National Insurance Contributions Bill

Shabana Mahmood Excerpts

Monday 4th November 2013 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I salute the Minister’s valiant effort to gloss over recent history and his record. I can tell Government Members that the reason their Minister was not making any predictions about the impact of the policy in the Bill was that he got all his previous ones wrong.

[Nick de Bois]

Given the Opposition’s dreadful predictions about how many jobs would be lost under the Government, does the hon. Lady agree that it would be wise for her to tread carefully on predictions?

[Shabana Mahmood]

That was a valiant effort to change the subject, but today we are talking about this Minister’s record and the regional national insurance holiday plan. I note that the Minister could not bring himself to admit that the Opposition were right and that he was wrong about that. Perhaps we can return to that point later.

The Minister sought to focus as much as he could on the employment allowance and desperately tried to forget its predecessor scheme that the Government introduced in their 2010 emergency Budget—the regional national insurance holiday, which was enacted in the National Insurance Contributions Act 2011. The national insurance holiday was an abject failure, so I am not surprised that he wants to pretend it never happened, but it did, and it failed utterly. He has wasted three years clinging to that policy rather than doing what Opposition Members told him to do, which was to rip it up and design a new scheme that took account of the criticisms made by us and others.

The Bill introduces the employment allowance, which we support, so perhaps we should give the Minister credit for getting there in the end, but it is somewhat difficult to do so, because it has taken him far too long to rectify the flaws of the previous scheme, which we warned him about from the beginning, as my hon. Friend the Member for Nottingham East (Chris Leslie) has reminded him. As a result, businesses desperate for help have struggled in the meantime.

Those businesses, particularly small and medium-sized enterprises, which are the engine of our economy, have continued to suffer. Bank lending to SMEs is still contracting, and analysis published by the Department for Business, Innovation and Skills shows that tightening credit has disproportionately affected low and average-risk SMEs. Last year, Project Merlin missed its target for lending to SMEs by more than £1 billion. In 2010, the Office for Budget Responsibility predicted that lending to businesses would have risen 34% by now, but in fact it has fallen by 10%.

Given this climate of the past three years, action has been necessary to support business, but, on national insurance, it has taken the Government too long to get there.

[Richard Fuller]

The hon. Lady is making some fair criticism of the national insurance holiday, but does she agree that one problem with the holiday was that it was a one-off, and that businesses are so smart in their planning that they ignore one-off schemes and go on previous predictions? Does she agree that a steady basis for policy is better than one-off, one-year schemes?

[Shabana Mahmood]

The hon. Gentleman makes a fair point, but there were many other problems with the national insurance holiday, which I shall return to later.

[Ian Swales (Redcar) (LD)]

As we are having a national insurance history lesson, what does the hon. Lady think the impact would have been of a 1% increase for employers and employees in April 2011?

[Shabana Mahmood]

I thank the hon. Gentleman for that intervention, but I prefer to look at the record. When the Government came to power, they inherited a growing economy. They choked off the recovery, resulting in three years of flatlining and stagnation, and the current cost-of-living crisis that affects businesses and people up and down the country.

[David Rutley (Macclesfield) (Con)]

The new version of events on the Government’s legacy is interesting. We received a dismal legacy. We had a huge deficit, but Opposition Members—deficit deniers—cannot recognise that. They should apologise for proposing the jobs tax. Will the hon. Lady apologise for putting that on their policy platform? It was a complete disaster.

[Shabana Mahmood]

I do not think that an economy that was growing was a bad legacy to leave. The legacy of three wasted years, caused by the Government pursuing a failed economic plan that has delivered a cost-of-living crisis for millions of people, is not one to write home about.

[Jonathan Edwards]

The key point about the national insurance measure in the emergency Budget was that it was a statement of intent that the UK Government wanted to rebalance the economy geographically. Under the last Labour Government, wealth polarised geographically at an incredible rate. If the hon. Lady is in the Treasury after the next election, what will she and her colleagues do to rebalance the UK economy geographically?

[Shabana Mahmood]

We have been speaking a great deal about rebalancing the economy and our proposals on regional banking, for example, are proof that we take the issue seriously. The hon. Gentleman described this Government’s policy as a statement of intent, but it was an absolute failure, and that is the subject of the debate today.

The national insurance holiday was a flagship policy of the Government’s first Budget, which is why they are so desperate to forget that it happened. They created a scheme that ran from 6 September 2010 until 5 September 2013 and applied to new businesses only. They were eligible only if they were created after 22 June 2010. Under that scheme, new businesses would not have to pay the first £5,000 in national insurance for each of their first 10 employees during the first year of the business. Greater London, the south-east and the eastern region were all excluded from the scheme. The Government said that 400,000 businesses and some 800,000 employees would benefit from the national insurance holiday, at a cost of £940 million over the three years of the scheme. In their impact assessment, the Government confidently predicted that the average benefit per business would be about £2,000, but by the end of the three years of the national insurance holiday in September this year, the scheme was shown to have been a comprehensive failure.

