Independent Banking Commission Report
Sheila Gilmore Excerpts(13 years, 3 months ago)
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Mr Osborne
John Vickers explicitly examines the argument that this will somehow undermine credit and comes to the conclusion that it will not. He says that, first, because the broader benefits of a stable banking system to the banks themselves and to the economy outweigh the costs and, secondly, because retail banks will, as I say, be more encouraged to use their retail deposits to support retail lending.
Sheila Gilmore (Edinburgh East) (Lab)
One of the forms of banking competition that many people in Britain want is the encouragement of more mutuals, with a legal safeguard to prevent them from being refloated. What plans does the Chancellor have to progress that agenda?
Mr Osborne
We do want to see more mutuals created—we have explicitly said that in relation to Northern Rock, while not ruling out other potential options for Northern Rock. We have also taken action to strengthen credit unions, which are another part of the piece. It will be good to see mutuals growing, and the proposals in the report, particularly those on competition and the switching of current accounts, will help the mutual sector.
Finance (No. 3) Bill
Sheila Gilmore Excerpts(13 years, 5 months ago)
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Tracey Crouch (Chatham and Aylesford) (Con)
Having listened to the lengthy speech made by the hon. Member for Walthamstow (Stella Creasy) in the Public Bill Committee, and having checked Hansard to find that it was almost identical to the speech that she just made, I congratulate her on raising, yet again, both her profile and the issue of unscrupulous and high-cost lending. As she knows, she has a great deal of cross-party support on the underlying problem, but I fear that her new clause has little to do with identifying a workable solution, and I found her speech today disappointingly partisan.
I have been rather bemused by the hon. Lady’s recent Twitter stream, which refers to the campaign to persuade Members to vote for her Consumer Credit (Regulation and Advice) Bill. Perhaps she does not realise that we are voting today not on her Bill—although many of us may agree with its principles—but on amendments to the Finance Bill. For reasons that I shall give later, her new clause is fundamentally flawed.
The problem of vulnerable consumers being preyed on by high-cost credit lenders is not new. It did not suddenly appear following last year’s general election. It is a problem about which Members in all parts of the House have felt strongly for some time. My constituency contains areas of severe deprivation, and I deal regularly with case work relating to debt. I am active locally in trying to ensure that those with debt understand that there are good people to turn to, such as local credit unions and citizens advice bureaux, and that they need not rely on high-cost credit lenders.
Through the local media I have highlighted my own earlier debt problems, incurred when I worked as a researcher here in the House of Commons in the mid-1990s. I have received messages from local people saying that it was brave and courageous of me to be so honest, but I do not think that it was anything of the sort. I saw it merely as a way of removing some of the stigma from debt, and demonstrating not only that anyone from any background can get into debt, but that there are good people out there who can help to put those in debt back on the right track.
Increasing debt is an issue that should concern Members in all parts of the House. It, too, is not a new issue. I remember talking about the nation’s personal debt topping £1 trillion before I entered the House. For some time my local citizens advice bureau has been advising clients with debts totalling £1 million per week, including priority and non-priority debts, but the figure is now nearing £3 million per week. Unfortunately, Medway has a high repossession rate: on average, about 70 repossession hearings take place each week. In these worrying times, what we do not need are unscrupulous credit lending and, indeed, debt management companies taking advantage of those who are in financial trouble and at their most vulnerable.
The new clause proposes taxation measures as a means of clamping down on, or even stamping out, the industry. I fear, however, that the Opposition have not thought it through in any great detail. For a start, they have not addressed its unintended consequences. It is likely that any additional tax on the companies in the industry, just six of which control about 90% of the market, would simply be passed on to the consumer in the form of even higher rates. What is being proposed as a solution to the problem could exacerbate it by increasing the cost to the consumer and creating an even larger debt.
Sheila Gilmore (Edinburgh East) (Lab)
The new clause asks for a review and a report. It does not suggest that the proposed measures should be implemented immediately. I fail to see the detriment that the hon. Lady seems to have identified.
Tracey Crouch
The hon. Lady obviously did not listen to the Minister’s response to a point made earlier. As he said, a review is currently taking place. The new clause proposes
“a review of all taxation measures contained in this Act”.
I think that, on this occasion, the hon. Lady is wrong.
Oliver Heald
I am a member of one, and membership is a good way of trying to convey knowledge about credit unions. I pay tribute to the all-party group on credit unions, chaired by my hon. Friend the Member for East Hampshire (Damian Hinds). We need to do more to increase the amount of credit that is available on reasonable terms.
I am a member of the all-party group on financial education for young people, chaired by my hon. Friend the Member for North Swindon (Justin Tomlinson). The move to teach children the basics of budgeting from quite an early age is long overdue. In households that are chaotic and at the bottom of the economic pile there is very little understanding of basic budgeting, which we must resolve.
Finally, I want to support the point about advice. In the past, I have given free legal advice and dealt with welfare rights. I have experience of the people the hon. Member for Makerfield described, who come to see us carrying bags of documents from companies and unpaid invoices. The people who sit down with them, go through everything carefully and present their case to creditors do a marvellous job. The other day, I went to the Shelter facility in Hatfield, which offers debt advice in that part of Hertfordshire. Someone there had been working on debt advice for 29 years and she had lots of letters on the wall from people saying how grateful they were to her for trying to sort things out for them. We must certainly support debt advice, but we need to do other things in relation to education and credit unions. I would like more regulation in this field and, possibly, a cap.
Sheila Gilmore
Unfortunately, it seems that debates on this subject are beginning to follow a pattern: we all agree that high-cost lending is terrible and a scourge of many of our communities and that we would like something to be done about it, but the problem arises in agreeing to act. In February’s Back-Bench debate, the teeth were drawn from the motion proposed by my hon. Friend the Member for Walthamstow (Stella Creasy). The amendment agreed by the majority of Members of the two Government parties removed any impetus for immediate action or any agreement that the regulator should consider doing something. I see exactly the same pattern beginning to emerge. We are told that we all agree that high-cost lending is bad, but when Opposition Members want something to be done about it we are accused of breaching the consensus. In the words of the hon. Member for Brigg and Goole (Andrew Percy), we are the ones who are being political.
