Finance (No. 4) Bill

Stephen Williams Excerpts

Monday 16th April 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I wish to make only a short speech in support of giving this Bill a Second Reading, because I made a speech on the broad thrust of the Budget on Budget day itself and because, once again, I have been the lucky winner of the Liberal Democrat Whips Office lucky dip competition and will be serving on the Committee. I therefore have many days ahead of me going through the Bill’s detailed provisions, both in this Chamber and on the Committee corridor upstairs.

One Budget highlight of a month ago for Liberal Democrats was the largest rise in history of the income tax threshold. My hon. Friend the Member for Gainsborough (Mr Leigh) mentioned John Bright, and I am sure that John Bright would have approved of that simplification of the tax system, as it would have disproportionately benefited the thousands of factory workers that he represented in Birmingham. Other highlights of the Budget were the introduction of effective wealth taxes and anti-avoidance measures, and, in order to make the United Kingdom more competitive internationally, the two reductions in corporation tax scheduled for the next couple of financial years.

Taken together, those measures in the Budget involve billions of pounds, but since the Budget we have heard much about the pasty tax, the granny tax, the church tax and the charities tax. Now we hear from the hon. Member for Kingston upon Hull North (Diana Johnson) about the caravan tax. I had not heard about that before, but no doubt we will take much interest in it as the Finance Bill progresses. Even though all those measures and all those controversies are important in their own right, the focus on them suggests that the broad thrust of the Budget—rewarding work, taxing wealth effectively and making the United Kingdom economy more competitive—was right and that the Chancellor and Chief Secretary struck the right Budget judgment.

All those measures will, of course, be discussed during consideration of this Bill, which is another behemoth of a Bill. Every year we hear that the Treasury has produced another mammoth Bill and this one seems to be a bit of a record, as it contains 225 substantive clauses and 38 schedules. We can all look forward to dealing with them over the next few weeks.

Clause 1—it is rightly clause 1—is the Bill’s most important, because it announces the increase in the personal income tax threshold that took place on 6 April, while we were on recess, raising the threshold to £8,105. We know from the Budget statement that in a year’s time that threshold will be raised to £9,205. Cumulatively, since the general election, we will have raised 2 million people out of the income tax net altogether and provided a tax cut in cash terms of more than £500 to more than 20 million basic rate taxpayers. We also know that there is to be a proposed stamp duty charge on properties worth more than £2 million. As the hon. Member for Kingston upon Hull North said, we do not have a mansion tax, but we do have a mansion duty—a new stamp duty charge on properties worth more than £2 million. This was indeed a Budget that gave a tax break for the millions while taxing effectively the wealth of millionaires.

In business terms, the Liberal Democrats very much welcome the fact that corporation tax will be cut this year to 24% and next year to 23%. We also welcome the introduction of yet another scheme to encourage entrepreneurial activity, the seed enterprise investment scheme. It is a five-year scheme to support small business start-ups. As the Member of Parliament for Bristol West, I particularly welcome the announcement in the Budget of a consultation in order to proceed to giving tax credits to the television industry, and, in particular, for animation, on the same basis as those for the film industry. I met Aardman Animations Ltd, which is based in my constituency, last week and I understand that discussions between the Treasury—with my hon. Friend the Exchequer Secretary and his colleagues—and the animation industry are progressing well. I look forward to the Finance Bill 2013 and to the full provisions for that tax credit to support important British business being introduced in a year’s time.

[Anne Marie Morris (Newton Abbot) (Con)]

Given the hon. Gentleman’s interest in small businesses, does he welcome, as I do, the new provision for a cash-based tax return that will make it much simpler for small businesses with turnovers of less than £77,000? Simplifying the tax return and making it cash-based is a real step forward for the smallest businesses.

[Stephen Williams]

Yes. I welcome my hon. Friend’s intervention. When I met representatives of the Federation of Small Businesses, they were particularly keen that that measure should be introduced in the Budget and they are no doubt very pleased that the Government have responded to their representations and those made by hon. Members, such as my hon. Friend, on its behalf.

The anti-avoidance measures in the Budget and the Bill are also very much welcomed by the Liberal Democrats, particularly the consultation on introducing a general anti-avoidance and anti-abuse role based on the paper prepared for the Treasury by Graham Aaronson. We will need to wait until the next Finance Bill to see how that pans out. There are also specific anti-avoidance measures in the Bill, such as those to tackle the use of envelope schemes by corporate bodies and unincorporated bodies to acquire properties while avoiding stamp duty. That abuse was overlooked for far too long by the previous Administration and I am delighted that the coalition Government are tackling it head on.