In the end, only 25,000 businesses received NICS relief—that is 375,000 fewer businesses being helped than the Government originally claimed. It was always highly unlikely to have ever been worth the maximum £50,000 to a new start-up business. To get the maximum relief available, the new businesses would have had to take on 10 people with salaries of up to £40,000, which does not exactly fit the pattern of how new start-ups behave and the sorts of choices that they make in their first year of business.

Of the £940 million set aside to pay for the scheme, only £60 million was ultimately paid out, a paltry 6% of the amount originally intended. To put that in context, the Government spent £12 million on the administration of the scheme. We repeatedly warned that the scheme was not working, that it was not helping businesses as intended and that the Government should reform it, expand it, review it or bring forward a new one, but they refused to listen.

It is not as though the Minister could not see the failure unfolding before his eyes. Take-up of the national insurance holiday was never anything other than dismal. In the first year of the scheme, there was not one month in which HMRC received more than 850 applications. In 2012, there was only one month when the total number of successful applications was more than 1,000—that was in May 2012, when there were 1,130 successful applications. For the Government’s scheme to succeed, they would have needed to hit that number every month for three years, and they got nowhere near that.

When the Treasury Committee conducted its inquiry into the June 2010 Budget, the Chair of the Committee said:

“For those of us who have been on the circuit a while it sounds like another case of the triumph of hope over experience.”

How right he was.

[David Mowat (Warrington South) (Con)]

A few moments ago, the shadow Minister was asked a question on regional focus. She has also said that one of the problems with the last scheme was that it did not include the south-east. Is it Labour’s position that the scheme should have applied in the south-east as well?

--- Later in debate ---

[Shabana Mahmood]

The hon. Gentleman is somewhat confused. As was pointed out earlier, we always said that one of the problems with the scheme was the regional element, and I am coming to that point.

During the passage of the National Insurance Contributions Act 2011, we told the Minister that he should drop the regional condition attached to the national insurance holiday and expand it to areas of the UK that had been excluded. Today, he brings to the House the employment allowance, which does exactly that. In fact, the Government’s analysis, published this morning, shows that more than 40% of the expected total number of employers who will not pay any NICs under the employment allowance are based in regions excluded from the previous scheme. At the time, the Minister said that extending the national insurance holiday across the UK would increase the cost by approximately £600 million to a total of £1.6 billion over three years. Today, his employment allowance is predicted to cost £1.3 billion in the first year, rising to £1.7 billion by 2017-18. We said that the national insurance holiday should be extended to cover all businesses, rather than simply new ones. Today, the Minister is introducing an employment allowance that covers all businesses, not just new businesses.

[Richard Fuller]

I am delighted to hear the hon. Lady talk about the virtues of expanding reductions in national insurance across the country and extending it in terms of time. Does she therefore think it was wrong for her, in the previous election, to stand on a manifesto that advocated an increase in national insurance?

[Shabana Mahmood]

I was proud to stand as a Labour candidate at the general election when the economy was starting to grow, but that recovery was choked off by the hon. Gentleman’s Government.

During the Committee stage of the National Insurance Contributions Act 2011, we tabled amendments to extend the national insurance holiday to charities. The employment allowance will do just that. This is effectively our policy, so we are of course delighted to support the Bill. Since the policy was announced in the Budget, we have been calling for it to be enacted immediately, rather than waiting until April 2014.

[Mr Gauke]

I note that the hon. Lady did not respond to the question from my hon. Friend the Member for Bedford (Richard Fuller) on whether she supported the Labour party’s policy of increasing employers’ national insurance contributions. Does she recognise that the Labour party’s policy has been to target the NICs scheme at small businesses—not all businesses, as she said—and only for new employees, not all employees? That substantially complicates the scheme, requires applications and shares many of the complexities of the NICs holiday.

[Shabana Mahmood]

I thank the Minister for that intervention. I am not surprised he wants to turn the attention away from his own U-turn. I remind him that our proposal was a refinement and an extension of his failed policy. We could see it was failing and, doing our job as a responsible Opposition, we were suggesting ways in which the Minister might be able to rescue his failed national insurance holiday. I must correct him: the scheme was not for small businesses only, but all existing businesses.

[Julian Smith]

This is a highly depressing speech. Should we not all be celebrating the fact that the economy is turning a corner and celebrating this policy, which will encourage the risk-takers, who are pushing the recovery on, to go further and faster and take on more people? This is a depressing speech. Let us get on with the opportunity that this policy brings.

[Shabana Mahmood]

I am sorry that the hon. Gentleman is so depressed that his Government’s policy has failed, but that is not a matter for me.

