took office.

[Mr Hollobone]

The employment rate in Kettering is well above the national average. Of all the policy options before the Chancellor, which offered the best prospects of sustained, long-term and lasting employment growth for my constituents in the borough of Kettering?

[Sajid Javid]

The one policy that brought the coalition Government together was our determination to deal with the record budget deficit we inherited. When the Government came to power, the previous Government were borrowing £300,000 a minute. We have cut the deficit by 25%, which has brought confidence and jobs back to Britain.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

As an English and a Yorkshire MP I have a great interest in how the Heseltine review, “No Stone Unturned”, will help my region. Some of us in Yorkshire are very pleased with the report, because there is a glimmer of hope for more jobs and more investment in Yorkshire. What will the Treasury do to follow up the report that it commissioned?

[Sajid Javid]

This Government rightly commissioned the report because we believe that Lord Heseltine has a lot of experience in that area. We will study it carefully and will respond in due course.

[Mr Peter Bone (Wellingborough) (Con)]

Does the Minister realise that unemployment in my constituency went down last month? Does he also realise that in the neighbouring constituency, Corby, the unemployment level fell by 5%? Does that not show that the Conservative-led Government is succeeding in Northamptonshire?

[Sajid Javid]

My hon. Friend is absolutely right. In the first two years of this Government, the private sector created 1 million new jobs whereas in the last 10 years of the previous Government the sector created about half of that figure.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

One way to tackle youth unemployment in Kettering and Northamptonshire and across the UK would be for the Government to commit now to repeating Labour’s tax on bank bonuses on top of the bank levy to fund much-needed new jobs for young people. Is the Minister aware that in some parts of Northamptonshire, such as Corby, the number of under-24s on the dole for more than 12 months has gone up by a shocking 233% in just the last year?

[Sajid Javid]

I am not surprised that the hon. Lady is talking about youth unemployment, because in the last 10 years of her Government it rocketed by 72% from 534,000 to 921,000. The previous Government created the problem and this Government’s policies are bringing the number down.

[Pauline Latham (Mid Derbyshire) (Con)]

4. What assessment he has made of the fiscal implications of the Government’s proposed employee-owner scheme.

--- Later in debate ---

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

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

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

The UK labour market is showing some signs of recovery. There are more people in work now than ever before, and youth unemployment is at its lowest since 2011. The Youth Contract was launched in April to support up to 500,000 young people into employment, and the Work programme has been under way since 2011.

[Gavin Shuker]

In my constituency, long-term youth unemployment is not up by 11% or 110%, but by 1,150%. Will the Government now apologise for their complacent decision to scrap the future jobs fund?

[Sajid Javid]

I think it is the hon. Gentleman who should be apologising. He is probably having a hard time explaining to his constituents why the number of young people on jobseeker’s allowance in the last five years of the previous Government went up by 45%. I have some good news for him, however. Under this Government, that number is down, and under this Government the number of vacancies in his local jobcentres is up by 30%.

[Rushanara Ali]

All other Olympic boroughs received a much-needed economic boost from the Olympic games, but the Office for National Statistics figures show that youth unemployment increased in my constituency between June and October, not to mention the 141% increase in long-term youth unemployment in the past year. Does the Minister agree that tackling this problem requires action from the Government, with a bank bonus tax to fund 100,000 jobs for young people, and action locally by the council, to take this issue seriously?

[Sajid Javid]

I know the hon. Lady takes this issue very seriously, which is why I believe she took her right hon. Friend the shadow Chancellor to Queen Mary university recently to discuss it with young people. I hope that they told young people that under the previous Government youth unemployment was created as a problem—up 72% in 10 years. I hope she also told them that youth unemployment has fallen by 62,000 in the last quarter because of the Youth Contract, the Work programme, investment in apprenticeships and other Government policies.