Other more controversial potential abuses are being tackled in the Bill through the limits on tax reliefs that individuals are able to claim. Before the Budget, the Deputy Prime Minister talked about a tycoon tax. Across the Atlantic, President Obama has been talking about a minimum rate of tax, such as 30%, that US citizens should be expected to pay, and Warren Buffett has been making very similar points. We have many reliefs available in our tax code in this country to encourage enterprise, such as the enterprise management incentive scheme, the enterprise investment scheme and the venture capital schemes of which, in my life before 2005, I used to help many businesses and entrepreneurs to take advantage.

The Bill provides another relief, the seed enterprise investment relief, but all the reliefs available at the moment are capped. They are limited as regards both time and the amount that can be put into them, and therefore the amount of tax relief—whether it is on income tax or capital gains tax—that a wealthy individual might be able to obtain. That leaves various uncapped reliefs that are available under our tax code for income tax losses, loan interest and, of course, philanthropy, which is where a lot of the controversy has come about in recent weeks.

From the outset, it is right to say that the extension of restrictions and caps on reliefs, whether they are on gifts to charity or loss reliefs, is entirely logical. When restrictions are imposed on existing reliefs, such as gift aid, the Government and the Treasury must take greater care than when they are imposing reliefs from the outset for a new scheme, such as the seed scheme. The Government and the Chancellor have already said that they intend to work very closely with the charitable sector on the introduction of the restriction on gift aid, and I hope that that will lead to a measure that meets the Government’s objectives of protecting our tax base while ensuring that philanthropy can continue.

It is important, however, to say that, contrary to much of the coverage that we have read about and that constituents have written to us about, the restriction on reliefs is not the same as the abolition of reliefs. The phrase “charities tax”, which has been bandied around the Chamber this afternoon, has left hanging in the air the implication that the Government are somehow withdrawing tax relief from philanthropic activities altogether. That is simply not true. An individual will still be able to donate and receive tax relief on the higher of £50,000 or a quarter of their annual income. Some of us might dream of this, given the salaries that we are on, but if we had an annual income of £1 million, we could still donate £250,000 to charity while receiving full tax relief. I understand from figures that I have seen from the Charities Aid Foundation that the median donation that our constituents make is about £11 a year, so very few people will be affected by what the Government have proposed. It is right that such details should be closely considered by the Treasury and by all of us, as parliamentarians, to ensure that they work.

There are various things that the Government could do. The limits are annual and perhaps they could consider rolling up the annual limits. If you, Mr Deputy Speaker, were to win £1 million on the lottery, you would not be able to donate an amount to charity under the Bill’s provisions while getting tax relief and while, more importantly, the charity got the gift aid matching relief, too. That would be an absurd anomaly and I am sure that it was not intentional.

[Jacob Rees-Mogg]

My hon. Friend talks about someone winning £1 million on the national lottery but a £1 million win on the national lottery is not taxable; one ought not to get tax relief on a gain that is not taxable.

[Stephen Williams]

I am trying to think whether my hon. Friend has caught me out on a provision, but I am not sure that he has. The reason there has to be a £50,000 limit on relief is that most people who give large amounts of money do so out of their accumulated wealth and their asset base, which may have come from a lottery win or from an inheritance. It is likely to be a one-off event in their life when they receive a large amount of money and philanthropically decide to give much of it away. It would be absurd if the charity was not able to claim higher rate income tax relief if the individual who received that one-off legacy or windfall gain was not able to claim gift relief.

[Charlie Elphicke]

There is one thing that troubles me. The average income in my constituency is below £20,000 a year, so if one of my constituents gives to charity they are able to tag along the taxpayer to the tune of the basic rate. Is it not a basic unfairness that someone who pays tax at 50% is able to drag along the taxman and the public finances to double the amount that a constituent of mine on an ordinary income is able to? That seems an unfair aspect in the way the relief system has worked in recent years.

[Stephen Williams]

I welcome my hon. Friend’s addressing the fact that the tax system should be fair in how different individuals get relief for an activity that is to be encouraged. Perhaps the relief on pension contributions ought to be seen in the same light but I think that would be controversial among many of his colleagues. I suppose that the basic principle of gift aid relief, tax relief and what can be recovered by a charity relates to one’s net income and the money that one no longer has. It therefore has to be grossed up by the rate of tax that has already been taken off one’s income before one chose to give that money to someone else. That is the basic underlying logic.

[Bob Stewart (Beckenham) (Con)]

My problem is that I do not quite understand how it works so perhaps my hon. Friend will correct me. If a philanthropist gives a huge amount of money to a charity, does that mean that he or she chooses who they give the money to and that the only loser is the Exchequer because it does not get tax on that? It is difficult but I rather like the fact that a philanthropist can give all that money and choose what happens to his or her money and that the Exchequer is the only loser. Am I wrong or is that his understanding?

