Finance (No. 3) Bill
Stella Creasy Excerpts(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Redwood
I, too, would find forecasts helpful, but I understand the uncertainties surrounding what bank shares might be worth in one or two years’ time. There may even still be considerable uncertainties about how much profit the banks will deliver. It would be much easier to get value for taxpayers if these banks deliver reasonable profits.
The second point I wish to make is that the other disadvantage of a bank levy tax is that it is a tax on exactly the kind of activities that we really want banks to perform at the moment to fuel the recovery: it is a tax on lending money to businesses and individuals. The loans that we probably most want, if we are to get the recovery going more quickly, will be the riskier ones, yet they are exactly the kind of assets that the banks will own that will score more heavily for the levy.
Stella Creasy (Walthamstow) (Lab/Co-op)
Does the right hon. Gentleman agree that we might want to deal with the banks’ behaviour in a more general sense and their impact on the economy? Might it not be worth considering a third way of dealing with the banks, particularly re-mutualisation of some of them? Might that be a way of getting banks that are more focused on their stakeholders, particularly the people to whom we might want them to lend, than on paying bonuses to people all the time?
Mr Redwood
I am always very happy to see ownership extended in ways that include that type of mutual, although the history of the mutual banking movement in the past 20 years provides no evidence that such banks were particularly good at reading the cycle or dealing with the capital problems—indeed, many of those institutions went to the markets and decided to exploit market opportunities because they had a capital problem that they thought they could solve by that route. It may be that we could go back to more traditional mutually owned banks with much more constrained balance sheets and activities, and that might be part of getting back to a more healthy banking sector. That is something that the market should decide.
I am firmly of the view that we need more competition and choice in the marketplace. One of the big errors was allowing banks that were too big. As a competition hawk, I was publicly very strongly against the takeover of HBOS by Lloyds; it was a great tragedy for Lloyds and for the country that that merger went through. We should have dealt with HBOS in other ways, which would have been less expensive. I was also a critic of the Royal Bank of Scotland takeover of ABN AMRO. Although the competition issues that raised were not as clear as the competition issues raised in the case of the Lloyds takeover of HBOS, I would have liked to have seen a tougher line taken. I hope that this period of change and reflection on banking, including how we tax it, can lead to a much more competitive structure. One of the ways of doing that would be to sell off some of the assets currently owned through Lloyds and through RBS in ways that created more banking challenge in the market.
Stella Creasy
Does my hon. Friend agree that one of the things that we could do is to consider whether the amendment on the adequacy of the bank levy could be used to deal with some of those practices and with illegal loan sharks who are preying on people to whom our mainstream banks will not lend?
Stella Creasy
It is a pleasure to follow my hon. Friend the Member for Scunthorpe (Nic Dakin) and his eloquent description of the problems facing us as a country. I rise to speak to clause 72 and amendment 9 because this debate is about the bank levy and whether it is being applied in the right way and to the correct extent.
I support the amendment, because it seeks to address the challenges of any new legislation and answer the question of how we as a Parliament ensure that the legislation that we pass is effective at doing what we want it to do. The amendment would meet the challenge of asking whether bankers pay their fair share of the cost of dealing with the global financial crisis, just as we as taxpayers have paid more than our fair share, some might say, in trying to support them. That goes to the heart of today’s debate about clause 72 and what the Bill will do for the financial future of this country, so I support the amendment because it highlights the need to address the adequacy of the bank levy.
I also pose a wider question about how the clause will work to ensure that all those who have benefited and, indeed, continue to benefit from the financial crisis that this country has endured pay their fair share in helping the economy out of recession and back into growth, not least because I am deeply concerned, as many Members know, about this Government’s policy of reducing the national debt by increasing private household debt, and about what that might mean for many of our constituents.
I spoke at length on Second Reading last week about the impact of that policy on families throughout the country, and I do not propose to repeat the measures that I put forward, but, on the adequacy of the bank levy, the clause makes an omission that I hope the amendment will address. High-cost lenders are benefiting disproportionately from the impact of the Budget on our people, and from the fact that mainstream lenders are not lending because of banks paying out more in bonuses than they do to the people of this country, who need that money. Indeed, perhaps the omission calls for a new clause to deal with that issue and, therefore, to make sure that that money benefits our economy.
The industry has certainly benefited greatly from this Government and from the events of the last year alone. Of the £216 billion of unsecured lending in this country, £8.5 billion comes from that market, which has increased by £1 billion in the past year, and £8.5 billion is the same amount of money that it would cost to repair all the schools in England—a cause dear to many Opposition Members. It is also the entire budget of the Department for International Development; we are talking about a substantial amount. The market is growing not least because of the lack of regulation—the lack of Government action to deal with the high-cost credit industry—and the amendment could deal with that omission.
Mike Gapes (Ilford South) (Lab/Co-op)
My hon. Friend refers to schools, and she knows from her constituency and borough how the coalition parties’ drastic, ruthless and unplanned cuts to Building Schools for the Future have caused great grief to her constituents, yet she says that they could have been compensated for by the measures to which she has just referred—
The Temporary Chair (Mr James Gray)
Order. I have been quite generous so far in not picking up hon. Members on what they have said, but we have to focus on the bank levy, how much it should be and whether it should be reviewed annually. Debating the way in which the Government might spend the proceeds from any such levy is not in order during discussion of this amendment.
Stella Creasy
Thank you, Mr Gray. I appreciate very much the passion with which my hon. Friend the Member for Ilford South (Mike Gapes) expresses his concern about BSF, which is a sentiment that I share, but I take the Chair’s point, and the bank levy is exactly what I want to speak to. I am concerned, because it offers an opportunity to deal with the challenges to our economy, and therefore the Bill should be amended by amendment 9.
I return to the case that I am trying to make about the high-cost credit market in the UK and its impact. It is precisely because the market has not been subject to any regulation, which could be introduced under the amendment, that we have seen a massive explosion in payday lending—a quadrupling of the industry in the past 18 months alone.
Dollar Financial, which Members may know better as The Money Shop, has already stated that the lack of regulation here brought it to the UK. The company had one store in the country in 1992, 273 by 2009, and it has announced plans for a further 800 this year alone as a result of that lack of regulation.
The question of adequacy, which the amendment raises, includes how those companies act—certainly, that is how I interpret it—and the opportunity that the levy and its review could provide for dealing with the impact of their actions on consumers in the UK. By using the review, we could ask whether the levy might be applied in such a way as to deter consumer detriment.
Jeremy Corbyn
I pay great tribute to my hon. Friend for her work on those scoundrels who lend money at huge rates of interest. What she has done is very welcome. Does she also consider it important that the bank levy be used beneficially to promote and to develop credit unions, which provide a decent system, help people when they are desperate, do not charge them excessive interest and are democratically run? They seem to me to be a beneficial service all round which should be encouraged.
Stella Creasy
My hon. Friend hits the nail on the head, because proposed paragraph (b) of amendment 9 talks about wider reform of our banking system. Many Opposition Members have called for action on access to affordable credit, but this is not just about credit unions; it is about the schemes that housing associations have put forward. In that context, I register my disgust at the fact that a housing association was recently taken to the Advertising Standards Authority by The Money Shop for daring to point out to their tenants the cost of borrowing from such companies—and was, indeed, censured.
The question of how we deal with banking reform, so that everybody can access affordable credit and there is not a new dividing line in our communities between those who can get on in life and families who are scarred with debt for generations, is a key concern for me, and many Opposition Members are concerned about what the Bill and the amendments can do to promote such measures.
Barry Gardiner
I welcome all the energy and work that my hon. Friend has put into that subject. Does she share my disgust at the fact that, here we are, debating an issue that affects literally hundreds of thousands of our constituents and, in terms of bankers' bonuses, dealing with one of the biggest issues before the public, yet there are precisely two people sitting on the Conservative Benches?
Stella Creasy
My hon. Friend makes a good point about the importance of this Bill putting first the needs of this country and, therefore, about the importance that others attach to it. I hope that we have support from members in all parts of the House for the need to act on the high-cost credit market. There has certainly been support among Government Back Benchers; noticeably, however, Government Front Benchers have so far reacted with negativity to that support. I hope that they will change their minds, given the possibilities that we have through the Bill, the amendment and, indeed, the regulatory measures being considered to make progress on an issue that concerns many Members. Our concerns are about a number of products—I want to put on record what we are talking about—and the lack of action on such products in contrast to dealing with the bank levy and whether it is applied appropriately.
First, there are payday loans. Many people will be familiar with the concept of a short-term loan, and given that almost half of households cannot make their pay cheques last to the end of the month, it is no surprise that almost one third of households are now considering such products. Interest rates on such loans include one from a company called Oakam, of about 443%; and many people will be familiar with Wonga, whose rates are more at the 4,000% level. We are also talking about the home credit industry and companies such as Provident. Many people will be familiar with Provident going from door to door in their communities lending money to people at interest rates of, say, 272%. That means that if someone borrows just £300 from the company—perhaps to buy a new sofa or TV, or to fix a washing machine or a boiler that has gone wrong over the winter—that will cost them £546.
Were we to use this amendment and the opportunity of the bank levy to deal with some of these problems and with the actions of some of these companies, we would be encouraging the Government to look at the concept of adequacy and consider some of the issues in that market. First, there is the lack of competition in providing credit to those who are denied mainstream credit. That is embodied in the fact that there is no innovation in these products; they are very similar. There is therefore a great contrast with people who are able to borrow from mainstream creditors. Many people will be familiar with mainstream banks offering preferential rates and loyalty schemes to customers who they want to hold on to because they know that they have alternative sources of credit. We could apply the bank levy to the question of adequacy and ask whether these companies are acting in a way that is detrimental to consumers and whether the lack of competition is detrimental to consumers and to our economy. Many people have expressed concern that our banking industry is already overloaded, which requires more competition. I would argue that there needs to be more competition in lending to people who cannot access mainstream credit, and this is one way in which we could achieve that.
A quarter of the customers who use high-cost-credit companies cannot borrow from other lenders. As a consequence, they do not build up the evidence of being good borrowers that would allow them to use mainstream sources of credit. These companies do not share information on their customers, making it incredibly difficult for customers to prove that they could use more mainstream sources of credit. The question of adequacy could also be applied to companies’ use of rollovers and stepping up of loans, which means that borrowers are stuck with using them. In particular, because they often lend only small amounts of money to begin with—
The Temporary Chair (Mr James Gray)
Order. The hon. Lady is making a passionate point, but it is associated only very loosely with amendment 9 to clause 72, so I wonder whether she could bring herself back to the matter that we are discussing.