[Tom Greatrex]

Long-term youth unemployment in my constituency in the past two years has increased by 188%. Rather than flinging back his low-grade abuse, could the Minister explain to the House his objection, as we approach bank bonus season, to implementing a bank bonus tax to help fund jobs for those young people?

[Sajid Javid]

The hon. Gentleman will know that the Government have introduced a permanent tax on bank balance sheets, which will raise far more than a bank bonus tax. If he is interested in the fiscal action the Government are taking to create jobs, maybe he can tell his constituents about the brownfield allowance the Government introduced for North sea oilfields a couple of months ago. A few weeks later there was investment of £1.6 billion, creating up to 2,000 jobs in Scotland and beyond.

[Harriett Baldwin (West Worcestershire) (Con)]

One of the fiscal measures that best increases the incentive to find work for those who have been out of work for a long time is the benefit cap. Is the Minister surprised to learn that this morning a measure that will save the taxpayer half a billion pounds over the next two years and greatly increase the incentives to work was voted against by the Labour party?

[Sajid Javid]

I thank my hon. Friend for bringing that to the House’s attention, and I am not surprised to learn it, given Labour’s opposition to the benefit cap. The Government are determined to make the welfare system work in order to help people find employment, and that includes the benefit cap as well as the introduction of universal credit.

[Andrew Selous (South West Bedfordshire) (Con)]

Does my hon. Friend recognise that it was virtually impossible to be long-term unemployed under the last Government, because they used to take people off the register, put them on a short-term course, and then put them back again, and is he pleased that we are being more straightforward?

[Sajid Javid]

My hon. Friend makes a good point. A number of people have made those accusations. The important thing is that youth unemployment is falling—down by 62,000 in the last quarter.

[Mr Alan Reid (Argyll and Bute) (LD)]

Has my hon. Friend considered the submission that the Government have received from FairFuelUK showing that putting up fuel duty will hinder job creation, and will he give serious consideration to cancelling the planned January fuel duty increase inherited from the Labour party in order to boost job prospects?

[Sajid Javid]

We carefully consider all submissions from stakeholders, including the FairFuelUK campaign. The important thing is that had the Government continued with their inheritance on fuel duty, that duty would have been 10p higher, which would have made things a lot more difficult for ordinary people.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

10. If he will use the revenue received by the Exchequer from the forthcoming auction of the 4G mobile telephone spectrum for the purpose of building affordable homes over the next two years.

--- Later in debate ---

[Mr George Mudie (Leeds East) (Lab)]

18. What estimate he has made of the level of economic growth since the October 2010 spending review.

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

The economy grew by 1.8% in 2010 and 0.9% in 2011. The Office for Budget Responsibility is responsible for producing independent economic and fiscal forecasts.

[Mr Mudie]

The Minister will be aware that the Chancellor boasted that there would be growth of 2.6% in 2011 and 2.8% in 2012. Actually, growth has averaged 0.6% over the past two years. What went wrong?

[Sajid Javid]

The hon. Gentleman is a distinguished member of the Treasury Committee, and I think he knows better than that. The Government introduced an independent Office for Budget Responsibility to make forecasts, and the OBR report in October 2012 said that there were several reasons why the out-turn has been different from the forecasts, including

“deteriorating export markets…impaired credit conditions”

and “euro area anxiety”. Perhaps the hon. Gentleman can welcome yesterday’s report from the Centre for Economics and Business Research, which said that Britain would be the fastest-growing economy in Europe in 2013 and 2014. [Interruption.]

[George Freeman (Mid Norfolk) (Con)]

On behalf of my constituents, I welcome the news that the economy has returned to growth, and I draw the Minister’s attention to the success in the life sciences sector. Eli Lilly has announced a new early-stage neuroscience facility in the UK, Johnson and Johnson has made Britain the home of its new global innovation centre, and more than £1 billion has been raised this year in early stage funds. Is that not the only sustainable route to a really balanced recovery?

[Sajid Javid]

My hon. Friend is absolutely right. The only sustainable growth is long-term growth in private sector jobs.