We will seek reassurance from the Government and test the Bill’s provisions to ensure that the new scheme does not suffer from the problems associated with the previous scheme. In particular, we will scrutinise its administration. The national insurance holiday was too complicated and the employment allowance should not suffer from the same problems. One problem affecting take-up of the previous scheme, in addition to its complexity, was the lack of publicity. Many businesses simply did not know what was available. This problem must not be repeated. This is particularly important when it comes to publicising the scheme to charities and amateur sports clubs, to which it now also applies. They are more likely to be unaware of what is available, and the Government should have a clear publicity strategy, subject to review, if take-up is, for whatever reason, lower than expected.

Clauses 9 and 10 apply the general anti-abuse rule to national insurance contributions, and enable the Treasury to ensure that the GAAR, as it applies to national insurance and to tax, is kept in line.

We support the application of the GAAR to national insurance, but we remain unconvinced that the current version is up to the job. It is the Government’s flagship policy for tackling tax avoidance, and their figures show that it will result in annual revenue of £60 million in 2014-15, which they expect to rise to £85 million by 2017-18, but that compares with a tax gap that was estimated, when the GAAR was introduced, to be £32.2 billion but which has now risen to £35 billion. Have the Government thought about reassessing their figures in the light of the slightly over-enthusiastic estimates made for the UK-Swiss tax agreement? Anyway, a dent of £85 million in a tax gap of £35 billion is nothing to write home about.

The House will recall that two months ago, a member of the GAAR independent advisory panel, which decides whether people have broken the rule, was forced to resign, shortly after the GAAR came into operation, having been caught advising people at a tax-planning conference how to keep their money

“out of the Chancellor’s grubby mitts”.

This was someone who was hand-picked to advise Ministers on the avoidance schemes the GAAR should catch. We remain concerned, therefore, that the GAAR is far too narrow, that there is no specific penalty regime, that no arrangements are in place to monitor its effectiveness and that, as a result, it has little credibility. We will continue to press these arguments when the Bill reaches Committee.

We welcome the introduction of a certification scheme for offshore employers of oil and gas workers. The extent of this problem is significant, with at least 100,000 individuals having been found to be employed through an intermediary company with no presence, residence or place of business in the UK. I note that this is the first of three measures aimed at tackling this issue. We await the introduction of the other two by way of secondary legislation and provisions to be included in the Finance Bill. We know from analysis published alongside the Bill that the changes, as a whole, are expected to result in Exchequer savings of £80 million to £100 million a year, and we will wish to review the effectiveness of these provisions as and when they come into force.

[Julian Smith]

Does the hon. Lady regret the Labour Government’s failure, over 13 years, to take the anti-tax avoidance measures that this Government are now putting in place?

[Shabana Mahmood]

I absolutely reject the hon. Gentleman’s point. We have a very good record on tackling tax avoidance, and as I said, at the moment I do not think that the GAAR is anything to write home about. We have significant issues with it, but we will return to those points in Committee.

Clauses 12 and 13 make provisions for partnership arrangements, which we support. We welcome the regulations that will prevent the misuse of partnerships for the purpose of tax avoidance by focusing specifically on two issues. The first concerns partnerships and the tax-motivated allocation of profits and losses relating to the alternative investment fund managers directive, and the second concerns limited liability partnerships and the nature of the relationship between partners and the LLP.

Focusing on the second issue, the current HMRC interpretation of the existing tax rules has meant that individuals who are members of an LLP are taxed as though they are partners in a partnership, meaning that low-paid workers taken on as LLP members have lost employment benefits and protections, while, at the other end of the scale, high-paid workers have benefited from a self-employed status and the resulting loss of employment taxes payable. It is time for the use of LLPs as a way to disguise employment status and avoid employment taxes to stop. We note that the Budget report estimated that the Exchequer gains would be £125 million in 2014-15, rising to £365 million in 2015-16, and we support action in this area.

In conclusion, key aspects of the Bill began life as Labour party policy, so I suppose I should thank the Exchequer Secretary for giving us the rare pleasure of enacting legislation from opposition. It is a first for me, but one that I hope will happen many more times. The national insurance holiday scheme was a complete failure, and it is vital that the employment allowance gives businesses the support they need, but it is unacceptable that they will have been waiting four years for this support. Three of those years were wasted while he and the Government clung to the national insurance holiday scheme, and almost another year has been wasted as they have failed to take immediate action, instead introducing the employment allowance only from next April. Even when forced to change course and do the right thing, they are still failing to go far enough and act quickly enough. Businesses up and down the country deserve better.

