Oral Answers to Questions
Simon Kirby Excerpts(7 years, 7 months ago)
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Chris Elmore (Ogmore) (Lab/Co-op)
The Economic Secretary to the Treasury (Simon Kirby)
The UK remains very much open for business and the Government are committed to supporting SMEs to access the capital they need to grow, as demonstrated by the £400 million increase in funding for the British Business Bank announced at the autumn statement, unlocking £1 billion of funding.
Chris Elmore
The Minister will be aware that more than £10 billion of EU structural funds is invested annually in the UK, particularly in Wales. Indeed, in my constituency of Ogmore, many small and medium-sized businesses have benefited from Jobs Growth Wales, which is a success of the Welsh Labour Government. Will the Minister give a cast-iron guarantee to the people of Wales that structural funding will continue, pound for pound, after we leave the European Union?
Simon Kirby
We want to see the economy benefit every part of the UK. It is interesting to note that there are almost 1 million new businesses in our country since 2010, and I note the Prime Minister’s announcement at the CBI conference about the new patient capital review, which will be interesting, I am sure.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
Does my hon. Friend agree that Brexit is essentially a red herring for SMEs in this context, that what matters is that the Government create the right conditions for businesses to do business and that the banks are in a sufficiently capitalised position to lend money?
Simon Kirby
I agree absolutely with my hon. Friend. It is about creating an economic environment in which businesses can grow and thrive. The British economy is strong and will continue to be strong as we prepare for our departure from the EU.
Emma Reynolds (Wolverhampton North East) (Lab)
What would be the impact on SMEs, particularly those in the supply chain of big manufacturing firms such as Jaguar Land Rover or Airbus, if we were to leave the EU without full access to the single market or a free trade deal with the rest of the EU and if we were forced to fall back on World Trade Organisation rules and tariffs?
Simon Kirby
The Government have been clear that we will not comment on every turn of the negotiations. Indeed, the negotiations have yet to start. However, we are absolutely committed to getting the best possible deal we can.
Chris Philp (Croydon South) (Con)
Does the Minister agree that the City of London plays a very important part in helping businesses to raise capital and that maintaining clearing in euros in the City of London will be an important way to ensure that the City retains that status?
Simon Kirby
The City of London is a very important financial centre and we fully intend it to remain as such. Clearing is an important element of the negotiations, and we will do all we can to retain London and the UK as a financial centre of excellence.
Jo Churchill (Bury St Edmunds) (Con)
Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP)
The Economic Secretary to the Treasury (Simon Kirby)
The Government are committed to ensuring that exporters receive world-class support. That is why the autumn statement announced the doubling of UK export finance capacity.
Ms Ahmed-Sheikh
Last week, the OBR reduced its trade forecast, stating that this is
“due to the loss of trade that the OBR judges will result from the UK leaving the EU.”
We all know that this Government would like to have their cake and eat it, but changes to export finance alone will not bridge the gap between ambition and reality. Do the Government seriously expect to meet their own target of doubling exports without continued membership of the single market and without a comprehensive plan to do so? Do the Government stand by their exports target?
Simon Kirby
We do, and it is interesting to note that the Federation of Small Businesses, for example, welcomed the doubling of export finance because it felt that it would help small and medium-sized enterprises reach new markets. It is also interesting to note that the Scotch Whisky Association highlights the importance of exports, and it has seen an increase of 3.1%, to 531 million bottles. Perhaps the hon. Lady might remove uncertainty in Scotland by stopping banging on about a second referendum.
Mr David Nuttall (Bury North) (Con)
Does my hon. Friend agree that the best thing the Treasury can do to help British business export is to allow it to keep more of the profits it earns by continuing to cut corporation tax?
Simon Kirby
We have legislated for corporation tax to be reduced to 17% by the end of this Parliament—one of the lowest rates in the G7—and we will do all we can to help businesses grow and thrive in this country.
John McDonnell (Hayes and Harlington) (Lab)
Last week’s autumn statement should have been about providing answers to meet the challenges of Brexit and at least information on the options available. Instead, it appears that the only information we can glean is from photos snatched of the notes of a senior Conservative official in Downing Street. We know now, in the light of that leak, that many of the Chancellor’s senior colleagues in the Government are reluctant to pursue the transitional deal being called for by businesses when we leave the EU. Will the Minister now provide some clarity by inviting the Treasury and the Office for Budget Responsibility to undertake a full assessment of the public finance implications of the range of policy options associated with Brexit, including access—or not—to the single market, being in or out of the customs union and the potential for transitional arrangements?
Simon Kirby
I have to tell the right hon. Gentleman that that is a normal part of what we do on a very regular basis, and he really should not believe all he reads in newspapers from researchers or Back Benchers—it is hardly Government policy.
John McDonnell
I take that as a no.
Last week, we learned in the OBR report that the OBR was denied any information in respect of assurances provided to Nissan. The OBR said:
“On this occasion we asked specifically whether any contingent liabilities had been created in respect of assurances provided to Nissan and the Treasury declined to say.”
This level of opaqueness on an existing deal undermines the certainty businesses need to invest in any future deals. Will the Chancellor now provide the OBR with the information it has requested, so that it can provide a more accurate forecast, rather than being left in the dark or, as it put it, “none the wiser”?
Simon Kirby
Perhaps we should welcome the jobs to start with. However, in answer to the right hon. Gentleman’s question, it was, unfortunately, not possible to confirm this to the OBR in time to feed into the drafting process. Her Majesty’s Treasury therefore provided the same answer as it would to any query on contingent liability.
Kirsten Oswald (East Renfrewshire) (SNP)
Equitable Life Payment Scheme
Simon Kirby Excerpts(7 years, 7 months ago)
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The Economic Secretary to the Treasury (Simon Kirby)
The Equitable Life Payment Scheme (“the scheme”) started to make payments in 2011 and was due to close in 2014. The then Chancellor extended the scheme in 2014 to maximise the number of payments that could be made. He subsequently announced in the summer Budget 2015 that the scheme would close to new claims on 31 December 2015. From the beginning of 2016, the scheme began the process of winding down and completing all remaining claims. As the majority of these claims have now been paid, the scheme has today published its final progress report, which can be found at: www.gov.uk/equitable-life-payment-scheme.
The report gives an outline of the history of the scheme, details the significant efforts that have been made to trace and pay as many policyholders as possible, and provides a distributional analysis of the payments that the scheme has made over its four years of operation.
The report gives the final figures compiled by the scheme, which show that, as at 31 August 2016, the scheme has issued payments of over £1.12 billion to 932,805 policy-holders. This means the scheme has now issued payments to 90% of eligible policyholders. All the payments issued by the scheme have been free of tax.
It should be noted that the closure of the scheme to new claims will not affect the yearly payments made by the scheme to with-profits annuitants, which will continue for the duration of those annuities. The scheme has written individually to all with-profits annuitants to make them aware of this.
In the summer Budget 2015, the then Chancellor also announced that, as part of scheme closure, payments to non-with profit annuitant policyholders who were in receipt of pension credit would be doubled in early 2016. In fact the scheme succeeded in making the majority of these additional tax-free payments in December 2015, and all were completed by March 2016, providing additional help to this vulnerable group of policyholders.
[HCWS269]
Outsourcing and Tax Credits
Simon Kirby Excerpts(7 years, 7 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Louise Haigh (Sheffield, Heeley) (Lab)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the change in Government policy in relation to outsourcing and tax credits.
Simon Kirby
Not yet.
I can confirm that there has been no change in Government policy on outsourcing. I suspect that the hon. Member for Sheffield, Heeley (Louise Haigh) has asked this urgent question in the light of the recent concerns surrounding the Government’s outsourcing contract with Concentrix.
Her Majesty’s Revenue and Customs places the utmost importance on providing a quality service to its customers. As the Government have made clear, high standards were not met in recent months by Concentrix, the company HMRC had engaged to help us in the important work of tackling fraud and error in the tax credits system. Once this became clear, HMRC took steps to rectify the situation and deployed HMRC staff as quickly as possible. From that point, no new cases were passed to Concentrix, and HMRC took back 181,000 individual cases that were being managed by Concentrix. I can reassure the House that not only have all the 181,000 cases been finalised, but HMRC has now restored the expected quality levels of customer service to ensure people receive the tax credits to which they are entitled. HMRC continues to review outstanding cases in which a mandatory reconsideration has been requested, and it has taken steps regarding the future of the contract with Concentrix.
On 14 September, the Financial Secretary to the Treasury informed the House that HMRC would not be renewing the contract with Concentrix. Last week, she informed the House that HMRC is currently in discussions with Concentrix to agree a negotiated early exit to the contract. These commercial discussions continue. I want to be clear that HMRC will not go back to the market to seek another partner to replace Concentrix and provide additional capacity to challenge error and fraud in the tax credit system. There has, however, been no change in Government policy on outsourcing, which can be an appropriate way to deliver both quality public services and savings for the taxpayer. I assure the House that HMRC is committed to learning the lessons from the problems that have arisen over the past months, supported by the independent review of the National Audit Office.
Louise Haigh
Thank you, Mr Deputy Speaker, for granting this urgent question. I think we all agree that the continuing fallout from the debacle surrounding Concentrix will not be going away soon.
Last Thursday, the day after a debate in this House, the chief executive of HMRC announced to the Treasury Committee:
“We will not go back into the market for this kind of thing”.
He also said:
“We will not be going back to the market to seek a third party to help us in any way with this kind of thing”.
He was obviously referring to the outsourcing of tax credits. This announcement was unequivocal, and it represented a considerable shift for the Government and their policy on welfare. The implications of such an announcement for private sector involvement in our welfare state are profound.