Stella Creasy
I apologise to the Chair if I am not being clear, but I see this in the context of paragraph (b) of the amendment on the wider regulation of the banking system, and the importance of trying to use the opportunity that the bank levy presents to effect a positive impact on the way in which money is lent to those on low incomes.
John McDonnell
My hon. Friend has campaigned on this issue for a considerable period. Is it not true that the bank levy could be used as a lever to prise these other reforms out of the overall system?
Stella Creasy
My hon. Friend is absolutely correct. This is born out of my frustration at the fact that the Government have so far refused even to contemplate taking action. I hope that this time round the Treasury team will seriously consider how the bank levy could be used to effect such action. The concept of adequacy in the amendment offers us an opportunity to ask whether the bank levy is being levied in a way that deals with high-cost credit and its impact. This debate has been about the appropriate level of the levy and its impact on banks, and I would argue that it could be extended to an appropriate levy on high-cost credit industries. We could then look at the way in which such companies pass on their costs to consumers who are particularly struggling in the economic conditions that we face. As Debt on our Doorstep points out, the fixed costs of lending in the home credit industry represent about 15% of revenues, yet the cost of borrowing from such companies is £82 in collection charges for every £100 lent. It is therefore no surprise that their profits have gone up by 40% in the past year as the lack of regulation in the industry allows them to run riot in our local communities.
There is broad agreement on the need to act on the impact of these companies, and the clause could be amended and applied in such a way as to enable that to happen. Citizens Advice has argued that the Government should not use the need for regulation of the financial sector as a cover for failing to act in these markets, as has the Centre for Responsible Credit—and as have many Ministers. I urge Ministers to talk to colleagues who, prior to 2010, advocated caps on the cost of interest rates. The Minister with responsibility for consumer affairs was very supportive at that time, but he seems to have changed his mind. [Interruption.] I agree entirely with the suggestion that perhaps that is yet another broken promise. We are talking about the 5 million to 7 million people in our communities who are affected by not being able to access mainstream credit and who are forced to use such companies. The bank levy gives us the opportunity to send a strong message to those companies that the way in which they act is deleterious to our communities and to our economy as more people are stuck in debt.
Mr Ward
We have heard numerous calls for the additional bank levy that the hon. Lady supports, involving a couple of million pounds, I understand. The hon. Member for Ilford South (Mike Gapes) wanted it spent on the Building Schools for the Future programme, which would have blown the full amount. Does she support its use for BSF or would she like it all to be allocated to the very important cause that she is propounding?
Stella Creasy
The hon. Gentleman appears to be arguing that the money that would be raised by the bank levy should be given to the high-cost credit industry. Far be it from me to suggest that he wants to support those kinds of businesses. I know that some Liberal Democrat Members have been very supportive of these companies—mistakenly, because if they were to talk to the local communities affected by them, they would realise how damaging they are.
Let me be very clear: I am arguing for the ability of the Government to review the bank levy and for a review to consider whether it could be applied in such a way as to discourage lending that is detrimental to consumers. I have firmly in my sights the high-cost credit industry and the detriment that it causes to our local communities. I hope that Ministers will accept the amendment and explore whether the bank levy could be used to act as a positive behavioural challenge on these companies, because that would benefit many people in our country. I do not want to see investment in the high-cost credit industry, and I am sure that the hon. Member for Bradford East (Mr Ward) did not mean to suggest that, but I do want to see action on it, and I know that I am not alone in this House in hoping for that.
If the Government will not accept the amendment, I will table more amendments and keep pressing this issue, and I hope that other Members will join me in support. The Minister is shaking his head. I hope that he has spoken to the many Members on his own Benches who do not shake their heads and walk on by as people are preyed on by these companies. I spent yesterday with 900 members of London Citizens Black Clergy Caucus, who will be seeking urgent meetings with the Ministers responsible. Ministers may think they can ignore me or ignore Labour Members, but I hope that they will not ignore the millions of people who are struggling to pay their bills and make ends meet, and for whom these companies are increasingly the only option. Regulation has worked effectively in other countries, and it could be achieved through this Bill. I hope that the Minister will look at the case seriously and not dismiss it out of hand as he appears to be doing.
Barry Gardiner
It seems to me that when it comes to bonuses, the clue is in the word. If one looks at the etymology, the word “bonus” comes from the Latin: it means “good”. In fact, it should be “bonum”, as with “maximum”, “minimum” and “premium”, so that we had “bonum” and “bona”, but let us leave that aside. The bonus culture in the banks is supposed to be for something good—for good performance—and yet, certainly within the banks that are largely owned by the public, these bonuses are being given almost uniformly for bad performances: they are “malum”, not “bonum”. It is really quite ridiculous that these bonuses should be paid and that the Government should be proposing to levy such a low rate against them.
The right hon. Member for Wokingham (Mr Redwood) gave us a bit of the history of how the recession had come about and the context in which these bonuses were being paid. Interestingly, however, his history stopped in 2006 or 2007, when he published a paper about the regulatory regime and the need for tighter regulation. To find out the true history of this, one has to go back to a time before 2006 and 2007, and beyond this country, to look at the sub-prime market in the United States in 2000. At that time, the proportion of mortgages in the United States that were lent to sub-prime borrowers was just 5%. Between 2000 and 2005, that increased to 47%. That meant that by 2005, 45% of mortgages in the US were in arrears by two months, or more than 60 days. That is the origin of the problem.
Much has been said by Government Members to try to set the recession in context. For months, they have said that it was because of the Labour Government’s disastrous economic management. Of course, the context for it is in the United States, where what happened with Fannie Mae and Freddie Mac, the two major mortgage-lending institutions, was the beginning of the collapse of what had been a virtuous circle, and what became a vicious one. Those institutions could not lend because they were not getting revenues in, which was because people with mortgages were more than two months in arrears. That meant that there was a drying up of credit in the system in the United States.
One of my hon. Friends—I cannot remember who—mentioned the role played by the rating agencies. The way in which the situation impacted more widely on the economy, first in the United States and subsequently elsewhere, was through the securitisation of mortgages into bundles to create revenue streams for companies and, indeed, for financial institutions.
Finance (No. 3) Bill
Stella Creasy Excerpts(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Alec Shelbrooke
Absolutely. My hon. Friend makes an important point. That leads me to the problem, which I had not intended to mention, of how indebted the nation was personally. Indeed, my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) made the point that a total private sector debt that is 450% of GDP is something to fear and shake at.
One reason I believe we did not see the increase in the public’s spending in certain areas despite the historically low interest rates—the Bank of England brought interest rates down and I think we understand why—was because people saw the opportunity to use the extra money they had in their pockets from the reduction in their mortgage payments to start paying off credit card debts, although many were on fixed-rate mortgages. That money was not poured back into the economy as was originally envisaged because people saw the writing on the wall and started to reduce their personal debt, and the Government should take a big lesson from that. We need to get debt down if we are to sustain future growth. We talk about interest of £50 billion a year on £1 trillion-worth of debt, but that does not mean anything to people because those numbers are huge. However, when we tell them that £120 million is being given to foreign nations every day because of the money we have borrowed, they start to realise the situation we face.
We all face such situations in our constituencies, where certain services are being cut—there is some politics involved, but that is not my point—and local councils need more money, which they cannot have because of the situation we are in. People realise that rather than going to foreign nations, that £120 million could be used to go some way towards addressing, for example, the closure of a leisure centre in my constituency that is losing £100,000 in a year.
That is why we needed to rebalance the economy. We became far too reliant on public debt and public money—public money that comes from private money—and we cannot keep magicking public money out of the air, because in the end it leads to hyperinflation. Indeed, the shadow Chief Secretary to the Treasury, the hon. Member for Wallasey (Ms Eagle), made some link, which I could not follow, between our policies and the rise of the far right in the 1930s, which in turn led to the second world war. Hyperinflation certainly played a big role in nationalism among Governments, however, and it came about precisely because of the economic circumstances that we were moving towards recently.
I take issue with the hon. Lady when she says that we are attacking ordinary hard-working people. That is, quite frankly, a disgraceful comment to make. There is not a person on either side of the House who deliberately wants to attack the ordinary hard-working person, so let us just put down a few facts. We have just brought in an income tax cut for 23 million people and taken almost 1 million people out of income tax altogether. Let us compare that with doubling income tax for the lowest paid in society.
Alec Shelbrooke
But you cannot deny that your Government doubled income tax for the lowest paid in society and destroyed pensions—not you, Mr Deputy Speaker, but the previous Government. The previous Government destroyed pensions, leaving many people whom we would class as the most vulnerable in society to take their pensions with fear and trepidation. At least we have brought in the triple lock on pensions, meaning that people should never again get the 75p rise in their pension.
Stella Creasy (Walthamstow) (Lab/Co-op)
If a week is a long time in politics, then a year—and perhaps some aspects of tonight’s debate—is an eternity. Yet a year ago, when we were all candidates and none of us was allowed to stand in this place, things were very different. The economy was beginning to recover, as unemployment was falling and growth was returning. Crucially for today’s debate and the provisions in the Bill, that meant that the deficit came in at £21 billion lower than was forecast. Well, here we all are, a year later, and just as the faces in the Chamber have changed, as have the sides that we are sitting on—some would say not for the better—so too has the economic picture. Given where we were last year, one would have expected the economy next year not simply to have recovered, but to have begun motoring; and yet now, thanks to snow it seems, it appears that the reverse is true. By cutting too fast and too deep, this Government are delivering slow growth and higher unemployment, which is why they will now have to borrow £46 billion more than they planned.
However, the question that this Bill raises is about not just whether to cut the deficit, but how we do so and who ultimately pays. Our national Exchequer certainly will: slower growth plus higher unemployment will make it harder to get the deficit down. As we pay out in jobseeker’s allowance, we will also lose out as families fear spending money that they do not have. That is what I want to highlight this evening. We have a duty to consider how the proposals will help or hinder the finances of families across this country, because it is not just the Chancellor who will have to go cap in hand for extra funds. Contrary to what the hon. Member for Elmet and Rothwell (Alec Shelbrooke) seems to think—I am sorry that he is not here; perhaps he is in the gym preparing for his wedding—public debt and private debt are linked. Although public debt is down by £43 billion, private household debt is up by £245 billion—five times as much.