Andrew Percy
That is not quite what I said. I said that if we were to be political, we could bandy about the suggestion that all Governments had done nothing. I argued that we should await the Government’s response to the consumer credit review. We can condemn them if they do not do what we want, but until then we should at least try to pretend to be on the same side.
Sheila Gilmore
I am afraid I do not share the hon. Gentleman’s confidence that the review will indeed cover the issues, although something might be pending. The hon. Member for Solihull (Lorely Burt) is no longer in the Chamber, but I was interested to hear her say that “we” would all be happy to see the regulations “we” would be bringing forward. I do not know who “we” were, but it suggests that the Government’s plans are quite well advanced and that the hon. Lady is privy to their thinking, as we are not. At the end of the debate, I hope we shall hear what the regulations are and what will happen.
Warm words are not enough. Some of the organisations involved have tremendous resources behind them, yet there is so little control of their operations. Their services can seem attractive because they “solve” people’s immediate problems. Regrettably, at this stage credit unions cannot compete. Castle credit union in my constituency had to give up its shop-front premises in the main street because it did not have the resources to continue to pay the rent. It has moved into an office in a community building and is still functioning, but it has much less presence than it would have if it were still on the high street, where people would be able see it from the bus and pop in when they were doing their shopping. Now that it is tucked away in the community office, people might not know where it is. The situation is not helped by the fact that the local community newspaper, which used to advertise such facilities, has had to shut up shop owing to cuts in its funding. That will make it even harder for people to find the credit union.
Stephen Williams
I agree that sometimes it might be hard to find a credit union, although the one in my constituency is based on Cheltenham road, a main road. Perhaps credit unions need to go out and find customers; for instance, Bristol credit union had a stall at St Paul’s carnival this weekend.
Sheila Gilmore
Indeed. On Saturday, I was at just such a festival in my constituency. It was a beautiful day—the first sunny Saturday for some time. Volunteers from Castle credit union, who help to keep it going, were there for exactly the reasons the hon. Gentleman suggests. However, if, unlike credit unions, high-cost lenders have a high street presence—extremely attractive, brightly lit and hardly missable—it is much easier for people to find them.
Regrettably, only 2 % of people in the UK are members of a credit union. We can all work harder to increase that number, but one thing that would clearly help would be real resources to build the movement. Experience in my city is that real resources, far from being put in, are declining, and there are even fewer members. Despite the efforts of the volunteers who man stalls at local fairs and festivals, credit unions are not providing the competition we want with high-cost lenders. I should dearly like people to use credit unions instead of those institutions.
I understand that this is politics, but when Opposition Members make proposals we meet the accusation that Labour should have done things over the past 13 years, and it is suggested that the fact we did not debars our making proposals and expecting them to be listened to. I am sure that if my hon. Friend the Member for Walthamstow had been a Member during our period in government, she would have been harrying Ministers in exactly the same way as she has harried the Government over the past year. She would not have been afraid to speak.
We should not accept too lightly the suggestion that the previous Government did not look seriously at financial inclusion. The present Government say that they are interested in it too, but they do not put in the means to make it happen. It is not good enough to say they are interested. In my Westminster Hall debate, I referred to our manifesto proposal to oblige banks to provide basic bank accounts. The Minister’s response was, “Oh, we don’t really want that sort of regulation. We want it to be voluntary and we want to work with banks.” That is all too often the Government’s response. They say they want the ends, but they are not prepared to put in the means.
The previous Government did a lot of work on financial inclusion, but no one thing is enough: credit unions will not do it; basic bank accounts will not do it; and taking action against high-cost lenders alone will not do it. We need a range of measures.
Some of the steps that would help have been positively stopped by the Government. The growth fund, which helped to boost credit unions and other community-based financial institutions, has not been renewed or extended.
Damian Hinds
Is the hon. Lady aware of the modernisation fund of up to £73 million?
Sheila Gilmore
I might be wrong, but I understand that the fund is not a substitute for the money that was available through the growth fund. When it was introduced, it was hoped that banks would lend to community-based lending organisations; they have not done so, yet high-cost lenders can get finance to expand their businesses to make them attractive.
Stella Creasy
Does my hon. Friend agree that it is a cause of concern that the Wellcome Trust, which is supposed to advance charitable endeavours, has lent £73 million to Wonga so that it can expand its operations in the UK? Such companies can easily access credit; indeed, that sum is the entire amount left from the growth fund for credit unions across the UK.
Sheila Gilmore
I thank my hon. Friend for that helpful intervention. If we are to put the money where our mouth is, it is extremely important that we do not just sit in the House constantly agreeing about how bad something is; we need to take action. On that basis, I urge Members, and perhaps even the Government, to accept the new clause.
Steve Rotheram (Liverpool, Walton) (Lab)
I thank the House for its indulgence. I was at a meeting of the Select Committee on Communities and Local Government so I missed the beginning of the debate. I shall try to be as brief as possible, because I am sure that Government Members will have heard the compelling case made by my hon. Friend the Member for Walthamstow (Stella Creasy) and my colleagues and will have been won over by the powerful arguments they articulated.
Those outside the Westminster bubble sometimes question what we as Members of Parliament do in this place. I am sure that there are moments when even we wonder what it is all about and why we parliamentarians put ourselves through the rigorous demands of elected office. I realise just how privileged I am to be here and to represent not only the people of my community, for whom I have the highest regard, but a great city such as Liverpool, and then I have the opportunity, such as the one put forward tonight, to change the lives of ordinary people and realise that my time here is anything but wasted.
