Sammy Wilson
Main Page: Sammy Wilson (Democratic Unionist Party - East Antrim)Department Debates - View all Sammy Wilson's debates with the HM Treasury
(11 years ago)
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Stewart Hosie
I am almost at a loss for words at the suggestion that anyone could imagine that the world will hold its breath waiting on a Liberal Democrat pamphlet! [Interruption.] I do not want to digress, Mr Hoyle, but that is a mind-boggling proposition.
The confusion in the hon. Gentleman’s contribution was far from saying that new clause 5 does not make sense; rather, it confirmed why the new clause was necessary. There are so many flaws, omissions and potential avoidance mechanisms in the Liberal Democrats’ proposals—and we had all assumed that they were worked up to some extent when they went into this miserable Government—that it makes perfect sense for the Treasury to investigate them with all their flaws to determine whether they, or another version of them, are even workable. If the hon. Member for Nottingham East chooses to press new clause 5 to a vote, we will be happy to support it.
Sammy Wilson (East Antrim) (DUP)
One of the common themes that has emerged on the Opposition Benches throughout the debates on the Budget is that the Government can and should do something to stimulate the economy by means of additional capital spending. One way of doing that—and one way of rapidly stimulating the construction industry—is to build houses; and, of course, many other social benefits arise from house building.
The Government have chosen a particular path towards the stimulation of house building, and I am not sure whether they have chosen it simply in order to avoid the registration of additional borrowing as part of Government debt. The means by which they have decided to stimulate the housing market—this is significant, because it is stated in the Red Book—will have no implications for central Government public sector net borrowing; it will have an impact only on the central Government net cash requirement. It seems that the Government may be engaging in the contortions described by the hon. Member for Nottingham East (Chris Leslie) in order to avoid certain Treasury accounting arrangements, rather than considering what policy will prove effective.
That is the first thing that we should consider. The second was alluded to by the hon. Member for Dundee East (Stewart Hosie). If the sole intention is to stimulate the housing market and the construction industry and it does not really matter who buys the houses or benefits from the policies, the Government ought to make that clear. Such a move would have various side effects, perhaps benefiting people who, in the opinion of many Members, do not need help with housing. If the policy is to provide a general stimulus across the board which is not relevant to the size of people’s incomes, to whether they are first-time or second-time buyers or to whether they are buying to let or buying to live in their houses, that should be made clear to us.
I do not think that the Government should be afraid of new clause 1. One of its two policy schemes, the guarantee scheme, does not involve any expenditure, because it will come into operation only if a house has to be sold at less than the price that was paid for it. There is evidence that such schemes work. In the Irish Republic, the National Asset Management Agency introduced its 80-20 scheme in an attempt to stimulate demand for some of the properties that it had taken over, and I hope that it will introduce the scheme in Northern Ireland as well. It owns property there, and is currently putting it on the market. There is evidence that the guarantee enabled people to secure loans that would not normally have been available to them, because the lenders had been relieved of some of the risk.
The right hon. Member for Delyn (Mr Hanson) asked whether such schemes would apply throughout the United Kingdom and in all the devolved Administrations. He mentioned the potential for distortion in the housing market, suggesting that people might move from one country in the UK to another in order to take advantage of them. I understand that the guarantee scheme will apply throughout the United Kingdom.
The second scheme involves equity loans. I do not think that the Government should be worried about scrutiny of its likely effectiveness. For some time, Northern Ireland has operated a co-ownership scheme which enables people to rent half a property and buy the other half. We were able to negotiate that with the banks because all the risk was being taken by Co-ownership Housing and the public purse, which would be responsible for the first 50% of any loss. The banks have actually dropped the requirement for a 20% deposit. The good thing is that there has been no cost to the public purse; it has simply been borne by the banks not requiring the deposit, because the risk has been taken out of the house purchase.
Mr Steve Reed (Croydon North) (Lab)
Does the hon. Gentleman also see scope for more stimulation of co-operative housing schemes in the mix in the United Kingdom? In Germany and Canada, some 10% of housing is co-operative. In parts of Scandinavia, the figure is 18%. The figure is higher in those countries because their Governments act to promote the development of co-operative housing. In the United Kingdom, it accounts for just 0.6% of all housing. It offers a way for people to get their foot on the housing ladder, without the need for unaffordable deposits.