Interest Rate Swap Derivatives

Shabana Mahmood Excerpts

Thursday 24th October 2013 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I congratulate all the Members who secured this debate, and I also thank the Backbench Business Committee for giving further time for this important issue to be discussed on the Floor of the House. I also want to put on record my recognition of the tremendous work done by the all-party group on interest rate swap mis-selling. Its efforts in campaigning on this issue since it first came to light last year have made sure it remains at the top of the political agenda. I should mention in particular the hon. Member for Aberconwy (Guto Bebb) for his leadership of that group and his willingness to run with this issue. He opened the debate with a powerful speech touching on all the different elements of the redress scheme, which have been causing problems to small businesses throughout the country. He reminded the House that the banks were telling us they cannot promise that the date for full redress will be much before 2015, despite having spent £300 million and recruited around 3,000 staff to deal with this problem. The number of claims settled to date is pitifully small. The record on that is nothing to write home about and it needs to be dealt with urgently.

The Chair of the Backbench Business Committee, my hon. Friend the Member for North East Derbyshire (Natascha Engel), made a fine speech. She reminded the House that the imposition of a blanket moratorium on payments would concentrate the minds of the banks and press them towards resolving the claims businesses have made more swiftly. She also made the important point that much of the language the banks are using in their correspondence with businesses and Members of Parliament on this issue is not easy language, and that means there is a danger of the same kind of confusion arising as that which led to this scandal in the first place.

The hon. Members for Wyre Forest (Mark Garnier) and for Aberconwy reminded the House that in the last 48 hours some banks have moved to decouple the issue of consequential losses from technical redress, and I will return to that point.

My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) reminded the House that this scandal has further corroded and damaged trust between banks and their customers and drew a parallel with previous scandals, including the PPI scandal, which certainly should concentrate minds. He also reminded us that hedging and insuring against risks is not in and of itself wrong, and he is certainly right about that, but there has to be full understanding as to what these arrangements involve, and we must make sure that when they are entered into, it is done in a way that is suitable for both the companies getting involved and the banks.

My hon. Friend the Member for Llanelli (Nia Griffith) told us about the tragedy of good and very successful businesses who have been caught up in this scandal and the real fear felt by small businesses in seeking redress and how that can act as a barrier to them exercising their full rights under the redress scheme. They worry about admitting something has gone wrong because of what that might mean for their future relationship with their bank. That was an important point to put on the record.

My hon. Friend the Member for Edinburgh South (Ian Murray) reminded us again of the link between this scandal and the corrosion of people’s trust in the banks and how that has followed on from the PPI scandal and the manipulation of LIBOR. He also said that this all feeds into a sense that the banks, who are supposed to be on the side of small businesses—and who clearly need small businesses as much as small businesses need them—have not appeared to be behaving in that way and that needs to be dealt with forthwith.

Many Government Members, including the hon. Members for Poole (Mr Syms), for Bury North (Mr Nuttall), for South West Devon (Mr Streeter) and for Romsey and Southampton North (Caroline Nokes), made points about the snail’s pace of this scheme, which I will return to in a few moments. Those points were well made, and I hope they are being heard. On the speech by the hon. Member for Tiverton and Honiton (Neil Parish), I will not get into whether David felling Goliath is mythological, biblical or something else, but the analogy was well made and the symbolism of it will resonate outside this House.

It is clear from today’s contributions that the businesses caught up in this scandal, including businesses in my constituency that are following this debate closely from a place not very far away, have suffered terribly; we have heard distressing stories of injustice, bankruptcies, job losses, marriage breakdown, homelessness and, in some cases, death. Today’s contributions have rightly reminded the House that for all the debate about process—that is incredibly important and we have to get it right—there is a human cost, which should not be forgotten.

This scandal has highlighted shocking abuse of small and medium-sized enterprises; banks saw an opportunity in firms wanting to take out loans and they attached complex hedging products to them, in many cases giving the impression that this was a requirement of the loan itself. When interest rates plummeted, businesses were forced to pick up the punitive downside of the hedges. We know that in many cases banks had the option to cancel the loan. So, presumably, at any stage when interest rates might have gone up and the business would have benefited from having the hedge, the bank could cancel, but in the reverse situation the business could not exit the hedge when it became unfavourable to it without incurring punitive costs and charges. Not only was that an extremely unfair set of terms and conditions, but that behaviour violated the important relationship of trust between the banks and our small business community. Well run, long-established small businesses, which are the engine of our economy, have paid the price.

I will not rehearse the history of how we have got to the redress process that is in place, but suffice it to say that many concerns with this scheme require urgent action. I hope the Minister has heard all those points today and will take them away with him. I hope also that the FCA and the banks have been listening carefully to today’s debate. The biggest issue, about which we have heard a great deal today, is the time that this is all taking to resolve. Time is of the essence for the businesses concerned, yet figures show that banks paid out just £1.5 million in compensation in September, with 22 offers being accepted. That brings the grand total to a mere £2 million having been paid out, with 32 settled claims. In September, the chairman of the Federation of Small Businesses said:

“We are quickly losing confidence in the banks and the regulator as this scheme remains unbelievably slow.”