The Economy
Sheila Gilmore Excerpts(13 years, 6 months ago)
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Stephen Williams (Bristol West) (LD)
The hon. Member for Hartlepool (Mr Wright) rightly set much of his speech in the international context. I want to start by doing much the same, by comparing the UK’s record with that of our fellow EU member states, particularly the unfortunately named PIGS—Portugal, Italy, Greece and Spain—around the Mediterranean periphery. We have all seen or read about the extraordinary scenes in Greece in recent weeks and hours. The Greek Government debt currently has a triple C rating from Standard and Poor’s, which is as low as it can go without it effectively being a recommendation that no one should buy, whereas the UK has a triple A rating. That might surprise hon. Members given the underlying economic data on our budget deficit. Even after the difficult decisions that the coalition Government took in their first year in office, our budget deficit is currently 9% of GDP for 2011, as compared with the eurozone, where the figure is 4.3%, and Greece, whose budget deficit is lower than the United Kingdom’s, at 8.4% this year. That surprising difference in bond ratings is accounted for by the fact that people who want to lend to countries are just the same as those who want to lend to companies and individuals. They are looking for the confidence and certainty that comes when an institution that is in trouble realises that it is in trouble and takes the necessary measures to get to grips with it. That is what this coalition Government are doing.
Sheila Gilmore (Edinburgh East) (Lab)
Is the hon. Gentleman concerned that Ireland and Greece, the two countries with the greatest difficulties, have both gone through austerity programmes that were not enough, both had to have further bail-outs and implement more austerity programmes, and both still have difficulties? Does that not give him pause for thought about whether austerity programmes will lead to recovery?
Stephen Williams
I specifically mentioned Greece, and those who have been following events in Greece from afar will know that the reason why the international community is so concerned about Greece is that it has felt until recently that the Greek Government have simply not got to grips with the plan, or have announced a plan but not adhered to it. That is the key difference. This Government have announced plans—difficult plans—to deal with deficit reduction and we are sticking with them, no matter how painful they might be.
Dr Coffey
The hon. Lady is absolutely right. I am very proud of my home city, but I hope that she will also credit Lord Heseltine. We started back in the ’80s, we saw the Albert dock and other aspects of the city transformed, and some of that continued under the previous Government, but investor confidence in the city was knocked by that legacy of the ’80s which was referred to earlier.
The right hon. Member for Morley and Outwood also seemed to use marine terms, trying to suggest something about fancy yachts and the similar. The previous Government, in marine terms, were possibly the equivalent of the Titanic. People took their eye off the ball—holed by an unseen disaster, perhaps—with unintended, tragic consequences. That is the state of the economy which has been left behind, however, with tens of thousands of pounds of debt being loaded on to every child born and on to children not yet born.
The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) referred to the impact of the Budget last year on mothers and families, but every mother and family I know has to cope with a household budget which means that they have to try to balance the books every month. That is absolutely key.
Dr Coffey
No, I have already given way a couple of times to Opposition Members.
It is absolutely key to ensure that when one has already maxed out the credit card, one cannot not keep spending but has to stop and start paying it back.
Staying with the nautical terms, I recognise that it is not going to be plain sailing ahead, but I can assure members of the British public that Conservative Members will be firmly on watch. We may need to tack and jibe to reach our final destination, but that destination is fiscal sanity, a growing economy, and a prosperous working Britain. That is why I will support the amendment to the motion.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I want to start by putting an end to the myth that the Government have no mandate for the action they have taken. [Interruption.] Already I can hear somebody saying from a sedentary position that there is no mandate. Let us look at the figures. I do not think anybody in the House would deny how unpopular the Conservative Government of 1997 were. That led to the Labour landslide. I therefore wonder how the Labour party managed to take an even lower share of the vote in 2010 than the Conservative party took in 1997.
We went into the last general election saying that we would get the budget and the deficit under control, and that we would introduce welfare reform. Everybody heard that message, not least because the Labour party kept delivering leaflets to everybody’s houses saying that we were going to do those things.
Sheila Gilmore
I do not dispute that the Conservative party went into the election with those things in its manifesto. The point is that the Conservative party did not secure a majority and its coalition partner went to the electorate with a completely different prospectus.
Alec Shelbrooke
I am not sure that I quite understand the hon. Lady’s point.
Charlie Elphicke
I am grateful to the hon. Lady for the U-turn she has announced.
When I intervened on the shadow Chancellor, he attacked me for opposing the weakening of our border controls. The previous Government were not well known for being strong on border security or on immigration controls, yet he criticised me for standing up and defending my constituency. Just as the motion before the House is fantasy economics, it was the shadow Chancellor’s fantasy that this Government cut our border controls. It was the previous Government who cut our border controls, such was the commitment of the previous Prime Minister to keeping our borders safe. He had the grand plan of selling off our English borders at Dover in a privatisation, so much did he care about England. In many ways, I wish that he were in the Chamber more often, rather than hidden away in Portcullis House, so that we could set forth to him our concerns about the policies he pursued. The recession and misery that have been brought upon people up and down the land by his serial mismanagement of the nation’s finances are nothing short of a disgrace.
The Labour party has gone from government to opposition, but has learned nothing and forgotten nothing. It has proposed a £13 billion unfunded VAT cut—populist but unrealistic. It has made £10 billion of welfare reform spending commitments—nice for the base of people in dependency culture, but unrealistic and unaffordable. We need to ensure that work pays.
Charlie Elphicke
No.
We already have a situation in which our debt interest costs us £49 billion a year. We cannot afford to carry on like this. We need to get the nation’s books back into balance, and the country back under control. The Government are doing exactly that.
Let us look at the detail of the Opposition’s motion. It refers to 25,000 new affordable homes, but the reality is that in the five years of the previous Conservative Government, 34,786 affordable housing units were built on average each year, compared with 24,560 under the last Labour Government. That is a 30% fall in the amount of affordable housing built. The Labour party should not be proud of such a record, and no one reading the motion before the House can have any trust in the Labour party on the issue. The motion refers to jobs, which Labour destroyed during the latter part of their period in office.
Scotland Bill
Sheila Gilmore Excerpts(13 years, 6 months ago)
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Stewart Hosie
A permanent reduction for corporation tax to be devolved and taking responsibility for the income we raise to pay for the services we have.
Sheila Gilmore (Edinburgh East) (Lab)
Will the hon. Gentleman let us and Scottish taxpayers know how that financial gap would be met in the period before any economic benefits might arise? Would there be cuts in services, for example, or would the Scottish Government have to consider a rise in income tax for people in Scotland?