[Stephen Williams]

I intended to give a speech on the Bill this evening rather than a broad-ranging tutorial on how the tax system works, but yes my hon. Friend is broadly correct. The basic premise of philanthropy is that one chooses of one’s own free will to whom one gives one’s money, but one gives from one’s net income and the money available—that is all one has to make that donation. The gift aid system therefore works so that the tax that has been deducted from that income already is put back in place and the charity receives that benefit.

I wish to make a second suggestion about how this restriction could be addressed. Perhaps a better way of looking at it would be to exempt large gifts to certain institutions such as universities. My right hon. Friend the Business Secretary has rightly expressed concern about the effect on the alumni fundraising programmes of our universities. The Russell group universities are particularly active in raising funds from members of their alumni such as myself, although I do not think I would be caught by these provisions. Gifts to other institutions such as Cancer Research UK and national institutions and museums such as the National Gallery could also be exempted. Perhaps we need to look again at the Charities Act 2006 and the public benefit test to see which activities and donations are generally of a philanthropic nature and which may fall into the grey area. It may be an individual’s personal choice to donate to a particular cause but that cause might not be something of wider public benefit that deserves tax relief. Whatever system we come up with, whether it is what is proposed in a dry sense in the Finance Bill or one that takes on board the suggestions that I and others will no doubt make as the Bill progresses, it must support genuine philanthropic activity.

My final point is on the rather obscure clause 180, which it will probably take us some time to reach in Committee. It relates to controlled foreign companies and how the UK is changing the taxation basis for companies with activities abroad. The primary duty of the UK Government, and indeed of Members of the House of Commons, is to safeguard United Kingdom taxpayers, and we must always think about that whenever we debate these issues, but we also have a duty to make sure that our Government’s policies are joined up. At a time when despite decreases in budgets elsewhere we are increasing the budget of the Department for International Development, it would be perverse if DFID had to give developing countries more support because of the adverse effects of the tax changes we are making in this country. We cannot address all those aspects now, and we shall look at them again in Committee, but I hope we can find a way of measuring their effects and supporting overseas tax authorities more effectively to collect their tax liabilities so that they are not adversely affected by changes we are making to our basis for taxation.

I said that I wanted to make a short speech. We have long debates ahead of us over several days, both in the Chamber and in Committee. When the dust has settled on the Budget and it passes into the annals of history, despite everything that hon. Members have rightly mentioned today—whether pasties or caravans—I think it will be remembered for the huge increase in personal allowances that raised millions of people out of taxation and provided a broad cut in income tax for millions more. That is the radical measure in the Budget; it is something I am very proud of and it is why I shall support the Bill this evening.

Illegal Alcohol and Tobacco Sales

Stephen Williams Excerpts

Tuesday 27th March 2012 Westminster Hall

[Stephen Williams (Bristol West) (LD)]

I congratulate my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) on securing this debate. I want to make some brief remarks as chairman of the all-party group on smoking and health. My hon. Friend the Member for Burton (Andrew Griffiths) is chairman of the all-party group on beer, and I want to make it absolutely clear that my group is against smoking whereas his, I believe, is in favour of the consumption of beer.

[Andrew Griffiths]

The responsible consumption.

[Stephen Williams]

Absolutely. I saw my hon. Friend just last night responsibly consuming beer in the Strangers Bar downstairs.

The UK is a leader in tobacco control, and I want our country and the coalition Government to remain at the forefront in that area. We have seen huge progress over the past couple of decades in the limitation of tobacco companies’ opportunities to market their products. Checking carefully around the room, I think that all of us, perhaps with the exception of the Economic Secretary, remember popular television tobacco advertising, with catchy tunes. They are now a thing of distant memory, and we will see further changes shortly. I am sure that many of us will visit supermarkets in our constituencies during the Easter recess, and we will no longer be able to see displays of tobacco products because all large shops will have to cover them up. Some shops in my constituency have already pressed ahead with doing so, including the Tesco superstore in Eastville on the edge of my constituency.

The next necessary stage in tobacco control is introducing what has been called plain packaging for cigarettes, although that is to some extent a misnomer. The design of plain packs shows that they are anything but plain, but they would be of a standardised design in order to remove what is essentially the last opportunity available to tobacco companies to promote their products: the design of packs, of packaging within the cardboard pack and of cigarettes, which now come in many shapes, sizes and colours to attract the next generation of gullible young people attracted by glitzy products that they think it is cool to consume. Of course, it is anything but.