The initial target indicated for the redress scheme was six months. That time scale has already been missed, and it now looks as if it will be missed by a very large margin.

One of biggest issues with the redress scheme is the complete lack of a deadline for the process. Last month, my hon. Friends the Members for Nottingham East (Chris Leslie) and for Chesterfield (Toby Perkins) wrote to the chief executive of the FCA about the delay in compensation payments and requested that a strict deadline for settlement be imposed on the banks taking part in the scheme. Unfortunately, the imposition of a deadline has been resisted by the FCA. That is deeply disappointing, given the necessity of achieving a faster rate of progress for businesses that are in financial difficulty and the fact that the Federation of Small Businesses has indicated that some reviews of the interest rate swap products could be completed in as little as four to six weeks. I am sure the Minister will agree that firms that are due redress must receive it as quickly as possible if they are to survive; they need certainty and clarity so that they can plan for the future. Does he agree that a deadline would help matters? I hope he will respond to that point. Will he outline for us what he might do to bring that about?

We have seen some movement in the past 48 hours on the issue of consequential losses, which is very welcome. However, it is important that all the banks that have not signed up to the decoupling arrangement in respect of consequential loss and technical redress do so as quickly as possible. As this is now an evolving element of the redress scheme, will the Minister confirm that he will follow it closely to ensure that the evolving process will still allow for a fair assessment of consequential losses and that there is no risk that businesses will opt to forgo money they are owed in order to obtain compensation for their direct losses more quickly?

We also heard a lot about the suspension of payments, an issue about which many hon. Members have been writing to banks in our capacity as constituency Members of Parliament. Clearly, there is some inconsistency in the way in which the suspension of payments is being applied. Will the Minister undertake to do whatever he can to ensure that the suspension of payments applies wherever it is necessary? Will he consider the threshold? Will he eliminate the requirement for the business to go into special measures, as that is clearly holding some people back?

A huge amount of data have been published by the FCA on its website, which is helping Members of this House to assess the progress of this scheme. However, I wonder whether there is scope for some of those datasets to be expanded, particularly to give Members more information about what is happening to businesses in financial distress and businesses in administration, so that there is no incentive for banks not to bother dealing with them, as we have heard discussed today.

Small businesses are the lifeblood of our economy; they account for about half of private sector turnover, employ millions of people and make up 99% of UK enterprises. They deserve to be treated better by our financial institutions, and to be supported and protected more effectively by both the regulators and the Government. I hope that the Minister can provide some much-needed assurance, and that the FCA and the banks take on board all the points made by hon. Members today.

Economic Growth

Shabana Mahmood Excerpts

Wednesday 15th May 2013 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I am grateful for the opportunity—albeit time-limited and short—to contribute to the debate on the Gracious Speech. We as a country face huge challenges, and those faced by my constituents and the people of Birmingham are acute. My constituents are getting poorer and my constituency has the highest rate of unemployment in the country. Youth unemployment is at 8.4% in Ladywood, and long-term unemployment has gone up. More and more of my constituents are dependent on food banks that operate in my constituency, and my advice surgeries are inundated with people who cannot make ends meet and for whom simply keeping a roof over their heads and putting food on the table is a serious struggle. That is the reality of 21st-century Britain after three years of this Government.

Given the scale of the challenge faced by the country, and the reality of what the last three years have meant for my constituents, we needed a change of direction in the Queen’s Speech and bold action to kick-start our economy—we desperately needed a jobs Bill. We have an unemployment emergency in this country and there are simply not enough jobs to go around. Instead of acting quickly and decisively as required by such an emergency, the Government are content to trundle along at a pedestrian pace, doing a bit here and not going quite far enough there, as if they have all the time in the world—or, more likely, two years to kill before the next general election.

My constituents, however, do not have the luxury of time to waste. The Government do not realise that each day one of my constituents remains unemployed there is a clear and present danger to their chances of ever being able to find work, and the longer that goes on, the more likely it is that they will be for ever on the fringes of the labour market. As individuals, my constituents will pay a heavy price, but so will the country. A lost generation is not only a tragedy for those unfortunate enough to be among their number, but frankly it does not come cheap. My constituents were crying out for a jobs Bill—something that would have given a chance of work to young people who have been unemployed for more than a year, and a compulsory jobs guarantee for the long-term unemployed who have been out of work for more than two years. The scale of the challenge demanded that, but the Government failed to deliver.

I am also disappointed that the Government’s proposals contained no reference to using public procurement to boost apprenticeship places. Again, that is a missed opportunity to put a rocket booster under apprenticeship policy. The Government have real power in the market—they are the UK’s biggest consumer—and should use it strategically and for the good of the country. In March, the Government voted against the Opposition’s plans to use public procurement contracts worth more than £1 million to create apprenticeship places. The Government could make a difference. I do not understand why they will not accept my point and weave it into procurement policy. It is no good them praying in aid EU law, because other European countries have been able to take into account the impact of procurement decisions on the local economic environment and remain within its confines.