Stewart Hosie
The hon. Lady predicates her argument on failure, as Labour Members tend to do. There is no reason to believe that there would be a net loss of revenue to Scotland. Let me put it to the hon. Lady in a different way. The UK went into the recession with £0.5 trillion of debt; it now sits somewhere close to £1 trillion and it is forecast to rise under this Administration to about £1.5 trillion by 2014-15. Scotland, however, has had a net surplus over many years and it is certainly a surplus relative to the UK even in very recent years. Instead of talking Scotland down, we need to be serious about how to gain the powers to grow the Scottish economy and take responsibility for our own actions, which is vital.
Sheila Gilmore
I understand the optimism and do not want to cut through it in any way. However, the hon. Gentleman said that he accepted that there would initially be a reduction in the block grant, which will initially create a financial issue. I was simply asking how it would be met in the short term.
Stewart Hosie
It will not be a reduction because we will have the corporation tax yield, which is comparable to the reduction in the block. It is the same amount of money initially and we take responsibility thereafter.
Stewart Hosie
Some projects were simply unaffordable, not least because a number of parties—the other three parties represented here now, in fact—voted for half a billion pounds for the Edinburgh tram system, and look at what an overwhelming success that is!
The Scottish Government are responsible for the vast majority of Scotland’s public investment, covering transport, water, health, education, local government, prisons, housing and so forth. There is, I hope, now widespread agreement across the political spectrum that the Scottish Parliament should have full responsibility to determine the pace and scale of Scotland’s infrastructure investment programme, within a prudent and sustainable long-term financial framework. The Scottish Parliament should have substantial capital borrowing powers to fund productive expenditure for the following purposes: for very large, discrete projects or programmes such as the Forth crossing, which the Minister mentioned; to provide medium-term economic stimulus similar to the accelerated capital programme undertaken in 2008-09 and 2009-10; to smooth the profile of investment in key public services; and to help to lever in additional investment, particularly from the private sector.
Sheila Gilmore
Given what I understood to be the hon. Gentleman’s party’s green environmental credentials, I am surprised that the capital projects he appears to favour are largely to do with roads, rather than public transport, such as the tram proposal that has been mentioned.
Stewart Hosie
The hon. Lady’s surprise is a matter for her, not me. An investment programme is in place that includes housing, environmental and insulation programmes and a large number of other programmes in Scotland, but we are discussing capital borrowing, not the specific projects for which it might be used. That will be a matter for the current and future Scottish Governments.
Sheila Gilmore
I must take the hon. Gentleman up on the point about housing, because I understand—from a recent report by Shelter, for example—that the number of new affordable homes being started in Scotland this year will have fallen from 6,000 to 1,500.
Stewart Hosie
That report is probably for the overall statistics. Sadly, because of the banking crisis, the banks’ withholding of cash and the difficulties with Bradford & Bingley, which funded housing associations, the slack has had to be taken up by the Scottish Government, who have been funding as many new housing starts as is humanly possible. I find it extraordinary that, given the thousands of houses that have been contributed to by the Scottish Government, the hon. Lady or anyone else on the Labour Benches can talk about Labour’s record, which, from memory, was not 6,000, 600 or 60, but six council houses being funded by that Scottish Government.
Stewart Hosie
I have given way twice—I am going to carry on.
As I was saying, the Scottish Parliament should have substantial capital borrowing powers for very large, discrete projects, the provision of medium-term economic stimulus, smoothing the profile of investment in key public services and helping to lever in additional private investment.
Stewart Hosie
Not just now.
However, as a result of the decisions taken by the UK Government in 2010 in the comprehensive spending review, capital budgets available to the Scottish Government are now likely to fall by some 36% in real terms. That represents a cumulative reduction in spending power of around £4.1 billion over the period of the comprehensive spending review. The speed and scale of the cuts by this Government significantly constrain the Scottish Government’s flexibility in managing their infrastructure programme. It is vital that while ensuring the overall sustainability of borrowing—I agree with the Minister on that—Scotland’s capital borrowing facility has sufficient scale and flexibility to enable the funding of productive investments over the long term.
The proposals in the Bill state that from 2015 the controls and limits applied to capital borrowing mean that Scottish Ministers should be allowed to borrow up to 10% of the Scottish capital budget in any year to fund capital expenditure—£230 million in 2014-15—and that the overall stock of capital borrowing could not rise beyond £2.2 billion. They also state that borrowing to finance capital funded by a loan from the national loan fund would be for a maximum of 10 years, but that a longer time frame—for example 25 years—may be negotiated if that better reflected the life span of associated assets such as with the new Forth crossing.
In the written statement of 13 June, the Chancellor and the Secretary of State proposed:
“bringing forward to 2011 pre-payments, a form of cash advance, to allow work on the Forth replacement crossing”
and
“introducing a power in the Scotland Bill that will enable the Government to amend, in future, the way in which Scottish Ministers can borrow”—[Official Report, House of Lords, 13 June 2011; Vol. 728, c. 58WS.]
including through the provision of bonds. Notwithstanding any of that, the £2.2 billion cumulative limit is unchanged.
I am pleased that there is now established consensus among the Scottish Government, the Scottish Parliament, the House of Commons Select Committee on Scottish Affairs and a number of independent experts that the Scotland Bill’s proposals for capital borrowing require substantial enhancement and improvement. That unanimity was reflected in the motion that was agreed unanimously on 9 June in the Scottish Parliament. I make this criticism of the proposals even with the changes regarding our attempt to have capital borrowing devolved so that limits, bond issuance and all these matters are agreed between the Governments on a statutory basis. At the moment, the Bill is predicated on a framework that appears to have been developed without any explicit discussion about sustainability or affordability and without offering any objective means of testing those essential criteria. The annual borrowing limit of 10% of capital departmental expenditure limit seems arbitrary and the proposed total limit on borrowing, set at £2.2 billion, is believed to be too low to make a meaningful difference. Indeed, I think that the Scottish Parliament Scotland Bill Committee in Holyrood suggested £5 billion. The UK Government have not proposed any objective criteria to determine the path of total capital borrowing capacity over time and that builds uncertainty and discretion into the framework. The arbitrary mechanism that the UK Government have proposed for revising this is inconsistent with the basic principles of devolution. The central assumption of a 10-year repayment period for capital borrowing is inappropriate, as public capital assets will typically have a useful life of perhaps more than 30 years. Although helpful, the early implementation measures will do very little to offset the cumulative £4.1 billion reduction in capital expenditure.