Sammy Wilson
It does indeed. Let me illustrate the success of co-ownership in Northern Ireland, which is similar to the co-operative housing that the hon. Gentleman describes. More than 50% of new houses in Northern Ireland are being sold through the co-ownership arrangement. Importantly, because it is targeted at first-time buyers, it has enabled them to get their foot on the housing market ladder, stimulated demand in the economy and created the jobs in the construction industry that are so sorely needed.
Be it the mortgage equity scheme or the mortgage loan scheme, the Government should have no fear of new clause 1. If they have confidence in the schemes they propose, they should not fear scrutiny of them. Indeed, all the evidence from the Northern Ireland market and the Irish Republic market shows that the schemes will work.
Bill Esterson (Sefton Central) (Lab)
Does the hon. Gentleman agree that there is a particular need across the country for affordable housing to rent and to buy, and that, on striking the balance that he referred to earlier, there is a grave danger, as the Royal Institution of Chartered Surveyors has said, of creating another housing bubble if the wrong level is set? Is that the point he is driving at?
Stewart Hosie
Before the hon. Gentleman moves on, he is making a number of very serious points about the financial transaction part of housing support, but I hope he agrees that the one downside is that it does not allow that cash—such as it is—to be used for capital spending in any way apart from housing, and that it is being paid for by a real-terms cut in the Revenue departmental expenditure limit over the next two years.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
Order. I hope that the hon. Gentleman is coming to the end. I know he has a lot to say, but other Members want to contribute and I want to make sure that the Minister can reply.
Sammy Wilson
Thank you, Mr Hoyle; I will finish, then.
What, therefore, are the reservations about this scheme? The first concerns the way in which the spend will be dealt with. Of course, loans have to be repaid, and the scheme has been financed through a DEL cut across Departments of 1%. Secondly, it amounts to £4 billion over the next three years. The question is, could that money, if it is spent on housing, target the most needy, rather than being spent across the board with no restriction on income, meaning that people can buy second homes? Is there a better way of spending that £4 billion? Or, as the hon. Member for Dundee East suggested, if the approach were less prescriptive, are there other capital areas it could be spent on, leading to a far greater multiplier effect and impact on the infrastructure of the United Kingdom? Those are questions about the scheme that need to be asked.
My last point is that although the dynamics of the housing market would suggest that if someone moves from their home to a more expensive, bigger home—I am sure that the Minister will make this argument—it releases houses further down and starts the market moving. My main priority for constituents who come to see me is those who are not even in the housing market at all. Even though the dynamics of getting people to move up the housing chain are important, it seems to me that the priority ought to be those who cannot get social houses and who cannot afford privately rented housing as rents, certainly in Northern Ireland, are going up at a rate that prices many people out of the market. The opportunity should be provided for them to get in at the low end of the market through affordable housing. That is why we need a much more targeted scheme. One reason why I think it would be useful to examine the scheme within a short period of time is that it would show whether the real objectives and priorities in the housing market are being addressed by these schemes.
Stephen McPartland (Stevenage) (Con)
I appreciate the opportunity to speak in this debate, Mr Hoyle, and I shall make my speech very short as I appreciate that two Opposition Members wish to speak. I will speak for about three minutes tops and will rattle off my points as fast as I can.
The first issue I want to raise on new clause 5 is the fact that it refers to property and does not distinguish between residential property and business property. That concerned me greatly when I first looked at the new clause, as it would create huge concerns in the business community. In my constituency of Stevenage, we have some large business interests. GlaxoSmithKline has a huge operation employing 4,000 scientists in Stevenage—[Interruption.] Although the new clause mentions the “mansion tax”, it just states that it would be on “property”.
How would that property be valued? There seem to be two values in property at the moment: the value one thinks one’s property is worth and the value at which someone would buy it. There is always a big disparity between those values. Such a change would lead to a large revaluation exercise across the UK and my concern is that once we have that revaluation exercise, council tax revaluation will be a real problem across the country. A huge number of people will be very concerned about council tax increases if all their properties have been revalued. Council tax more than doubled under the previous Government and I am pleased to say that under this Government it has been frozen for the past three years—[Interruption.] I see the annunciator has just changed to show my name, although I will sit down in about one minute.
My other point is that the new clause also refers to a tax cut for low-income and middle-income earners, and I am proud that this Government have introduced a tax cut that will be worth more than £700 next year for those low earners on up to £10,000. I am sure that the Opposition would agree with the Government that the best way to introduce a tax cut is to have a tax rate of zero rather than the 10p tax rate on which my colleague the hon. Member for Bristol West (Stephen Williams) had a very robust exchange with Opposition Members.