The contract between Concentrix and HMRC has revealed the grotesque consequences of the profit model in our welfare state. The chief executive of HMRC now clearly agrees that the private sector has no place in the delivery of welfare. He is absolutely right, but it is still embedded deep within our social security system. The company Maximus is still operating a £500 million contract to deliver the work capability assessments for personal independence payments conducted by Atos that are causing deep distress for thousands. If having a trade-off between profit maximisation and the principles of our welfare system has been deemed inappropriate for those on tax credits, why is it considered appropriate in other sensitive areas of our welfare state?
By setting this precedent, is the Treasury not accepting that, when it comes to the sensitivities around welfare, the private sector is uniquely incapable of determining the best interests of individuals on welfare? If not, what were the principles underlining the unequivocal announcement that there would be no longer be any third party involvement? Will this extend to the operation of universal credit? If not, many will see these words as a cynical manoeuvre to raise the hopes of many who should never again have to deal with a company that has so singularly failed them in the delivery of welfare.
Furthermore, I seek clarity on something the Minister’s colleague said in a debate in this House last month. The Financial Secretary said of the way in which Departments do something, that
“there are circumstances in which the use of a private company offers a cost-effective way”.—[Official Report, 14 September 2016; Vol. 614, c. 910.]
Are we now right in thinking that, after this announcement, the Government do not believe that those circumstances extend to our social security system?
Finally, I want to press the Minister to release the key characteristics used by HMRC to profile the individuals whom Concentrix was then unleashed to target. Given the unprecedented distress that the targeting by key characteristics has caused and the commensurate levels of error that they evidently caused, it is very clearly in the public interest that they are now released. I would be very grateful if the Minister gave me a firm commitment this morning to provide me with that information.
Simon Kirby
I have had the pleasure of responding to debates on this in Westminster Hall and in this Chamber, and this is now the third occasion I have had such an opportunity to respond. There are clearly lessons to be learned. The Financial Secretary has made the Government’s position very clear: Concentrix will not be providing the service in the future. However, there is no change to Government policy on outsourcing, which can be an appropriate way to deliver both quality public services and, importantly, to make savings for the taxpayer. We will have to wait to see what the independent National Audit Office review shows, but I am sure we are all looking forward to it. As I have said, there are many lessons to be learned.
Mark Pawsey (Rugby) (Con)
Our constituents expect the Government to spend taxes wisely and efficiently. Is it not entirely right that the Government should seek to minimise error and fraud? Is this not a case of the Government having taken some action, discovered that it has not worked in the way they sought and then taken effective action to deal with that?
Simon Kirby
That is a fair point. It is worth saying that most of these problems are errors—there is always, sadly, some fraud as well—but this is about getting the balance right between, on the one hand, the taxpayer and, on the other hand, making sure that people receive the service they rightly expect. We have cut fraud and error in benefits to some of the lowest levels ever, making savings to the taxpayer. As I have said, there are lessons to be learned and there is a balance to be struck.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I thank my hon. Friend the Member for Sheffield, Heeley (Louise Haigh) for securing this urgent question, and for her brilliant work in bringing this issue to light. Like her, I do not understand why it was not deemed appropriate for a Minister to come to the House to make a statement on a significant change in Government policy last week, not least because that happened the day after we had had a full Opposition day debate on Concentrix. Having listened to the Minister, I am not sure whether the policy has not actually changed again this morning. How can the Minister reconcile what he has just told the House with the statement last week that there would be no further outsourcing for such matters?
As my Front-Bench colleague, my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey), made clear in the debate last week, our party continues to stand by the victims of this terrible fiasco, the majority of whom were single mothers. There is clear human suffering at the centre of this chaotic debacle. These people did not deserve to face the hardship and stress they suffered. In order to move forward, we need confirmation that those unfairly targeted by Concentrix will at the very least be properly compensated, and that that will happen as soon as possible. The Government need to announce as a matter of urgency the timetable for a comprehensive investigation into the increasing number of systematic failures that continue to be brought to light.
As we are continuing to hear the details of these terrible cases from Members on both sides of the House, it would only be proper and decent for the Minister to issue a formal apology on behalf of his Government for the distress and hardship that they have caused. We are pleased that the Government have conceded to the Opposition that this was an unacceptable episode. Such contrition is welcome, but now the Government must proceed by putting right the wrong that has been caused, and they must properly report to Parliament on their progress towards doing so.
Simon Kirby
Compensation is available where error has occurred. That has been made very clear. The hon. Gentleman asks whether I am prepared to apologise; I think this is now the third time I have done so. If people have not received the high-level customer service to which they are entitled and if mistakes have been made, I do apologise. I also say, however, that this is a necessary part of government and there are lessons to be learned. We will all make better decisions as we go forward. We will have to wait for the independent NAO report. That has all been said before.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
May I commend my hon. Friend for his balanced and reasoned responses today? The Opposition seem to think that everything done by the state works perfectly and that whenever it is outsourced it may go wrong. I think they forget that, over the years, HMRC has had quite a few internal problems of its own—failing to answer the telephone and the chaotic initial introduction of tax credits, for example. It is absolutely right to look to securing savings through outsourcing to the private sector throughout Government Departments where it is the right thing to do.
Simon Kirby
As ever, my hon. Friend makes a valuable point and worthwhile contribution. He is right that there have been mistakes and lessons to be learned over a large number of years in a number of different Departments. What is important is that we get the balance right, pay the money that people—often the most vulnerable in society—are owed, while at the same time protecting the taxpayer from unnecessary overpayment, error and fraud.
Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)
While Concentrix certainly has questions to answer, the model for indiscriminately targeting low-income families was devised by the Conservative Government and designed to place the burden of the failing austerity agenda firmly on the shoulders of the most disadvantaged in our society. As tax credits are to be overtaken by universal credit, there have already been reports on the delay of the roll-out of UC as well as on continued problems with the system. With private companies such as Atos, Maximus and Concentrix under the spotlight for their poor handling of contracts intended to support social security claimants, does the Minister agree that we must ensure that all future contracts are kept under close scrutiny by his Department, that they are fit for purpose and that they protect vulnerable people?
Simon Kirby
I agree that everything that the Government do should be kept under close scrutiny. It is worth saying again that HMRC has reduced error and fraud in the tax credit system, so that it remains on target and is at a near record low since tax credits were introduced in 2003—some 13 years ago. We are always well advised constantly to check and ensure that the service we deliver is appropriate.
Chris Heaton-Harris (Daventry) (Con)
Does the Minister agree with this recent statement about the Government’s position on this matter:
“We welcome this recognition from the government”?
That was said by the general secretary of the Public and Commercial Services Union.
Simon Kirby
My hon. Friend makes a valuable point. It is, I think, important to say that, particularly for vulnerable people, overpayments lead to debt. That is why it is important to make sure that we get the payments right and do not make mistakes. We must act in a fair, appropriate and customer-focused way.
Mrs Emma Lewell-Buck (South Shields) (Lab)
My constituent Ashley Davenport was one of many who suffered for three months under this contract. She had two children, one of them a new-born, and she contacted me after she had not eaten in days. Concentrix is not the first abysmal private company that this Government have allowed to fail in delivering sensitive public-service contracts. Since 2010, billions have been spent on the outsourcing of privately run public services. Is it not time that lessons were learned right across the board when it comes to welfare and benefits in order to mitigate any further hardship such as what we have seen in this latest shambles?
Simon Kirby
I would say three things in response. First, if the hon. Lady feels that her constituent has been wrongly treated, she should write and apply for compensation. Secondly, it is worth saying that the savings to the taxpayer are probably in excess of £200 million —not a small sum. Thirdly, yes, there are lessons to be learned—[Interruption.] I shall have to say that even more often, because it obviously gets a reaction. As a Government, we would be foolish not to learn lessons and not to make sure that the service we provide is as good and appropriate as possible. [Interruption.] The hon. Lady says from a sedentary position that this is turning into a debate, Mr Deputy Speaker. She asks whether we are going to come back and report. We shall have to wait for the independent NAO report.
Mr Deputy Speaker (Mr Lindsay Hoyle)
The danger is that the Minister is going to keep the debate going.
Philip Davies (Shipley) (Con)
Does the Minister agree that there is a great deal of amnesia on the Opposition Benches? I well remember the misery caused to my constituents when 50% of all tax credits were paid incorrectly during the course of the last Labour Government. I welcome what my hon. Friend said about Concentrix. What financial penalties will the Government impose on Concentrix for the cock-ups it has made?
Simon Kirby
My hon. Friend is right to highlight amnesia. It is sometimes easy to forget how things were in the past and by how much things have improved today. There are penalties in the contract. Concentrix will be penalised for not doing the job that was intended. That is right and proper—not only for the people who have suffered through Concentrix’s mistakes, but for the taxpayer as well.
Maria Eagle (Garston and Halewood) (Lab)
Some of my constituents have lost other moneys. They have gone into rent arrears and have bank charges to pay, for example. Will the Minister undertake to make sure that either Concentrix or HMRC compensates those people for their actual losses—caused, it must be remembered, when they were accused of having an undeclared partner who was dead or a previous tenant they had never known. This has nothing to do with my constituents and has everything to do with rank maladministration. I hope that the Minister will stand up today and confirm that these people will be compensated by Concentrix or HMRC.
Simon Kirby
The hon. Lady will be pleased to know that HMRC does run a compensation scheme. If her constituents—or her as their MP—would like to write, I am sure they will have some success.
Mr David Nuttall (Bury North) (Con)
Does my hon. Friend agree that the key objectives must be that the rules laid down by this House for the payment of tax credits or welfare benefits are followed accurately, and that fraudulent claims are identified and stopped? Does he further agree that these two key objectives are equally applicable whether the delivery is by the public sector or the private sector?
