(7 years, 9 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
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Absolutely. It is pretty dire that the number of women ever elected is less than the number of current male MPs. It does not make sense. Although we have made positive changes, it is not enough. We need to go further. I do not think that is entirely within the gift of political parties; everybody needs to take responsibility. That is one of the really good things about the report: it gives the whole House the responsibility for a lot of its recommendations. Some specific responsibility is given to two political parties, and they will interpret that in their own ways, but the whole House needs to take ownership.
I thank the hon. Lady for giving way. I also thank Professor Childs for her work, and the Speaker for his long-standing commitment to these issues and on moving the debate forward.
The hon. Lady makes a very important point about the flexibility that political parties should have to take their own measures. I was not elected on an all-women shortlist, but I am a massive advocate for them and the change that they have brought about. I also believe that were they to be removed, we would see a roll backwards. It is very important to find ways to put stakes in the ground so that we do not see a rolling back on the progress that we have achieved. I also support the hon. Lady’s point that we need to see a shift in representation of MPs and elected politicians and around the culture of politics, which includes representation in the staff of the House as well as in the media.
Absolutely. The report recommends looking at the gender balance of the House of Commons Commission, as well as in Select Committees and other Committees across the House, but this is not just about gender. We still do not have enough people from working-class backgrounds, from black, Asian and minority ethnic backgrounds, or from minority religions or non-Christian religions in the House of Commons. Political parties can achieve some change in all of those areas, but changing the culture of the House and the barriers to becoming an MP could support change.
The report makes suggestions for changes to the buildings. If the renovation work is going to go ahead, there is a real opportunity to make real changes. One suggestion is that we have more toilets, which seems eminently sensible. I do not think anybody would disagree with that and I am hoping that the Minister will stand up and say, “Yes, we’ll accept that one.” That would be great. There is a recommendation on artwork, which suggests that more women are depicted in the artwork hanging around the House of Commons, and that there is more work from women artists. That would be hugely positive.
Even if there are, they are not in very prominent positions. It would be nice to have more female artwork.
Members probably expect me to talk about the report’s recommendation to look into a crèche. The fact that I took my children to a Select Committee meeting was fairly publicly discussed. There is a real issue with the lack of flexible childcare here. I phoned the House of Commons nursery and asked them if they could take my children for the afternoon, and they said, “We can take your children for six weeks of afternoons.” I said, “Well, they live in Aberdeen. What use is that?” There is a real problem with childcare provision.
There is such a contrast with the Scottish Parliament. Someone who is giving evidence to a Committee of the Scottish Parliament or who has come to see their MSP can leave their children in the Scottish Parliament crèche while they have that difficult conversation for an hour with the MSP, perhaps about problems they are experiencing with housing—conversations that they might not want to have in front of their children. Members of the public can use the crèche for free, and MSPs and passholders pay for its use. That is a really good system and one that we should consider adopting if we are going forward with renovations in the building as it is. I get that the nursery was a massive step forward and everybody was hugely supportive, or was convinced to be supportive, of the nursery taking over a bar, and I understand that a number of MPs still seem quite upset that the nursery took over a bar, but that is only a step on the way forward; it is not the flexible childcare that those of us from further away and those of us who choose not to base our children in London require.
My last point about the recommendations is about the promotion of the role of an MP. I have been really clear that I am not a fan of Westminster, but I think it is incumbent on me and people like me, who are not from that traditional male group of politicians, to say to young people, “You can do this. You can get involved in this place. You can get involved in politics. You can get involved in making a difference in your country.” A number of my colleagues and I have tried to be really honest about what our job involves. It is not just about sitting in PMQs and people shouting at each other and then being on BBC News or wherever. It is not just about those things. It is about all of the casework that we do. It is about all of the everyday things such as about doing five minutes on a bike for the Poppy Appeal and getting comprehensively beaten—I will do better next year. It is about all of those things that we do that are not mentioned in the media, but that are fabulous experiences for someone coming into this who has never experienced anything like it before.
The number of things that we are privileged enough to do is absolutely unbelievable, as is the number of amazing things that we get to do and the amount of change that we get to achieve for people in their everyday lives. If we are better able to promote that and to explain to people how being an MP actually works, people would be more likely to come into this role with a better attitude and intentions.
The hon. Lady makes a very important point about understanding the reality of our lives as Members of Parliament. I have six years’ experience since I set up the Fabian Women’s Network mentoring scheme, which does a lot of political education and mentoring for those who might seek to come forward in political life. Does the hon. Lady think that there might be an opportunity for Members of Parliament to be engaged slightly more formally in ways to promote and help people understand the role of parliamentarians?
Yes, absolutely. One of the report’s recommendations uses the phrase
“a diversity of people are, and can be, MPs”
and recommends having case studies on the House of Commons website about a range of different people and the backgrounds that we come from, so that young people in particular can understand what it is that we do. There is also a suggestion of a residential course, which would be a really good idea because it would give people hands-on experience.
I am going to the Patchwork Foundation awards tonight. The Patchwork Foundation tries to get under-represented groups more involved in politics. It does absolutely fabulous work—again, not in formal structures but more informally, through mentoring and similar things. It is quite difficult for me to get involved in some of those programmes from Aberdeen. I cannot take patchworkers out and about in my constituency, because they are not going to come 500 miles to do that, so there are some issues. It might be better if there were more formal structures.
There are some other points not mentioned in the report that are worth considering. I mentioned the financial barriers to becoming an MP. It is expensive to stand for election and it is difficult to make the change after being elected. As a newly elected MP, it was difficult for me to suddenly be able to finance the five extra dresses that I needed and to pay for things out of my own pocket before being set up properly with the Independent Parliamentary Standards Authority. It is hard to come up against those barriers and to begin that life.
I took a £50,000 pay rise when I became an MP; I had never earned more than £26,000 a year and I had debts to pay off when I was first elected. It was very difficult in that initial period. There is not enough recognition of the circumstances that people find themselves in. I am not saying that MPs’ salaries should be increased—I definitely do not think they should be—but the institutional barriers for people from less affluent backgrounds should be considered more carefully in the future.
I do not think geography is given enough consideration, even though there are quite a few of us from far away—perhaps we just have not shouted loudly enough about it. Five hundred miles is a very long way and I cannot just drop everything to come here for a vote. It is even worse for my colleagues from the highlands who have to get two aeroplanes or drive for four hours and then get an aeroplane down, when there are only two a day. There are something like five or six aeroplanes a day from Aberdeen, so it is not as bad for me as it is for some of my colleagues. Because of the way the business of the House works, there is a lack of understanding about and recognition of the geographical challenges for MPs from further away. The boundary review will compound that, because MPs from the furthest away constituencies will be representing a wider geographical area. In addition to doing a large amount of travelling, they will have to represent a constituency that takes six hours to drive across, or even longer in some cases, so the boundary changes will create some real issues.