The hon. Member for West Suffolk (Matthew Hancock) is a man for whom I have tremendous respect—both him and his pullovers. He lauds the role of the Office for Budget Responsibility, but like Rosencrantz and Guildenstern, he is hoist by his own petard, because the OBR forecast last June that household debt would increase from an average of £58,000 in 2010 to £66,000 by 2015. The OBR now expects the figure to be £77,000. That is the downside of the Chancellor’s deficit reduction plan. As taxes increase and public spending squeezes households’ disposable income, they will be forced to take on more and more debt in an attempt to maintain their living standards. In fact, the OBR’s March forecast shows household debt rising from £1.6 trillion this year to £2.1 trillion in 2015—or, from 160% of disposable income to 175%. The OBR reports that households will have to borrow more money than forecast in order to maintain their living standards. With the planned cuts in public spending, the only way the Government will see an improvement in the OBR’s forecast for growth is for that ratio to increase.
I know that many Members will be sick of hearing me talk about credit and debt. Many may also argue that it does not matter, because we are a nation that is comfortable with debt—something the hon. Member for West Suffolk talked about. We have always had a different approach to personal debt from many other countries. We are a nation comfortable with borrowing in ways at which other cultures baulk. It is no surprise that we have the highest level of personal debt in the G7. That is not a problem if it can be managed. Much of the money that this country owes is housing related, which reflects a culture in which mortgages are routine. The truth is, however, that the debt that families are now getting into is not related to such investment in their future or about luxury living; it is about the money that they spend on everyday items. That is what is missing from their family finances.
In the current economic climate, UK adults face an average shortfall of £165 each month, with 26% unsure whether they can pay their bills on time. Recent research shows that more than 2 million people have used credit cards to pay their mortgage or their rent. That is an increase of almost 50% in a year. Since the recession, nearly a third of Britons are now spending more than they have coming in each month, and 22% of consumers will carry a credit card debt throughout 2011, with 7% of people saying that they will still be paying for Christmas 2010 after June 2011. It is estimated that 5 million people are now permanently overdrawn, and that 18 million have gone into the red at some point in the past 12 months. Nearly 8 million of us failed to pay at least one bill in the past year.
It is not just the poorest consumers in our society who are affected. According to Experian, the biggest rise in insolvencies in 2010 was among the people whom it calls “suburban mindsets”, a consumer group comprising married, middle-aged people. That situation has not come about by chance. It is a direct consequence of how this Government have chosen to address the deficit.
Matthew Hancock
I do not wish to extend the love-in much further, but the hon. Lady’s arguments, which are being passionately put, would carry much more weight and credence if she were to disappoint her Front-Bench team and accept Labour’s role in bringing about this situation.
Stella Creasy
I am sorry that the hon. Gentleman has not been listening closely. Let me make it very clear: the figures from the Office for Budget Responsibility that I cited refer to this past year. Forgive me, but as far as I am aware, his party has been in power during that time and it has presided over this increase in the private debt that households are now taking on.
Let us talk about some of the things that are causing that increase. VAT is costing a family with children an extra £450 this year, on average, due to the rocketing cost of buying basics such as telephones and clothes and of getting a boiler or a washing machine fixed. That is before they even consider getting out and about to spend money. Many Conservative Members have talked about fuel prices, but the increase in VAT is adding £1.35 to the cost of filling up a 50-litre tank with unleaded fuel. The cut in fuel duty gives back only 1p, but the VAT increase costs us almost 3p a litre.
Those who are in work are finding it even harder to make ends meet as a result of the Budget. Since 5 April, 750,000 more workers have been dragged into the higher rate of income tax, and benefit recipients have lost £2.7 billion-worth of payments. Cuts to child care support have taken £1,500 a year from families. The £48 that people will get through the personal allowance increase in the Budget is barely a tenth of the amount that families will have to pay back through increased VAT. In two years’ time, 1.5 million families—including many in places such as Walthamstow—will lose all their child benefit. Credit Action has pointed out that, of the 45 changes to the tax and benefit system made in the Budget, 26 will have a negative impact on households.
There will also be fewer chances of getting a better-paid job, or of getting back into work, because unemployment is set to be higher in every year of this Parliament as a result of this Government’s actions.
Jim Shannon (Strangford) (DUP)
Those in the 16-to-25 age bracket who are unemployed will soon top the 1 million mark. Does the hon. Lady share my concern, and that of many other hon. Members, about what the future holds for them?
Stella Creasy
I absolutely agree with the hon. Gentleman. I have been a close reader of the work of Paul Gregg at Bristol university, who has shown how unemployment can scar young people and affect their earning potential for life. I am extremely worried about young people in this country who are facing unemployment and have little prospect of a place on a training scheme or in a university.
There is little sign that these pressures on family finances will ease. With the current wage squeeze expected to continue until at least 2013, average wages are expected to fall to less than £25,000, which is more than £1,800 lower than in 2009. People do not have the pounds in their pockets that they need in order to keep spending in the way our economy needs if it is to grow. If we add to that the anticipated rise in interest rates and mortgage payments, which has been one area of respite in the past few years, we can see that things are going to get a lot bleaker. As our newspapers warn daily, and as the Bank of England has pointed out, interest rates are likely to climb, piling pressure on the 60% of low to middle-income families who are already struggling to pay their bills.
It is no wonder that four in 10 people are worried about their current level of debt, with 4 million fearing redundancy and 4 million more having taken on debt in recent months. We know that the cuts that we have seen so far are just the beginning. The ones that families across the UK felt this month accounted for a mere 10% of the total savings planned before 2015 from changes in the tax credit and benefit system. More than 40% of the cuts kick in in 2013.
Loading debt on to households helps this Government to cut the deficit at the pace they desire, but it is the job of Opposition Members to challenge them on the cost and consequences to all of doing so. In an economy where jobs and growth are in short supply, such debts do not just mean lower consumer spending, higher levels of bankruptcy or repossessions. Nearly 30% of British parents admit they are arguing over their family finances and a third of parents are suffering the stress of sleepless nights because they are worried about money.
Such changes also directly impact on our chances for economic recovery. As the Bank of England pointed out,
“prospects for consumption…have an important bearing on the outlet for activity”,
but it added:
“Near-term prospects have weakened further over the month. The squeeze on households…was likely to dampen consumption materially over the next year or so.”
Even after a sharp reduction in its private consumption forecasts, that favourite of the hon. Member for West Suffolk, the Office for Budget Responsibility, expects British households to account for just over a fifth of economic growth this year and for almost a third next year. The truth is that if the average family is not willing to dig itself deeper into debt, those figures might have to be revised.
The Bill reflects the Government’s complacency about the challenge. There is no commitment to act on these problems—only a general sense of unease, summed up best by the Minister for Equalities, the hon. Member for Hornsey and Wood Green (Lynne Featherstone), who wrote:
“What is tough—and will get tougher—is losing jobs. People in work will mostly get by—somehow. People on benefits will mostly get by—somehow. But for those who lose their job—it will be devastating. The cuts were announced last year. Their impact has yet to fully hit. This budget promised growth. The proof will be in the pudding. And the question will be whether there’s a new job to be found within a time frame that can keep health, hearth and home together—and we need to keep a watch over that.”
Well, I want to do more than keep a watch over that, and I hope to answer a question posed by Government Members about what policies Labour Members could suggest.
Today, I argue that we could do more than squabble over Keynes or the Ricardian equivalence; we could do something to help those people in immediate danger of insolvency and bankruptcy. At present, this Bill is missing that. Given the large numbers of people facing financial difficulty, we should be deeply concerned about the strategies that families have to cope with these pressures and how the Bill could do something to help.
To cover costs, more and more people are turning to sources of credit, which might seem like short-term solutions but quickly become long-term problems. The number of people who say they are likely to use an unauthorised overdraft this month has nearly doubled since July last year—from 900,000 to 1.6 million. Similarly, the payday lending industry in the UK, with its 4,000% interest rates and more, has quadrupled in the past 18 months.
Being able to borrow in a way that does not leave a long-term scar on the family finances is the new dividing-line in our society. Those who can access mainstream credit might just scrape by in austerity Britain. Those with little option but the legal loan sharks, maxing out their credit cards or racking up unauthorised debt, could spend a generation or more trying to become debt-free.
This Government want to pretend that such kinds of personal debt are solely a private matter, but Opposition Members see the social and economic consequences and we must beg to differ. A lack of regulation of the high-cost credit market in comparison with other countries allows that industry to go unchecked in the UK. Recognition of the problems caused by casino banking in the City is widespread across the House, but that is only half the battle; we should not forget the financial needs of those in our communities. For the sake of our economic recovery and for the sake of those families, credit should not be lent in a way that is detrimental to consumers without those who profit from exploiting them being made liable for the consequences.
When this Government announced their Budget, I asked a simple question: how can they be so keen to show that they are so tough on national debt, yet so blind to the growing crisis of personal debt that their policies are stoking? Today, with this Bill before us, we are no closer to an answer, but thousands more edge closer to personal financial problems as a direct result. That is why I will table amendments to review whether the supplementary charge or the bankers’ levy could be applied in a way that would disincentivise negative, high-cost credit lending. It is time that this Government put the fortunes of every family first. Other countries have done that to protect their consumers, and I do not see why British consumers should be denied the same opportunity.
Let me offer an open invitation to Treasury Ministers to do what their colleagues in the Department for Business, Innovation and Skills have signally failed to do, and respond to the concerns of Members throughout the House. I invite them to meet us to discuss how we could cap the total cost of credit. Campaigners all over the country who support such action—Churches, trade unions, community groups and consumer associations—would thank them for taking it.
I hope that Members who share my concern about personal debt will support my amendments, and will join me in holding the Government to account for what they are doing to the personal finances of families in every constituency in the country.
Amendment of the Law
Stella Creasy Excerpts(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stella Creasy (Walthamstow) (Lab/Co-op)
I share other Members’ pleasure in talking in a debate that has had so much heat and also the light of the maiden speech made by my hon. Friend the Member for Barnsley Central (Dan Jarvis).
I want to speak about a question that has been puzzling me for some time. How can the Government be so keen to show that they are tough on the national debt yet so blind to the growing crisis of personal debt that their policies are stoking? Families across Britain today will have listened to the Chancellor and wondered if he really understands the financial pressures they face—if he really has, as he said, done all he can to help them—because of the perfect storm of challenges hitting millions of homes across the country. Thanks to the VAT rise that he introduced, average families will pay an extra £300 to £450 a year in VAT and pensioners will pay an extra £275. Also, the benefits that help many families, such as tax credits and child benefit, are no longer there for them. That is a key concern for many of my constituents who have large families and who just tip into the higher tax bracket because of the London weighting on their wages.