I am sure that tobacco companies will fight tooth and nail to prevent standardised packaging from being introduced in the United Kingdom. The Department of Health is about to start a consultation exercise on plain packaging on behalf not only of central Government but of the devolved Administrations. I am sure that tobacco companies will come up with all sorts of reasons why plain and standardised packaging should not be introduced. One reason will be that it could increase the opportunity for the sale of illicit and counterfeit cigarettes, which is the topic of this welcome debate.

I doubt whether the introduction of plain packaging will increase the opportunity for counterfeiting. If it does, it will only do so because the tobacco industry inflicts that problem on itself. Most or all tobacco companies already put covert markings on their packs to protect their legal sales from illicit sales in a market where their brands are clearly visible. Their brands will no longer be clearly visible on packs if plain packaging is introduced, as I hope it is. Instead, the packs will have prominent health warnings and standardised colours and fonts. The fact that they will still have covert markings, bar codes and other measures to counteract the best efforts of those who wish to smuggle cigarettes into our country should mean that moving from branded packs to standardised plain packs will not increase the opportunity for illicit sales.

[Brandon Lewis]

I am not a cigarette smoker, but surely one potential problem with plain packaging is not whether experts and officials can check a code to see whether the product is illegal but whether the public who buy the packs can spot it easily. With plain packaging, the codes will be less easy for the public to spot. Therefore, it will be less easy for them to report counterfeit packs, increasing the opportunities for illegal and counterfeit sales.

[Stephen Williams]

I thank my hon. Friend for his intervention. As I mentioned, the Government are about to embark on a consultation exercise about the various issues that must be considered before we move ahead to a plain packaging regime for the sale of cigarettes. I am sure that that point will be tested with all the current enforcement agencies to see whether it is indeed a legitimate worry and concern. If so, we will have to take measures to ensure that the design of standardised packs makes it easy for the public to distinguish a bona fide, legally sold product of a tobacco company from a bootleg or imported product that does not meet UK standards.

I have just thought of a direct answer to my hon. Friend’s point. At the moment, there are few regimes in the world where plain packaging is the norm. To the extent that the UK follows Australia’s lead, we will be the first in the European Union to adopt it. People who currently import lorry loads or white van loads of tobacco and other products, as my hon. Friend the Member for Hereford and South Herefordshire mentioned, and who make enormous profits as a result, will not be able to import branded products from the rest of the European Union, because those products will not be legally saleable in this country unless they have a standardised pack design. It could be argued that standardised packaging will limit the opportunities for people to import van loads of material supposedly for their own personal consumption, much of which we must suspect is diverted into the illicit market.

It would be wrong of us to assume that the trade is rampant at the moment. It is certainly highly profitable, as my hon. Friend the Member for Hereford and South Herefordshire said, but the various Government agencies, working together, have driven down the share of illicit tobacco over the past decade. Her Majesty’s Revenue and Customs estimates that 10 years ago, in 2000-01, the share of tobacco packs sold on the illicit market was just over one fifth, at 21%, but by 2009-10, that market share had been halved to 10%. Unfortunately, the market share of hand-rolling tobacco, which is easier to counterfeit, is still shocking. Some 46% is sold on the illicit market, without any control and at a tax revenue loss to the Treasury.

In closing, I urge the Government, as well as moving to standardised and plain packs, to adopt some other measures. First, all the various agencies that wish to control illicit tobacco should work effectively together. HMRC has a responsibility. The Economic Secretary to the Treasury, who is with us today, has a direct responsibility to work more closely with the UK Border Agency, which, as my hon. Friend the Member for Hereford and South Herefordshire mentioned, also has a key role.

The Government should also work with local authorities. I am all in favour of localism—I have been an evangelist for localism for a long time, and I am pleased that our coalition Government are pressing ahead with it—but we must make it clear as part of the Government’s national public health strategy that local authorities have a duty to use Government public protection officers more effectively in areas of tobacco control. Of course, the police have a role as well. Police and crime commissioner elections are being held in November, and I will certainly ask all the candidates in Avon and Somerset what they will do to stop the sale of cigarettes to underage people and the sale of illicit cigarettes to anybody.

Secondly, there should be a more effective registration scheme for retailers, so that we can separate rogue from responsible retailers. Thirdly, the Government should work with the World Health Organisation to develop more effective tracing of tobacco packs as they travel around the world. The tobacco industry is now global, and many of the cigarettes sold in this country are manufactured elsewhere.

I thank my hon. Friend again for giving us the opportunity to discuss these important issues. Driving down the smoking rate is good for public health outcomes in our country, and driving down illicit cigarette smoking while a legal trade still exists will be good for the public finances.