Simon Kirby
My hon. Friend is absolutely right. Those are two key objectives and it is important to get the balance right between them. Whoever delivers—whether it be the private sector or the public sector—must deliver what is most appropriate. We have been clear that in the case of Concentrix, it was not the most appropriate way to proceed. We must ensure that what is done is fair, reasonable and represents value for money.
Kevin Brennan (Cardiff West) (Lab)
I am sure it was inadvertent, but I do not think the Minister fully answered the point made by the hon. Member for Shipley (Philip Davies) when he asked what penalties Concentrix would suffer as a result of its failure. Is it not the case that, in fact, because the Government are ending the contract early, Concentrix are the ones that are going to be compensated? Will the Minister clear that up for us right now?
Simon Kirby
The contract is still under sensitive commercial negotiation. As for the exact penalties, the contract states clearly and transparently that penalties will be imposed for a failure to fulfil elements of it. I can tell the hon. Gentleman that HMRC will be seeking the best possible deal for taxpayers and, indeed, people who are entitled to these payments, and we fully expect to get the best possible deal.
Stephen Pound (Ealing North) (Lab)
The Minister is in a contrite mood this morning. I wonder whether he will extend the balm of that contrition to the PCS members working in HMRC who will have to clear this mess up. Will he tell the House whether there were any formal discussions with the PCS before the contract was awarded to Concentrix?
Simon Kirby
I am not aware whether there were or not, given that I am a Minister who is relatively new to the Treasury and given that I am dealing with a subject that is not in my portfolio, but I am sure that I can write to the hon. Gentleman clarifying the position.
I pay tribute to the hard-working staff in HMRC, who have helped to resolve what was a very difficult situation. HMRC took back 181,000 cases, and the staff have done a brilliant job, extending the helpline hours and specifically helping MPs. We should all be grateful for that.
Mr John Spellar (Warley) (Lab)
It is no wonder that the Chancellor is not here today to respond to the urgent question. We have heard an announcement of no change in policy: in other words, “Do not adjust your mind, reality is at fault.” Apart from the structural weaknesses of this and so many other contracts, time and again we are seeing Ministers and Departments failing to monitor contracts, and failing to react and respond when those failures are pointed out. Once again, we are hearing the same lame old excuse: “Lessons will be learnt.” I ask the Minister, “When will they ever learn?” For a start, will Concentrix be barred from tendering for any future contracts with the Government?
Simon Kirby
The right hon. Gentleman speaks of a failure to respond; the Government responded very quickly, which is why we are in this position, having cleared up the mess that we found. He asks when we will learn our lessons; we have learnt lessons, which is why the Concentrix contract is coming to an end. We shall all have to wait for the independent report from the National Audit Office, and there will be further lessons to be learned, but the Government have taken this matter very seriously and have acted quickly, and I think that we have done reasonably well in the circumstances.
Jeff Smith (Manchester, Withington) (Lab)
May I press the Minister once more on the financial issue? He talked about the HMRC compensation scheme. Will he tell us whether the payments under that scheme will be recovered from Concentrix?
Simon Kirby
What I can say is that the penalties referred to in the contract will be taken from the money paid to Concentrix and will go to HMRC, and that any compensation that is appropriate and due will come from HMRC.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Last but certainly not least, Daniel Zeichner.
Daniel Zeichner (Cambridge) (Lab)
I think we have got the message that the Minister wants lessons to be learned. Will he assure us that all that the minutes, recordings and transcripts relating to the process that led up to the tendering of the contract will be published?
Simon Kirby
I understand that the independent National Audit Office will be looking at all those and will report in due course—let us hope that it does so sooner rather than later—and we will learn lessons from that independent report.
Mr John Spellar (Warley) (Lab)
On a point of order, Mr Deputy Speaker. In the age of emojis, is there any way in which Hansard will be able to report the look on the Minister’s face when he responded to the question asked by the hon. Member for Manchester, Withington (Jeff Smith)? It said it all.
Leaving the EU: Financial Services
Simon Kirby Excerpts(7 years, 7 months ago)
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The Economic Secretary to the Treasury (Simon Kirby)
I am grateful to the Backbench Business Committee for allocating time for this debate, and to the hon. Members for Leicester West (Liz Kendall) and for Nottingham East (Chris Leslie) for requesting it.
Earlier this year, the British public made it clear that they want a new relationship with the European Union. Although we are under no illusions that this will not mean hard work and adjustment, we are committed to getting on with the job to make Brexit a success for people across the UK and for businesses across our industries. That includes, of course, our world-leading financial services sector, because it is clear, both from the many points raised today and the regular discussions I have with Members on these issues, that we are all in agreement on the importance of this industry to the British economy and of making sure this sector remains robust, highly competitive and open for business after our withdrawal from the EU.
First, it is worth reflecting on why this sector is of such importance to our economy. We have heard many statistics today, and they tell a compelling story. Last year, this industry contributed more than 7% of the value of all goods and services produced in the UK. The industry also exports £63.7 billion of services worldwide every year, making it the world’s largest exporter of financial services. From a Treasury perspective, the sector also brings a huge amount of money to our Exchequer. Let me give hon. Members a sense of the scale: in 2015, the banking sector alone contributed £24.4 billion through just corporation tax and PAYE. Recent analysis suggests that if we look at the broader financial services sector, we find that the tax contribution increases to £67 billion.
Leaving aside the enormous value this industry adds to what we produce, the services we export and the taxes we receive, we also have to remember how many jobs this industry gives to British workers. Across the country, more than 1 million people have jobs in this sector, with two thirds of these outside London, and in addition more than 1 million people are employed in jobs related to the financial services sector. To give just one example, the north-east has more than 50,000 people working in financial services.
What are the Government doing to ensure the continued success of an industry of such huge importance to our economy? First, since the referendum result we have been engaging extensively with companies across the financial services industry, to understand how we can make sure that our withdrawal from the European Union is a success for the financial services industry.
Secondly, the Prime Minister has made it clear that we will invoke article 50 no later than the end of next March to begin our formal negotiations with the EU. The Government are determined to continue with that plan. Finally, we have said that the European laws and regulations will be transferred to British law on our exit from the EU to provide continuity for businesses that operate in the EU.
On the points that have been raised, the hon. Member for Leicester West (Liz Kendall) asked me for some clarity. I am very pleased to say that, hopefully, I can do just that. She asked about passporting. I can say that the Under-Secretary of State for International Trade, my hon. Friend the Member for Wyre Forest (Mark Garnier), was not correct on this matter. Passporting, or rather the access to EU markets that comes with it, is one of the key areas under negotiation. The UK is looking for a sensible discussion on how our two markets can continue to serve one another, and on what is needed to support that. She also mentioned freedom of movement. It might be helpful if I were to quote the Chancellor of the Exchequer, who said:
“I see no likelihood of our using powers to control migration into the UK to prevent companies from bringing highly skilled, highly paid workers here.”—[Official Report, 25 October 2016; Vol. 616, c. 134.]
The hon. Lady mentioned transitional arrangements. We are determined to secure the best possible deal for UK goods and services, and that is very much in the interests of both the UK and the EU. Given the strong level of interconnection between our economies, continuity of service and an orderly withdrawal from the EU are also very much in the interests of both sides,
The hon. Lady finally asked me to agree with her that the best possible Brexit for the UK was also the best possible Brexit for Europe. I do agree with her, and that is a message that we should all do our very best to persuade others of: it is in everyone’s interests that we get the best possible deal.
I thank my hon. Friend the Member for Wimbledon (Stephen Hammond) for his thoughtful and sensible contribution. The hon. Member for West Bromwich West (Mr Bailey) asked about the impact of withdrawal on smaller businesses. It is a very important point and we must always remember that companies involved in financial services are not necessarily all huge firms in the City of London. My hon. Friend the Member for Stone (Sir William Cash) obviously knows a great deal about Europe and I am always very pleased to hear from him. He made an interesting contribution, and I can reassure him that it is our intention to secure the very best possible deal.
The hon. Member for Wirral South (Alison McGovern) made the good point that not all financial workers are fat cats in the City. Indeed, they are hard-working people up and down the country, two thirds of whom operate outside the City of London. From Edinburgh to Brighton, and from Belfast to Bournemouth, the financial services industry is a very important employer, and I pay tribute to all those people who work so hard in it.
My hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) made an excellent point about the benefit that the UK offers to all of Europe, and it is in our common interest to get the best possible deal. The hon. and learned Member for Edinburgh South West (Joanna Cherry) might be pleased to know that I am planning to visit not only Scotland but Northern Ireland and Wales in the near future to look at financial services and to demonstrate the Government’s interest in all parts of the country. The hon. Member for Islwyn (Chris Evans) will also be pleased to hear that Wales is an important part of the solution. The hon. Member for Aberdeen North (Kirsty Blackman) sought certainty. What I can say is that I am certain that we will seek the best possible deal, and the clearing function is an important element of that deal.
As usual, the hon. Member for Nottingham East (Chris Leslie) made some thoughtful points. I can assure him that I listened to them carefully. The hon. Member for East Lothian (George Kerevan) thanked me and said that I was doing a fine job. Who am I to disagree? I can tell him that Brexit does mean Brexit, we will not be giving a running commentary, and we do intend to get the best possible deal. I thank the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) for his sensible and constructive contribution. We all want Brexit to work for everyone and I look forward to working with him where we can to make sure that we get the best possible deal.
In conclusion, it is important that we retain our reputation for excellence in financial services and remain the most competitive place in the world to do business. It is not only about doing what is best for the British economy, but about doing what is best for everyone throughout the country, maintaining the quality of financial services available to British customers and taxpayers.
Once again, this has been a useful debate. I thank everyone for sharing their thoughts. We are very much in listening mode and I look forward to listening as things progress.