Thanks to the Chancellor’s cuts, our economic recovery is stalling, which is why 8% of our working-age population is now unemployed. That is the highest level since 1994 and is set to rise further. Those people are in a job market in which 10 people are chasing every job and the situation is worse in London, with nearly 13 people chasing every job in my constituency. As a result of the cuts in the public sector, 130,000 people lost their job last year and another 170,000 families have members who are on redundancy notices. Buried in today’s papers are predictions that another 130,000 people will be made unemployed next year. Even those who are managing to stay in work are getting less because of the public sector pay freeze. The consumer prices index and the retail prices index are rising, reflecting the growing cost of living as clothes, food, energy and travel all cost more.
We are already seeing the impact of those problems. According to the Consumer Credit Counselling Service, London has the highest demand in the country for debt advice. Nationally, half of its clients gave unemployment or reduced income as the reason for their debt problems. In 2008-09 there were twice as many crisis loan applications as in 2006-07 and half of those applicants made two or more applications. Barnardo’s has reported a rise of 20% in the number of applications for its emergency loans for families and the UK now has one of the highest levels of personal debt of any country in the world.
There are 60 million credit cards in circulation in our country, for 14% of which customers can afford to make only the minimum payment. We should be extremely alarmed by what some people are using their credit cards to pay for. Shelter has highlighted the fact that one in 12 households in London is using credit cards to pay for mortgage or rent. Across Britain, the figure is one in 20 families. In the face of the changes the Government are making to our economy, families across Britain are struggling to make ends meet. That is vital to our economic recovery because, as we all know, credit is key to that recovery. Recently released figures show how consumer confidence is falling. People are not buying and spending in the way that our economy needs them to if it is to recover, but we should care about that and about personal debt not only because of the figures and the economic conditions but because millions of families now live with the fear of debt.
Half of all British households are worried about their debts and how they are going to pay them. Some 44% of households find that there is too much month at the end of their money and try as they might they cannot make what they earn cover what they need to spend. The problem is only going to get worse. In a recent survey, 43% of people said that they expected their personal financial situation to deteriorate over the next six months. This is not about buying new TVs or fancy holidays—it is about families struggling to feed their kids, pay their bus fares or keep their car going so they can get to work. It is about people having to cut corners or shift money from one credit card to another, chasing deals. It is about people worrying about paying their mortgage, affording school uniforms, arguing about debt and suffering sleepless nights. It is about people wasting time applying for jobs when so many jobs no longer exist.
I judge today’s Budget by what it will do to address those problems and to help families across Britain to make ends meet, not least because 20% of those who say they are struggling blame the recent tax rises for that. As the Institute for Fiscal Studies has said today, the Budget is giving with one hand and taking away lots with the other. The crippling impact of the rise in VAT will more than cancel out any change in the income tax threshold. Rather than offering corporation tax cuts to big business, we need to do more to get jobs and growth back into our economy. We need to put the needs of those families first but instead the Government are privatising personal debt.
At a time when people need help accessing credit to keep a roof over their head, the Government are taking away their options for help, with potentially disastrous consequences. They are taking away the social fund and capping the number of crisis loans for living expenses to just three a year, at a time when even more families are struggling.
I welcome the support that the Government have given for credit unions, but it will take a generation for them to become regarded as a serious, mainstream way for families across the country to access credit. As we all know from our surgeries and our conversations on the street, in these difficult economic circumstances, our banks are refusing to lend to businesses and individuals. The truth is that, with no real help in the Budget, there is very little option for many in our communities apart from the high-cost credit market, one of the few areas of our economy that is growing under this Government. Legal loan sharks are profiting from the perfect storm of rising living costs and falling wage packets for families across the country. Those people need our help now, not in the future.
Already, a quarter of payday loan customers cannot borrow from anyone else. They are sitting targets for such companies, whose business models rely on locking people into borrowing at an extortionate yet legal rate, so that what seems like a short-term solution to financial problems quickly becomes a long-term debt. We know that there has been a fourfold increase in payday lending since the recession began, and that due to a lack of regulation in the market in the UK, The Money Shop, Wonga, Provident, BrightHouse and other companies are expanding across the country at an alarming rate. Indeed, they have already pointed to the Government’s policies as increasing their customer base.
The problem will only get worse, as the Institute for Fiscal Studies predicts that households’ real incomes will be lower than they would have been without the recession. The Governor of the Bank of England predicts that real incomes will stagnate because of the weak condition of the labour market. That means that there are likely to be more and more families in the year ahead finding that they cannot keep their heads above water financially, but the Government have yet to lift a finger to help them. Even if the Government will not do anything that the Office for Budget Responsibility says will increase growth in the economy—we know that the plans put forward today have already been factored into the OBR’s growth predictions—they could at least take action on the cost of credit.
Back in February, I warned of the problem, as Members across the House called for a cap on the cost of credit. The Government sought to do what they could to delay taking action. Today, I am giving notice that I will be seeking support for a similar measure in response to the Budget. We can learn the lessons of windfall taxes that targeted the behaviours of particular companies. I want the Budget to review whether the set of companies that I am talking about ought to have their tax systems changed to discourage them from behaving as they do. If the Government will not regulate them, perhaps it is time to use the tax system to deal with legal loan sharks, just as we do with cigarettes and their toxic impact on our communities.
I hope to secure support from across the House for making such a measure part of the Budget, and to challenge the Government not to continue to sit on their hands when there are growing levels of personal debt crippling families in our communities. Introducing such a measure in the Budget could, for some families, be the difference between getting into hundreds of pounds of debt and thousands of pounds of debt. That could be a massively welcome relief for the families who are looking at today’s Budget and finding little to help them to make ends meet, and who are therefore having to turn to such companies.
We know that debt in itself can become a barrier to finding employment, as the emotional consequences and financial penalties become too much to bear. If we do not act to protect the poorest communities from unaffordable credit measures, we will all pay through higher welfare bills, lower spending and a lack of growth in the economy. I hope that the Chancellor and his Treasury team are listening to the needs of those families, and I hope that the Government will finally act to end legal loan sharking, so that we can at least get some good news out of today. I do not believe that they have done all that they can to help families who are struggling with the cost of living. If they will not listen to me, perhaps they will listen to a famous lady who I know has been an inspiration to many Government Members. She once argued that if a person could understand the problems of running a home, they were closer to understanding the problems of running a country. The Budget shows that the Government understand neither, and the British people will suffer all the more for it.
Chris Williamson (Derby North) (Lab)
Does my hon. Friend agree that at a time when so many more people in society will face huge debts, it is wrong for Derby city council to cut the welfare rights and debt advice provision for local people in my city?
Stella Creasy
My hon. Friend makes an important point. There are families struggling to understand what options are open to them. It is vital to support debt advocacy services. That is why I proposed that in my Consumer Credit (Regulation and Advice) Bill and why it is all the more pity that the Government sought to delay action on that measure—
National Insurance Contributions Bill
Stella Creasy Excerpts(13 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Kelvin Hopkins
I am not at all surprised that the Prime Minister was not prepared to be drawn on that. What happens in a year’s time, and in two years’ time, as a result of what the Government are doing now will be the true measure of whether their policies are successful. I suspect that we will have a massive rise in unemployment, as forecasts suggest. That will tend to damage confidence among consumers, businesses and everyone else in the long-term future of our economy, so the Government are pursuing a dangerous policy.
The Bill, although welcome, is modest in comparison with what the Government are doing as a whole. The precise impact of what it will do needs to be measured and published, so that we can set it in the context of the rest of the economy rather than let it drift along, with the Government perhaps making exaggerated claims for its success.
Dr Stella Creasy (Walthamstow) (Lab/Co-op)
Does that mean that my hon. Friend agrees with the Minister, who told me in a letter that £940 million was a large sum of money to allocate for an uncertain benefit? That is exactly why we need to see the figures, to see whether the Bill is working.
John Healey
One of the two consequences of devolution is that in this area of health such decisions are taken in Wales for Wales. The second, however, is, I have to concede to the House, that I, as an English shadow Health Secretary do not follow those decisions in detail, so I think the hon. Gentleman is going to have to prosecute that argument in his home area.
Finally, the House will note that the date in the amendment is anticipated to be after the expected Royal Assent to the Bill, so it is tied to the Finance Act. The Exchequer Secretary might want to discuss with the Chancellor the idea of doing this assessment, publishing the report and highlighting the shortfall, showing the extent to which the promises they made to protect NHS funding and give it a real-terms increase in each year of this Parliament are being broken. The Budget, of course, provides the Chancellor’s opportunity to make good his word and make good the promises that his Government have given to the British people on the NHS.
Dr Creasy
I rise to speak to amendment 8, because it goes to the heart of the Bill and what we do in this House. We do not pass laws to raise money for no purpose. Clearly, we raise national insurance for social insurance purposes. Since 2003 there has been a hypothecated fund in our national insurance contributions specifically for funding the NHS, and the amendment addresses that. It is critical that we get the Bill right and that it reflects the important purpose that we attribute to national insurance. I note that, back in 2003, the then Opposition opposed such use of national insurance, but they have come a long way in the past seven years. That is why it is important to get the Bill right and make sure that the public can have confidence that when national insurance is levied, funding will go to national health care services. My first point concerns why that is important and why the NHS therefore needs the guarantee that amendment 8 would provide. Secondly, I will explain why the public have a reasonable expectation that such provision be made.
Mel Stride
Does the hon. Lady accept that, irrespective of whether the amendment is accepted, the Government have the ability to provide whatever level of resourcing for the national health service that they deem fit?
Dr Creasy
The hon. Gentleman raises the interesting question of how we guarantee that. That is precisely the point that I am coming to, because his Government made a pledge to my Walthamstow constituents that they would “cut the deficit, not the NHS”. As my right hon. Friend the Member for Wentworth and Dearne (John Healey) has set out in his remarks, there is some uncertainty over whether that is the case. Indeed, we could be seeing cuts in the NHS unless we can be sure that the money it needs will be generated. The amendment provides the Government with an opportunity to show how and why they will do so and to consider hypothecation through the national insurance contributions fund, which has been accepted as a principle across the House, to ensure that the money is provided.
There has been sleight of hand in the investment promised by this Government for the NHS through the attribution to social care. As a former local councillor I know that social care is one of the largest costs that any local authority will face, so the cuts that we have seen in local authority budgets over the last couple of months raise severe questions about the ability to deal with adult social care—even before we consider its relationship to health care at local level. It is very clear to me that there are real concerns about the funding that will go to the NHS in the years ahead.