[Mr Adrian Sanders (Torbay) (LD)]

20. What his policy is on taxation on unearned wealth; and if he will make a statement.

--- Later in debate ---

[Duncan Hames (Chippenham) (LD)]

Some pensioners with capped draw-down and self-invested pension plans have seen their retirement income halve as a result of decisions by the Government Actuary’s Department. How would the Minister suggest those pensioners cope in retirement with such a sharp fall in access to what is, after all, their own money?

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

My hon. Friend is right to point out that pensioners are facing pressure because of low interest rates and longevity. The Government Actuary’s Department makes recommendations to the Government and we must take them seriously—we keep the matter constantly under review.

[Sheila Gilmore (Edinburgh East) (Lab)]

The Government make a great deal of creating 1 million private sector jobs—[Hon. Members: “Hear, hear!”] Wait, wait. Half of those jobs, according to their statements, were in place after eight months of their coming to office, meaning that in the following 22 months only another half a million jobs were created. That suggests that the rate of growth has slowed substantially as a result of the Chancellor’s policies.

Beer Duty Escalator

Sajid Javid Excerpts

Thursday 1st November 2012 Commons Chamber

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

I congratulate my hon. Friends the Members for Burton (Andrew Griffiths) and for Leeds North West (Greg Mulholland) on securing what has been an excellent debate, and on the excellent work that they do through chairing the all-party beer group and the all-party save the pub group respectively. I also thank all Members who have contributed to the debate—I, too, counted 20 Back-Bench colleagues—as well as the 104,000 people who have signed the e-petition and all Members who are in the Chamber today.

[Richard Graham (Gloucester) (Con)]

Does my hon. Friend agree that the British brewing sector, British pubs and the British people have paid a heavy price for the previous Government’s beer duty escalator? May I urge him to hold a review and then do what Treasury Ministers have done to the previous Government’s fuel duty escalator, which is to stop it? In that way, he will deserve a celebratory pint from all my constituents in Gloucester, a pint of beer from the—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The Minister will not have time to drink the pint if we have such long interventions.

[Sajid Javid]

I thank my hon. Friend, and I will come on to that point.

The Government really do recognise the importance to the British economy of pubs and brewers. I fully support the industry, and I know that Members of all parties would like to see it prosper. We have heard a lot from hon. Members about beer duty, but let us be clear that the previous Government introduced the escalator. They increased beer duty by 60% while they were in office, and in fact for the poorest households it went up by 80%. That was the inheritance that we had to deal with. At the same time, as we all know, we were burdened with a huge budget deficit of £159 billion, or 11% of gross domestic product, which was greater than that of any other developed country. That inevitably meant that the incoming Government had to take some difficult decisions that the Labour party dodged. We had to deal with that legacy.

We set out a clear plan to deal with the deficit, part of which was the planned increase in beer duty rises until 2014-15, about which we have heard so much today. We have announced no changes to that policy. Cancelling the planned 2% duty rise represented by the escalator portion of beer duty would cost £35 million next year and £70 million the following year. If that tax were cancelled, the revenue would have to be recouped one way or another, either through further public spending cuts over and above what is already necessary or by finding increases in other taxes or duties.

[Richard Drax]

The whole point is to reduce taxation and thereby encourage growth and employment. That will create wealth, which will inevitably end up in the Treasury’s pockets. Is that not the Conservative way forward for the long term?

[Sajid Javid]

My hon. Friend makes a good point, but I think he will accept that the Government need to raise taxes to pay for public services in one way or another. However, we continue to keep all taxes and duties under review, including the ones that have been discussed today, and we regularly monitor alcohol duties to ensure that we are on top of their impact on the industry and consumers.

[Cathy Jamieson]

I hear what the Minister says about keeping matters under review, but in my experience that sometimes means keeping something on a shelf. Is it not time to dust down some of that information and hold a review that reaches a conclusion?