--- Later in debate ---

[Ian Paisley]

I would have no difficulty with the deployment of more people in the worthwhile work of Her Majesty’s Revenue and Customs and other customs and border agencies, but our Committee took evidence from HMRC officials who said that they were satisfied with the money given to them by the Treasury and that they probably have enough people. If HMRC wants more people, it can argue its case, and it will not lack any support from me.

Some people argue that the plain or uniform packaging of cigarettes would solve the problem, but that is utter, total baloney. If people think that by simply uniformly packaging all cigarettes they will suddenly meet a public health objective, they are losing the plot. Plain or uniform packaging will not affect the problem. Every survey tells us that adults do not care if the package is gold, has a camel on it, or if it is red, white and blue. They care about price and taste. A person will smoke Camel lights because they prefer their taste to that of Marlboro. The colour of the stupid package does not matter—that goes in the bin. A person will smoke Benson and Hedges not because the box is beautifully gold with a pair of lungs on it, but because of the product’s taste and availability.

We have to wipe out the nonsense that plain packaging is the panacea to achieving a public health goal and to preventing smuggling. Plain or uniform packaging will just make it much easier for the smuggler, no matter what people say. Smugglers are rubbing their hands in glee at the prospect that someone would be so daft as to uniformly package all cigarettes in the same year as we are implementing a display ban so that we cannot see the daft things. We have to recognise that, if we are to have a display ban, we do not need plain packaging. It would infringe people’s rights and on trade laws, and it would jeopardise many legitimate businesses.

I do not hear the same lobby group arguing for the plain packaging of tins of beer, or for the uniform packaging of bottles of wine or spirits. We should remember that diseases as a result of drinking alcohol cause far more damage and create far more costs for our health system than those that result from smoking cigarettes. Moreover, on antisocial behaviour, there are far more fights on the streets of this city on a Friday night, not because someone has had too many fags, but because they have had too much to drink. We have to recognise that the plain packaging argument is, frankly, nonsense. It is not a panacea to solving the problems of counterfeit crime.

[Stephen Williams]

The hon. Gentleman has made several points that need to be knocked down, but I shall address only one. If he thinks that the introduction of plain, standardised packs is pointless, why does he think that the tobacco industry is going to fight it with all the resources at its disposal, and why does it put so much effort into providing attractive packs, colourful cigarettes, gold wrapping and all the other paraphernalia that goes with the marketing of cigarettes? Surely, it is wasting its money if that has no effect.

[Ian Paisley]

The tobacco industry is able to speak for itself, but one of the reasons why it is annoyed is that this is an infringement on its trading rights, its branding and all the things in which it has invested over the years. It would be wrong to turn around and say that we can just remove those things overnight.

The industry argues that it would damage the actual trade, so let us look at that and what it costs. In my constituency, more than 1,000 people are directly employed in the tobacco industry. In Manchester, another 800 people are directly employed in the manufacturing of cigarettes. If we are not careful, those jobs will go to eastern bloc countries and to Europe—they will move out of this country. Will that affect the number of people who smoke cigarettes? Not one jot. The same number of people will continue to smoke cigarettes, but they will be manufactured elsewhere. We will be the biggest losers, because we will have lost the jobs, the tax and the pay-as-you-earn tax.

Amendment of the Law

Stephen Williams Excerpts

Wednesday 21st March 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

All Budgets are packages, and all of them are balancing acts, and that is particularly true of a Budget presented by a Chancellor in a coalition Government. It is fairly clear for all to see, in bold primary colours, which are the yellow and which are the blue packages in this particular Budget. What is also clear is the string that binds together this Budget and this coalition Government: reducing our deficit from the position that we inherited, where £1 in every four was being borrowed; restoring our economy to balanced and sustainable growth; restoring and maintaining confidence in the international markets; and bringing about a fair tax system that rewards work and enterprise, and taxes wealth. Labour borrowed us all into the mess that we inherited in 2010, but under the coalition Government, Britain will earn its way back to prosperity.

As Liberal Democrats in the coalition, we wanted three tax changes in this Budget. First, we wanted a fair income tax system that would lift the low-paid out of tax and bring about a tax break for middle earners. Secondly, we wanted a system that would tax accumulated and unearned wealth fairly and effectively. Thirdly, we wanted action to tackle the abuse of the tax system that was taking place through aggressive tax avoidance schemes. All three of those objectives have been met by the Chancellor’s Budget.

Two years ago, we were all about to go out on to the streets to start the general election campaign. The Liberal Democrats’ No. 1 priority at the time was to achieve in this Parliament tax-free pay for all our fellow citizens earning less than £10,000. That objective is in the coalition agreement, and significant progress has already been made towards achieving it.