The amendment would mean that we could all have confidence in the fact that money would go to the NHS budget, about which I know Members across the House care, so that the real-terms increase that my constituents and the Minister’s constituents were promised can be made good—not to mention concerns about job losses in the NHS as a direct result of some of this Government’s policies. If Government policy is about job creation and the Bill is about ensuring that people are employed and the economy is in recovery, cuts in the NHS that will lead to job losses will provide a real challenge. The amendment is designed to make sure that, given the pressures on its budget, the NHS has the money that it needs, and that the public’s expectation, which is reasonable and proportionate given the statements made by Ministers both before and after the general election, will be met.
I note in particular that before the election the Chancellor was very concerned about what the national insurance contribution rise might do to the NHS budget. I am sad to see that the Chancellor is not in his place today; I wish he was here to talk to us. I know that my right hon. Friend the Member for Wentworth and Dearne wrote to him, encouraging him to participate in today’s debate. The Chancellor should apply the same degree of concern to ensuring that the money is there for the NHS.
As a member of the Public Accounts Committee, which deals with the National Audit Office, I particularly support the amendment. The amendment would involve the NAO, which has a strong track record of ensuring not just probity but value for money. It is a key concern for us all in these times of economic austerity to ensure that the money goes to the front line in the NHS, that there is a real-terms increase, as we have been promised, and that the Government are held to account if we do not get that, because my constituents living in a poor area such as Walthamstow are already losing out by not getting the national insurance holiday and should at least have confidence that when national insurance contributions go up, the money will go to the NHS, as many of us hope.
I hope that the Government will accept the amendment. It is a reasonable amendment to help the Government keep their promise to the people of Britain that the money goes to the NHS so that we can all have confidence that the NHS will thrive in the years to come.
Kelvin Hopkins
I shall speak briefly in support of the amendment. I strongly endorse what my right hon. Friend the shadow Health Secretary and, indeed, my hon. Friend the Member for Walthamstow (Dr Creasy) have said. Strains in the health service are already being felt, as are pressures on jobs. In my constituency, we are already seeing job losses in the primary care trust and the hospital trust.
There are obvious points to be made about the increasing costs of modern treatments and the reorganisation mentioned by my hon. Friend the Member for North Durham (Mr Jones), who is no longer in the Chamber. Even Conservative Members have suggested that that reorganisation will lead to further privatisation of the health service, and private health services are inherently more inefficient than public health services. The Americans spend twice as much on health as we do, yet millions of Americans have no proper health cover, because private sector health care is much more expensive than public sector health care. We want to keep public health care in the public sector. Indeed, I believe that even the services that have already been privatised should be returned to a full public national health service. I am sure that Nye Bevan would agree. No doubt he is turning in his grave at this moment at the thought of what the Tories are going to do to the health service, but that is a debate for another day.
However, there are other, less obvious points to be made about the health service. It is, for example, inherently labour-intensive. Unlike manufacturing, it cannot take advantage of productivity gains. Its costs rise not in line with inflation, but in line with average earnings. If we are to ensure that health service employees are properly paid, there must be real-terms increases equivalent to the rise in earnings, not just the rise in prices. In general, earnings rise more quickly than prices as the economy grows, although that is not necessarily the case at present. If we are to have a health service that is as good as we wish it to be, we must bear the employment costs in mind.
I agree with what my right hon. Friend the Member for Wentworth and Dearne (John Healey) said about what Labour achieved during its 13 years in office by increasing spending and improving the quality of the health service. The previous Tory Government had left it in a terrible state. However, although the improvements have been massive, there is still more to do. We must not allow health service funding to be threatened in the ways that have been mentioned today. Amendment 8 is important because it will ensure that that funding is protected. There are many other problems in the health service, and we must not put more pressure on it. We do not want what happened at Stafford hospital to happen elsewhere because of underfunding and understaffing in wards. We must ensure that the service is properly funded.
Andrew Bingham (High Peak) (Con)
I support the general idea and hear the points that Opposition Members make, but we have to remember that in High Peak setting up a business is not easy. It is not easy anywhere in the country, but we need to look at rebalancing the economy, and in the north-west, or in the east midlands where High Peak is, we have to contend with such issues as rurality and communication links that are not of the same gravity in the south-east. Members might recall how I went on about the Mottram-Tintwistle bypass, but that road link in and out of High Peak makes it difficult for businesses to get going and to survive.
I remember setting up a business years ago and how difficult it is. On transport costs, we used to deal predominantly with south-east companies. We had to get goods up from the south-east and deliver them around the country, which created extra costs. Hon. Members might smile, but one of the things I have noticed since being elected to the House is that it is so much warmer in the south. I can assure hon. Members that it is cold in High Peak and that there are extra heating costs and numerous other extra costs and overheads. The measure is an incentive to business men and, importantly, new business men to start their businesses in the north.
Dr Creasy
I draw the hon. Gentleman’s attention to the fact that business men and women in the south-east may well be familiar with a concept called the living wage, which reflects the high cost of living in London and therefore some of the difficulties that new employers might face in attracting staff because they have to pay a higher wage in the south-east. It is not all grim up north.
Andrew Bingham
We have expensive houses in High Peak—I have seen something on my BlackBerry today about house prices being expensive. We have issues, but it is not grim up north. Speaking as someone who is technically the Member for Royston Vasey, as the programme concerned was filmed in my constituency, I implore all southern MPs to come to High Peak. It is not grim. [Interruption.] It is beautiful. Thank you; we agree on something.
I reiterate the point that there are challenges to setting up businesses outside the south-east—for example, slower broadband. That is another hobby-horse of mine. The measure is an incentive. It will get local people setting up local businesses in the north and outside the south-east, which will rebalance the economy. I hope that more businesses will flow up north to High Peak and other constituencies. The measure is an excellent policy. We hear all about the cuts, but they are having to be made because of the economic carnage left by the Labour party. If we acknowledge that, we might get somewhere.
Mike Gapes
Allegedly, we are all in this together. If so, why is it that those of us in east London, along with people in the 21 authorities in the Thames Gateway, which include authorities in Kent, where there is not a single Labour Member of Parliament—they are only Conservatives—and those in Essex, are excluded from the package that we are discussing? We heard earlier today about the Maoist chaos of the Government’s regional policy. That is not the responsibility of the Treasury; it is the responsibility of its close allies and partners, and the Business Secretary. However, as we are all in this together, presumably the Treasury is also involved up to its neck.
We have also heard that, apparently, the Government are refocusing regional policy. Well, that regional policy refocus includes, in today’s measures, discrimination against poor people in poor communities. My right hon. Friend the Member for Delyn (Mr Hanson) spoke from the Front Bench about a number of boroughs and constituencies that have high unemployment—higher than the national average—and where, at the moment, there are also high levels of public sector employment. Those areas will take a disproportionate hit because of the measures announced in the comprehensive spending review and the Government’s policy to reduce, for ideological reasons, the size of the public sector so drastically and quickly.
So, we are not all in this together: some of us are in it much deeper than others. I suppose that we are a bit like the residents of Brisbane, Australia. When the tsunami or flood comes in, we hope that it will meet a certain ceiling point before going back down, and that the next day it will go no higher. Some people have a little footbridge or step to get them above the water, but others are pushed down below it. People in the small business sector in my community—in Ilford and Redbridge, which is a Conservative-Liberal Democrat borough—will not benefit from these measures. When it comes to benefits, we are not in this together with those in Tatton or elsewhere. We will lose out.
Other Members represent poorer communities than mine, but I have wards in my constituency with very high unemployment. I also have a very diverse community. One of the interesting features of excluding London from the proposals is that it is not only discriminatory geographically; it could also be discriminatory ethnically. That needs to be taken into consideration, given the way in which the measures disproportionately affect different communities in different parts of the country.
I do not want to delay the House for long. I spoke on Second Reading in November. I hoped at that time that the Government would come forward with some changes to their proposals. I hoped that they would listen to the logic, but they did not. We have already had Committee stage and Report brings us to today.
The Thames Gateway Partnership for London, Kent and South Essex recently wrote to Members, urging us to make representations to the Minister—[Interruption.] He might wish to listen to this. It wanted us to write to him to point out the discriminatory nature of the proposals and to urge the Government, even at this stage—I say again, even at this stage—to see what they can do to help the Thames Gateway authorities. The partnership pointed out that there are 3.5 million residents in the Thames Gateway local authorities area and that it believes that in
“excluding London and the South East from the regional freeze on National Insurance contributions the government is failing to take proper account of local economies, particularly the challenges faced by the Thames Gateway growth corridor.”
My right hon. Friend the Member for East Ham (Stephen Timms) has already referred to that.
The Bill is damaging to a potential growth sector of our economy. The Thames Gateway is part of the future of London as a global city. It is vital to the prosperity of our nation, yet this short-sighted, quasi-Maoist Government are operating in such a chaotic way that they cannot see the damaging consequences of what they are proposing. Next year, I hope, they will come seriously to regret what they are doing. I urge all local authorities in the Thames Gateway area to look very closely at the Division lists for today and to register which Members from Essex, Kent and London went through the Lobby in favour of such discrimination against London, Kent and Essex and which Members voted against it. Then, hopefully, those local authorities, councillors and communities will hold those Members to account.
Dr Creasy
I want to talk about three things in my comments on the amendment, the first of which is the test set by the Opposition about what this policy is designed to achieve. Secondly, I shall explain why the amendment is needed to ensure that the policy achieves what is intended. Thirdly, I shall say a little about the evidence base for the policy, which was a matter of great concern to me in Committee—and the Bill is still found wanting in that respect. I shall show how the amendment addresses some of those challenges.
The test we set for this policy and, indeed, for this Government, given our concerns about their economic approach, relates to jobs. At the heart of what we do as a Parliament must be the concerns of our constituents, and I know that one of the main concerns of my Walthamstow constituents and those of many other Members is jobs. How are people going to keep a roof over their heads, keep their families fed and ensure that their families stay together? Those concerns relate to the jobs people have and the support we can give to them in their jobs. Job creation is, as my hon. Friend the Member for Edinburgh East (Sheila Gilmore) ably set out, absolutely key to how we judge this policy.