Concentrix
Simon Kirby Excerpts(7 years, 8 months ago)
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The Economic Secretary to the Treasury (Simon Kirby)
This has been a thoughtful debate. I thank all hon. Members for their contributions and efforts to support their constituents. It is right and appropriate that I thank MPs’ staff, who have worked hard to help constituents with their tax credit claims.
It is clear—there is no doubt—that mistakes were made in HMRC’s partnership with Concentrix. As my hon. Friend the Financial Secretary to the Treasury said, it is right that we take action to stop errors and fraud in the tax credit system. That was why HMRC entered into a contract with Concentrix to support that action, which—let us be clear about this—delivered millions of pounds of savings and achieved close to the lowest level of fraud and error in the tax credit system since it began.
I reiterate that this is all about people. It is about making sure that the most vulnerable people are paid appropriately and that errors are not made. It is often very difficult for the most vulnerable people to deal with overpayments.
Maria Eagle
Given the poor quality of some of the information that Concentrix has used—information about tenants, previous tenants, people who are dead and people who live in the same block but not in the same house—how can the Minister justify putting our constituents through the pain of having their payments stopped on such very poor information?
Simon Kirby
I will cover that matter later, but there are clearly lessons for all of us to learn.
Kevin Foster
Given the number of people affected, what work will the Government—the Treasury, working with HMRC—carry out to help local advice centres that, like Members of Parliament, may be approached by people for advice about what to do if they receive such letters?
Simon Kirby
I will certainly ask HMRC to look into that. The important point is that this is about helping people. It is easy to stand in the Chamber citing figures and trying to pretend that something is not what it is. This is about making sure that the most vulnerable people get the money that they deserve, and about clearing the backlog as quickly as possible.
This issue is about customer service. Everyone has a right to expect a good level of customer service. There is no doubt that the customer service provided in recent times was simply not good enough and not up to the standard clearly specified in the contract. As a result of that poor performance, a great deal of worry and distress has been caused to the often vulnerable people who claim this benefit. We heard lots of very good examples of that today. I do not think that any MP is in any doubt that vulnerable people have suffered worry and distress. I advise anyone who has been adversely affected to get in touch with HMRC, which will take all complaints seriously and provide compensation where appropriate.
I move on to specific issues that hon. Members raised. The hon. Member for Paisley and Renfrewshire South (Mhairi Black) suggested that Concentrix targeted people at random and engaged in fishing expeditions, which the hon. Member for Bootle (Peter Dowd) also mentioned. That was not the case—Concentrix was not allowed to engage in fishing expeditions. It is important to note that when information was incomplete or suggested that something was wrong, customers were asked to provide further information to enable an informed decision to be reached.
Maria Eagle
Would this be an opportunity for the Minister to tell the House why the information used was so very poor?
Simon Kirby
Some of the information used was very poor—some of it applied to people who no longer lived at the address—but, at the end of the day, the review will provide lessons for us all to learn.
The hon. Member for Paisley and Renfrewshire South said that the evidence was flimsy. HMRC sent Concentrix cases to review if it thought that they were worth checking because there was an indication that the tax credits claim might be incorrect. Concentrix and HMRC will never be able to screen out all cases that do not involve error or fraud through data analytics alone. That is why—this point is important—HMRC and Concentrix write to customers to ask for more evidence to inform decisions.
The hon. Lady asked for an apology. At a sitting of the Work and Pensions Committee on 13 October, the chief executive of HMRC apologised for the worry and distress caused to claimants. On behalf of the Government, I echo that apology today.
The hon. Member for Stretford and Urmston (Kate Green) said that she thought that the letters were unconvincing and misleading. This is an area in which there are lessons to be learned. It was said that customers could not provide the evidence requested. Most people were able to provide the information asked for, but we want to make it easier and cheaper to supply information in the future, so we are looking at ways of improving the customer journey on tax credits.
Simon Kirby
I will keep going, if I may.
The hon. Member for Stretford and Urmston also asked whether the contract unfairly discriminated against women. It is important to note that as of April 2016, 88% of single claims were made by women, and 80% of single claims sent to Concentrix to check with regard to high-risk renewal were from women. I recognise this—
Simon Kirby
I will not—I have to respond to a lot of people.
I recognise that sensitivity is needed on tax credit claims and that claimants should be treated with dignity and respect. The hon. Lady also asked about penalties. The figures that will and have been deducted from payments, and the detailed calculations, cannot be disclosed at this point as they are commercially sensitive, but the amounts will be fair and appropriate.
The hon. Member for Salford and Eccles (Rebecca Long Bailey) said that Concentrix was getting a rap on the knuckles. I point out that it is actually losing the contract.
My hon. Friends the Members for Torbay (Kevin Foster) and for Gloucester (Richard Graham) made particularly thoughtful and considered contributions. They have obviously given the matter great thought.
The hon. Member for Ayr, Carrick and Cumnock (Corri Wilson) asked whether the contract was ended only because of poor call handling. That was not the case. The poor call handling had an impact on customers and resulted directly in tax credits being stopped. She also mentioned the downsizing of HMRC. An extra £800 million has been announced for HMRC. Using a private company in this way offered a cost-effective method of reaching a large number of people.
The hon. Member for Cardiff South and Penarth (Stephen Doughty) asked whether this situation spelled the end for outsourcing. This is about cutting down on errors and some fraud, but HMRC will evaluate each case on its merits to deliver value for money for the taxpayer. It is fair to say that the lessons learned from this situation will help to inform future contracts.
Louise Haigh
That is the central point. As my hon. Friend the Member for Garston and Halewood (Maria Eagle) said, the information was duff, and was acted on incorrectly, because the contract was designed to incentivise Concentrix through profit to incorrectly target people and strip them of their tax credits. Will the Minister commit to reviewing payment by results across our welfare system?
Simon Kirby
I will not commit to that. The hon. Lady’s points will be picked up by the NAO. Not all the information was duff, but there are clearly lessons to learn from the exercise.
The hon. Member for Foyle (Mark Durkan) talked about the 30-day cut-off. Tax credit regulations require a claimant to be given a minimum of 30 days to respond to a request for information. The hon. Member for Dundee West (Chris Law) mentioned training. I assure him that Concentrix staff are trained in the same way as HMRC staff.
The hon. Member for Garston and Halewood (Maria Eagle) asked about unresolved cases. I am not sure whether the Financial Secretary was in the Chamber to hear that, but if the hon. Lady writes to my hon. Friend, she will, I am sure, do her very best to help to resolve those cases. The hon. Lady also asked about the significance of August. August was a particularly busy time.
Mark Durkan
The Financial Secretary told me in a written answer yesterday that between 1 August and 31 August, HMRC automatically stopped 365,483 tax credits—in just that one month—as a direct result of customers failing to comply with the requirements of the annual renewal process. How many stoppages were made by Concentrix and how many were made directly by HMRC itself?
Simon Kirby
I am happy to commit to look carefully at that matter and to get back to the hon. Gentleman.
I clarify that hardship payments are effectively tax credits brought forward. Compensation, however, is not offset against tax credits and is a separate payment. That is an important distinction to make.
The hon. Member for Ochil and South Perthshire (Ms Ahmed-Sheikh) mentioned the timeline. It is important to understand the timeline, and she makes valuable points about how we can ease the customer journey and introduce new measures. That is work in progress, and I do not think there is a lot of disagreement about some of her more sensible suggestions.
In response to the hon. Member for Bootle, I would say that a lot of issues have been raised in the debate. They will be looked at very carefully by the National Audit Office. We are giving careful consideration to the balance of the contract with Concentrix to make sure that nothing else goes wrong. This is about making sure that the most vulnerable people who need help get it, and that we move forward and learn from the exercise.
Although we recognise that the service provided was simply not good enough, it was right to review people’s claims for tax credits. That must go hand in hand with quality customer service that minimises distress and disruption to the people involved. Concentrix fell short of providing that standard of service in recent times, and, as a result, a large number of people were caused undue distress and worry. We have taken immediate action to restore a fast, fair and efficient service to anyone claiming tax credits. We will take further action in the days and months ahead. We will look at what went wrong, and at the NAO report, and learn from those lessons. We want to ensure that we provide the kind of quality tax and benefits service that the British public deserve.
Question put and agreed to.
Resolved,
That this House notes that Concentrix has not fully met the performance standards set out in its contract with the HM Revenue and Customs to correct tax credit claims, and welcomes the announcement that the services performed by Concentrix will be brought back in-house to HMRC next year; and calls on the Government to conduct a comprehensive investigation into the performance of Concentrix under its contract with HMRC, which includes a consideration of the potential effect on other HMRC services, take urgent action to compensate people who have erroneously had tax credits withdrawn by the company, and in doing so mitigate any adverse effect or reduction in service for claimants.
Oral Answers to Questions
Simon Kirby Excerpts(7 years, 8 months ago)
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Edward Argar (Charnwood) (Con)
The Economic Secretary to the Treasury (Simon Kirby)
The Government are committed to helping the midlands to unleash its economic potential and make it a powerful engine for growth. We are backing skills and innovation. We are supporting the automotive and aerospace industries. We have made investments, and we are putting power in the hands of local people by devolving budgets from Whitehall to a new mayor for the midlands. I hope that it is in order, Mr Speaker, for me to mention our excellent candidate, Andy Street.
Edward Argar
Earlier this year, a Grant Thornton report suggested that the east midlands could contribute £53 billion to the UK economy by 2025, reflecting the central role that Leicestershire and the east midlands continue to play in driving the country’s growth. Does my hon. Friend agree, however, that if we are to sustain that record of success, it is vital for us to continue to deliver on investment in Leicestershire’s road, rail and broader infrastructure?
Mr Speaker
Order. May I remind colleagues of the merits of the blue pencil?
Simon Kirby
Good advice, Mr Speaker, as ever.