[Dame Joan Ruddock]

The hon. Gentleman is part of a Government who have voted to reduce the income of the average family with children by £530 from the beginning of next month. There is no measure in the Budget that will make up for that, and frankly, people in my constituency will see it as an insult to their intelligence.

[Stephen Williams]

The right hon. Lady will hear as I make progress through my speech that working families up and down the country, with or without children, will benefit significantly from the tax changes that the Government are making.

In the current tax year, we have raised the allowance from £6,475 to £7,475, lifting 800,000 people out of the income tax net altogether and providing a £200 tax cut for every basic rate taxpayer.

[Stewart Hosie (Dundee East) (SNP)]

Before the hon. Gentleman continues with his party political broadcast, may I ask him to look at his own Government’s Budget? Every single quintile will still be worse off after the Budget. It is in the Red Book. He is wrong.

[Stephen Williams]

These are extraordinarily difficult times, and none of us has ever shied away from the fact that we are in a tight fiscal squeeze or that there is a tight squeeze on family budgets. That is why it is important that we put more of people’s own money back into their pockets through the tax changes that we are introducing.

When the next tax year starts in two weeks’ time, the personal allowance will rise again, to £8,105, lifting 1.1 million people out of taxation altogether and providing a tax cut of £330. Also in two weeks’ time, as well as those tax changes, the largest pension increase for a century will have been delivered by this coalition Government.

[Teresa Pearce (Erith and Thamesmead) (Lab)]

Will the hon. Gentleman give way?

[Stephen Williams]

I cannot give way any more.

In this Budget, our Liberal Democrat priority was to move further and faster towards our goal of £10,000 tax-free pay. Liberal Democrats in the coalition Government are therefore delighted by the confirmation that the rise in the personal allowance of £1,100 will proceed in April 2013. It is the largest rise in the personal allowance for 30 years—that is, in all our working lifetimes. In April 2013, people will be able to earn £9,205 without paying tax, which will lift a further 840,000 people out of tax. Over three years, 2 million British people will have been raised out of income tax. That will help everyone who works part time, the majority of whom are women. The measures will lift young people on the minimum wage out of income tax altogether, and 24 million basic rate taxpayers will be better off to the tune of £546. These changes will allow people to keep more of their own money. They will inject spending power into local economies and they will make work pay.

As the front page of the Liberal Democrat manifesto promised, we have delivered more than £500 into the pockets and purses of Britain as a result of this Budget. It will have been obvious from the fact that my colleagues were waving their Order Papers earlier that we are extremely pleased to have achieved that. Let us contrast it with the last Budget under the leadership of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when Labour MPs waved their Order Papers following the abolition of the 10p tax rate. There could not be a greater contrast between the priorities of this coalition Government and those of the last Labour Government.

[Charlie Elphicke]

Does my hon. Friend agree that this Budget shows how effective partnership working can be in the coalition? Has he seen chart B.1 in the Red Book, which shows that those in the top decile—that is, the most well off—will experience the greatest reduction in income? They are being made to pay, despite Labour’s 1970s class war rhetoric.

[Stephen Williams]

I shall come to how the Budget will affect the most well off in society shortly.

Our second objective in the Budget was to rebalance the tax system, so that taxes would fall lightly on work and enterprise and more heavily and effectively on wealth. Already, this coalition Government have raised capital gains tax from the historically low rates that we inherited from the last Labour Government, and there have been no changes to inheritance tax. Some people might have wanted to drop the 50p tax rate altogether. However, we all know that 2012 is going be a difficult year for families up and down the country, and Liberal Democrats have been clear that now would not have been the right time to reduce the top rate of tax. I am pleased that the Chancellor has agreed with our position.

By April 2013, our top rate of tax will be in line with that of our competitor states in the European Union and the United States of America, but we will also have effective taxes on wealth in place by then. Stamp duty will be 7% on house sales of more than £2 million. We might not have got a mansion tax in this Budget, but we have certainly got a mansion duty. That mansion duty alone—just that one measure—will raise three times the amount lost through the lowering of the 50p tax rate by 5p.

The third objective that we set in this Budget was to take action on tax avoidance, and I am therefore pleased by the introduction of a 15% charge on personal property that is under corporate ownership. I am pleased that tycoons will have the reliefs that they claim restricted to 25% of their income, and I am particularly pleased that the general anti-avoidance rule for which I have argued for so long is to be introduced by this Government. I see that rule as a kind of electric fence across the tax system: a clear warning to every taxpayer that this is a line that they must not cross.