In that context, the symptoms are not good. We know that unemployment is rising and that it has hit 2.5 million—it has been suggested that it is likely to increase further, especially in areas currently excluded from this policy—so job creation is a critical aspect of what the Government can and should be doing. Six people are chasing every vacancy in this country; if there were ever a time when we needed to create more jobs for which people can apply, it is now. We cannot have a jobless recovery; that is not sustainable. Indeed, the cost to the public purse of doing so would be tremendous. It is worth noting that every extra 100,000 people on the unemployment register is half a billion pounds of welfare expenditure that has to be found. There is a great cost to us of not doing something about rising joblessness.
We therefore look at this policy and ask how it will meet the test that the Minister set. In Committee, he said that the purpose of the policy was specifically “the creation of jobs”. It was to
“help the wealth-creation sector in regions currently reliant on the public sector”. ––[Official Report, National Insurance Contributions Public Bill Committee, 2 December 2010; c. 47, Q167.]
That is the second test that we put: does this policy affect not the regions but the people it is designed to help? If we look at the people test, we see that, as currently constructed, the policy does not meet it; it fails on that basis.
Many Members have named areas in which some of the public sector workers most affected by the Government’s cuts are living. My constituency is already among the top 100 in the unemployment league. Our current unemployment rate is 8.5%, and it is rising as we speak. About 24% of people living in Walthamstow work in the public sector. They are losing colleagues, and they are worried about themselves. My surgeries are full of people asking for help after receiving redundancy notices. I ask the Minister what I should tell those people. What will this policy offer them? The task of Government is supposedly to support people and create jobs in the economy. What can I tell those people in Walthamstow who work in the public sector and risk losing their jobs, or have already received redundancy notices?
Ian Murray (Edinburgh South) (Lab)
As was pointed out by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), my constituency is at the top of the league in terms of public sector jobs, yet unemployment is less than half that in the constituency of my hon. Friend the Member for Walthamstow (Dr Creasy). Does that not highlight the discriminatory nature of the Government’s policy?
Dr Creasy
That is a very good point. I am talking about the public sector workers who are most at risk of redundancy. The people who live in my constituency may not do the same jobs as those who work in the public sector in Edinburgh. They are teaching assistants, nurses, and people working in inclusion units and Sure Start. They are losing their jobs because of the cuts that are being made in local and national Government. People such as civil servants—who knows, perhaps they include the admin assistants in the Minister’s offices—fear for their jobs. They are looking to the Government, who say that the private sector will pick up the pieces following the cuts in the public sector, and they are asking how that will happen. In my region, the answer is very unclear.
This policy could be part of the remedy, and that is the aim of the amendment. It asks, “How can we generate jobs? What are the motives that lead people to set up businesses and industries that generate jobs in the private sector?” Many of us share an interest in whether the private sector could generate jobs as part of the recovery. We think that the policy has failed that test, and needs to be amended. Excluding London and the south-east means excluding a key wealth-creating element of our national economy, and we feel that that is remiss.
I also think that the Government have been remiss in excluding the voluntary sector and charities, and in Committee I supported amendments seeking their inclusion. According to the National Council for Voluntary Organisations, if the voluntary sector could benefit from the change of policy on national insurance holidays, an extra 2,500 charities could be created. Perhaps even more could be created through the big society, given the interest in how the voluntary sector could work in public sector commissioning. Cruelly, however, they have been excluded. The questions “Who are the people who are generating jobs?” and “Where are the places where people who are losing their jobs in the public sector can best find employment in future years?” have not been answered; the test has not been passed.
I ask the Minister to consider amending the policy in the way we have suggested, not least on the basis of his own evidence. He will recall that, in Committee, I was particularly concerned about the way in which the Government had constructed the policy, and the evidence on which it was based. He himself has described it as an uncertain benefit, and his officials have admitted that they did not have much evidence on which to assess whether they could reach all the people whom they wanted to reach, or involve all the businesses that the Minister had hoped to involve. In the impact assessment, the Minister said that he hoped that the policy would help 400,000 businesses, but he has admitted today that only 1,500 have applied so far. In Committee, one of the officials suggested that the number of applications would increase at the remittance stage, but that is not job creation. The jobs would have already been created, and people would be applying retrospectively for remittances. That suggests a challenge to the status of the policy as a job creation measure.
According to the Minister’s own analysis, the inclusion of London and the south-east might well make possible the creation of an extra 300,000 businesses. Before he says that there is no extra money, let me suggest to him that the creation of those extra businesses might enable him to meet his target of 400,000 over the three years. He could then return to the House and reassure all of us who are concerned about the efficacy of the policy that it had succeeded in generating new business in the United Kingdom and forming a key part of our recovery. Let me also encourage him to consider the extra tax take that the Treasury would gain as a result of the creation of all those new businesses, as well as the fact that all the extra national insurance funds could be spent on the national health service or on pensions, as he desired. There are many benefits in considering how the Bill could be amended to include London and the south-east. Let us think about all the people who would be affected by the jobs that this would create, the money it would bring into our national Exchequer and, above all, the economic recovery it could help drive.
I therefore hope the Minister will accept the amendments and acknowledge that they have been tabled in good faith. They are motivated by a genuine desire to make sure this policy is effective. Whether or not we agree with the Government—and we certainly disagree with many of the changes they want to make—I hope the Minister will understand and share our concern that jobs must be the first priority of any British Government in the current economic climate.
Gavin Shuker
I believe these amendments would make a real and fundamental difference to people in my constituency who wish to start their own businesses—to people who are creative and dynamic, and who want to have the opportunities that come from not being at a disadvantage to those running businesses in other parts of the country.
This Bill seeks to bring about a social benefit. There is a reason why national insurance contributions are going up. They are going up to help bring down the deficit, which is important. The structural deficit needs to be tackled over time. There is a further aspect to the Bill, however: it is also about trying to rebalance the economy.
The Minister has been very clear about his desire to see public and private sector employment rebalanced in various regions, but I personally do not have a problem in this regard, because for me a job is a job. I do not think people in the public sector should be in any way disadvantaged or looked down on because they work in the public sector rather than the private sector. We accept that private sector jobs should be generated, however, because Opposition Members believe that economic growth is the way to tackle the deficit, not slash-and-burn economics.
We accept that under the Government’s plans to reduce the number of public sector workers by about 500,000, those of us in areas with high public sector employment will need more businesses coming up and through. My point is simple, therefore. Across wide swathes of the greater south-east, including the Luton seat I represent, there are areas of very high public sector employment and high unemployment, and the Minister would do well to accept these amendments in order to ensure that we are not disadvantaged, which we are. That would be a positive step.
I agree that legislation has a role to play in helping to moderate behaviour. We want more businesses coming up and through. In Committee, the Minister made a number of salient points about the complexity that might be added by including regions such as the greater south-east, but we are not just in politics to administrate. We are in politics to make a difference. We are in politics to ensure that everyone in this country has a job they enjoy and through which they can generate both wealth for their family and self-worth, and it is unfair to the people in my constituency, and to others in the east, the south-east and London, that they should be exposed to this great disparity.
We in Luton have a number of particular issues with this proposed legislation. First, we have great transport links, which is a positive. It is why businesses like to locate in Luton. However, those same transport links also allow people to travel outside Luton to set up their new businesses, meaning that people in Luton who need a job cannot find employment. We have a young and creative work force; they are the kind of people who want to get stuck into building new businesses, and I am constantly amazed by the range of new businesses I see in my constituency. They are innovative, professional young people who want to establish businesses and set out on their own path, but they are going to be disadvantaged by these measures.
Luton has areas of deprivation, and we also have high public sector employment; that is certainly the case in the constituency of my hon. Friend the Member for Luton North (Kelvin Hopkins), as well as in Luton South. It would be deplorable to say to the people in my constituency that if they move 15 or 20 minutes up the train line or on the roads they will get a £50,000 golden hello, which they would not get if they set up their business in Luton.
Labour Members who represent seats in the greater south-east are willing to make a stand. We want to stand up for our constituents and constituencies, and to talk about our creative people. I hope that the Government will support these amendments, and that Conservative Members will want to stand up for their constituents as well, and say that this disparity is wrong.
In Committee, the Minister discussed why this exemption is being applied and spoke of a constrained budget. We could tackle that in a number of ways, and the amendments take account of them. Obviously, we could address the amount of time on the scheme, the number of businesses that engage in it, the percentage rate of take-up and the number of employees that the businesses take on. I urge the Government to re-examine the matter and find a way to include the greater south-east in this arrangement.
I make my final point to ensure that we are not in any doubt. The Committee took evidence from the assistant director of Her Majesty’s Revenue and Customs, who made it clear that it is possible to check where people are in the scheme. There was a high level of postcode accuracy about businesses, so it would be possible to re-examine this. As his first point in thinking again, I urge the Minister to consider the greater south-east as a region. It has great disparity between parts and constituencies, containing areas of deprivation, areas with high public sector employment and areas with high unemployment. He should say that those areas are just as deserving as the others represented here today.
Mr Gauke
Of course the Treasury examined all these matters in respect of its policies as a whole, its budget announcements and so on. I must point out that although the excluded region as a whole is diverse, the areas that will be included are equally so. I am not strongly persuaded by the arguments that have been made about this being discriminatory. When listening to these arguments, I was struck by the fact that it is worth reminding the House of what we are seeking to do. We are seeking to reduce the amount of NICs that will be collected, because we believe that in the way that we are doing so, we will be able to help to encourage business—
Mr Gauke
I want to develop this point, but I shall give way after I have done so. We want to encourage the creation of new businesses and more jobs. That issue has been raised in some of the earlier remarks. The hon. Lady discussed the importance of jobs and the hon. Member for Ilford South (Mike Gapes) discussed the impact that failing to reduce NICs might have on the Thames Gateway. The conceit of the speech made by the right hon. Member for East Ham (Stephen Timms) was that there was some division between the Treasury and No. 10. I do not know whether he was thinking of his own lengthy period in the Treasury rather than of the current circumstances, but let me assure him that there is no great tension between the Treasury and No. 10. I know that that has not always been the case in recent years.
Public Accounts Committee
Stella Creasy Excerpts(13 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Dr Stella Creasy (Walthamstow) (Lab/Co-op)
I am delighted to contribute to this debate as a new Member of the House and a new member of the PAC. We have seen the breadth of experience within the Committee and some formidable Members have addressed the House already. It is incredibly daunting to join them. I pay tribute to the Chair and her work in making newer members of the Committee feel very welcome, although we must do our homework.