I thank my hon. Friend for his interest in the east midlands. I agree that improving transport between and within our major cities is vital to help them fulfil their productive potential. As the Chancellor has said, we are investing over £5 billion in transport infrastructure to put the midlands at the heart of a modern transport network.
Mr Philip Hollobone (Kettering) (Con)
May I press the case for the continued electrification of the midland main line and that there be no further delays to this excellent project?
Christina Rees (Neath) (Lab/Co-op)
James Heappey (Wells) (Con)
The Economic Secretary to the Treasury (Simon Kirby)
I thank my hon. Friend for his interest in both these important topics. The National Infrastructure Commission has estimated the benefits of a smart energy system to be between £3 billion and £8 billion a year by 2030.
James Heappey
I am grateful to the Minister for his response and am pleased that he agrees with the advantages of a smart energy system. Ahead of the autumn statement, will the Minister look at the role that the Treasury might play in digitising our energy system by accelerating the deployment of storage technologies, demand-side response and the upgrade of our distribution networks so that we can achieve the productivity gains he expects?
Simon Kirby
The Treasury will continue to work with the Department for Business, Energy and Industrial Strategy to drive forward a smart energy system. The Government have committed to implementing the National Infrastructure Commission’s recommendations in full.
Steve Double (St Austell and Newquay) (Con)
Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)
The latest reports on the dash for cash in RBS’s Global Restructuring Group show even more misconduct by this bank. Given that we own a majority of RBS shares, does the Chancellor not believe that the UK Government have an obligation to the people of this country to conduct a robust investigation into the allegations of misconduct?
The Economic Secretary to the Treasury (Simon Kirby)
The Financial Conduct Authority is looking at this important issue, and we will wait on its view.
Mr Speaker
Michael Fabricant—not here. That is unprecedented in the history of my being in the Chair. I have never known the hon. Gentleman not to be here, but, fortunately, Mr Philip Davies is here.
George Kerevan (East Lothian) (SNP)
In light of the upcoming report of the RBS’s Global Restructuring Group and given that past systems of redress for small businesses have been ad hoc and have failed, will the Chancellor meet the all-party group for fair business banking to see whether we can involve a permanent and effective system of redress?
Simon Kirby
The hon. Gentleman makes a fair point, but we should wait until we receive the FCA report before we proceed.
Robert Jenrick (Newark) (Con)
Mr Speaker, you will have seen the latest Office for National Statistics survey that found that Newark is the happiest place in mainland Britain. However, what is testing the people of Newark is the appalling state of their local roads. Will the Chancellor do another favour for Newark, and in his autumn statement bring forward the new Newark northern bypass?
Draft Financial Services and Markets act 2000 (Ring-fenced Bodies, core activities, excluded activities and prohibitions) (Amendment) Order 2016
Simon Kirby Excerpts(7 years, 8 months ago)
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The Chair
Good afternoon, ladies and gentlemen. Members may remove their jackets if they wish. Let me just put down one marker at the start of our proceedings: this statutory instrument concerns banks and banking, but that does not give Members free range to wander down every highway and byway of banking after Brexit. Please resist that temptation.
The Economic Secretary to the Treasury (Simon Kirby)
I beg to move,
That the Committee has considered the draft Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016.
It is a pleasure to serve under your chairmanship, Sir Roger. This order is a technical measure. From 1 January 2019, the ring-fencing regime will require the structural separation of core retail banking from investment banking for UK banks with retail deposits of more than £25 billion. Ring-fencing was the central recommendation of the Independent Commission on Banking, chaired by Sir John Vickers, and the Government accepted and legislated for that recommendation in the Financial Services (Banking Reform) Act 2013. Ring-fencing will continue to support financial stability by insulating retail ring-fenced banks’ core services from shocks originating elsewhere in the global financial system.
The continuous provision of core services—namely, retail and small business deposits and payments services—is essential to the economy. Ring-fencing means that banks that provide those essential services become simpler and more resolvable, so core services can keep running even if a ring-fenced bank or its group fails. In so doing, ring-fencing reduces the perceived subsidy that comes from the presumption that the Government will bail out failing banks. Details of the regime are set out in secondary legislation passed in 2014, and it is some of those details that the order amends.
There are 18 different changes in the order, which will achieve three purposes: first, to address issues in the 2014 secondary legislation that could inhibit the successful implementation of the regime; secondly, to ensure that ring-fenced banks can continue recognisable retail banking activities; and thirdly, to close holes we have discovered in the ring fence. Together with the Prudential Regulation Authority, we will constantly patrol the ring fence for any flaws in the regime, and we will step in and resolve any that are identified.
To assist the Committee, I will identify the part of the order in which each of the changes can be found as I note them. Unfortunately, the order is laid out in line with the elements of the existing secondary legislation that it is amending, rather than thematically. As such, some changes require multiple amendments to different parts of the legislation, so my explanation might involve some skipping around. I am happy to provide a more detailed explanation of any aspects of the order.
The first category of amendments tackle issues in the regulations that could work against the successful implementation of the regime. Article 2 withdraws the requirement for banks’ large customers to complete a burdensome qualifying declaration and also removes the requirement for banks to issue information to customers who are unaffected by the regime. Article 3(3) on page 4 also falls into that category, by allowing the securitisation of assets required in the resolution scenario under certain circumstances. It also provides for the treatment of assets held by the banking group before ring-fencing comes into effect.
Sticking with issues that could threaten implementation, article 3(6), found at the top of page 7, makes it much easier for the PRA to assess compliance with the rules relating to the selling of simple derivatives. Article 3(7) ensures consistency with the pensions regulations. Finally in this category, article 3(10), at the end of the order, addresses what happens when an organisation unexpectedly becomes a relevant financial institution while a ring-fenced bank is exposed to it.
The second set of amendments address issues with the regulations that might prevent ring-fenced banks from carrying out activities that we would certainly expect a retail bank to conduct. Amendments found in article 3(4), on page 5, will ensure that ring-fenced banks can continue to be members of payments systems and central counterparties, and that they can hedge risks within the ring fence. Articles 3(7) and 3(8), on page 7, will ensure that ring-fenced banks can manage their liquidity risk. Similarly, amendment in articles 3(9) and 3(10), on pages 7 and 8, will ensure that ring-fenced banks can continue to lend working capital to small businesses, to act as trustees, to provide consultative services and to provide loans to infrastructure projects.
The third and final set of amendments will close holes that we have discovered in the ring fence. Article 3(2), on page 4, will expand the list of global systemically important insurers to which ring-fenced banks may not be exposed. Article 3(6) on page 6 will tighten the risk calculation that constrains ring-fenced banks’ issuance of simple derivatives.
To be clear, there are some things that the order does not do. It does not alter the location of the ring fence: core activities must be ring-fenced and investment banking activity must be outside the fence. It does not alter the height of the ring fence: the same degree of operational and financial independence must be observed between the ring-fenced bank and the rest of its group. It does not alter the timetable for ring-fencing: banks that are within the scope must be ring-fenced 27 months from now. We will be monitoring progress closely with the PRA and the Financial Conduct Authority.
Simon Kirby
I welcome the hon. Member for Stalybridge and Hyde to his new post. I wish him all the very best and hope to see him there for a long time to come.
I will make some general comments before moving on to the specific points. It has been a thoughtful and helpful conversation. This will not be the final opportunity for Parliament to provide scrutiny of the details of the ring-fencing regime. In its annual report, which the Treasury must lay before Parliament, the PRA will be obliged to report on compliance with ring-fencing and the banks’ use of exemptions. That will add transparency and ensure that exemptions are used only for the purpose intended. The PRA must also carry out regular reviews of its rules and provide a report to be laid before Parliament.
Section 8 of the Financial Services (Banking Reform) Act 2013 also obliges the Government to appoint a post-implementation review within two years of the separation date to monitor the implementation of the ring-fencing regime. That review will also report to Parliament and allow scrutiny on whether the legislation is working as intended. As banks complete their implementation plans and the regime comes into force, the Treasury and the PRA will continue to patrol the ring fence to ensure that it remains robust. We have come forward with amendments to ensure that the regime works and to close holes in the fence today. Should we discover further need, we will act again.
As recommended by the Parliamentary Commission on Banking Standards, the ring fence is electrified. With electrification, trying to game the regime, second-guess it or pass unwarranted business through the fence poses a serious cost. If the rules are flouted, the PRA can impose, with the Treasury’s consent, the complete separation of a banking group. Our vigilance, combined with the electrification powers supported by the Treasury Committee, should provide a powerful disincentive to attempts to undermine the ring fence. That should deliver an effective, robust regime that supports financial stability while ensuring that the benefits our banks provide to the UK real economy continue.
I was asked about consolidation. Commercial providers will in due course produce consolidated versions of the delegated legislation. There is no prospect of the SMA being consolidated. I was also asked why we did not produce an impact assessment. These amendments are mainly technical changes to the ring-fencing regulation. The Regulatory Policy Committee rules state that the deregulatory nature of this change means that we do not need to prepare a regulatory impact assessment. We do not normally publish validation impact assessments, but in this case I will be happy to do so, once it has been validated by the RPC.
I was asked to confirm that the arrangement would not allow banks a way around segregation. I can absolutely confirm that. On the qualifying declaration, can we be sure that banks will get that right? A banking group that wrongly places a small business deposit into a non-ring-fenced bank places itself at huge risk. That would have serious consequences, including the PRA potentially taking enforcement action. Therefore, that risk is minimised.
I was asked about infrastructure investment. I can reassure the Committee that commercial property is ruled out. Of course, any investment involves risk, but there is a strong need to be able to fund infrastructure from a variety of funding sources, including customer deposits. We will monitor use of that provision to ensure that it is used appropriately.
On the subject of trustees, banks must report use of exemptions to the PRA, which will then report to Parliament. We and the PRA will exercise constant vigilance to step in if we see any abuse whatsoever. Providing trustee services of individuals and charities does not give scope for the ring-fenced body to incur risks itself as a proprietary trader.