In the absence of an effective, speedy and decisive response to the emergency we face, we in Birmingham are still trying to make a difference. My hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) deserves special mention for the work she has spearheaded on the Birmingham Labour party policy review of education and skills in our city. The review culminated in a process to create a Birmingham baccalaureate, which will embed in the core school curriculum both generic employability skills and sector-specific skills in areas where Birmingham hopes to grow. I hope that, with the process we have embarked on towards a Birmingham baccalaureate, we can address the skills disconnect in our city, and move to a position in which young Brummies are first in line for the jobs that are created in our great city.

In addition, the greater Birmingham and Solihull local enterprise partnership and the city council await the spending review in June to see how much money the Government will put into the single local growth fund. However, the Government’s approach to regional growth so far has created uncertainty, deterred investment, and held back regional and local economies. I agree that local areas should have the powers and resources they need to get growth going and create jobs, but devolution should not be used as a cover for even deeper cuts.

I welcome any progress we can make in Birmingham, working with the council, the LEP and other stakeholders to address our skills gap and get more Brummies into work, but we will not achieve the jobs revolution we need without the Government taking bold and decisive action. That is why a plan for jobs and full employment should have been at the heart of the Queen’s Speech. The Queen’s Speech failed to deliver it. My constituents, Birmingham and our country deserve better.

Jobs and Growth

Shabana Mahmood Excerpts

Thursday 17th May 2012 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

Given that the economy is in recession, with the first double dip for 37 years, that long-term unemployment is at its highest since 1996 and that 1 million young people are out of work, it is shocking that the Queen’s Speech contains no measures to deal with those problems and, therefore, utterly fails to address the crisis that millions face.

I wish to focus my remarks on unemployment and, in particular, on youth unemployment and the Government’s failure to understand that there is an unemployment emergency in our country. We have had a Budget and a Queen’s Speech that have failed to deliver on jobs and desperately needed economic growth. Not only is that complacent; the Government do not seem to understand that every day they waste in failing to take comprehensive action to get our economy moving again, and our people into work, represents a tragic waste of talent, aspiration and confidence for more and more of our citizens.

My constituency has the highest rate of unemployment in the country, at 21.6%, and youth unemployment is at 11.2%—that is, 2,200 young people looking for work. From March last year to March this year, there was an 84% increase in the number of young jobseeker’s allowance claimants out of work for more than six months, and a shocking 91% increase in the number of unemployed young people out of work for one year or longer. Youth unemployment alone is set to cost Birmingham as a city £400 million in the coming decade.

Behind each statistic is a young person, bruised and battered by their experiences of job hunting under this Government and terrified that they will be part of the lost generation. They tell me that they have worked hard, overcoming difficult social and family circumstances to get qualifications, only to find that none of it matters. It is depressingly normal for young people in my constituency to tell me that they might as well not have bothered, that their effort has been wasted and that they do not know where to turn.

A climate of fear is already brewing among young people still at school, who despair that their chances of getting on have been kicked away by the cuts to education maintenance allowance and the trebling of tuition fees. They watch their older siblings getting into debt and sending off CV after CV with no luck and no hope, and fear that they will end up in the same boat.

Yet the Government do nothing but create more damage. They cut the future jobs fund, which was making a real difference in my constituency, as soon as they came into office, saying that, at £6,500 per job created, it was simply too expensive. Last week, the National Audit Office told us that the Government’s flagship regional growth fund will create 41,000 jobs, not the 500,000 that the Government originally claimed. The NAO also said that most of these jobs would have been created in any event and that each of them will cost us £33,000, with a cost, in some cases, of as much as £106,000 per net additional job. So the Government got rid of something that was making a real difference, saying that it was too expensive, and brought in something that is even more expensive but is not making the difference they said it would. That proves that they are not only out of touch and complacent but incompetent.

Unlike Labour’s proposal for a real jobs guarantee, the Government’s youth contract does not guarantee a job; it is merely a subsidy to an employer who is hiring a young person which covers only half their wages and does not create a new job. Labour’s plan for a real jobs guarantee would go much further, guaranteeing a job after 12 months of unemployment and covering the full wages for the employer.

In failing to deal with youth unemployment, the Government are storing up problems for the future, because if we allow the young unemployed of today to become a lost generation, they will be the long-term workless of tomorrow. As I have seen in my own constituency, which already suffers from long-term worklessness, getting back into work people who have been out of work for significant periods, or who have never been in work, is a significant challenge that costs huge sums. Problems that have been a generation in the making will take at least that long to fix, so it is far better, on every measure, to stop us getting to that point in the first place.

The young unemployed in my constituency and across our country were looking for a change of course and a sense of hope, but I am afraid that in this Queen’s Speech there is neither change nor hope—just a confirmation that this Government do not listen, do not care, and do not have a clue.