I shall now sit down as you are gesturing for me to do so, Mr Hoyle.
Alison Seabeck
The hon. Gentleman has completely misconstrued my remarks.
We need to invest to grow jobs. We need to grow our economy, and as we do that, there will be more jobs. People want to work, but the evidence is that the jobs are not there. People are having to work part-time, even to have multiple part-time jobs, in order to keep body and soul together. We need an economy that is growing, and we are not getting that from this Government. We need Labour’s bank bonus to invest in jobs, to tackle unemployment across the country, and to help young people.
Sammy Wilson
Although we have not heard many speeches by Government Members, I am a bit surprised by the attitude they have adopted to this proposal in view of one of the Government’s declared objectives in the Budget book. Under the heading, “Fairness”, it states:
“The Government’s economic and fiscal strategy is underpinned by its commitment to fairness”.
I would have thought that anyone looking at the proposal would find it very difficult to say that it does not have a core of fairness within it. It is directed towards an industry, the banking industry, which was partly responsible for the economic crisis we face, the impetus for which was people in that industry being given incentives to behave in a reckless way that led to the kind of borrowing and lending that created our current difficulties. They were bailed out by the taxpayer, with bonuses then being paid out of that bail-out. I would have thought that on the grounds of fairness alone, Government Members would see at least some merit in the arguments for the proposal which have been advanced.
I have often heard it said, not only by Labour Members, but particularly by Government Members who are close to small businesses—perhaps many of their supporters are small business owners—that the banking industry has strangled those businesses in the middle of the recession, refusing to lend to them even when there are good, viable propositions and putting the squeeze on them when they most needed liquidity. I would have thought that Government Members would have some sympathy for a proposal that said to them, “We cannot reward people at the top of an industry who are destroying, squeezing and making it difficult for the businesses that many of you would regard as your supporters”, yet they seem to be opposed to it.
Huw Irranca-Davies
The hon. Gentleman is making a very powerful speech. Has he had the same conversations as I have with lower-paid bank clerks and bank staff who are equally appalled by the excesses of their extremely well-remunerated paymasters right at the top of the organisation? They would look at this amendment and think that it is completely fair and should be delivered for them, as well as for us.
Sammy Wilson
The hon. Gentleman brings me to my next point. Even some within the banking industry would say that there is no economic rationale for the obscene bonuses that are given at the top of the industry, and that there is no necessity for those bonuses to make it work efficiently. On a weekly basis, businesses and individuals come to me and say that if anything is strangling growth and the potential for it, in the economy today, it is the performance of the banking industry. When I hear about of some of these bonuses, I wonder what they are being paid for. They are certainly not being paid because the banking industry is performing well in helping to grow the economy and lift us out of recession.
Mark Garnier
The hon. Gentleman is making a very powerful point. However, that is exactly why some of us have spent the past nine months on the Parliamentary Commission on Banking Standards examining the problems he is talking about. It is why the Government introduced the Financial Services Act 2012 in order to repair the regulatory environment and to establish the Financial Policy Committee to look at the instability in the system that can come about as a result of perverse incentives from bonuses. It is why the Government are currently taking the Financial Services (Banking Reform) Bill through Parliament. A huge amount is being done for exactly the reasons he mentions.
Sammy Wilson
Yet the situation continues. Despite all that, we do not see any change.
Some of the arguments advanced by Government Members, mainly through interventions, as to why the proposal is a bad idea, have become increasingly desperate as the debate has progressed. I believe that this should be done, first, on the basis of fairness, and secondly, because it has some potential for changing behaviour, and that ought to be given serious consideration.
The first argument was to say, “If we do this, we will be taking money out of the economy.” What do these people who get the bonuses do with them? Are they generating additional expenditure in the economy? If someone gets a bonus of £1 million, are they likely to spend it? We all know, and it is well evidenced in economic theory, that the more money we get, the higher the proportion of that additional income we tend to save—it does not contribute to the economy. During the Budget, the Chancellor said that the poor performance in the economy was because consumer spending had been suppressed and was not what had been anticipated. When I hear the argument that discouraging these bonuses, or taking them back in the form of tax, removes spending power from the economy, I find it rather bizarre.
Alison Seabeck
The hon. Gentleman is reinforcing a point that I touched on earlier. In Plymouth, we are losing £16 million a year in benefits, and the people who usually get those benefits are poor and would spend the money in their local areas, not on foreign holidays or by putting it into bank accounts.