I hope that I have covered everything. These are important changes. Although technical and complicated, their intention is to provide the best possible solution for the banks, the banks’ customers and, ultimately, all of us as consumers.
Question put and agreed to.
Sale of Annuities
Simon Kirby Excerpts(7 years, 8 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Greg Mulholland (Leeds North West) (LD)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on why the Government have abandoned plans to allow savers to sell their annuities in return for a cash lump sum.
The Economic Secretary to the Treasury (Simon Kirby)
This Government have taken a great step forward in giving more and more people freedom to choose how they use their pension savings when they retire. We have already seen more than 300,000 people choosing to access their pension flexibly since the reforms were introduced. Alongside our efforts to do that, we also said that we would look at how we could spread that flexibility to people locked into existing annuities. We consulted extensively with the industry and with consumer groups to explore whether we could put in place the right conditions for a market to develop to facilitate that idea.
Throughout our investigations, one of our very highest priorities was to establish whether people could get a good deal through such a market. In the course of our efforts to investigate the viability of a secondary market in annuities, two things became clear. First, without compromising on consumer protections there would be insufficient purchasers of these annuities to create a competitive market in which British pensioners could get a good deal. Secondly, pensioners trying to sell their annuities would also be likely to incur high costs in doing so.
This Government have made it very clear that we want this to be a country that works for everyone, and that includes making sure that everyone gets a high level of consumer protection. It has become clear, through our extensive research, that a secondary market would not be able to offer this. Rather than being to the benefit of British pensioners, it would instead be to their detriment. It is for that reason that we are not prepared to allow such a market to develop, and we will not be taking this policy further.
Greg Mulholland
No disrespect to the Minister, whom I like, but the Chancellor should have been here to answer this question, particularly given the disgraceful way in which the announcement was made.
The move towards pension freedoms was the flagship announcement in the Budget just two years ago, in 2014. Originally the brainchild of the former Liberal Democrat Pensions Minister Steve Webb, it was embraced by the former Chancellor and specifically included in the manifesto on which this Government were elected. Yet yesterday afternoon, the Government announced via the press, not via this House, that they were scrapping the whole deal. This is a huge U-turn, which was announced after clear lobbying by an industry that never really subscribed to it, and a failure by the Government to build a reasonable secondary annuity market. Of course it is right that protections are put in place to ensure that people are not exploited on the secondary annuities market, but there are tens of thousands of people trapped in poor-value annuities who are eager to be able to take advantage of the new freedoms. Based on the promises in this Government’s manifesto, many of them will already have been considering how to take advantage of the plans in order to release themselves from their annuity and invest their savings differently. This announcement will leave many people having to make different decisions about their retirement from those to which they were being directed—if, that is, they have even heard of the change, given the way that it was rushed through and the way it was announced by the Government.
Can the Minister say, first, when the decision was made to drop the new pension freedom plans? Secondly, why was this decision not announced to Parliament before it was announced to the media? Thirdly, what are the Government doing to inform those who may wish to cash in their annuity that they will no longer be able to do so? Fourthly, what assessment have the Government made of people’s change of behaviour in response to the freedom, and how will this affect their financial decisions?
The pensions freedom plan was about trusting people with their money. Clearly, this Government have decided that they no longer trust people. They owe an apology to those who have spent time and money examining their options for retirement, and I hope we get one today.
Simon Kirby
It is easy to wish to have the cake and eat it, as the Lib Dems regularly do. It is difficult being a Minister. Sometimes we have to make hard decisions, but on balance, the interests of the consumers, often older people and the most vulnerable in our society, have trumped the desire to further increase pensions flexibility. The hon. Gentleman is disingenuous. It was one element of our pension freedoms and, after extensive consultation, it transpired that it would not provide value for money. Which?, which is totally independent of Government, has said that
“it would have been wrong to move forward without assurances that consumers could get value for money and have the necessary protections”—
assurances and necessary protections protecting those most vulnerable people in our society.
Several hon. Members rose—
Sir Desmond Swayne (New Forest West) (Con)
It is the right decision for the circumstances, but does my hon. Friend think that there is any connection between poor value in the annuities market and the Bank of England’s monetary policy?
Simon Kirby
Mr Speaker, I acknowledge your sound advice, as ever, and apologise if I have been anything other than my usually well-behaved self.
My right hon. Friend the Member for New Forest West (Sir Desmond Swayne) raises an interesting point, but this is about people, many of whom are older and more vulnerable, making the right choices, and the Government making sure that the market is there to support them. That is not the case, which is why we have changed tack.
Peter Dowd (Bootle) (Lab)
This is the latest of the many U-turns that the Government have made. I thank the hon. Member for Leeds North West (Greg Mulholland) for securing this urgent question. Labour Members want to know why the Government did not do proper market analysis prior to the announcement. They were warned at the time. If they had done that analysis at the outset, they may have realised the chaos and confusion that such an announcement would cause for up to 500,000 pensioners across the country, who are already worried about their long-term future.
This U-turn on pensions comes in the same week as the Government have pushed forward with their proposals for a lifetime ISA, despite widespread cross-party concern about the impact of future public finances on personal retirement plans. In the UK pension market the consumer is unable to make an informed choice because of a lack of cost and performance data. We believe that it should be the role of the Government to provide those data. What will the Government do to assist with that process?
Like the hon. Member for Leeds North West, we would like to know when the Government decided to abandon the policy. Who made the final decision? Was there another interference by the Prime Minister in the previous Chancellor’s decisions? Who was consulted? How extensive was that consultation? The Government were warned. What assessment has been made of the pension market in general and the knock-on effects of this decision? What influence, if any, has the recent vote for Britain to leave the European Union had on this decision?
There is an indication that because of this decision, £900 million may be lost in the first two years in tax that would have come in as a result of people paying tax on the sale of their annuity. Where is that money going to come from? Is that not another black hole in the Government’s finances?
Simon Kirby
Let me deal with the points in reverse order. The hon. Gentleman will have to wait for the autumn statement to see what the finances look like, but it became increasingly apparent that not only was it not a good deal for consumers—those vulnerable people who we care about—but it was unlikely to provide the kind of income that had first been expected. We consulted extensively with the industry and consumer groups. I had many conversations with the Department for Work and Pensions, and particularly with the Parliamentary Under-Secretary of State for Pensions. The hon. Gentleman asks where information will be provided. The Government are introducing a new money advice service that will provide such information.
I shall finish with a quote from the Association of British Insurers, in whose interest the hon. Gentleman might suppose it was for us to continue with the policy. The ABI says:
“This is the right decision for the right reasons”
and that there were
“considerable risks for customers, including from unregulated buyers”.
We do not want to see unregulated buyers out there or vulnerable people affected.
Jeremy Quin (Horsham) (Con)
Does my hon. Friend agree that for a market to work, buyers as well as sellers are needed? To try to create a market where there are not both is an impossibility, and to have done so would have led to a potential disaster for consumers.
Simon Kirby
As ever, my hon. Friend makes an excellent point. There were very few people interested in buying those products, which would have resulted in a very poor deal for customers. The market was not big enough to provide value for money and on that basis we decided not to proceed.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
On that point, given that we now know that there was an absence of buyers in the market, where was the Government’s consultation before they offered their proposal? We cannot get away from the fact that this was a manifesto commitment from the Government. I welcome the U-turn; they have done the right thing, but why was the matter not brought to the House? Why did we read about it in the media?
Last April the Financial Conduct Authority said that there were concerns about the secondary market in annuities, which would mean
“a significant risk of poor outcomes for consumers”.
The regulator said:
“Annuities are inherently difficult for consumers to value, and consumers who will be able to participate in this market will include a higher proportion of older, more vulnerable consumers.”
We could see that. The FCA came out with that last April. Why has it taken so long for the Government to do the right thing? We recognise some of the concerns for consumers as a result of the pensions freedoms introduced. May we have a full review of the pensions freedom policy?
Simon Kirby
I thank the hon. Gentleman for recognising that this is the right thing to do. It is a difficult decision and it is, as ever, a balance between two conflicting viewpoints. My job as a Minister at the Treasury is about making sure that consumers are protected, that industries are regulated sufficiently, and that there is the very best possible deal for customers. Withdrawing this product, which is aimed at many old and vulnerable consumers, is absolutely the right thing to do.
Stephen McPartland (Stevenage) (Con)
I know that the Minister has very bravely taken this decision to protect the more vulnerable pensioners who are suffering, but what will he and the Treasury be able to do to ensure that pensioners on very low incomes who are trapped in difficult annuities can escape those punishing regimes?
Simon Kirby
We are looking at an economy that works for everyone, including those pensioners on low incomes. The Treasury will be considering this very carefully, but my hon. Friend will have to wait until the autumn statement to hear how we are best placed to deal with this. However, those people are absolutely at the centre of our attention, and we will do all we can to help.
Chris Leslie (Nottingham East) (Lab/Co-op)
Of course, guarding against mis-selling is important, but does this announcement not represent two new problems? It is a problem, first, for those hundreds of thousands of pensioners who have been marched up the hill only to be marched back down again, and left uncertain about their financial options, but, secondly, for those other generations of potential savers who are baffled by pensions generally and who will find this mixed message—this chopping and changing—on flexibilities even more of a reason to feel sour towards the attractiveness of pensions? We have a savings crisis in this country, and the Government need far more consistency and a clearer policy.
Simon Kirby
None of us wants to see people being baffled, and none of us wants to see uncertainty, but at the end of the day we are surely better off making the right decision, which protects vulnerable consumers, rather than carrying on regardless. The hon. Gentleman is right that we all have a responsibility to educate and inform people throughout their lives about the importance of savings and pensions, and that is something the Government fully intend to continue doing.