Job sharing, which the hon. Member for Brighton, Pavilion (Caroline Lucas) mentioned, and maternity leave go hand in hand. The Green party has talked about job sharing for MPs, which is a really interesting concept. I do not think it would be possible for a single parent of young children to do this job. I cannot imagine a way in which they could do it, but a job share that enabled two MPs to be elected on half the salary and staff costs, with one office that they run together—the MPs would actually end up working for more than their allotted hours—would make the job more flexible and accessible for single parents and people from caring backgrounds. I do not see how somebody with caring responsibilities for, say, an elderly relative or a disabled family member could be an MP at the same time, but a job-sharing option would make that much more possible.
We do not have maternity leave. I was a local councillor when I had both my children. I had the first one, Harris, at the end of April, I was back in the office within four weeks and I took a promotion in the local authority in June. What was I supposed to do? There was not another option. My constituents would not have been represented if I had not been there. It is not fair for constituents to be disadvantaged because their MP happens to have a baby. If I had a baby right now—it is not going to happen today, obviously, and hopefully not any time soon—I would not have been able to fly for four weeks before having it, and I would not be able to fly for two weeks afterwards because I would have to have a caesarean section. Why would it be fair for my constituents not to have somebody to vote for them when it is not their fault that I had a baby? We need to think better and smarter about this. It could be easily overcome with a bit of sense. I do not think it is fair for constituents to have that issue. I think changes should be made to voting in particular when Members have children.
The attitudes, the misogyny and the abuse that some people from non-traditional backgrounds face are a real barrier. I have spoken to people who have said, “I could never be an MP because you get so much abuse.” I know that those things are an issue for people from all backgrounds—they are an issue for 45-year-old males from a privileged background—but I think they are more of an issue for those of us from less traditional backgrounds. Adopting the recommendations in “The Good Parliament” report would inspire the cultural change that would make the difference. It would make the House of Commons a more positive place to work, with fewer barriers. It would make this a more representative Parliament.
(7 years, 10 months ago)
Commons ChamberManufacturing depends on long-term investment. What assessment has the Minister made of the impact of our potentially leaving the European Investment Bank, and what progress has there been in any discussions about us maintaining our stake?
(7 years, 11 months ago)
Commons ChamberObviously, the hon. Gentleman does not know me, or indeed the Minister, well enough to know that we are both very much on the pro-European wing of our party. I was not in any way blaming the EU. I was simply trying to make the point that, in looking to get a new set of trade arrangements with dozens of countries across the globe, we should not rush headlong into making lower corporation tax the incentive for companies. One of the big factors for them will be the sense that there is a simpler and more straightforward tax code in the United Kingdom, and that will make us open for business in the way that we have traditionally been open for business during the past 200 to 300 years.
The Floor of the House of Commons is not the place on which to make such a policy, but I very much hope that we will keep this very firmly in mind. There is now an urgent case for having a more straightforward tax system, even if it is one that only says what we are aiming to achieve. It will obviously be difficult to unravel tax benefits created in the past. I accept that it will be difficult to unravel all the reliefs, not least because entrepreneurs in the future, like those in the past, will want to rely on them in making investment decisions.
The right hon. Gentleman is making some very important points about simplification and its impact in ensuring that measures work in the way intended. Does he agree that simplification and clarification of the objectives of reliefs would go a long way to making sure that small enterprises or first-time entrepreneurs could understand and gain greater access to the available reliefs, which may be intended for them but are perhaps used by others with greater experience?
I am sure there is a lot of truth in that. I was a businessman before I entered the House. It was a relatively straightforward business, based in the City of London, in the service industry, so there were not a huge number of reliefs available, although it may well be that 20 years of additional pages of the tax code have made it even more bloody complicated than it was for those working in and setting up businesses in the 1990s. I agree with the hon. Lady. Again, getting rid of reliefs and making the system more straightforward is the right way forward. Rather than having a whole lot of reliefs to recommend to would-be entrepreneurs, let us try to cut down the whole thicket.
Madam Deputy Speaker, I have spoken for long enough. I almost veered off the subject, but had I done so, I am sure you would have been the first to stand up and say so. I very much hope that amendment 151, among others, will be supported. It is definitely a move in the right direction, although I am sure we will have to come back to the issue of carried interest in the future.
I am grateful for the opportunity to speak in this debate, which was opened by my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey), on the new clause and amendments relating to capital gains tax. I will speak particularly about new clause 14, on “Entrepreneur’s Relief: value for money”, amendment 174, which would remove the capital gains tax cut, and amendments 175 and 176 on the investors’ relief sunset clause. Labour’s main issue of contention with the Government is the reduction of capital gains tax, the reasons for which have been well outlined. I want to highlight the very serious issue of value for money in public finances, and to continue to make our call for the Government to look at the way in which we scrutinise and review tax reliefs.
As we have argued since the Budget, the Finance Bill is inadequate if we are to rise to the challenges we face and to work towards a very strong economy in which we can all feel and believe that prosperity is shared by all. At a very tough time for the public finances, the Government have chosen to prioritise a corporation tax cut and a capital gains tax cut. Certainly while working on the Finance Bill, including as shadow Chief Secretary, I have had several conversations with business figures who quite openly said that they did not necessarily expect a corporation tax cut while other issues that are so important for their business success—investment in skills, housing, infrastructure and superfast broadband, and ensuring that we get the productivity shifts this country so desperately needs—require great attention. To purport that there is a simplistic link between a capital gains tax cut and a strong enterprise and investment culture is therefore not very honest, because it has not been proven that the cut is either necessary or sufficient to achieve that outcome, which we do indeed want.
Let us not forget that at the last Budget, the OBR took all the Chancellor’s measures into account and still downgraded the business investment forecasts. The latest figures from the Office for National Statistics estimate that business investment decreased by 0.8% between the second quarter of 2015 and the second quarter of 2016. Therefore, it continues to be a concern that the Government’s economic strategy does not take into account the wider needs of businesses beyond tax cuts.
It is the context of squeezed public services and lack of investment that leads me to raise the issue of tax reliefs, particularly those pertaining to capital gains tax, and the way in which we understand the needs of businesses. Tax reliefs are an important part of our tax system and have been needed for a variety of reasons, many of them extremely valid. However, after six years of this Government’s failure on the economy, in so many ways, with many people feeling the brunt of the cuts and with our public services under considerable strain, every penny of public spending should be going on much needed investment in our schools and hospitals and on supporting the most vulnerable. The figures got even worse this summer, with more than a third of children leaving school without the equivalent of five good GCSEs, and schools in my constituency tell me that they are giving out money every day to help parents buy school uniforms and shoes. We therefore need to justify every penny that is spent by the Exchequer.
That also has to apply to every penny that is not collected. Tax reliefs are effectively tax forgone. I firmly believe that we need to apply just as much scrutiny to relief as we do to expenditure. That is not to say that I am opposed to tax reliefs to incentivise good and positive business behaviours—far from it. For me, providing behavioural incentives to achieve economic and social goals is a central part of the role of Government, but they must use effective judgment that is based on the interests of fairness and prosperity. A Government who are working in strategic partnership with business and industry in the interests of the economy and society will actively consider such measures.