[Sajid Javid]

I assure the hon. Lady that, as an incoming Minister who is new to this portfolio, I plan to keep nothing on the shelf. I will be looking at everything, which includes all duties and taxes for which I have responsibility. That would be a sensible thing for any Minister to do.

Let me say a word about the importance that the Government attach to pubs and brewers in the wider economy. The sad truth is that pubs have been closing for many years, and that decline has been influenced by many factors, not just alcohol duty. Lifestyles and consumer tastes are changing and individuals have increased choice in their leisure activities. Those things have an impact, and those factors—not just alcohol duty— determine the size of the pub sector. The number of pubs continued to decline in the early 2000s, despite relatively flat alcohol duties in real terms. The Government are rightly doing a lot to support pubs and brewers, and those businesses will benefit from many decisions taken in the tax system and elsewhere.

Let me give a couple of examples. Changes to business rates mean that small pubs can benefit from small business rates relief, or rural rates relief. The Government have extended the small business rates relief holiday until March 2012. We have also legislated to allow local authorities to give grant discounts to businesses, including pubs and brewers, as appropriate.

Other wider actions will also benefit the pubs and brewing industry, and the cut in corporation tax from 26% to 22% by April 2014 will help brewers. Small businesses such as pubs benefit from the small profits rate, which has fallen from 21% to 20%. The change in machine gaming taxation will affect the majority of pubs. From February 2013, machine games duty will replace the current system of taxation on gaming machines, and more than 70% of pubs will benefit from that move to MGD through reduced tax liabilities.

My hon. Friends the Members for St Austell and Newquay (Stephen Gilbert) and for Mid Derbyshire (Pauline Latham) mentioned small breweries’ relief, which helps small brewers up and down the country, and that is vital to our economy. The right hon. Member for Southampton, Itchen (Mr Denham) mentioned entrepreneurship. The Government have supported entrepreneurship by lowering beer duty for small producers, and helping small brewers invest and grow. There were 394 small breweries in 2002 when that relief was introduced, and today there are more than 730. My hon. Friend the Member for Bristol North West (Charlotte Leslie) mentioned the Live Music Act 2012, which came into force on 1 October and is already making it easier for pubs to play live music. The Government have launched a £90 million support programme to help eligible community organisations take on the community ownership and management of assets that are important to them, including pubs.

A number of hon. Members, including the hon. Member for Midlothian (Mr Hamilton) and my hon. Friend the Member for Harrow East (Bob Blackman), mentioned the Government alcohol strategy. Alcohol drunk in moderation can have a positive effect on the well-being of adults, but excessive consumption has negative consequences on both individuals and wider society. The Government published their alcohol strategy earlier this year, which includes plans for minimum unit pricing. Setting a floor price for alcohol will prevent heavily discounted alcohol from being sold in supermarkets and off licences. Raising the price of cheap alcohol will help tackle excessive alcohol consumption, and I hope that pubs will benefit from minimum unit pricing once the demand for cheap alcohol in the off-trade has been tackled.

The Government recognise the importance of pubs and brewers to their local communities and the wider economy. We have done much to try and support that industry—I have given a few examples, which I hope was helpful—and it makes sense for us to keep looking at other ways to continue that support.

May I thank again those who sponsored the debate and all hon. Members who took part, as well as all those who signed the public petition? In conclusion, I will respond to a comment that was made by the mover of the motion, my hon. Friend the Member for Burton at the start of the debate. If I remember his words correctly, he challenged me to become known as “the Minister who saved the great British pub.” I am very tempted, although I would have to compete for that honour with the Under-Secretary of State for Communities and Local Government (Brandon Lewis), who has responsibility for pubs. I am sure, however, that we can work well together and perhaps jointly take that title.

I assure all hon. Members who have contributed to the debate that I have been in listening mode. This debate has been valuable and showed just how important debates tabled by the Backbench Business Committee can be. I will take on board a lot of messages from the debate, and ensure that the Government do even more to help the pubs and the brewing industry.