Sammy Wilson
Although saving is, of course, good in any economy, the important question at the moment is: how do we generate spending? The hon. Lady has reinforced the point that if money goes to unemployed people they are likely to spend 100% of that income, but someone who gets a £1 million bonus is likely to save 90% of it—perhaps more—so it will not be injected into the economy. I do not think that the argument that the amendment would remove money from the economy and, somehow or other, deflate it stands up to scrutiny.
The second argument, which was made by the hon. Member for Dover (Charlie Elphicke)—he tried to promote it in a couple of interventions on the hon. Member for Nottingham East (Chris Leslie)—is that all this levy would do is make finance either pricier or less available. As has been said, that implies that the only part of bank spending that is sacrosanct is the amount of money spent on bonuses. Making an activity more expensive tends to direct people away from it, and I cannot see how the banks would be any different. If we make it more expensive and more costly for them to give bonuses, they will be driven away from using those funds in that way and it would create a behavioural change. If that change did not happen, however, and bonuses continued to be paid and the tax on them recouped from customers, the alternative would be regulation. The customer should not have to pay for them—if banks do not change their behaviour, we should ensure that the taxes cannot be passed on to customers.
The third argument—I found this one bizarre, especially with regard to the bank levy—is that since we cannot be sure how much money will be raised, we should not pursue it. If that were true, we probably would not tax anything. How often do we hear the Government predict the amount that will be raised in tax revenue, only then to revise the figure within six months, either because behaviours have changed and the expected amount has not been raised, or because the economy performed in a different way than expected?
The hon. Member for Wyre Forest (Mark Garnier) made that argument, but on that basis we would not have the bank levy, which was supposed to raise £2.5 billion this year, and raised only £1.1 billion. I do not know why that revenue was not raised—perhaps there was some change in the economy—but whatever the reason the bank levy did not raise the money intended. Moreover, the Government made spending plans on the assumption that that revenue would be available. I do not think that the amendment can be argued down on the basis that it may not raise the money and therefore no commitment should be made.
Mark Garnier
On that point, the hon. Gentleman does not seem to have read the amendment, the whole point of which is to raise money specifically to be invested in creating new jobs and tackling unemployment. If the Opposition want to invest a specific amount, they need to know how much money they will raise.
Sammy Wilson
The hon. Gentleman has missed my point; perhaps I did not make it very well. When the Chancellor declares what taxes he intends to levy in the Budget, that announcement is accompanied by what he intends to spend that tax revenue on. Sometimes that revenue materialises and sometimes it does not.
The only requirement that I would make of an amendment of this nature is that it does not throw out a reckless figure and say, “We will make £x billion from this provision and spend it.” The Minister was right to ask on what basis the amendment’s calculation was made, but it cannot be argued that, because there is a degree of uncertainty, this is not a good proposition. I would have been very unhappy had the amendment said, “Let’s raise the money and then we’ll see what we will do with it.” It is much easier to make an argument on the grounds of fairness: “Let’s raise the money and this is what we will do with it.” Knowing where the money comes from, the purposes for which it was being used and the purposes for which it will be used once collected would enable us to judge whether the proposition is fair. It is not possible to divorce how the money is raised from what will be done with it.
Neil Carmichael
Does not this line of argument represent the thin end of the wedge with regard to hypothecation? Raising taxes is a general activity and the decision on how they should be allocated for expenditure purposes has to be made on other grounds. The obvious example is the health service.
Sammy Wilson
I agree that a general proposition that every specific tax raised should be hypothecated for a certain purpose would be very dangerous, but this is not a general proposition; it relates to one specific case and that case has to be made.
Geraint Davies
In following the logic of the hon. Gentleman’s eloquent argument, am I right in saying that he agrees that what banks should really be doing is supporting small businesses that have large order books and successful products and that want to upsize and build their business, but that do not have a lot of collateral and houses? That is what the banks should be focusing on in our local communities and economies, not on massive bets against share price changes and derivative bundles, which will develop multi-billion pound bonuses in an almost virtual world. What we want is a real economy supported by banks, not a bonus culture backed up by the state.
Sammy Wilson
That is one of the arguments for separating retail banking from the riskier banking activities described by the hon. Gentleman.