The Budget makes further changes to rebalance the economy, to restore green growth to the economy and to build on Britain’s strengths in engineering and the creative industries. In 2012, we shall see the launch of the green deal, which was spearheaded by my right hon. Friend the Member for Eastleigh (Chris Huhne), when he was Secretary of State, and which is now being taken forward by the Secretary of State for Energy and Climate Change, my right hon. Friend the Member for Kingston and Surbiton (Mr Davey). Last weekend, I witnessed the demonstration projects that are already taking place in my constituency under the Bristol Green Doors initiative, which are showing what every householder can do to take advantage of the green deal. Also in 2012, the green investment bank will be making its first investments.

The creative industries are incredibly important to our national economy, and I was pleased that video games were given recognition in the Budget. As a Bristol and west country MP, I was particularly pleased to see the extension of film tax credits to the television industry. The Chancellor mentioned Wallace and Gromit. Despite Wallace’s Lancashire accent, their home is of course Bristol. The films are made in my constituency by Aardman Animations, Europe’s largest animation company. It is incredibly important to the economy of Bristol and is a great British brand that sells millions of pounds of exports all over the world.

[Mr John Denham (Southampton, Itchen) (Lab)]

Will the hon. Gentleman tell me what the difference is between the tax breaks introduced by the Chancellor in today’s Budget and the tax breaks introduced by Labour that the same Chancellor scrapped in 2010?

[Stephen Williams]

The difference, as I understand it, is that these tax breaks are going to be focused on high-end television production, so that we no longer find ourselves in a situation in which “Coronation Street” can claim tax credits, as it did under the last Government. I do not think that there will ever be a risk of “Coronation Street” moving to China, but there was a serious risk that Britain would lose its animation industry to the rest of the world. These measures are right if we are to maintain British talent and innovation in this country, but it is also culturally right that children should watch programmes that have been made with the right regional accents and made around Great Britain.

For Liberal Democrats in this coalition, the headline of this Budget is that we have delivered a tax cut for millions of Britons and effective taxes on the wealth of millionaires. It is a Budget that maintains the confidence that Britain is back on track. It is a Budget that delivers the biggest tax break in a generation for millions of hard-working families. As a Liberal Democrat in this coalition, I am proud of the role my party has played in making Britain a fairer country.

Oral Answers to Questions

Stephen Williams Excerpts

Tuesday 6th March 2012 Commons Chamber

[Danny Alexander]

As the hon. Gentleman knows, we have had to make some very difficult decisions in order to deal with the enormous Budget deficit left to this country by Labour. If his party had not left a mess, we would not have to clean it up.

[Stephen Williams (Bristol West) (LD)]

One direct economic stimulus would be to allow people to keep more of their own money from the proceeds of work. The Government have already taken a great step forward in implementing the Liberal Democrat policy of raising the income tax threshold to £10,000. Will the Chief Secretary and the Chancellor seriously consider going further and faster in the Budget and achieving in this Parliament the goal of all our constituents having £10,000-worth of tax-free pay?

[Danny Alexander]

Such decisions are, of course, for the Chancellor to announce on Budget day, but, as my hon. Friend will know, the coalition agreement commits this Government to real-terms increases in the personal allowance every year in order to reach the goal of a £10,000 tax allowance, which the Liberal Democrats set out in our election manifesto. As a result of the substantial steps we have already taken, there will be a further tax reduction of £126 for all basic rate taxpayers in this country from April this year.

Living Standards

Stephen Williams Excerpts

Monday 5th March 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

We have debated many Opposition motions on the economy and public finances in the past 20 months, and this one is little different from the many others that I have discussed—I have spoken in all these debates. We are asked to focus on the needs of hard-pressed families—we are hardly likely to disagree with that—and on pensioners, but the whole tenor of this motion, like all the others that have gone before it, is that the coalition Government should do more for some people and should reverse the planned changes that they have set in train. So despite the U-turns that the shadow Chancellor and the Leader of the Opposition have made in recent weeks on the need to cut the deficit, we are exactly where we have been before on all other Opposition days. We are back with uncosted proposals somehow to make us all believe that tackling the deficit can be a painless and, indeed, invisible process of fiscal rebalancing. It is as if public finances can be restored to health by magic, with no tax rises and no expenditure cuts—it simply is not credible.

[Toby Perkins]

The hon. Gentleman mentions the importance of tackling the deficit, but he will recognise that by 2013 this policy will be out of date because of the incoming universal credit. What is the point of putting 200,000 people through tremendous pain for the sake of 18 months? When the Government review their books in 2015 that figure will have entirely disappeared, so why not wait until the universal credit has come in and sort the system out at that point?