However, there is a serious paucity of scrutiny of whether and to what extent various tax reliefs are achieving those goals and whether they remain value for money for the taxpayer. The HMRC website lists 405 tax reliefs in the UK, but in reality there are many more. The Office of Tax Simplification has identified 1,140 tax reliefs. Of the 405 tax reliefs listed by HMRC, 102 cost more than £50 million, 84 cost under £50 million and there are 219 for which HMRC does not provide cost data.
Does my hon. Friend agree that of all those reliefs, the biggest scandal is tax relief on pension contributions, which costs more than £30 billion a year in forgone revenue and principally goes to the most well-off? For years, the Department for Work and Pensions has had no evidence that that tax relief produces a change in behaviour that results in more people making pension contributions. We are, in effect, handing out a lot of money mostly, but not entirely, to a lot of rich people to get them to do something, when there is no evidence that it does so.
My hon. Friend makes an important point. The conundrum of how we fund, finance and incentivise pension savings needs to be thought about much more holistically. He highlights an example of incentives that reach not the majority, but a minority. We must keep that under review.
The Public Accounts Committee took forward the work of the National Audit Office on these issues and took evidence. Its report found that some reliefs
“costing some £100 billion a year, are designed to deliver a policy objective that could be met instead through spending programmes”,
which would be more rigorous and more auditable. The report states that
“HM Treasury and…HMRC do not keep track of those tax reliefs intended to influence behaviour. They do not adequately report to Parliament or the public on whether reliefs are working as intended and what they cost and whether they represent good value for money.”
Nothing has really changed since the report was published last year. That is why Labour continues to raise this issue during the passage of the Finance Bill.
We need to question the efficacy of tax reliefs such as capital gains tax relief and entrepreneurs’ qualifying business disposals, or entrepreneurs’ relief. There are clear reasons for entrepreneurs’ relief and it can be argued that it incentivises investment, but does it make a great enough difference to be worth £3 billion a year to the Exchequer? I do not claim to have all the answers, but we do need evidence to prove that it makes that difference and the Government need to be challenged to justify this and other reliefs.
In Committee of the whole House, the then Financial Secretary to the Treasury defended entrepreneurs’ relief and, as usual, did so without evidence, saying:
“of course, as with all tax reliefs, it is entirely appropriate that the Government keep it under review to ensure that it is well targeted and not open to abuse”.—[Official Report, 28 June 2016; Vol. 612, c. 245.]
I challenge the Government to say when they will do that. New clause 14 would make the Government and all of us turn those warm words into action.
Furthermore, the Finance Bill introduces a new relief, investors’ relief, which extends the low rate of capital gains tax to investors in an unlimited trading company for at least three years. In principle, I support the idea of a relief that is intended to incentivise investment and to support access to capital for businesses, particularly at an early stage in a business’s life cycle, if we can provide evidence that it will help turn those with initial ideas into the successful job creators and innovators of the future. That is extremely important in creating the economy of the future, with all the opportunities that new technology and other initiatives can bring.
However, it concerns me that this could end up being yet another tax relief that is introduced for a good reason, but then left to mushroom into a relief that is extremely expensive and difficult to remove. We need a mechanism to ensure that there is time to review whether it is achieving the desired effect, whether the costs are aligned to those that are forecast and whether it constitutes value for money. For that reason, I support the sunset clause for the relief in Labour’s amendment 176, which would ensure that after a number of years, when we have the evidence on which to base our conclusions, those questions will not go unanswered.
I call on the House and the new Treasury Ministers to take seriously our scrutiny of tax reliefs and to support the Opposition amendments, which would put in place proper mechanisms for reviewing the reliefs and ensure that they remain targeted at supporting businesses, while showing evidence of value for money.
I will start by outlining the Government amendments in the group before responding to some of the points that have been made by hon. Members in what has been a thoughtful debate. As a new Treasury Minister, I have found a number of the speeches good food for thought as I look forward to a series of meetings into the autumn.
On Government amendments 149 to 151, the Finance Bill provides an incentive for people to invest in companies by reducing the main rates of capital gains tax from 18% to 10% and 28% to 20% on most gains made by individuals, trustees and personal representatives. We announced at the Budget that the 28% and 18% rates would continue to apply for carried interest. That is justified by the fact that carried interest is a performance-related award that is hybrid in nature, with characteristics that distinguish it from most other types of capital gain, as was alluded to by some hon. Members. We recently learned that it is possible to create an investment fund structure generating carried interest that, under clause 82 as it stands, would be taxed at 20% or 10%. That would clearly be unfair and contrary to policy. The amendments therefore ensure that the continuing 28% and 18% rates apply to all forms of carried interest.
(8 years, 1 month ago)
Commons ChamberUrgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
I know my hon. Friend’s constituency well, as it neighbours my own. We represent similar communities in Parliament. We as a country do not have to make a choice between exporting to Europe and exporting to the world; we should be doing both. Of course we should be doing everything we can to maintain close trading links with our European partners, and indeed building on them if that is possible, but we should also be looking for opportunities around the rest of the world. The trip that I am making to China will provide an opportunity to communicate that message, and I have also spoken to the Speaker of Congress and others in the United States Administration about what we can do to strengthen our links with that huge market. In the end, however, the best thing that UKTI can do is to help not only our largest companies but the small businesses that my hon. Friend has referred to. In countries such as Germany, many more small and medium-sized companies are exporting than is the case in the UK, but it is within our own gift to address that and we need to give those companies all the help that we can.
This week marks a year since the Chancellor published his productivity plan, and his record speaks for itself. UK productivity remains at the bottom of the G7 league table and 20% lower than the average. The plan was never a plan. Indeed, his decision today shows that he is continuing down that road. Is it not time for him to do what British businesses are actually calling for, which is to provide investment in our schools, in infrastructure and in affordable housing for workers, rather than doing as he is today and running the risk of our becoming tax haven Britain?
I do not think that the business community wants higher business taxes, which is the Labour proposal. When it comes to major transport investments, we are making them. Labour was in office during all those years when money was apparently coming in, but where were the major investments in the railways and the roads? Labour Members complain about our energy investments, but where are the power stations that were opened under the Labour Government? The more we look at that period of our economic history, the more we can see what a massive missed opportunity it was.
(8 years, 2 months ago)
Commons ChamberI am happy to take a close look at my hon. Friend’s proposal—I know what a rural constituency he represents. We have piloted support in north Yorkshire for rural businesses and their broadband links, and as announced in the Queen’s Speech, we are considering using the digital economy Bill to make broadband a universal service obligation, because we know what a transformative effect it can have on the rural economy.
The Chancellor talks about supporting business, and like Labour I am sure he will want to see long-term sustainable business growth in Britain. After his six years at the helm, what is the forecast for business investment growth this year?
According to the forecast from the Office for Budget Responsibility, business growth this year and in the years ahead will be positive, whereas it was negative when I became Chancellor, so things are improving.
The OBR has revised down business investment growth by a huge 4.9% since November, even after taking into account the fiscal measures the Chancellor has introduced, and we know that growth could fall further if we leave the EU. The acting head of the British Chambers of Commerce recently highlighted frustration among businesses over infrastructure projects, the huge skills gap, childcare, housing and the uncertainty around the apprenticeship levy. It almost sounds like gruel today without the jam tomorrow. Does the Chancellor agree with him?