The changes are welcome, but we believe that the UK Government’s proposals still require improvement in four key areas. First, the specification of annual limits on borrowing should be agreed between the Governments and not set arbitrarily. Secondly, the methodology for determining the borrowing capacity that is sustainable in the long term needs to be agreed. Thirdly, the terms of repayment for capital borrowing need to be agreed and, fourthly, the impact of the early implementation measures that are proposed also need to be looked at and agreed properly. We believe that should be done within the framework of a statutory agreement between the two Governments, and that is the purpose of the various amendments and new clauses we have proposed. They include amendment 26, which would allow Scottish Ministers to borrow for the purpose of meeting capital expenditure without requiring the approval of the Treasury and without it being by way of loan, and amendment 27, which would mean that Scottish Ministers and the Treasury must both agree to a code of practice and framework within which these things would be agreed. Our amendment 28 would remove the measure that suggests the cumulative borrowing total should be set at £2.2 billion, so it would become redundant when an agreement was in place.
Amendment 29 would remove subsection (10) of clause 32, which introduces the type E procedure. That subsection would not be necessary because the agreement on how Ministers are to determine and keep under review how much they can afford to borrow, the terms and conditions and the sums that may be borrowed and the limit on aggregate at any time outstanding in respect of the principle would be agreed.
Amendment of the Law
Sheila Gilmore Excerpts(13 years, 8 months ago)
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Mr Pickles
I suppose if a council sits on £130 million of reserves, that is an easy thing to do, but let him recall Hammersmith and Fulham, which, after years of considerable increases, managed not only to freeze the council tax but to cut it in each successive year.
I regret that the Labour party says one thing in the Chamber and another thing to the voters. I am proud to say that we are able to set aside—
Mr Pickles
In a moment.
I am proud to say that we are able to set aside £3 billion to support councils with a freeze on spending, and that is despite the mess that the Labour Government made of our nation’s finances. It sounds as though some on the Opposition Benches would like to wash away the past few years and drown out their bitter legacy: record national debt; unsustainable public spending; and a crushing burden on ordinary families.
The Opposition do not like to admit that their Labour Government planned spending cuts of £44 billion by 2015. Labour’s cuts were to be front-loaded cuts, with £14 billion of cuts falling this April, and Labour’s spending plans would have made bigger cuts to housing, regeneration and local government.
On Saturday, the Leader of the Opposition should have told the crowds the extent of Labour’s cuts. That would have been much more convincing, as hon. Friends have said, than comparing himself to Martin Luther King or, more bizarrely, to Emily Pankhurst.
Mr Pickles
Certainly not to Martin Luther King.
Let us be clear: Communities and Local Government was the unprotected Department under Labour’s plans. Unprotected Departments would have received a larger average real-terms cut over four years under Labour than they are under the coalition’s deficit reduction plans over the spending period.
Thanks to the £18 billion of savings from our welfare reform programme and the £3 billion of savings from lower debt interest, the coalition is cutting £2 billion less from departmental budgets than the Labour party would have. Labour would have cut local government more, and, without the support for a council tax freeze, the end result would have been soaring council tax.
Sheila Gilmore
Will the Secretary of State consider monitoring what happens to charges where local authorities have imposed the council tax freeze? We have had a council tax freeze in Scotland for four years now, and a 90-year-old constituent of mine has just received a charge for garden aid. It was nil under a Labour council, it became £75 and it is now £200, so she is not that impressed by the council tax freeze.
Mr Pickles
We will certainly look at that, but may I remind the hon. Lady that Labour councils are of the view that it would be “barmy” not to have the freeze, and that the freeze itself is “great news”? She should really get with the programme.
Sheila Gilmore (Edinburgh East) (Lab)
A very interesting thing happened in my city in 2009. For the first time since the 1960s, the number of affordable rented homes built exceeded the number of private homes—55% of all new build was affordable rented homes, subsidised by public spending. That subsidy helped the private builders who otherwise would have had to shut up shop for a while—as many have had to do—and meant that some at least could stay in work, and that gave work to the skilled work force who would otherwise be sitting at home watching daytime television because there was no work. When those people are at work they are contributing to our economy and paying taxes—[Interruption.] I do not know why that is so funny for people who want to reduce the deficit, because if people are paying taxes in, that is far better than their simply taking benefits out.
That was a good thing. It showed the weakness of the private sector, however, that it was affordable rented homes that had to be built in the numbers to keep some people in work. I look out from my constituency office at a regeneration scheme that has stalled because the private sector is not leaping in to build new homes and to bring offices or any other kind of business into the area. I look out on land. There is no shortage of land, but there is a shortage of investment to make all this development happen. We ought to invest in housing and build a real shared equity scheme, rather than providing a meagre amount of money that will be available for only one year, as we learn if we read the detail. The scheme is not sustainable: for one year there will be £250 million.
Shared equity has certainly helped to keep the house market going in my city—it is very important—but it needs subsidy. What is wrong is the constant juxtaposition of the private and public sector as though they are at war. In fact, the two are constantly interrelated.
Sheila Gilmore
No, I will not.
The private and public sectors are constantly interrelated, because public sector stimulus has kept the economy going since the recession began.
History has been rewritten, and I find it deeply perplexing and upsetting that the Liberals have been prepared to be complicit in that. I am not surprised that the hon. Member for Colchester (Bob Russell) took us along the byways of Colchester becoming a city, because it was a diversionary tactic. He did not want to talk about his party’s real economic policy. It reminded me of when I was working from home—suddenly, cleaning the kitchen became quite attractive because I could not settle down to do the work that required a bit more effort. That is what is happening with a party that went into the election telling people that it would be downright dangerous to cut public spending too quickly. That is not just some sort of Labour notion, as the Conservatives seem to think. It was the policy of two of the parties that went into the election and that, together, won a majority of public support. It is not true that the public supported the financial disaster that the Conservatives are now wishing on us.