Oral Answers to Questions

Shabana Mahmood Excerpts

Tuesday 6th March 2012 Commons Chamber

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

My hon. Friend is absolutely right to highlight the seed enterprise investment scheme, which will provide 50% income tax relief on investments in new start-up businesses. There is also the £50 million business angel co-investment fund, supported through the regional growth fund, the business coaching for growth arrangements and a number of measures that HMRC is taking to help start-up businesses.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

The Minister’s answer on the national insurance holiday for small businesses was simply not good enough, so may I press him again on why he will not expand eligibility for the national insurance holiday to all small businesses with fewer than 10 employees that take on extra workers, as set out in Labour’s five-point plan for jobs?

Tax Avoidance (Public Servants)

Shabana Mahmood Excerpts

Thursday 2nd February 2012 Commons Chamber

[Danny Alexander]

Yes, I said that in answer to the original question. The cases that are brought to me are cases in which the level of pay is in excess of £142,500. Of course, the review will look not just at those cases, but, potentially, at the cases of people on lower salary levels. Appointments that are currently in operation may well have been put in place under the previous Government. I do not know that there are any; that is why I have instituted a review, and we will see in due course what that brings forward. As I say, I will be happy to share that information with the House.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

The Government have a duty to ensure that everyone pays their faire share of taxes. They should be especially careful when making senior appointments themselves. At a time when the economy is flatlining, families are being squeezed and students are facing the tripling of tuition fees, the news that Ministers approved the contract of a senior official that allowed tax and national insurance to be avoided shows just how out of touch they are.

There are several important questions that the Chief Secretary must answer. When he approved the contract, did he ask about the tax and national insurance implications of employing Mr Lester on this basis? Did HMRC approve the arrangement after Mr Lester was appointed chief executive on a permanent basis, or only when he was the interim chief executive? Does the Chief Secretary know how much tax and national insurance has been avoided by these arrangements? Has he now withdrawn his approval of Mr Lester’s contract, and is it being redrawn? How many other senior appointments have the Government made on these terms? Surely the right hon. Gentleman will know how many he has signed off. If he does not know, is it not time that he started asking questions of his colleagues and defending the interests of taxpayers?

The Government’s handling of higher education has been disastrous. This week, we have heard that their tripling of fees and botched reforms have cut applications to university, and before Christmas the Public Accounts Committee criticised HMRC for its cosy relationship with big business. There will be great concern if it turns out that the Government have turned a blind eye to tax avoidance. I look forward to the Chief Secretary’s answers about what seems to be a Treasury-backed tax dodge, and to a full investigation into the facts of the case.

[Danny Alexander]

I agree with the hon. Lady’s first remarks: of course we have a duty to ensure that every individual pays their fair share of tax. That is why the Government have done much more to tackle tax avoidance than Labour ever did during its 13 years in office.

The hon. Lady asked some important questions. I was not made aware, when approving the salary level for this post, of any tax benefit to the individual concerned. As I said earlier, the initial interim arrangements were approved before my time as Chief Secretary. I was involved in the re-appointment. As far as I am aware, having looked through the cases, of the 180 appointments with salaries of more than £142,500 that I have approved as Chief Secretary, this is the only one to which such arrangements apply. That does not mean, however, that there are not similar existing arrangements for people appointed under the previous Government or for those with lower salary levels. That is why I have implemented the review that I have set out to the Chamber. I am sorry that she did not feel able to welcome that step. I would have thought that she would have. As I have said repeatedly, however, I will happily bring the information that we unearth back to the House.

Economic Affairs and Work and Pensions

Shabana Mahmood Excerpts

Tuesday 8th June 2010 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I am grateful to you, Mr Deputy Speaker, for giving me the opportunity to make my first contribution in the House, especially as today’s debate has particular resonance for me and my constituency. I shall talk about that shortly, but before doing so I must congratulate all hon. Members who have made their maiden speeches today, because they were all excellent and are a hard act to follow. In particular, I am delighted to follow the maiden speech made by my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) who, like me, is one of the first Muslim women to be elected to this House. As we are joined in that achievement by my hon. Friend the Member for Bolton South East (Yasmin Qureshi), I can only remark that Muslim women in the Commons are rather like buses: there are none for ages and then three come along at once.

My predecessor, Clare Short, was very well known for being unafraid to speak her mind. When making her maiden speech in 1983, Clare said:

“I intend to follow tradition and speak about my constituency. However, it is impossible for me to follow the tradition of not being controversial”. —[Official Report, 29 June 1983; Vol. 44, c. 623.]