Where was Labour’s apprenticeship levy—before they complain about what we are doing? If Labour wants to contribute to this important debate about how we make our economy more productive, we will need a better contribution. The hon. Lady’s Parliamentary Private Secretary has been in an email exchange with the hon. Member for Bishop Auckland (Helen Goodman) in which the latter complained about these questions at Treasury Questions, saying that the brief she had just been sent was a disgrace and demonstrated that the Labour Treasury team—
(8 years, 4 months ago)
Commons ChamberAs I say, we have the products to help first-time buyers in this country afford housing, but I make this observation on migration: you cannot have access to the single market without accepting the free movement of people. That is an absolutely clear principle, which has been made very starkly clear to this country by Germany and France, and is internationally accepted. If we want access to the single market, we have to accept the free movement of people.
Will the Chancellor confirm that the number of under-35s who own their own home has fallen by a fifth since he came to office?
Under this Government the number of first-time buyers is up by 57%, whereas under the last Labour Government in the last Parliament it fell by 50%.
Perhaps the Chancellor will be hearing for the first time that the number of under-35s heading homes they own has fallen by more than 280,000 since 2010. Indeed, the number of affordable homes available to buy has halved since then. Private rental prices rose by 2.6% in the year to February, with incomes failing to keep pace. In September, the Government spoke of a “national crusade” to get 1 million homes built by 2020, but in November that figure was more than halved. Shelter says the Government’s starter homes scheme takes away homes that people on typical wages could afford. Is it not true that home ownership is in freefall because of the housing crisis, with young people who are aspiring to own being the hardest hit?
I have already said that the number of first-time buyers is actually up by 57% under this Government, and I would make this observation: we cannot have a strong and successful housing market, and people getting on the housing ladder, unless we have a strong and successful economy. If we followed the prescription of the Labour Front-Bench team, of nationalising half the economy and imposing punitive tax rates, there would not be anyone able to afford any home in this country.
(8 years, 4 months ago)
Commons ChamberI thank the many organisations that have been involved in supporting the inquiry on the issue of the Panama papers. They include Oxfam, Tax Justice Network, Global Witness, Transparency International and Christian Aid. They have played an invaluable role. I also thank all Members for their contributions to the debate. They include the hon. Members for Dundee East (Stewart Hosie), for Torbay (Kevin Foster), for South Suffolk (James Cartlidge), for Newark (Robert Jenrick), for East Antrim (Sammy Wilson) and for Glasgow South (Stewart Malcolm McDonald), and my hon. Friends the Members for Blaydon (Mr Anderson), for Newcastle upon Tyne North (Catherine McKinnell) and for Oldham East and Saddleworth (Debbie Abrahams), all of whom have raised important issues.
We have heard about tax being not a donation but a legal requirement, and about the need to take the non-payment of tax incredibly seriously. We have also heard that the work of the Public Accounts Committee is vital in this area. My hon. Friend the Member for Newcastle upon Tyne North said that this was a pivotal moment that the Government must not squander. We have also heard about the challenges relating to prosecutions owing to the complexity of the structures of multinational companies, and about the need to extend the law further to tackle the wider issues of economic crime.
This is a moment that we must seize. The public and the media have not always been engaged with this issue, but they can now see the scale of the injustice not only in the UK but across the world. The Panama papers have lifted the lid, and there is no going back. These revelations have provided concrete examples of what we have all suspected; they have exposed details of the worst excesses of our international financial system.
At the heart of the issue is the matter of public trust and confidence in the fairness of our tax system. People rightly say, “I pay my fair share towards the cost of vital public services. I can’t dodge or negotiate with the tax authorities, so why should wealthy individuals and companies get away with not paying their fair share?” Despite all the claims that we have heard from the Government, people do not think that they have done enough to tackle the problem, either here or in the overseas territories and Crown dependencies for which we have responsibility.
This is a global issue and it needs a global response. Today’s debate reflects the widespread public view that individuals and companies should pay their fair share, and we are calling on the Government to implement Labour’s tax transparency enforcement programme. Labour has a strong record on tax evasion and avoidance. The measures that we introduced while we were in power will still raise 10 times as much over the coming years as those introduced by the Tories in the last Parliament. That is the conclusion of analysis carried out by the Financial Times.
Over the past week, the Government have had the chance to step up and take a strong lead. It is disappointing that they have failed to do so. The Government’s taskforce and other measures represent a missed opportunity to end the secrecy ahead of next month’s anti-corruption summit. In 2013, the Prime Minister wrote to overseas territories and Crown dependencies calling for greater transparency and for fully resourced and properly managed centralised registries. He wrote again on this subject. We have had written questions and oral questions, but we can now see that it is not the Government’s intention to push the issue of public registers further. Instead, the information that has been agreed on will be available only to UK law enforcement and tax authorities.
The beneficial ownership agreement with the Cayman Islands allows only designated Cayman Islands officials directly to obtain and provide to the UK details of beneficial ownership of companies incorporated in the Cayman Islands. Furthermore, the UK’s Swiss tax agreement announced in 2011 has raised just a fraction of the promised £5.3 billion. So the Government are very good at spin, but their record does not stand up to scrutiny. What is particularly stark about the Panama revelations is that more than half the companies named in the papers were registered in UK-governed tax havens. That is something of which we should be ashamed. We believe that the UK should be leading the global campaign to fight against aggressive tax avoidance and evasion; instead, we are lagging behind.
There are a number of other vital issues. We have talked about the need for an independent inquiry. While there have been moves across the world, including an important meeting in Paris today organised by the Joint International Tax Shelter Information & Collaboration network, our officials have not yet managed to make it to Hitchin to undertake their own inquiries into the Panama papers.
The issue is effectively one of theft. Every year, about $200 billion of untaxed income is taken out of poor countries by international corporations that are avoiding paying tax. Speed is another issue, as was highlighted by the chair of the JITSIC network, who emphasised today the need for immediate information exchange. Far from seeing the Government heed that call, they continue to slow down, not accelerate, their action to tackle tax avoidance.
We have a lot more to do. We need greater parliamentary scrutiny, a specialised tax enforcement unit, greater public sector transparency, including having companies that want to bid for public sector contracts make public their beneficial owners. We need greater co-operation with our European partners, country-by-country reporting and protection for whistleblowers. The issue also highlights the importance of our membership of the European Union in tackling complex problems that do not stop at national borders. We have called on the Government to take much more action and fast. We have called for stricter minimum standards for Crown dependencies and overseas territories, but the lack of stronger international standards was cited by the Financial Secretary today as a reason for not pushing for public registers of beneficial owners.
Let me add one more point in conclusion. On Monday, the right hon. Member for Rutland and Melton (Sir Alan Duncan) said that the Opposition should
“snap out of their synthetic indignation”
and that we risk having a House
“stuffed full of low achievers who hate enterprise”.—[Official Report, 11 April 2016; Vol. 608, c. 34.]