The fourth argument is totally different from the others, but I think that Government Members were getting increasingly desperate as they clawed for arguments against what is a reasonable proposition. One Member asked several times whether the amendment was designed to change behaviour, to act against perverse incentives or to raise revenue. All taxes tend to have behavioural consequences anyway; it is in their nature to change behaviour. Some are specifically designed to do so, while some are more genuinely revenue-raising because they do not affect behaviour as much. If the revenue from the tax goes down because fewer bonuses are paid, that does not necessarily mean that it is bad for the economy. For example, if banks decide not to pay bonuses and to keep the money as profits, corporation tax revenue will go up; or if they decide to put the money back into the bank and thereby increase liquidity, that will have a beneficial effect on the economy, because banks will be able to make more loans to businesses. Just because it may change behaviour does not necessarily make it a bad proposition. In fact, the proposition stands, as it could have other tax revenue-raising consequences or induce changes in bank behaviour that mean they have more money to do what the public expect them to do, rather than simply giving huge bonuses to their top-ranking employees.
Richard Graham
The hon. Gentleman is contributing to the anti-bank ranting that we have had for the past couple of hours. What about the second part of the amendment, which provides that the levy shall be used to create jobs and employment? As a former economics examiner, does he believe that it is the business of the Government to create jobs? If so, what sort of jobs—Government jobs or state aid that would fall foul of EU rules? What does he think of the Government’s performance on employment? Is he surprised that unemployment is not higher?
Sammy Wilson
I hope that my speech has not been interpreted as an anti-bank rant. Indeed, I made the point at the beginning that banks are essential to the working of the economy. They provide the oil for the economy, and we want to find ways to make them do the job they are meant to do. If a bank bonus tax is one of the ways in which we could get them back on track and away from providing perverse incentives for particular employees to behave in certain ways that have not been helpful to the economy, that would be beneficial.
A properly functioning banking system is important for the economy. Rather than this proposal being anti-bank—[Interruption.] From a sedentary position, the hon. Gentleman says, “Answer the question.” He asked me two questions and I am answering the first. Banks are an essential part of the economy and we want to ensure that our proposals address that.
The hon. Gentleman also asked whether it is the role of the Government to create jobs. It is the role of the Government and the private sector to create an environment for jobs and in which economic growth can take place. In some cases, that will mean direct involvement by the Government in job creation. Even some of the most right-wing members of the hon. Gentleman’s party, who are adherents of supply-side economics, would accept that it is the role of Government, for example, to provide opportunities for people to train. That creates jobs. It increases the skills base of the economy, which makes it easier for the private sector to create jobs. It is a question of co-operation. It is not a case of either/or. It is a simplistic view of the economy to suggest that only the private sector creates jobs and the Government sit on their hands—
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
Order. May I remind the hon. Gentleman that this is a timed debate that will end at 7.15 pm. I hope that he will forgive me for interrupting, but it would be good to hear what the Minister has to say.
Sammy Wilson
I will conclude on that basis. I hope that I have addressed some of the points made by coalition Members. The amendment should be supported on grounds of fairness, of improving the banking system and of ensuring that the money that the Government raise from this provision could be used to help to stimulate the economy.
Greg Clark
I am grateful to you, Ms Primarolo, for allowing me to get a word in edgeways in this debate. It has been a most illuminating debate. We have discovered that it is the policy of the Opposition to raise £2 billion from a bank bonus tax when the pool of bank bonuses this year is forecast to be £1.6 billion. The Opposition Front-Bench team was commended for proposing an imaginative measure. It certainly is imaginative. Indeed, it is the stuff of fantasy that more could be raised in revenue through a tax than is contained in the tax base to which it applies.
The Opposition have done this before, as I shall say later, and this is a familiar debate. We had this debate in 2011 and in 2012, and now the Opposition have tabled a more or less identical amendment on a policy that was introduced in the dying days of the last Labour Government for one year only—a payroll tax on banks. When the then Chancellor introduced it in December 2009, he insisted that it would be a one-off tax. Indeed, it was not even for a full year, but from December 2009 to April 2010. But in the Finance Bill Committee of the whole House almost exactly a year ago, the hon. Member for Pontypridd (Owen Smith) revealed:
“If Labour had won the election, it may have changed its view and continued the bank bonus tax.”
On reflection, he said,
“I think a Labour Government would have continued it”.—[Official Report, 18 April 2012; Vol. 543, c. 391.]
The annual reappearance of this temporary Labour tax should remind us all that whenever Labour proposes a temporary tax, it is best to assume that it is for life—