That was a sign of things to come, but it was also indicative of her honesty. Clare had a distinguished career as a Labour MP but following differences over the Iraq war she ultimately resigned the Labour Whip in October 2006, choosing to sit as an independent MP. She was not the first Labour MP from Birmingham, Ladywood to have disagreed with the Labour party over policy, because our predecessor, Victor Yates, who held the seat from 1945 to 1969, had the Whip withdrawn from him twice. That meant that he, too, sat as an independent in this House for a period of time. This is not a Ladywood tradition that I hope to continue, but I will strive to emulate the passion and fearlessness of my predecessors in standing up for the people of my constituency. In every part of Ladywood, Clare is remembered with pride, warmth and gratitude for her hard work, and that is the best and most fitting tribute that I can give to this most outspoken of MPs.

I am a Brummie born and bred, so the fact that I now represent a constituency that is the heart of Birmingham is a source of great honour and it is a privilege. My constituency consists of four extremely diverse and different wards: Aston, Ladywood, Nechells, and Soho. Between them, they are home to the Grade I-listed Aston hall, the historic Jewellery quarter, the Star City entertainment complex and the Grade II-listed Soho house, home of the manufacturer Matthew Boulton. I am also lucky to have both Aston Villa and Birmingham City football clubs in my constituency, but as both are in the premier league I will have to learn new skills of football diplomacy when the two sides play each other.

Birmingham, Ladywood is one of the most multicultural areas in the country. More than 50% of our population is non-white and we have a proud multicultural tradition. I have been privileged to meet many people from all race and faith backgrounds during my time as a candidate and now as a Member of Parliament. Each such meeting has reiterated to me that while the people of my constituency might have come from different places, the destination they seek is the same—a place of greater opportunity and the same chance as everyone else to succeed.

That brings me to why it is so important to me to begin my parliamentary career by speaking in this debate and focusing on the labour market. My constituency has the devastating and unwanted distinction of having the highest rate of unemployment in the country. Our figures for unemployment have been too high for many decades. In researching my maiden speech, I noted with dismay that unemployment was a theme in the maiden speeches of many of my recent predecessors. My constituency is particularly blighted by long-term intergenerational worklessness, which is the legacy of previous recessions which devastated my constituency so much that it has never really recovered. I was pleased, therefore, when the Labour Government announced in December 2007 that £1.5 billion would be provided through the working neighbourhoods fund specifically to tackle the problem of long-term worklessness, and allocated more than £100 million of that money to Birmingham.

I wish that action had been taken earlier in our term in office. However, I have real concerns about the effectiveness of the working neighbourhoods fund in Birmingham, where the partnership tasked with delivering the fund is controlled by Birmingham city council, which has been run by the Conservatives and Liberal Democrats in coalition since 2004. To date, the fund has not been adequately used for the express purpose for which it was created by the Labour Government—to help to reduce unemployment in Birmingham’s most deprived communities such as my own. Two facts are evidence of that. First, mid-way through the three-year programme, of the £30 million that had been spent, only £2.5 million had actually been spent on projects to tackle worklessness. Secondly, and just as controversially, £14 million of working neighbourhoods fund money was diverted to help to bail out the Tory-Lib Dem council’s budget overspend on social services. I believe that cash for jobs should be spent on jobs, and I hope that what is left of that money is spent in the way intended by the Labour Government—to support the long-term unemployed in areas such as mine in getting the skills and confidence that they need in order to get and retain a job so that they can transform their lives.

I wish to make a related point on youth unemployment. In 1983, Clare Short warned that school leavers in Ladywood in the 1980s faced unemployment not only in ever greater numbers, but for ever greater periods of time. In 2010, I find myself warning that the children of that generation might be in the same boat, because of the new Government’s plans to cut the future jobs fund. That fund created 200,000 jobs and arose from our guarantee of a job, or training or a work placement, for anyone who was under 25 and out of work for six months. I am disappointed that the new Government are getting rid of the fund. Once again, a Conservative Government—this time helped by the Liberal Democrats—are walking away from the young unemployed in our country. I implore them to change course. When we damage our young people, we damage us all, because they are our future. If the Government walk away from them and break their hearts and spirits, they truly will create a broken Britain.

I conclude on a personal note and with a pledge to the people of Birmingham, Ladywood. My grandfather came to this country from Pakistan in the 1960s. He worked long hours on a low wage and made sacrifices so that his family could access greater opportunity. He died when I was six years old and did not live to enjoy the fruits of his labour. He could not have known that his decisions and his hard work would one day lead to his granddaughter being elected to this House. I pay tribute to him and to the successes of the Labour party and the Labour Government, who created the opportunities that made my family’s journey and that of so many ordinary hard-working families possible. I believe that opportunity and the chance to fulfil one’s aspirations is the birthright of every one of our citizens, and I pledge to the people of Birmingham, Ladywood that I will devote myself to eradicating the misery, hopelessness and sheer waste of long-term unemployment so that my constituents can have what they deserve—the same chance to succeed in life as everyone else. For however long I am their Member of Parliament, I will never settle for anything less. I thank the House for listening.