I said in a previous finance debate that the proof would be in the outcomes and that if the Conservative party was right and economic growth was driven by their policies, I would concede that, but so far we are seeing nothing of the sort. Our position would not be too far, too fast—
Amendment of the Law
Sheila Gilmore Excerpts(13 years, 8 months ago)
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Stephen Williams (Bristol West) (LD)
This is, of course, the second Budget of the Liberal Democrat-Conservative coalition Government. The first Budget was put together in the extraordinary circumstances that followed the 2010 general election, when the two parties came together to co-operate in government and clear up the mess left by the Labour Government. In that Budget we dealt with the emergency, and set out a plan to restore fiscal credibility and put Britain back on track. Today we begin the next phase of this coalition Government. Over the next four years we will build a stable economic future, with growth in our economy that is regionally balanced, encourages innovation, and is green and sustainable. We have moved from the rescue stage. We are now on to recovery, and we look forward to reform.
Sheila Gilmore (Edinburgh East) (Lab)
When the hon. Gentleman stood for election last year and his leader said that making deep and fast cuts in public services would be dangerous, did he believe it? If he did, but then came to a different view, what made him change his mind?
Stephen Williams
I would remind the hon. Lady that we can all be selective with quotations from different party leaders or finance spokesmen in the general election. Indeed, we could do that all round the Chamber. I well remember the leader of my party saying that there would need to be “savage cuts” in public expenditure to deal with the desperate circumstances that whoever won the general election would have to deal with. He was heavily criticised for using the phrase “savage cuts”; none the less, he gave a stark warning that was also timely and well made.
Despite those circumstances, we—and in particular the Liberal Democrats in the coalition—have endeavoured to ensure that all the measures that we put in place, whether in the emergency Budget, the spending review or the Budgets to come, are underpinned by fairness. It is important that we recognise people’s concerns about the cost of living and the pressures on their household budgets. That is why today Liberal Democrats in particular welcome the further step taken towards our main manifesto commitment of ensuring that nobody on an income of less than £10,000 should face an income tax bill. From April this year, almost 900,000 people will be taken out of income tax altogether, with all average earners getting a tax cut of £200. In a year’s time, 1.1 million lower-paid people will be taken out of the income tax net altogether, leading to a tax cut for everyone on average earnings of £326 a year. This measure will, as we always pledged, help the poor and reward work.
Oral Answers to Questions
Sheila Gilmore Excerpts(13 years, 9 months ago)
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Mr Osborne
If my hon. Friend will allow me, I will keep my personal views on this matter private while we await the publication of the independent commission that has been set up to look at this issue, and which I, the Business Secretary and the whole House will have to consider. It is producing its interim report in April, and will produce a final report in September. Let us remember that the commission was set up by this Government to ask the difficult questions of the kind that he is asking, because we are determined not to repeat the mistakes of the past.
Sheila Gilmore (Edinburgh East) (Lab)
2. If he will bring forward proposals for a scheme to provide looked-after children with a savings account or trust fund funded by contributions from the Exchequer; and if he will make a statement.
The Chancellor of the Exchequer (Mr George Osborne)
In October, the Government announced that we will create a new tax-free children’s savings account to be known as the junior ISA. We expect the accounts to be available from this autumn, and will be setting out details of how they will work next week. As the hon. Lady and the right hon. Member for Wythenshawe and Sale East (Paul Goggins), who is my constituency neighbour, will know, Barnardo’s and Action for Children have proposed that these accounts be used to support saving for looked-after children. I know that these children face particular challenges, and I can tell the House that the Department for Education will work with others to make the necessary funding available to ensure that we can provide the support that they deserve. We will work with charities and interested parties to develop detailed proposals funded by the Government, so that junior ISAs can best support these children.
Sheila Gilmore
There were warm words on this last summer when the child trust funds were abolished, and there are warms words now, but will the Chancellor tell us when such a savings scheme, backed by the Government, will be introduced for looked-after children?
Mr Osborne
I have just announced the money for the scheme that the hon. Lady asked me about, and we will now engage with Barnardo’s and Action for Children. I have seen their report, “On Our Own Two Feet”, and we will provide the funding to make the scheme a reality for looked-after children.
Fuel Prices and the Cost of Living
Sheila Gilmore Excerpts(13 years, 9 months ago)
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Justine Greening
I will not give way to any more Opposition Members, and I will tell the House exactly why. This is not the first time that there has been an opportunity to debate fuel duty rises: last month a Conservative MP had a debate in Westminster Hall. The reason the Opposition have now gone quiet is that they probably did not know that that debate was due to take place, but if they did, it is even more disgraceful. How many Opposition Members turned up to participate in that debate and represent their constituents?
Claire Perry
My hon. Friend makes an excellent point. The shadow Chancellor’s predecessor referred to a financial primer that he felt he should read. Might I suggest that the current shadow Chancellor should borrow a copy? I would be delighted to lend him my calculator because I think that a financially literate Opposition would be a quality Opposition and one that the country would welcome.
I find this muddled and inaccurate motion extremely worrying because it is illegal. The EU directive on VAT states:
“Member States may apply either one or two reduced rates…The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III”,
but annex III does not list road fuel and other amending articles do not permit a reduced rate or an exemption to be applied to transport fuel. Even if we wanted to do this—if the motion were passed—it would be impossible. This is yet another inaccurate attempt to create a political narrative that joins words such as “bankers”, “tax” and “too far too fast”, but does nothing to address the fundamental problem that the Labour Government left, which we are having to clear up. I do not know about you, Mr Deputy Speaker, but people in my constituency are sick to death of this political posturing and narrative.
Claire Perry
I am afraid that I will not at the moment.
The motion is a sham attempt to create dividing lines when we should be working together to get the country growing and out of this mess. It is cynical, muddled and inaccurate, but, as in all our debates on this issue, I welcome the chance to speak about these matters. Outside London, in many parts of rural Britain, people use their cars. Some 43% of households in London do not own or have access to a car, whereas the figure for my constituency is only 15%. That is not because it is a wealthy constituency—the average income in Devizes is well below the national average—but because in large parts of rural Britain people must have a car to go about their everyday business, to get to their job, to take their children to school and to carry out normal day-to-day activities. It is a necessity.