I stood for election to this important Committee because Parliament has three key roles. First, our role is representation—we speak on behalf of the people who voted us in. I am conscious that when I speak, I do so not as myself but as the representative for Walthamstow. Secondly, we are here to make laws as the legislature. We all came into politics not just to change governance, but to change lives, which we do through passing laws. Finally and crucially, our third role is oversight and scrutiny. As my right hon. Friend the Member for Stirling (Mrs McGuire) alluded to, sometimes that is not seen as glamorous as the other two roles I mentioned, but I disagree, because oversight and scrutiny is crucial. The best oversight and scrutiny is about whether politicians can achieve the things that they say they want, and why they cannot do so if that is the case, and considering other ways of doing things. Oversight and scrutiny speak to a recognition that Governments should not just start projects or policies—the public expect them to be able to finish them too. Essentially, implementation is as important as ideology in politics.
Clearly, good governance requires all three of those functions to be enacted effectively, and each depends on the others for success. Without an effective system of scrutiny and oversight, wise words and good intentions will falter on the wheel of day-to-day delivery and the messy complexity of how change occurs.
I therefore ask hon. Members to support the motion, because it relates to the PAC’s performance of those functions within the House. The PAC is very different from Select Committees that look at the desirability of policy because it looks at policy effectiveness and implementation. That is why I take great pleasure in being a member of the Select Committee that Baron Hennessy of Nympsfield described as
“the queen of select committees”.
I take pleasure in quoting him not least because I represent him, which is a nice way of referring back to the first function of Parliament that I mentioned. The Westminster model is seen across the world as the gold standard of accountability on questions of effectiveness and value for money—other countries have subsequently followed that proud historical tradition.
I stood for election to the Committee not least because of my experience in local government and the value of scrutiny in the delivery of policy. I have been on the Committee only since November, but I have thoroughly enjoyed the experience so far, because we take seriously our job of safeguarding public money. I understand now why Baron Hennessey argues that the PAC exerts a cleansing effect on all Departments, because each week we thoroughly challenge witnesses—some more than others, perhaps—on the basis of the evidence before us. We take seriously the lesson that John F. Kennedy once taught: from his experience in government, when things are non-controversial and beautifully co-ordinated, there is not much going on.
The wide range of topics I have covered in my short time on the Committee bears that out—from our work on the community care grant to the major Ministry of Defence projects and the employment of consultants. I have learned more about hard shoulders on motorways and the nature of the M25 than I ever thought I wanted to know. However, all our work reflects the Committee’s crucial role in holding Governments to account over how they deliver on their promises to the public. The hon. Member for South Norfolk (Mr Bacon) expressed that honourably in his detailed examination of farming policy. That, too, reflects the breadth of our work.
Our Committee is an exercise not in teaching new or seasoned MPs about the topics of the day, but in understanding the concept of delivery and how to make it work. It is also about the crucial and honourable role that civil servants play in government. My right hon. Friend the Member for Stirling admirably set out some of the challenges in how the civil service and the Government work together. However, the work does not stop with meetings, and that is what the motion reflects and why I want to pay tribute to the Clerks and the National Audit Office for the work they do to support our Committee. I have found their reports incredibly useful. Our role is about the process of change and how it is followed through. That is the cleansing work in action.
The Committee’s meetings and follow-up work form a circle of scrutiny that is critical to how Governments act, which is why it is vital that our work does not disappear into a dusty report or an uncomfortable meeting in Committee Room 15—however cold or hot it may be. The motion is about ensuring that the cycle of scrutiny and oversight matches our legislative and representative functions in Parliament. Ministers need to be held accountable, if there are problems with their Departments in following up on the Committee’s recommendations, and it is right that we have a motion about the power to bring them to the House if necessary, so that all Members can be involved in the discussion and understand what is happening on the ground with those policies.
There are examples of where these problems of accountability lie. According to recent research, about 60% of the Committee’s recommendations have been accepted and about 30% partially accepted. That is comparable with other systems. However, there is an issue for us to consider, because it is not any one Department that has been challenging in terms of following up those recommendations. We need to reconsider our ability to follow up those issues and tell Departments and Ministers what is happening. The Committee Chair set out admirably some of the challenges we face over the patchy delivery of value for money and the pace of change in implementing recommendations.
When recommendations are followed up, there can be great benefits for the Government and ultimately the public in the delivery of policy. In particular, I am impressed by the work done on obesity. The Committee played a role in bringing together a holistic view of how the Government were looking at the cost to the taxpayer of not addressing obesity. That work is key. Also, the Committee’s rigorous and persistent scrutiny in relation to the Criminal Injuries Compensation Authority has finally enabled change to happen.
The hon. Member for South Norfolk also alluded to the work on health and stroke care. That is another example of where the process of overview and scrutiny has made a real difference to the quality of service that people in this country receive. We also had a debate this week about the major MOD projects. Clearly, that is a controversial subject, and yesterday, we took some very difficult testimony. Notwithstanding the examples that we looked at yesterday, this rigorous scrutiny of how those projects are delivered, and the fact that the NAO, together with our Committee, has continued to apply pressure, is testament to the work that we do. Some 13 out of the 15 projects we are looking at are now being delivered better. That is a result of our work with the Government. That is why I think that our Committee reflects what is best called constructive criticism made real. However, we need more powers to ensure that that happens.
From my few months on the Committee, I can vouch for the fact that we have been equally helpful to both the last and the current Government. That is why the Government should not fear the motion, but welcome it, especially given some of the major changes to delivery that they are talking about making, particularly in terms of localism. My right hon. Friend the Member for Stirling admirably set out some of the challenges involved in having new actors delivering things through the public purse and perhaps even being responsible for commissioning services. It is all the more important that Parliament should have a clear role in asking, on behalf of the public, whether we are getting value for money, and whether we are able to deliver the things that we talk about in this House and that we as representatives, making laws, want to see happen.
It is also important to note what studies of other public accounts committees have looked at. The hon. Member for Southport (Dr Pugh) gave some examples of that. For instance, 75% of public accounts committees that were surveyed by the World Bank agreed that it was crucial to their effectiveness to have the power to follow up reports and to check the implementation of their recommendations. The World Bank also calls for powers for public accounts committees across the world to be strengthened. It is therefore important for us to recognise—as perhaps representing, as it were, the gold standard of public accounts committees—that we could lead the way on that, through today’s motion and the proposals that have been put forward. That is why the House should support the proposals, because this debate is not just about the positive impact of overview and scrutiny of public policy; it is also about ensuring that the work that we do benefits the people of this country. Indeed, I am also incredibly mindful of that representative aspect to this debate. We have a responsibility to the House and to the people whom we represent.
I do not intend to speak for too long, as I know that many other new Members also want to contribute. I hope that I can persuade the Government to accept the motion. In the words of Thomas Jefferson:
“Whenever the people are well informed, they can be trusted with their own government; that whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights.”
I hope that the House will see the Public Accounts Committee as part of that process of setting things to rights, and that the power that we are seeking today becomes part of ensuring that policy is delivered in the way that we want it to be delivered. If that alone is not encouragement enough, I would also ask the Minister to reflect on the words of an anonymous source who said:
“Admit your errors before someone else exaggerates them.”
I hope that the Minister will see the reports that we produce as a fair reflection of the work of Government and the challenges ahead, and that, in the spirit of constructive criticism, he will support the motion today.
Savings Accounts and Health in Pregnancy Grant Bill
Stella Creasy Excerpts(13 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Paul Maynard
Let us rejoin the theme of progressive universalism, which the hon. Lady so kindly and patronisingly explained to me. If the fund is so universal, why in the first four years did 25% of people not apply for it? To me, that is not universal; that is rather partial.
Stella Creasy (Walthamstow) (Lab/Co-op)
Is the hon. Gentleman aware of the research by Elaine Kempson of the university of Bristol on the increased take-up of the child trust fund? Three out of every five parents now take it up automatically, and the state picks up the rest.
Paul Maynard
Three quarters of those accounts opened since 2005 have failed to receive additional deposits; 99% have not received the maximum funding available; and only 71% of eligible children have a child trust fund. I am not trying to argue, as Opposition Members seem to think, that the fund is a failure; I am trying to argue a more subtle point, that this piece of legislation—this policy innovation—has not achieved its goal.
Paul Maynard
I thank the hon. Lady for those ifs and buts. We can all hope for what might happen at some point in the future.
The shadow Minister, the right hon. Member for Delyn, set out three reasons why Labour introduced the measure. It was about inculcating a savings culture, encouraging financial education and providing a nest egg. So, rather than assessing the measure against the legislation, let us try to assess it against what the shadow Minister said was important.
There is no evidence that the fund has encouraged a savings culture. Many organisations that promote financial education come to me time and again to ask, “Why didn’t the last Government do more to promote financial education, particularly at primary level?” In the average family, a piggy bank—
Paul Maynard
Sorry, I am not going to give way any further. I have been very generous in giving way, but I am afraid that I am not a bus stop.
Paul Maynard
No, I am sorry, but I am not giving way to you, madam, so kindly take notice of that.
Having a piggy bank—[Interruption.] I am going to make the point that having a piggy bank in one’s bedroom is a much greater spur to saving and learning about the culture of savings than any attempt to lock away money until the age of 18.
The right hon. Member for Wythenshawe and Sale East (Paul Goggins), and the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) in her Westminster Hall debate, have raised the issue of looked-after children and how we deal with them. It is a very important issue, but the Opposition should hang their head in shame at the outcomes that looked-after children obtain after 13 years of Labour rule. The points that those Members made were an example of what I call the rhododendron test. By focusing on the tiny issue of whether such children should continue to receive child trust fund payments, they overlook the much wider public policy issues. There are many other ways in which we can and do help looked-after children.
Stella Creasy (Walthamstow) (Lab/Co-op)
I wish to speak in the debate tonight because of my deep concern that these proposals will ensure a bleaker future for many young people and their families in our country. In particular, I am deeply concerned that cutting the measures that promote savings and financial stability for many of the poorest families in our society saves comparatively little for the public purse but will have a massive long-term impact on social mobility. I want to make my remarks in three stages: first, my concern that we need to do more to help families to manage their finances and plan for the future, which measures such as the saving gateway and the child trust fund help support; secondly, the evidence that those products were achieving the aims that they set out to achieve; and, finally, the wider social consequences of failing to support action on social mobility.
Members may know of my concerns about affordable credit and the financial hardships of many of the families in my local community. My concern that the Government should act to support measures that will help to tackle the causes of debt and improve access to affordable credit are expressed in the ten-minute Bill that I will table in the House next week. I fear that the forthcoming cuts to public services, which have already impacted on the incomes of families in Walthamstow, will make such problems worse, given the high number of local residents who work in the public sector.