Sadly, the Financial Secretary seemed to back him up. This is not about begrudging entrepreneurs and those who succeed in business their success; it is about basic fairness in our society. This is an issue on which the rich and poor who believe in fairness are united. When we shirk our responsibility to crack down on tax havens, we let down our country and our constituents. That is why I urge the House to join us in voting in support of Labour’s proposed measures today.
(8 years, 4 months ago)
Commons ChamberWe have just had a speech from the Financial Secretary which puts a very positive spin on the Finance Bill. Although he sought to put a positive spin also on the measures announced by the Prime Minister today on tax avoidance, his speech shed no further light on the critical issue of offshore trusts and the need for a public register of beneficial ownership. It fell far short of the measures that we announced today in our tax transparency and enforcement programme.
The House is back after three weeks of turmoil at the top of the Tory Government which has called into question the competence and credibility of the Prime Minister and his senior Ministers. They were in trouble even before the Business Secretary’s inept handling of the crisis at Port Talbot. Since then we have had a week of ducking and diving from the Prime Minister over revelations in the Panama papers. What the Prime Minister showed today was that he and his colleagues can get top marks for talking the talk, but when it comes to walking the walk their scorecard is far less impressive.
The Bill seeks to put into law the tax-related measures set out in the Budget, and what a Budget it was. The author of the omnishambles surpassed himself and delivered a mega-shambles. No Budget has unravelled as quickly or as comprehensively as this one. It was a Budget that failed to add up. As we begin to debate the Bill, we do so against the backdrop of a huge, gaping black hole, with estimates of a figure of £12 billion or more that has yet to be funded. The Chancellor was faced with the real prospect of a revolt and his Budget not passing. Within days the main revenue-raising policy—cuts in personal independence payments for over 300,000 disabled people—proved too much even for the Work and Pensions Secretary. His parting shot, aimed at the Chancellor, complained of a Tory Government heading in a direction that divides society, rather than uniting it. The Budget and this Finance Bill have unfairness at their very core.
We will be voting against the Bill tonight, because it fails the fairness test and the test of adequately investing for our future. The Bill cuts corporation tax, which is already the lowest in the G7, while the Budget cuts support for working people, leaving over 2 million families, on average, £1,600 worse off a year by 2020. The Bill cuts capital gains tax, which benefits the wealthiest, at a time when the Chancellor has failed to meet his own deficit and debt reduction targets. How can it be fair, at this time, to fund tax breaks for his friends on the backs of the poor and the vulnerable?
Growth has been revised down last year, this year and every year of this forecast, and so too have business investment and productivity. The Chancellor is set to miss his export target by more than 14 years. Growth in average wages is being revised down while household debt is going up. He has admitted failure on his key targets. He has breached his own welfare cap. The Government are set to borrow £38.5 billion more than planned, and public sector net investment is set to fall as a share of GDP over this Parliament.
This is a recovery built on sand, and it is not just us saying it. The right hon. Member for Cities of London and Westminster (Mark Field) told readers of ConservativeHome that, for all the Chancellor’s talk about investment in export-led growth,
“the growth our economy has seen… comes courtesy of debt-fuelled consumption and a renewed housing and property boom.”
It is young people who are being punished by those choices. A recent YMCA survey of young people found that 41% said that debt was the biggest issue facing their family in 2016—so much for a Budget for the next generation.
The Chancellor has singularly failed to rebalance the economy, and that failure has implications for this Finance Bill. The Bill contains a series of tax cuts that he simply cannot afford. The £12 billion estimate does not include new figures published in an answer to a written parliamentary question, revealing that the Tories’ plans to force every school to become an academy could cost £1.3 billion, yet just £140 million was allocated for those plans, leaving a funding shortfall of more than £1.1 billion.
Before the Government seek once again to hide behind the turbulent conditions in the world economy, as the Minister attempted to do, let us be clear that most of the problems are of the Chancellor’s own making. We needed a Finance Bill that builds the foundations of a strong economy and that is the basis for prosperity and security for Britain’s families and businesses. We did not get it. Of course, there are some positive measures, such as anti-avoidance measures and industry support measures, that we broadly welcome. Support for the oil and gas industry and the quality of apprenticeships— 30% of apprentices currently appear not to complete their apprenticeships—are issues that we will want to explore further, along with tackling frequent tax avoiders. But these measures do not go far enough, as I will highlight later.
There is little good news for manufacturing, and no coherent overall industrial strategy, which of course includes the needs of the steel industry.
While the hon. Lady is in a positive frame of mind, would she like to welcome the significant increase in employment over the past few years and the fact that the deficit has been cut by such a large proportion?
The hon. Gentleman says that I am in a positive frame of mind. I normally am, but I am just very concerned about the economy. Perhaps he will raise the Resolution Foundation’s finding that, as a result of the measures in the Budget, the poorest 20% of the population are set to be £565 worse off, while the richest 30% are set to be £280 better off. Perhaps he will think about his constituents and how they are set to suffer as a result of the Budget before he makes another intervention.
I was talking about the steel industry.
I will just continue on steel, because it is important also to talk about what is missing from the Bill. This is a serious missed opportunity to provide greater support for manufacturing and steel. The collapse of the steel industry could cost the Government £4.6 billion over the next 10 years. Some 40,000 jobs could be lost, devastating steel-making communities and industries that depend on British steel.
We welcome today’s news that a buyer has been found for Tata’s Scunthorpe steel plant, and we congratulate Unite, Community, the GMB and others who played an important role in the negotiations leading to that deal. However, against that background comes the revelation of a U-turn on business rates by the Chancellor. Before the Budget, the Engineering Employers Federation made a strong case for giving companies an allowance on business rates for plant and machinery, which could have applied to assets such as the blast furnaces in the steel sector. However, we learned from The Times that although the Chancellor was planning to act, he then pulled plans to give Britain’s struggling factories tax relief on business rates.
Why did he do that? The answer, analysts suggest, is that British manufacturing has been sacrificed on the altar of the Chancellor’s obsession with getting a £10 billion Budget surplus in the final year of this Parliament. We wait to see what actually materialises from today’s statement and what actual support comes forward from the Government, particularly for Port Talbot.
The Office for Budget Responsibility revealed that the decision was taken so late that there was no time to change the calculations in its economic and fiscal forecast. That means that its forecast for the level of business investment in this Parliament could well be an overestimate.
Families in Britain are to suffer as a result of another missed opportunity—on housing. By 2025, nine out of 10 Britons under 35 on modest incomes will not be able to afford a home. Rents in the private sector are soaring. So much, again, for a Budget for the next generation.
On that subject, the hon. Lady will be aware that the Residential Landlords Association put forward to the Government some ideas for changes, but those have not happened. One was to give people the chance to buy their houses, and the association was happy to do that, but we have not got that in the Bill. Does the hon. Lady feel that something could be done on that to help?
The hon. Gentleman makes an important point, and there are many measures we should explore, particularly as we go into Committee, to support house building and home ownership.
We know from the English housing survey that 201,000 fewer households own a home now than did at the start of the Chancellor’s tenure. That compares with an increase of 1 million under Labour. As of last year, the housing benefit bill is forecast to be £350 million more than the Chancellor intended. It is clear that this country needs a massive programme of capital investment in new affordable homes to rent and buy—nothing less will do if we are to tackle the growing housing crisis. That is why Labour has far more coherent plans to build homes and to make sure we tackle spiralling housing costs. That is the way to control the housing benefit bill.