Fuel Prices and the Cost of Living
Sheila Gilmore Excerpts(13 years, 9 months ago)
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Andrew Percy
Absolutely. I share that concern for dairy farmers throughout the United Kingdom. I am sure the Minister heard that and I hope he will respond.
My constituency is a logistics hub. We have many transportation firms. A business owner, Paul Emms, came to see me at my surgery in Epworth this weekend. He said that because of fuel prices, he now faces the possibility of laying people off. Rather than contributing tax to the economy, not only has he been stung by tax rises on fuel, but he is putting people out of work whose payroll taxes will be lost and who will have to be funded by the taxpayer through their benefits.
Andrew Percy
No, I will not. I have taken a couple of interventions already.
Fuel prices are a particular issue to my constituents and to businesses in our area. In our patch we also suffer the problems of rural transport. We have very little rural transport. My local Labour council—this is my dig at it—is proposing to scrap the Axholme shopper bus service, which costs only £13,000 a year to run. A political assistant at the council is still being paid several thousand pounds, but we are losing many of our rural bus subsidies. My constituents are not even in the privileged position of being able to rely on public transport as an alternative.
My plea to the Government is to listen to the genuine concerns that have been expressed. I greatly respect the Economic Secretary. She is one of the Ministers who accepts my invitations to visit Brigg and Goole. I heard what she said, and there seemed to be the possibility of some positive messages coming out of the Budget. My constituents cannot bear the prices as they are.
Figures out today show that the average wage in northern Lincolnshire is much lower than in the rest of the country. We pay a lot for our petrol and we have to drive a long way to get to a petrol station these days. This is a massive problem for my constituents, and I urge the Government to pay heed to the promises that we made at the general election—promises on which I was elected—which included doing something about fuel duty and introducing a fuel duty stabiliser. As I said, I am sure that was a well thought out policy before the election and will be implemented shortly.
Charlie Elphicke
My hon. Friend makes a powerful point on behalf of her constituents, for whom she is such a brilliant advocate. As she and I know, the difficulty is the amount of money in the kitty, which is massively in the red. We have a structural deficit of £109 billion and borrowings this year of more than £150 billion. That is the poisoned economic inheritance that the previous Government left, having maxed out the nation’s credit card and brought this country to the brink of bankruptcy. What do they urge us to do? Opportunistically, they urge us to cut taxes. How would they do that? They would borrow more money, as we know from the shadow Chancellor’s Bloomberg speech, and raise interest rates on mortgages for the average householder, who struggles to get by as it is.
Sheila Gilmore
Did the hon. Gentleman actually listen to what his hon. Friend the Economic Secretary to the Treasury said earlier about the impact of VAT rises and fuel cost rises on businesses? They mean that businesses go under, people are put out of work and they then buy less? Is that not the crux of the issue? If we want growth, we need to give people income with which to purchase things.
Charlie Elphicke
The crux of the issue is that we have to stop the draining of money from the public finances, right the nation’s finances and get this country growing with a pro-business agenda. That is what the Government are looking at, and I hope that in the Budget next week we will see a pro-growth, pro-business, pro-jobs and pro-money economic policy, which we have not had for the past decade. We have been brought to the brink of ruin by the amount of debt that the previous Government encouraged ordinary people to get into and, indeed, managed to get the public finances into. This Government are about putting those things right: ensuring that our housekeeping personally and as a nation is put back on the level. That is really important.
Scotland Bill
Sheila Gilmore Excerpts(13 years, 9 months ago)
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Fiona O'Donnell
I will withdraw my remark, then, and acknowledge the humility that we have now heard from the hon. Gentleman. Up until 20 February, however, we had seen none of the details of the SNP proposals. I have sometimes accused Conservative Members of shotgun legislation, and I have to level that accusation against him as well.
Sheila Gilmore (Edinburgh East) (Lab)
Does my hon. Friend agree that one reason why we do not need to table copious amendments is that we took part in the deliberations of the Calman commission and in all the consultation related to it?
Fiona O'Donnell
I absolutely agree. The whole process has been about consultation, and at some point the SNP has to admit that perhaps the reason why it has been outside the process, and why it had to file a minority report, is that it is just plain wrong on this issue. I genuinely appeal to SNP Members to pause and consider whether Unionist parties would really advance legislation that would put Scotland and the Union at risk.
I am tempted to think that spring has come to the House, because what we have heard today is not the sound of chickens but the sound of constitutional cuckoos. That is what SNP Members are. They allow others to do the work and build the nest, then they come and try to throw our eggs out.
Iain Stewart
I support the clause, but I wish to raise a couple of specific examples just to test that the definition of a Scottish taxpayer as set out in the Bill is robust and covers all eventualities. I appreciate that the examples I am about to give are technical, and if the Minister is unable to give me a definitive response tonight, I hope he will be able to do so on Report.
My first example is based on the situation my father was in for a number of years. It relates to proposed new section 80E(3)(c) on the definition of Scottish residence, as opposed to residence of another part of the UK. My father’s home was, and is, in Hamilton, just outside Glasgow. By any reasonable test, that is his main residence: it has been the family home for generations; my mother lives there; and it is what my father would call home. However, for a number of years he worked for the Civil Aviation Authority and although he was mainly based at Prestwick, the nature of his job required him to spend a considerable amount of time at its headquarters in London. He rented a flat in central London, where he was registered on the electoral roll for council tax, for utility payments and for all the other aspects of living in a dwelling. For a number of tax years he spent a majority of nights in London, as opposed to spending them at the family home in Scotland. Therefore, if I have read proposed new section 80E(3)(c) correctly, he would not be deemed to be a Scottish taxpayer. I would be grateful if the Minister would confirm whether that is the case. If so, is this not an anomalous situation and will the Government re-examine what the definition of “a Scottish taxpayer” should be?
Secondly, I wish to discuss the “Caledonian sleeper” question, which relates to proposed new section 80F(1)(a) and the number of days spent in Scotland
“at the end of the day.”