To give some flavour of the financial planning problems that families in areas such as mine are facing, I want to refer to a survey recently undertaken by the Children’s Mutual society on the impact of the credit crunch on family finances. It found that one in four families in this country claim their household income is not enough to pay their bills each month. Given many people’s fears about redundancy and the impact of the cuts that the Government plan to their livelihoods, it will not surprise many Opposition Members to learn that one in 10 families fear that the main breadwinner will be made redundant in the next six months. Three quarters of them have debts in the shape of credit cards, loans and overdrafts, and a quarter of them have borrowed money from their parents in the past year. Without intervention, those cycles of debt will continue and deepen as these cuts bite.
Helping parents to plan for the financial future of their families is about not just a stable economic platform in Britain, but the quality of life itself. Some 29% of British families admit that they are already arguing over their family’s finances. A third of parents are suffering from sleepless nights because they are worried about money.
There is therefore a deep irony that the Chancellor makes comparisons between household debt and national debt, and then scraps the measures that help to address the former in the name of addressing the latter. Thinking of the future when the present is so fragile is tough at the best of times for such families. Taking away the mechanisms by which the Government can help them indeed makes the worst of times, but that is exactly what the Government are doing in this Bill to families such as those in Walthamstow whom I represent.
Abolishing the child trust fund and the saving gateway will do nothing to secure the culture that the Chancellor said just 18 months ago he wished to see in this country in a speech to Reform about a nation that supports savers. He is not the only member of the Government who wanted to support a savings culture in the UK; even after the election, when we know that many pledges have been broken, the Financial Secretary to the Treasury argued that the Government
“is committed to curbing unsustainable lending and helping individuals manage their finances better”.
Those are laudable aims. They are aims that I share and that also motivate my ten-minute Bill, but that is why I find this legislation all the more heartbreaking: it stops in their track programmes that we know have a proven track record in improving savings for some of the poorest families in our nation, including many in my own constituency of Walthamstow.
Sarah Newton
I wonder what analysis the hon. Lady has done to demonstrate that the programmes help in the way she suggests, to enable people in low-income households to save for the future, because I understand that very few families have made any additional contribution to the child trust funds.
Stella Creasy
I am glad that the hon. Lady asks about an Opposition Member looking for evidence. If she listens to me, she will find that I can refer to many different research points that can bring out exactly that. It would be useful in these debates to move from the examples given to what the independent academic research tells us the child trust fund has done in increasing savings in this country. I direct her to the work being done by the university of Bristol on this matter in particular.
As an MP in Walthamstow, I cannot help but see the impact of the Government’s decision. The latest figures tell me that more than 10,000 families in Walthamstow have a child trust fund voucher—well above the national average for a constituency. Nationally, we know that 70,000 are issued each month, including the top-ups, at a cost of just £500 million to the taxpayer. It is a relatively small investment compared to some of the other mechanisms that we have, but we know that it is money well spent, because until they were stopped, child trust funds were the most successful Government savings scheme ever.
My hon. Friend the Member for Stretford and Urmston (Kate Green) admirably set out the evidence that we have. It is worth repeating because of the questions being asked by Members on the Government Benches. Two million people were contributing to 4.5 million open accounts, resulting in more than £2 billion in assets, with £22 million in regular contributions. Critically, those are from families on less than £50,000 a year. In London that is not a high target rate to meet.
To get the full sense of what abolishing the scheme will mean, it is worth looking at the sums involved. Thanks to the Revenue’s child trust fund calculator, I was able to do just that. It tells me that a child born on my birthday this year eligible for just that basic payment of £250 from the Government and whose family saves just £100 a year, which is not even a tenner a month, could get about £3,000 in 2028. If the family started saving £20 a month, the figure could rise to £8,000. At £4 a week, it would be nearly £10,000.
Stella Creasy
With respect, I have given way once.
We do not need to wait until 2028 to see the impact that such funding will have on the choices that young people could make. We know that in 2020 the first generation of child trust funds will mature. That means there will be 18-year-olds with access to £3 billion of investment for our nation. That may not be the riches of Croesus that some on the Government Benches will be able to bequeath to their children, but for the families that I work with in Walthamstow those first funds maturing in 10 years will transform the choices that their children are able to make.
In the context of the other debates that we have had in the House recently—on tuition fees, home ownership and entrepreneurship—we all know the difference that that kind of money will make. Putting that £3,000, the lowest sum, into context, it is worth reflecting that evidence shows us that parents are spending on average £4,000 on financing their children through university. We know, too, that more than half of 25 to 34-year-olds still rely on their parents for financial help. With tuition fees set to rocket under the present Government, that debt, that dependency and that distress for the parents concerned are only set to rocket.
Countless research studies show us that low income families aspire to saving for the long term, and that they want a nest egg for their children. The child trust fund is helping to make that ambition a reality, with almost 30% of the children who get the child trust fund also getting the top-up endowment of £500, meaning that their nest egg will be even bigger.
Bill Esterson (Sefton Central) (Lab)
My hon. Friend makes a good case for the evidence for saving, particularly in low-income families. Is she aware of the House of Commons Library research that predicts a £4 million saving from the abolition of the three schemes, which compares rather unfavourably with the amount to be saved by the levy on the banks? Will she comment on that?
Stella Creasy
I thank my hon. Friend for that question. He precisely answers the point that many on the Government Benches wish to raise about where else money could be raised. There are ample other ways that we could raise money to reduce the deficit, such as the bankers levy.
Stella Creasy
I shall make progress, as Mr Speaker has pointed out how many Members want to contribute.
I want to put on record my concern that children who will have the child trust fund removed—those 30% who are getting the extra payment—are kids from the families most likely to be hit by the cuts in public spending, as the housing benefit, tax credits, jobs and services that their parents rely on are also slashed by the Government. These are the kids of families who already struggle to make ends meet and for whom the scheme represents a lifeline of opportunity for their children in later life.
Members need not take my word for it. Let them look at the reports from the Treasury and the Institute for Fiscal Studies. They make it clear that the poorest will bear the brunt of the cuts. The Bill ensures that the burden will carry on to their children as well. This is not fantasy or wishful thinking, as some on the Government Benches may wish to claim. Since the scheme has been running, there has been clear evidence that it works in encouraging saving and supporting aspiration.
It is not fantasy to think that that money would be spent on the future of those young people. The research commissioned by the Treasury shows that families of all incomes see the money as the key to their kids getting on in life, whether it is used for higher education, setting up home or even having driving lessons. The research reflects the ample evidence and common-sense proposition that possession of even a small pot of money in early adulthood improves one’s life chances later on. It shows the strength of the economic argument for retaining the child trust fund, and that a savings culture can be ingrained in people from the early years of their lives. It shows also how counter-productive it is to cut the fund now, because the funding that would have been available to our economy in later years will also be absent from the choices that children are able to make.
The strength of the scheme, and what I want to concentrate my final remarks on, is the evidence that a small amount of capital at the beginning of life had a significant advantage for children 10 years on in life, even when accounting for employment, higher earnings and better health. At the heart of the scheme, and the reason why the previous Government introduced it, is a concern for social mobility, something that Government Members say that they too care about. If they do care about it, however, they will understand that assets are the key to social mobility.
Labour Members understand that if a child is born with a silver spoon in their mouth, it means not just nice baby clothes or a wonderful pram but the money, resources, confidence and networks that help to turn potential into reality. If a child does not have those assets, at every stage in their life their choices will be limited, and the decisions they make will be that much harder, whether they are about where to live or the lifestyle their family can afford, or whether they can even take the chance to go on to further and higher education. That is why Labour Members fought for the scheme and had planned to extend it if Labour won the election. It encourages not just savings, but aspiration.
We might look at our debates, and those that the UK Youth Parliament will have on Friday, about the right to vote and citizenship, but surely a truly progressive society is one in which we ensure that people have access to the capital endowment that gives them the same social power and responsibility of all their peers. I know that some Government Members agree. Only one day has been allotted to this debate, and attendance is low, but I hope that the country takes note of the fact that this Bill reflects the real impact of the Liberal Democrats on the coalition.
I urge those Government Members who consider themselves to be compassionate Conservatives to hold true to their own manifesto and to protect against this onslaught of Liberal callousness. The Conservatives’ manifesto at least pledged to protect the child trust fund for some children, so I urge them not to listen to the siren voices of the Liberal Democrats who, by abolishing the child trust fund, want to see the poorest families decimated.
The Liberals cannot even decide why they do not want the fund. Their claims run from “We can’t afford it,” to “It’s not the best way to secure asset-based mobility.” But as the former Chief Secretary to the Treasury said—
The Economic Secretary to the Treasury (Justine Greening)
“There’s no money left”.
Stella Creasy
I accept that the hon. Lady may be confused, but let me be clear that I am talking about the former Chief Secretary to the Treasury who claimed that the Government could not afford to continue with the child trust fund because it would burden future generations with a bigger debt. Some Opposition Members think that burdening future generations with no opportunity in life at all is not a price worth paying.
If we are to continue looking at what Chief Secretaries to the Treasury have said, we will find it worth considering what the current one said back in 2008, when he agreed that asset-based welfare was the true path to social mobility. He argued that there needed to be an alternative to the child trust fund, but tonight we have not heard about any measures to replace the asset that people would have had. We have heard nothing from Government Members; the silence has been deafening. Opposition Members have clearly explained why an ISA is not the same as a child trust fund.
My private Member’s Bill next week will call for a levy on financial institutions to help to support debt counselling and advice services. That is why I welcome the Financial Secretary’s remarks that the Government would back a consumer financial education body to begin that process of supporting financial advice services. However, it is no good on the one hand offering help and support for families who get themselves into debt, and on the other taking away the savings vehicles that keep such families going.
Given my proposal, I hope that the Minister will agree to meet me and other campaigners to discuss what more can be done to address the causes of poverty and ensure that families have access to affordable credit. Whether we are talking about the child trust fund, the health in pregnancy grant or the saving gateway account, I urge the Government to rethink the Bill and recognise that it is not in the long-term interests of families throughout Britain to support such measures.
A nation which ensures that every young person and their family has financial assets at key stages in their lifetimes is one in which potential stands a much greater chance of being realised. If the Bill is overturned and the scheme kept, a world of possibility will open up to many of our young constituents. I urge the House to reject the Bill and to sustain these vital instruments of social progress.