Today’s report from the Women’s Budget Group shows that female lone parents and single female pensioners will, on average, have seen their living standards fall by 20% by 2020. Women are now set to bear a staggering 86% of the cost of changes and cuts to taxes, tax credits and benefits by 2020. That is worse than the figure of 81% identified last year.
The tax cuts in the Bill are likely to benefit men more than women. It is surely time that the Government conducted a full gender impact analysis of their proposals. That would give the opportunity for greater parliamentary scrutiny.
When it comes to measures on capital gains tax and corporation tax, the Bill must pass two tests: are they fair and are they effective? The Bill confirms that the main rate of corporation tax will be cut further to 17% from 1 April 2020, which will be worth £945 million. If corporation tax, which is already the lowest in the G7, can be reduced yet further, perhaps money can be found and the Government can think again about cuts to working age benefits and public services.
More importantly, a cut to corporation tax will not address the underlying weaknesses of our economy, such as the challenges in productivity, skills and the investment required in infrastructure. Businesses that talk to the Minister as well as to us say that these are the biggest issues affecting their future growth. Connectivity and new technology also require investment.
The response from the Federation of Small Businesses contradicts what the hon. Lady has said. It said:
“The decision to further lower corporation tax to 17% in April 2020 is an important statement of intent and will provide a boost for affected firms.”
The hon. Gentleman certainly does not seem to have the same sort of direct conversations as I do with businesses. This is a question of choices and timing. They also raise the issue of housing, which affects the stability of their workforce, and of infrastructure investment, which affects access and their opportunities to grow. Investment is also required to support the scale-up of their businesses through developing skills. There is a whole host of issues. This is also about judgment, timing and what would be most effective in increasing our productivity.
I will make a little progress and then I will take another intervention.
Is the hon. Lady aware that there is ample evidence in the United States and the UK that large amounts—possibly half—of the retained earnings from lower corporation tax actually go into share buybacks, and that those share buybacks, which end up in the pockets of the original shareholders, do not get reinvested in industry, but go back into property and other kinds of non-productive assets?
The hon. Gentleman makes a very important point. That is one of the concerns. It is assumed that the proceeds from those tax cuts will go directly into investment, but the evidence for that does not necessarily stack up. In fact, an estimated £500 billion is not invested in this country at the moment. That is an important point, which is why greater analysis and scrutiny are required, as well as conversations with businesses about what will actually make a difference for them in the long term.
The basic rate of capital gains tax is to be reduced from 18% to 10%, and the higher rate from 28% to 20%. That is set to cost £735 million in 2020 and £2.7 billion over the forecast period. Capital gains tax was paid by only 200,000 taxpayers in 2013, which means that about 0.3% of the population will benefit from a giveaway of more than £600 million in total from the first year. That was not called for or expected. In fact, the Financial Times described it as an “unexpected gift” for wealthy investors. In 2010, the Chancellor told the House that raising capital gains tax was necessary to
“create a fairer tax system.”—[Official Report, 22 June 2010; Vol. 512, c. 178.]
It would be interesting to hear perhaps during the Exchequer Secretary’s wind-up speech what has changed.
The Residential Landlords Association was keen to see the extension of the capital gains tax relief so that landlords could sell property to their tenants. That is a small thing that could incentivise the whole housing market if it was done in the right way.
I thank the hon. Gentleman for his comments, but I think he will agree that the key issue in addressing the housing crisis is the rapid building of new homes and the strategy to deliver that effectively.
I want to make a few comments about entrepreneurs relief and the Government’s new investor relief. We welcome the endeavours to encourage investment, particularly long-term investment. The question will be whether the measures pass the test of what business is looking for: simplicity, stability and a strategic approach to fiscal policy. Our concern is that tinkering is no substitute for a clear, long-term strategy to support investment. That is why we are undertaking a review of tax reliefs to see what the evidence is for what incentivises business investment and provides real value for money. Our aim is to ensure that there is a strategic approach to supporting investment and the transparency around it. Those are questions we will pursue as we go forward into Committee.
We also welcome clauses on the reduction in oil and gas corporation tax and petroleum revenue tax. The Chancellor announced that he would reduce petroleum revenue tax from 35% to zero, and that he would reduce the corporation tax supplementary charge from 20% to 10%. There is no doubt that the struggling North sea oil and gas industry needs support. In fact, we think that the Chancellor could have gone further and announced the measures that Labour has called for. Our bold new proposal to invest in the industry is based on the creation of a new public body, which would be called UK Offshore Investment Ltd, to identify areas for temporary public investment. The purpose of that new body was spelled out last month by the Scottish Labour leader, Kezia Dugdale. It would conduct an open-book review with the Oil and Gas Authority to identify assets that have long-term viability and profitability. That, in turn, would provide the evidence to allow UK OIL to commit to public investment in strategic infrastructure and potentially profitable assets.
Clause 115 gives the Government power, through a statutory instrument, to reduce the VAT rate on women’s sanitary products from 5% to zero. That is welcome, as are the Minister’s comments. I am glad that the Chancellor has finally recognised that women’s sanitary products are not a luxury. However, it is crucial that the clause should set a firm deadline for the VAT reduction, and although the Minister’s comments signalled moves in that direction, they did not go quite far enough. I am sure that we will continue to address the point as we move forward in Committee and beyond. I congratulate Labour Members, particularly my hon. Friend the Member for Dewsbury (Paula Sherriff), and campaigners inside and outside Parliament on their hard work in forcing the Government’s hand on the issue. It is a sad indictment of the Government that it took a Labour amendment and an embarrassing Government defeat to achieve that result.
Where in the Finance Bill is a clause to reflect the Government’s other U-turn, which was on VAT on energy-saving materials? The Government accepted our amendment to the Budget resolution, which allowed the Government to legislate on the matter in the Finance Bill. The lack of legislation and the contradictory and noncommittal answers from Ministers are causing uncertainty in the industry. We simply call on the Government to make a commitment that they will not include a VAT rise for solar or other green energy measures in this or future Finance Bills.
On tax avoidance, the two key issues we face are structural reforms and public confidence. The rhetoric today, as in the past, has sought to be impressive—in the past, the Chancellor has said that aggressive tax avoidance is “morally repugnant”—but the reality has yet to match the rhetoric. Indeed, the tax gap has grown under this Government to £34 billion. Serious measures to tackle tax avoidance, which is estimated to account for £7 billion of the tax gap, will be even more critical.
It is two years since the Prime Minister wrote to UK overseas territories and Crown dependencies calling on them to publish a public register of firms and individuals sheltering money there, yet virtually no progress has been made so far. Today’s statement did nothing to move us forward on such a public register of firms and individuals. Fundamentally, this issue is about a rotten system that undermines the faith of ordinary families in the fairness of our tax system. Indeed, a definitive analysis by the Financial Times shows that the corporate tax avoidance measures that the Labour Government brought in will still raise 10 times as much as those introduced during the last Parliament.