I do not have a detailed knowledge of the railway timetable, but let us suppose that the sleeper train left Glasgow at 10.30 pm or 10.45 pm and so was clearly in Scotland at the end of the day. If it traversed the border before midnight and so was actually in England on the stroke of midnight, would that day be counted as Scottish or English for the purposes of this calculation? I hope hon. Members will forgive me for raising this very detailed point, which will affect only a small number of people, as it is the job of this Committee to tease out these practical matters. I do not expect the Minister to give me a definitive reply right now, but I would be grateful if he undertakes to examine the matter and give an answer at a later stage in our proceedings.
Sheila Gilmore
It is important that we move forward on these tax powers for the Scottish Parliament. The big difference between these proposals and the ones in the Scotland Act 1998 are that these apply to all the different rates of tax. The structure being used and the fact that there will be a corresponding reduction in the block grant will deliver to the Scottish Parliament a real ability to make decisions, be accountable and test how well these things work. We wanted that in Scotland and we need it, but that is not to say that the arrangements will not have any complications and that there is no need to be clear about the answers to some of these questions. Some could be covered by regulations that are to follow, but there is always an anxiety involved in depending too much on detailed regulations, as opposed to primary legislation.
I wish to discuss two particular areas, one of which is tax avoidance and the provisions that the Government suggest we put in place to deal with it. The last thing that we would want is for those who have the ability to arrange their tax affairs in different ways to be able to avoid paying this tax, as that would harm the Scottish economy and undermine the whole principle behind what we are trying to achieve. We need to know what provisions will be put in place to deal with tax avoidance in the future. My hon. Friend the Member for Glasgow North (Ann McKechin) mentioned the self-employed, and they are also important. It is easier for them to arrange their tax affairs in a beneficial way, whereas those of us on PAYE may not be able to do that. It is important for self-employed people to know exactly how this system will work for them, particularly if they generate earnings in different parts of the United Kingdom, as it is quite possible for such people to generate.
I also have concerns about the future interrelationship between the benefits system and the tax system. This is important because the way in which benefits are calculated for some people depends on their income after tax, which means that a variation in tax will affect benefits. The Government may be clear that systems will be in place to deal with that very quickly, but the last thing that people on benefits need is any uncertainty about their income. They need to know how any increases in their income, and therefore in their tax liability, or any decreases in their income will affect them, because at that level of income people suffer particularly badly when changes are made. If the Welfare Reform Bill proceeds in full, we will be moving towards a new benefits system at just about the same time as some of these new powers come into force, so it is important to get this right. I urge the Government to provide answers to these questions, if not now, in time for Report, so that we can be clear about how this interrelationship will work.
Fiona Bruce
May I begin by telling hon. Members how pleased I am that, after a thorough independent evaluation of the devolution settlement in Scotland, this Government have been quick to legislate on this issue, fulfilling a manifesto commitment of more than one party in this House? After more than a decade, the time is right to assess the implications and consequences of the devolution settlement.
I shall now speak generally in support of the provisions of clause 26. The Calman commission review predates the economic crisis, but the need to recover the UK’s economic strength makes this issue ever more important. It is clear that economic growth will be driven by enterprise in local communities. Creating a Scottish rate of income tax will give the Scottish Government more responsibility over not only how they spend revenue, but how they raise it. That is a crucial discipline, which we hope will increase the likelihood that fiscal decisions will reflect the needs and priorities of Scotland, the Scottish economy and, most importantly, the people of Scotland. This is an opportunity for genuine fiscal accountability.
The proposals outlined in the Bill are not entirely new, but they do mark the next stage of the devolution settlement for Scotland. The existing Scottish variable rate gives the Scottish Government the power to raise or reduce the basic level of income tax. As Donald Dewar, the original First Minister, said, the Scottish variable rate
“asks the Scottish Parliament to face real financial choices and makes it, in a sense, more directly accountable to the people it represents.”—[Official Report, 31 July 1997; Vol. 299, c. 465.]
However, as we have discussed tonight, the Scottish variable rate has previously been only somewhat theoretical, in that it has never been employed as a tool to influence the economic fortunes of Scotland. That raises the question of whether the new rate will be any different, but I believe that it will be. I believe that the Scottish Government can and will enjoy more financial responsibility through the radical proposals in the Bill. More importantly, the proposals have the propensity to have long-lasting positive effects in Scotland.
To understand that, we have only to ask ourselves how our constituents—no matter which part of the UK we represent—would respond if more funding were raised and distributed locally, rather than by central Government. If that were the case, I am sure that my constituents would take an even greater interest in what their money was spent on and would be able to assess more easily whether politicians were responding to local priorities. Although the provisions relating to Scotland are based at the national level, not the local one, the same phenomenon should apply. This move should strengthen democratic accountability and bolster political engagement in Scottish communities.
I am sure that I am not the only hon. Member recently to have received letters from constituents unhappy about the level of block grant funding given to the devolved nations and, in particular, concerned that there is a difference in funding for certain policy areas, such as university fees and prescription charges. What needs to be communicated more effectively is how the Scottish Government can prioritise their funding. In England, all funding is distributed by the UK Government but in Scotland, the UK Government pay for national—that is, UK-wide—public services, such as defence and industry, and the block grant funding is distributed by the Scottish Government and pays for devolved powers: education, various aspects of health policy and so on. As a result, although decisions on funding in England must involve national, regional and local priorities, the Scottish Government can spend their block grant funding on regional and local issues only.
Sheila Gilmore
Will the hon. Lady concede, nevertheless, that choices are made about how to spend that block grant and that if a Scottish Government make a choice about how to deal with university funding, they do so to the potential detriment of other funding? The decisions that have been taken in this place about tuition fees and the reduction of the teaching grant for universities have had a considerable impact on Scotland, so we are not somehow free from those decisions.
Fiona Bruce
The hon. Lady makes a valid point and that is why I prefaced my remarks with the phrase, “What needs to be communicated more effectively is how the Scottish Government can prioritise their funding.” By that, I meant that checks and balances are involved and that that needs to be communicated nationwide. A greater understanding of that needs to be gained.