David Rutley (Macclesfield) (Con)
I know that this is a difficult decision for my hon. Friend, because he feels passionately about pension freedoms. Can he assure the House, though, that every effort is now being made to ensure that pension providers fully co-operate with all other aspects of the Government’s wider pension freedoms, which have been so warmly welcomed around the country?
Simon Kirby
I can give my hon. Friend the reassurance that I will do all I can to make sure that providers work closely with the Government to get the best possible deal for older people and indeed savers, including younger people—people who are perhaps not in the habit of saving or contributing to pensions. That is an important thing, and I am happy to pursue it with my full vigour.
Tom Brake (Carshalton and Wallington) (LD)
I will ask the Minister a third time why this announcement was not made to Parliament before it was made to the media. Also, what is he going to do to inform people who may have intended to cash in their annuity, but who are now not going to be able to do so?
Simon Kirby
It is fair to say that there are often circumstances where information or announcements are market sensitive, and sometimes that drives how things are announced.
Kevin Foster (Torbay) (Con)
Given that these retirement annuities can form the bedrock of many people’s financial security, it is right that a decision is taken to secure the interests of those people rather than to press ahead purely because of a manifesto commitment. Will the Minister reassure me, though, about what work the Treasury is doing to ensure that people get a better deal on their annuities in the first place? For many people, looking to cash in their annuity in was about trying to deal with the bad deal they got on that annuity, not necessarily about wanting a lump sum.
Simon Kirby
My hon. Friend is absolutely right: two wrongs, sadly, do not make a right. The Government are committed to giving people pension freedoms so that they can choose what to do with their money, because that is the right choice to make, but, in this particular and individual circumstance, it was not the appropriate way forward.
Margaret Ferrier (Rutherglen and Hamilton West) (SNP)
My constituent, Mr Anderson, contacted me and advised me that, despite the risks, he planned to take up the option of selling his annuity. I wrote to the Treasury and was assured only 19 days ago:
“The Government remains committed to delivering these proposals”.
Yesterday’s announcement is a betrayal of people such as Mr Anderson. I notice that the Minister did not answer the question a few minutes ago, so what exactly do the Government suggest that Mr Anderson and others do now?
Simon Kirby
Obviously, Mr Anderson is as important as all the other people who, no doubt, will be very interested in this announcement. It transpired through consultation that a very small percentage of people would be better off. We were looking at legislation that would oblige the Government to provide guidance and advice; in the vast—very vast—majority of cases, that advice would be that it would not be appropriate and in the consumer’s best interests to proceed. There is no easy answer, but at the end of the day, I am not going to allow vulnerable older people to take advantage of what may, superficially, seem a good deal, but what, in the long term, is a poor one.
Mr David Nuttall (Bury North) (Con)
John Lawson, the head of retirement policy at Aviva, has said that one of the obstacles in the way of the secondary annuities market is the existence of statutory override clauses in annuity contracts. Has that played any part in the Government’s decision, and do they have any plans to at least look at passing legislation to deal with that?
Simon Kirby
That is certainly something we will be looking at. At the end of the day, many people got a poor deal on the way in; the last thing I want to do is to give them a doubly poor deal on the way out because the market is not big enough to provide value for money. If that means the option of reducing regulation, I am not a fan of that; regulation exists to support people and to help them make the right decisions.
Sammy Wilson (East Antrim) (DUP)
The industry opposed this; millions of pensioners who were locked into low-paying annuities supported it. The Chancellor at the time knew all the problems, yet he claimed to be the champion of choice for the people. What has changed? Do the Government now believe that the nature of people they said would make good choices because they were sensible and had good advice has changed? Given that the Minister has removed choice, but not the problem, what does he intend to do for those who still find themselves locked in annuity arrangements that do not give them a sensible and fair income?
Simon Kirby
It is fair to say that the Chancellor of the Exchequer at the time was not in possession of all the information following the consultation. It was our intent, clearly, at the time to listen carefully to not only the industry but consumer groups, which we have done extensively. It is worth saying that we remain absolutely committed to all the other pension freedoms that we are introducing. This is a sensible way forward, and I hope the hon. Gentleman welcomes it.
Mark Durkan (Foyle) (SDLP)
This pop-up policy, which has now been popped down again, came from a Government who had a long-term economic plan, yet this policy has not survived very long. As has been indicated, the policy was a response to the bubbling sense of scandal that was there because people were stuck with meagre and marginal annuities, and it was a chance to give them something different. If the Minister is convinced that he is avoiding the new scandal that would have happened, of people ending up mis-selling their annuities, what is he doing about the original scandal of the meagre annuities that people are trapped in, which this policy was designed to respond to?
Simon Kirby
The hon. Gentleman is right in as far as that certainly was the intention of the policy. There is a long-term plan, because I am concerned about the long-term financial wellbeing of these older and vulnerable people, and it is important that they get the right deal and make the right decisions. That is why this suggestion, which is only one of many, is not appropriate to carry forward. It is not a pop-up policy; we have listened carefully, and we have made the right decision.
Alan Brown (Kilmarnock and Loudoun) (SNP)
This U-turn has come about because of concerns about mis-selling and protecting consumers. The same risks and concerns must surely apply to the people who are currently exercising pension freedoms by cashing in their pension policies for lump sums. As my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) said, when are this Government going to have a coherent review of the existing pension freedoms legislation?
Simon Kirby
What happens in the secondary annuities market is very different from cashing in existing pensions for lump sums. To be clear to the House, selling an annuity would never have been the same as getting a refund on all the money that was put into the product or the original pension pot minus any payments made. Purchasers would have paid what they thought the income stream was worth. Without a competitive market, that income stream would have represented poor value for money, and people would have got a very poor settlement as a result.
Concentrix: Tax Credit Claimants
Simon Kirby Excerpts(7 years, 8 months ago)
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The Economic Secretary to the Treasury (Simon Kirby)
It is a pleasure to serve under your chairmanship today, Mr Nuttall, in my first debate in Westminster Hall. I give the Financial Secretary’s apologies: she is on a Bill Committee and cannot be in two places at once. I have listened carefully to what has been a very interesting debate and will do my best to answer all the questions.
I congratulate the right hon. Member for Slough (Fiona Mactaggart) on securing the debate and take this opportunity to thank all right hon. and hon. Members for their efforts, not just in the debate but during the past few weeks, supporting constituents and bringing to our attention the difficulties that constituents are experiencing with their claims for tax credits. I reassure hon. Members that we are making every effort possible to resolve those difficulties as soon as possible and to make sure that the support provided through tax credits reaches those who really need it. There is no doubt that last month we were falling short in the level of customer service that we were providing to claimants, and I am very sorry about that.
In our efforts to tackle error and fraud in tax credits, we had engaged Concentrix to investigate claims and it did help us to drive down error and fraud to almost the lowest level since tax credits began. However, faced with a high volume of calls, Concentrix struggled to provide the kind of service that people had a right to expect—indeed, the kind of service stipulated in its contract. That led to a stressful time for a lot of people, including some of the most vulnerable, as they struggled to reach Concentrix to resolve any queries about their entitlement to tax credits. Let me be clear that that was not good enough, which is why we stepped in to get things back on track.
Ms Angela Eagle
Where did the information, particularly on cohabitation, come from? So many of our constituents have been accused of cohabiting with the previous tenant of their usually rented property. Were the data HMRC-matched or did Concentrix do it all on its own?
Simon Kirby
I am going to reach that point later. Very briefly, HMRC provided third-party data to Concentrix, which then chose who to pursue from those data.
Neil Gray (Airdrie and Shotts) (SNP)
We have heard today of constituents who have lost employment, college courses and access to childcare, and have been forced to go to food banks and take out payday loans, which inflicts stress and trauma not only on the parents but on the children. Having admitted that it was the responsibility of HMRC as well as Concentrix, will the Minister commit to expanding the compensation available to reflect the hardship and trauma inflicted on those people?
Simon Kirby
I will make some progress, and if the hon. Gentleman listens carefully, he may well hear some things that are helpful to that question. Before I turn to those points, let me outline what we are doing.
First, as my hon. Friend the Financial Secretary announced in the House last month, HMRC is not passing any new cases to Concentrix. We have been very clear that the contract will not be renewed beyond the end date of May 2017. Secondly, staff at HMRC are, as we speak, making every effort to resolve all open cases to ensure people get the payments they need and deserve. HMRC took back 181,000 outstanding cases from Concentrix and it has already dealt with more than 149,000—82%—of them. I would like to reassure everyone whose case remains open that we are making every effort to complete those cases within the next couple of weeks. It really is a priority.
Simon Kirby
I will not give way.
Thirdly, anyone who does not agree with Concentrix’s decision has a right to ask for a review called a mandatory reconsideration. HMRC has allocated its own staff to carry out such reviews within 21 days of the request. It is a large organisation with flexible staffing, so it is able to deal with peaks and troughs of demand. The hon. Member for Aberavon (Stephen Kinnock) mentioned the issue of extra costs, but I am confident that there will not be any.
Patricia Gibson
Given the extra work being created for HMRC to clean up the mess created by Concentrix, does the Minister have any view on the fact that one third of HMRC staff will be cut by 2021?
Simon Kirby
As I said, HMRC has a large number of staff, who are flexible and deal with the peaks and troughs of demand. If HMRC, after receiving the relevant information and reviewing the case, finds that the claimant is entitled to tax credits, they can expect to see that money in their bank accounts within four working days.
Lastly, we are working with hon. Members to help their constituents who are struggling to resolve any issues. We have extended opening hours and have put extra advisers on the tax credits hotline for MPs, which is now handling about 200 calls a day. I am pleased to inform hon. Members that my hon. Friend the Financial Secretary, following last month’s drop-in session, will be holding another session tomorrow in the House of Commons Library.