While we broadly welcome the measures in the Bill, we think that they simply do not go far enough. We believe there must be far greater transparency and enforcement in relation to those who try to hide their wealth and profits in tax havens. As ever, the Chancellor and the Prime Minister give the impression of acting tough, while in reality they are proposing half-measures. Instead, as Labour have set out in our tax transparency enforcement programme, we require the introduction of a general anti-avoidance principle that proactively looks at intent and does not need the consent of the tax profession before it can be used.
Our programme includes an immediate public inquiry into the Panama papers, and more resources for HMRC. Staff numbers having been cut by 6,000 and then added to by 670, we can see that there has been a return of about 10% of those whose jobs were cut, and real concerns have been raised about the impact on tax collection as a result. We have called for a specialised enforcement unit and for greater co-operation with European partners on country-by-country reporting and protection for whistleblowers.
Far be it from me to make any proposals to Labour Front Benchers, but will my hon. Friend consider some research into the impact of the Liechtenstein disclosure facility and how it has been used during the past two to three years to subvert the Government’s attempts on taxation?
I thank my hon. Friend for his extremely well made comment. He is absolutely right that we should explore that area, because we want evidence about what works as we move forward urgently on the issue of gross tax avoidance and evasion. Indeed, if we want to ensure that tax avoiders and tax evaders pay their fair share of tax, the Finance Bill will need to be toughened up considerably. If the Chancellor fails to listen to our arguments, the public will want to know why.
The Bill also fails the fairness test. Resolution Foundation analysis shows that 80% of the gains from this Budget’s changes to income tax will be for the top half of the income distribution, with the top 20% of households getting the lion’s share. It estimates that, during this Parliament, households in the lower half of the income distribution will lose an average of £375 a year, while those in the top half are set to gain £235 a year. We are lucky that it can tell us that. It is a matter of shame that the Chancellor no longer produces his own full distributional analysis. This is a Chancellor who either does not want to know or does not want to tell us what impact his decisions are having. Neither competent nor compassionate—after the Budget, that is the verdict on this Chancellor.
This country faces huge economic challenges—automation, competition from nations such as India, China and other growing economies, our grossly imbalanced economy and our growing current account deficit—yet faced with these big challenges, what do we get? We get cuts to corporation tax that the Office for Budget Responsibility says will do nothing to reverse the deteriorating outlook for business investment, productivity and exports. There are cuts to capital gains tax that will benefit a tiny minority but do nothing for the millions of working people struggling simply to stay out of debt, let alone save for a home or a pension. There are clever accounting tricks aimed at reducing the Chancellor’s short-term political embarrassment that do nothing to secure our long-term public finances or economic stability. Missing was a clear vision of the future—a vision of a Britain that has a strategic partnership between Government and business, and is stronger because prosperity is shared more fairly.
We will vote against this Finance Bill because it is unfair. It is unfair on women, on low-paid workers and on children living in poverty—the number of children in poverty has increased by half a million since this Government came to power. These are people who are seeing their living standards cut to pay for the Chancellor’s tax giveaways to the better off. The Bill is unfair on the workers in our steel and manufacturing industries, who are worried now about their jobs and their families. It is unfair on all the hard-working families and responsible businesses that play by the rules and pay their fair share of tax. We will vote against the Bill because it fails the test of moving this country forward to a more prosperous and secure future for Britain’s businesses and families.
(8 years, 5 months ago)
General CommitteesIt is a pleasure, Mr Bailey, to serve under your chairmanship. I thank the Chief Secretary for his opening words outlining the background and the reasons we are here today. The new public servants’ pension schemes introduced from April 2015, in the most part, under the Public Service Pensions Act 2013, provide for pension benefits based on career average revalued earnings, rather than final salary, following Lord Hutton’s report and the negotiations thereafter. A feature of CARE schemes is that an individual builds up benefits in each year of service based on a proportion of earnings and that the earning factor is revalued each year until retirement. The Minister is right that different accrual and revaluation rates were agreed as part of the negotiations for the different schemes. In the schemes for civil servants, local government and the judiciary, the earnings factor is revalued by prices. Similar is true for NHS, teachers’ and police pensions, but they feature a small uplift percentage, in line with the agreement reached, and variations in the annual accrual rate. For firefighters and the armed forces, he is right that the revaluation rate uses average earnings.
Turning to the most affected schemes, the local government pension scheme had 1.8 million active members in England and Wales in October 2015. At the end of March 2015, the UK-wide civil service pension scheme had 493,000 active scheme members. Section 9 of the 2013 Act provided for the Treasury to make orders that specify the percentage change in prices or earnings for the purposes of revaluation by reference to the general level of prices or earnings estimated in such a manner as the Treasury considers appropriate. Today’s draft order fulfils that requirement in relation to the period 1 April 2015 to end of March this year. The figure specified is indeed a decrease at minus 0.1% and this order is subject to the affirmative procedure because the value is negative.
When the 2013 Act went through Parliament, the former Member for Kilmarnock and Loudoun raised the concerns of trade unions and others that negative growth would allow for negative revaluations. The then Treasury Minister, the right hon. Member for Bromsgrove (Sajid Javid), said:
“It is important to note that the clause theoretically allows for negative revaluations. It is extremely rare for negative growth to occur. For example, CPI, the Government’s preferred measure of prices, has never been negative.”––[Official Report, Public Service Pensions Public Bill Committee, 13 November 2012; c. 308.]
The concession made was that any such order would be subject to the affirmative procedure and that Parliament would have an opportunity to debate the measure, yet such an order has been brought before the House in the first year of the scheme. Not only has it come before the House, but it comes without any proper impact assessment. The implications of the change were unclear for those who have may retired within the last year. If I understood the Minister’s opening comments correctly, the change may not apply to those receiving pensions in payment who have retired in the last year and their pensions will be frozen. It would be helpful if he could reconfirm that and confirm whether any amendment to legislation is required to make it clear for the future.
The Minister also talked about how the Government came to decide on the use of the September 2015 CPI. He is right that the Treasury has a choice in this matter and will know that the year-to-date CPI figures were negative only in April, September and October. It is also the case that pensions in payment and the additional state pension are frozen rather than subject to negative revaluation, so will he explain again why the Government preferred to allow for a negative revaluation rate for active schemes rather than a nil adjustment—a point raised by Lord Whitty and others —when most observers would say that that appears far more consistent?
If the Minister has indeed decided that the change will not apply to those who have received pensions and have retired in the last year, will there be any impact and have any of those who have retired had the option to take any form of lump sum? Would there be any tax implications as a result? Has he taken legal opinion on that point, and if so what was the outcome? Does he have an estimate of the savings that he believes Government Departments will accrue as a result of the decision to apply a negative revaluation rate?
How has the decision been communicated? Will statements be sent out to scheme members, and if so when does the Minister expect that to happen? It would be helpful to hear what impact he believes the negative rate will have on confidence in the new pension scheme arrangements, and what capacity he believes is in place for any queries that people may rightly have when they receive their statement of accrued pension benefits and see that the figure has gone down. The Minister will know that MyCSP’s administrative difficulties were recently the subject of a National Audit Office report. Will it answer any queries that may come in on this matter, and will it have the capacity to cope with them? Finally, what assessment has the Treasury made of whether applying a negative revaluation rate rather than a nil adjustment will breach the cap?