Angela Crawley
The news that HMRC will not renew the contract with Concentrix is welcome. Those responsible for these reprehensible practices should be held to account. When these services are brought back in-house, we must ensure that the blanket, baseless accusations and sanctions that have been applied will stop and that compensation will be made for the Government’s mistake. Will the Minister take the opportunity to apologise to my constituents and the women and men up and down the country who have experienced the Government’s failure?
Simon Kirby
None of us in this Chamber wants anyone not to receive money that they are entitled to, especially if they are parents with young, vulnerable children. It is up to all of us to help our constituents and ensure we once again provide a fast and efficient service to everyone.
Let me turn to some of the issues that were raised. I do not have a lot of time, so hon. Members will have to bear with me. I acknowledge the points made by many hon. Members about the contract. HMRC will be undertaking a lessons-learned exercise, and it will share those lessons across the Government. It is clear that they will help to inform other contracts in the future.
Mark Durkan
In that lessons-learned exercise, will HMRC look at the question of the so-called high-risk renewal scheme, which is at the very heart of all the troubles that our constituents have suffered?
Simon Kirby
There will be a number of reviews, and all lessons learned will be looked at in an open-minded manner. We will consider all elements of what has gone wrong and try to ensure that the mistakes, which have clearly happened, are not repeated.
I have talked about how the data are given to Concentrix. It is up to Concentrix to choose who to contact from those data. The £100 hardship payment is important. It is available to everyone, not just through the MPs’ hotline. It is not necessarily a one-off payment; future payments can be made if there is a delay in the decision. I encourage people in hardship to apply for it, because it is there to help people while we sort out this mess.
The hon. Member for Foyle (Mark Durkan) talked about the 30-day cut-off period. I can tell him that most customers have been able to provide the information required within 30 days. There was a question about money being clawed back from Concentrix. Concentrix is not paid for wrong decisions, and payment is reduced where it fails to meet performance standards. That is still happening. At the end of the day, it is paid to do a job, and if it does not do the job, it is not paid for it. I have noted the comments about letters being lost.
In conclusion, I thank everyone here. This has been a short debate, and it would have been nice to have more time for contributions. I am here to listen, and I have listened very carefully.
Savings (Government Contributions) Bill
Simon Kirby ExcerptsMonday 17th October 2016
(7 years, 8 months ago)
Commons ChamberRead Full debate Savings (Government Contributions) Act 2017 View all Savings (Government Contributions) Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Simon Kirby)
First, let me thank everyone here today for contributing to this interesting debate. As my hon. Friend the Financial Secretary said in her opening remarks, the measures contained in this Bill are really important priorities for this Government, and both Help to Save and the LISA offer people in this country a new and effective option for how they save their money. Help to Save focuses on giving more support to those on low incomes. It will give a 50% boost to those who can get into the saving habit of putting aside a small, regular amount into their account each month. The LISA focuses on younger people. It is an account that will offer genuine choice and flexibility, not to mention—
Simon Kirby
I will give way, but I had hoped to address the hon. Gentleman’s many comments later on.
Ian Blackford
I am grateful to the Minister, but this is an important point. Will he explain to the House why he thinks it is right to encourage people to invest in the lifetime ISA rather than in a pension, given that a pension will give a better return, as has been demonstrated in the figures, such as the one I cited of a 32% difference over a 40-year period? Why are the Government being misguided and prioritising ISAs over pensions?
Simon Kirby
I thank the hon. Gentleman so much for that intervention, but the Government are not doing what he suggests. We are offering people a choice, and these two schemes are complementary and serve very different purposes. The genuine choice and flexibility to which I alluded are at the core of this Bill, but now let me deal with the specific points raised today.
The hon. Members for Salford and Eccles (Rebecca Long Bailey) and for Harrow West (Mr Thomas) mentioned credit unions. The Government recognise that many credit unions were interested in offering accounts, but it was not clear that a multiple provider model would guarantee national coverage for the scheme. We will continue to explore further options for credit unions to support delivery of the scheme, and I am sure that we will have that conversation in more detail as the Bill progresses.
The hon. Member for Salford and Eccles talked of this scheme being a substitute for benefits, but it is about increasing the financial resilience of low-income families so that if they are hit with an unexpected bill or if someone loses their job, they will have money for a rainy day. If something unexpected happens to their income, they will have savings to bridge the gap. She also asked why two years was chosen. This is the period of time needed to encourage account holders to develop a regular savings habit—a habit all too lacking in many people, especially younger people. I reiterate that the amount is up to £50 a month. People may not be able to afford that amount, but any regular saving is something that all of us should encourage.
I wish to clarify one point. The hon. Lady mentioned that there would be an additional penalty if people took money out of a lifetime ISA. An additional charge will be applied to reflect the long-term nature of the account, and that will act as a disincentive to people removing money unless it is essential or if there is a very important change in circumstances to be taken into account.
I wish to thank my hon. Friend the Member for Newark (Robert Jenrick) for his contribution. Our constituents are looking forward to the introduction of these products, and I agree with him that they contain significant incentives. He also mentioned the abolition of savings tax. It is worth putting it on the record that 95% of people have no savings tax to pay thanks to the new personal savings allowance.
The hon. Member for Ross, Skye and Lochaber (Ian Blackford) mentioned a smorgasbord of issues, a few of which I shall pick up on. He said that women were disadvantaged by automatic enrolment. Before it began, 65% of women employed full time in the private sector did not have a workplace pension; as of 2015, that had fallen to 35%. He said that a lifetime ISA was just for the rich, but it is for anyone between the ages of 18 and 40. They can open it and save into it until they are 50. The maximum annual contribution that an individual can make is £4,000. People can pay less than that and still enjoy the Government bonus. We expect that a large majority of those who use the lifetime ISA will be basic rate taxpayers.
The hon. Gentleman mentioned StepChange. Well, this is what StepChange has said:
“We welcome Government recognition of the need for a savings scheme aimed at those on low incomes. Our research shows that if every household in the UK had £1,000 in rainy day savings, 500,000 would be protected from falling into problem debt.”
He also mentioned the Association of British Insurers, which said in August:
“The industry supports the Lifetime ISA as a vehicle to help people save, in addition to a workplace pension.”
I hope that is fairly clear.
My hon. Friend the Member for North West Hampshire (Kit Malthouse) asked very sensible questions and made some thoughtful points. In particular, he asked about the limit of £50 a month. Individuals saving £50 a month for four years will earn a generous bonus of £1,200. It is probably an appropriate limit for people on low incomes, at whom the scheme is targeted. There has to be a ceiling.
The hon. Member for Harrow West asked about payroll deduction. I have to thank him for a very sensible and measured contribution. There is no reason why payroll deduction cannot take place. I cannot make a commitment to him today, but I can confirm that I am happy to see whether there is more that we can do in that area.
Mr Gareth Thomas
I am grateful to the Minister for his considered response to my request for payroll deduction. Would he be willing to meet me and the Association of British Credit Unions Ltd to discuss this issue further?
Simon Kirby
Yes, I would be very happy to do that.
I thank my hon. Friend the Member for Gloucester (Richard Graham) for his thoughtful contribution. Clearly, he feels very strongly about a vast number of issues. I respectfully disagree with some of his opinions, but I hope that he continues to contribute to this important debate, as it is important that we get it right. At the end of the day, this is about helping younger people and poorer people get into the habit of saving.
Dr Cameron
Given that the crux of the matter is to help younger people to save, will the Minister have a dialogue with colleagues about financial education at school, and why it is really important that children and young people have a stable and secure relationship with money and that they understand that at an early age?
Simon Kirby
I absolutely agree with the hon. Lady. Making sensible, correct and proper financial decisions is important for all of us throughout our lives. She has got her point in Hansard. I will also take it away with me.
Let me come back to the points raised by my hon. Friend the Member for Gloucester. There was some confusion about the factsheet of Her Majesty’s Treasury. May I make it clear that the lifetime ISA is for long-term saving, and is designed to complement pensions? Contributions to an ISA are made from post-tax income.
My hon. Friend the Member for Morecambe and Lunesdale (David Morris) mentioned self-employed people. We should never forget that many people do not have this quandary about whether they should auto-enrol or go for a lifetime ISA. There are sensible self-employed people who either want to save for later life or purchase their first home. I know that the lifetime ISA scheme will be very well received by them.
Finally, I thank the hon. Member for Bootle (Peter Dowd) for his contribution. I disagreed with almost everything he said, but I genuinely look forward to his continued involvement in this important area. Let us not forget that we have a responsibility to the millions of people out there—young people and poorer people—who should be saving and getting the very best assistance they can from the Government.
In conclusion, when it comes down to it, this Bill is about supporting people who are trying to save. It does not matter whether they are a young person looking for a flexible way to save for the future or if they are someone who is on a low income and are making a big effort to save up some money each month, they deserve a savings account that will support them and give them a boost on what they manage to put aside. Although these two savings vehicles are new, they are intended to do exactly that. I am pleased to commend this Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Savings (Government Contributions) Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Savings (Government Contributions) Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 1 November 2016.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed.—(Andrew Griffiths.)
Question agreed to.
Savings (Government Contributions) Bill (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a),
That, for the purposes of any Act resulting from the Savings (Government Contributions) Bill, it is expedient to authorise the payment out of money provided by Parliament of:
(1) any expenditure incurred by a Minister of the Crown or a government department under or by virtue of the Act; and
(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Andrew Griffiths.)
Question agreed to.
Savings (Government Contributions) Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a),
That, for the purposes of any Act resulting from the Savings (Government Contributions) Bill, it is expedient to authorise—
(1) charges on certain withdrawals from Lifetime ISAs; and
(2) the recovery (with or without interest) of sums paid by way of government bonuses under the Act.—(Andrew Griffiths.)
Question agreed to.