Let me see whether I can respond to the large number of reasonable questions that the shadow Minister asked me. The first thing to say is that she is right that this matter was debated during the passage of the 2013 Act, and it was pointed out that CPI could go negative in exceptional circumstances. Negative inflation is certainly not totally without precedent. It was useful that that debate was had and that Parliament approved the Act and many of the measures, including those that are now in the order. It approved the idea that if there were to be a negative revaluation, it would have to be brought to the House under the exceptional procedure, recognising that it would be an exceptional event.
The words that were used were that it would also allow for parliamentary scrutiny, but the Minister has introduced the order without any impact assessment. What extra information will he provide?
It is clear that today’s debate allows for parliamentary scrutiny, but the hon. Lady asks about an impact assessment. The impact will be fairly clear, and I will give some more examples.
To illustrate the amounts that we are talking about, let us compare workers in two different schemes, the local government scheme and the NHS scheme, both earning £26,000 a year. The local government worker will have earned about £40 more in their annual pension than the NHS worker, because of the trade-off between the revaluation and accrual rates. Because the revaluation rate will lead to a less favourable calculation for the local government worker but a more favourable one for the NHS worker, the local government worker’s pot will be reduced by 50p next year, whereas the NHS worker will get £7 more. Someone in the teachers’ scheme who is on £26,000 will also get about £7 per annum based on the revaluation. On the question of pensions in payment, there is a statutory link, so public sector pensions in payment will be frozen for the year without the need for new legislation or a further order.
The hon. Lady asked about the three months of negative CPI. I come back to the five main reasons why we have chosen to use the September CPI figure. First, we should set a precedent of using the CPI month that is most frequently used across Government. Secondly, in terms of the risk sharing, not only should scheme members benefit from the upside risk of revaluation but they should not be shielded from the downside risk. The third reason is consistency. Choosing a figure that is different from the September CPI figure would introduce the idea of significant policy discretion, going back to the point raised by my hon. Friend the Member for Beverley and Holderness, which would open up scope for lobbying and negotiations in an area where one wants a long-term degree of certainty. I think that would be a very unhelpful and unfavourable development.
The fourth reason is that this figure honours the pension settlement. Many of the schemes reached agreement through negotiations with the unions on the basis of CPI-linked revaluation. Choosing the correct CPI figure helps to deliver on that settlement. The final point is about fairness across the schemes. Schemes that choose faster revaluation instead of a better revaluation rate should not be able to benefit from both fast accrual and a more generous revaluation.
My hon. Friend is right. For all kinds of good reasons the Government made the decision to move this whole sector of public pensions and benefits from RPI to CPI. I think he is right that at that time RPI had gone negative.
If I could answer the final couple of points from the hon. Member for Feltham and Heston—
Shall I deal with these two and come back to the hon. Lady if I have not answered satisfactorily?
Thank you. All scheme members will receive annual benefit statements setting out the revaluation amount. I am confident that members will understand that, where the unions and Government agreed the terms of the scheme, this agreement must be upheld.
In terms of the savings accrued by Government Departments, if I understood the question correctly, no savings have been assumed, as is consistent with the scheme rules, whatever the prices are. The majority of these pensions will not come into payment, of course, for many years. This is about consistency with the proposed final agreement so that they are fair to workforces, schemes and the taxpayers. I will give way and, if I have not answered all the hon. Lady’s questions, I will come back.
I want to probe the Minister further on a few points that he missed or on which I am not completely clear. I understand that pensions in payment are frozen but may I check that in the particular circumstance of those who retire in-year in any month from April onwards, they will not be subject to a reduction? The implications are clear, because that means that any pension paid to members who had retired in-year would be reduced effectively and may have resulted in an overpayment—an unauthorised payment, with tax implications. In this particular circumstance, which may be a slight anomaly, can the Minister provide an absolute guarantee that no legislative change is required and that those who have retired in-year will not be adversely affected? Have any of those who have retired taken any lump sum payments and, if so, are they potential overpayments or not subject to such overpayment under the current law? When will the Government send out statements? Will it be possible to respond to queries that will inevitably be sent to the mailboxes of Opposition Members and to the Minister and others about statements that appear to show that members’ accrued pension rights have gone down? Where will those queries be answered? Who will constituents call, and will there be capacity to respond?
Let me try to answer those further questions. The annual benefits statements will be sent out in the usual way. I am confident that members of schemes will understand what has happened and they will be told about the September CPI figure. I am confident that such inquiries will be dealt with in the usual way. In terms of pensions in payment, I am prepared to reassure hon. Members that we will deal with this complex matter. It is a slightly anomalous matter, which may require a legislative amendment or a small change to the schemes, but I assure the Committee that members will not be adversely affected in the particular case of an in-year withdrawal from the scheme.
Detailed impact assessments were prepared for the new scheme designs and were published by each Department. They will have taken into account prices impacts. The order implements the prices elements of those schemes designs and therefore there is no need to conduct a separate impact assessment for the technical implementation of what has already been decided and laid out.
To revalue using the September CPI figure, which is the subject of the order, is a very important step for the Government to take to be consistent and to set a consistent precedent that will be easily understood. It was for the Government to choose a measure of prices for the purposes of revaluing the prices element of the new career-average public sector pension schemes. The Government have chosen the measure that was agreed with the schemes after negotiation with the unions, following the precedent set by last year’s revaluation of the local government pension scheme and also the measure used for indexation of public services pension in payment. I should also re-emphasise that it maintains the real value of these pensions, ensures that there is an appropriate sharing of risk between members and Government and, importantly, that it sets the right precedent for the future. I therefore urge the Committee to support the order.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Public Service Pensions Revaluation (Prices) Order 2016.
(8 years, 5 months ago)
Commons ChamberAfter six years as Chancellor, will the right hon. Gentleman confirm whether home ownership went up or down between 2010 and 2015?
When I first became Chancellor we were in the aftermath of a collapse in the housing market, so it took a couple of years to get house building going again. House building starts are now up, and the number of first-time buyers has risen by 60% since I became Chancellor. It was down by 50% under the last Labour Government.
There you have it, Mr Speaker. We know from the English housing survey that 201,000 fewer households owned a home in 2015 than five years ago, compared with an increase of 1 million under Labour. By 2025, nine out of 10 Britons under 35 on modest incomes will not be able to afford a home. Rents in the private sector are soaring, and the housing benefit bill is likely to be £350 million more than the Chancellor forecast last year. Is his record on housing investment one of failure, with British families now literally paying the price?
Housing starts are higher than they were when I became the Chancellor, but what people need—homeowners or people who are building houses—above all is economic security, which is what the Government are seeking to deliver. Frankly, the fact that the Labour party is now getting its advice from Yanis Varoufakis and the revolutionary Marxist broadcaster Paul Mason does not suggest to me that it has an answer to economic security. Presumably Labour chose those two because Chairman Mao was dead and Micky Mouse was busy.