[Stephen Williams]

I thank the hon. Gentleman for his intervention and I think he made the same point to the Minister. The coalition Government have a five-year programme of reform, which includes cutting the deficit as well as long-lasting reform of our entire welfare state, which has evolved over a long period of time. Many of the reforms, whether they are on the universal credit, pensions or other parts of the welfare state, are designed to last for a generation whereas the deficit reduction measures are, of course, short-term measures, painful as they might sometimes be. I acknowledge that for many households and some families what this Government are having to do—not because we choose to do it, but because we have to do it—causes discomfort.

What matters most to all households is putting our public finances and our economy back on track. That gives our country fiscal credibility and allows our Government, businesses and households to borrow and invest at affordable rates.

[Helen Goodman]

The hon. Gentleman clearly has not read the motion, which makes it absolutely clear that our proposals on working tax credits will be matched by an increase in tax take on stamp duty from those people who have houses worth more than £1 million and who are offshoring. That would match the revenue needed for the working tax credit.

--- Later in debate ---

[Stephen Williams]

All I can say is that the hon. Lady must have been reading an earlier draft, because that is not what the motion says. I shall discuss tax avoidance later in my speech, as I am sure she will be pleased to hear.

Even in the tough fiscal environment that the Government face, it is right that we should do what we can to help low-income households. That is why the Government are absolutely determined that the budget will not be balanced on the backs of the poorest and those in work who have low earnings. The Government will not repeat the fiasco that happened in good times under the previous Government. The Chancellor who became Prime Minister, in his last Budget as Chancellor, abolished the 10p rate of income tax, raising income tax for the lowest paid in society and all his hon. Friends, who, at the time, sat on the Government Benches and waved their Order Papers with glee that a tax on the poorest in society was funding a tax cut for the rich.

[Meg Hillier]

rose—

[Stephen Williams]

I have given way twice and I am on a time limit, unlike some previous speakers. The hon. Lady will have her turn later.

That is why reducing the tax burden for the lowest paid is the No. 1 priority, as far as the Liberal Democrats are concerned, of this coalition Government. I and all my colleagues stood at the last election on a promise that the income tax threshold would be raised to £10,000 and the coalition Government’s first budget raised the threshold by £1,000 to £7,475 a year, taking 800,000 people out of income tax altogether and giving a £200 tax cut to every basic rate taxpayer. From next month, the threshold will be raised again to £8,105, cumulatively taking 1.1 million low-paid people out of income tax altogether with a cumulative income tax cut for every basic rate taxpayer of £330. That is £330 extra take-home pay, particularly for part-time workers, who are disproportionately women and young people, that they can spend immediately in their communities.

Two weeks ahead of the Budget—16 days, as the shadow Chief Secretary kept saying—the Liberal Democrats want the Chancellor to go further and faster in announcing a timetable to reach that £10,000 threshold in this Parliament. We want to know that when all our constituents go out to work, they will be able to take home £10,000 a year and not face the burden of income tax. That will send out a message that we are determined to make work pay and to reduce the tax burden for everyone on the basic rate of tax.

[Sheila Gilmore]

rose—

[Helen Jones]

rose—

[Stephen Williams]

I have already given way twice and I am on a time limit.

The same arguments apply as when the Government had to take tough decisions on whether to raise out-of-work benefits in the comprehensive spending review and the last autumn statement, and those benefits were raised by the high consumer prices index of 5.2%. Child tax credits have also been raised by 5.2%; that is £135 extra this year. As the Minister said earlier, there has been £390 extra cumulatively so far since the general election. Difficult decisions are being taken on the reform of tax credits. The Liberal Democrat manifesto explicitly said that we thought there was scope for the reform of poorly focused tax credits. In 2010, nine out of 10 families with children received tax credits and, even after the difficult reforms we are introducing in these tough fiscal times, six out of 10 families will still receive tax credits.

Child benefit is another area in which the Government have to make a tough choice. If the Labour party’s message is that it opposes even that tough choice of withdrawing child benefit from the richest families in the country, where on earth is it going to find the cuts? I look forward to hearing, in all the Labour speeches between now and 10 o’clock, what alternative cuts would be made to replace that cut in child benefit. The cliff edge of the higher rate tax threshold is difficult. We all acknowledge the anomaly that was expressed in the extreme by the hon. Member for Wansbeck (Ian Lavery) regarding the earnings of two people in a household. The Deputy Prime Minister confirmed this morning that we are looking for ways to smooth that withdrawal of benefit from those who are marginally over the threshold; we will have to wait until the Budget to see the outcome of those discussions.

The Government are introducing other measures to support families with children. This morning, I visited a secondary school in my constituency, St Mary Redcliffe, and on Friday I visited the City academy in my constituency as well. Both those schools and all the other schools in all our constituencies are benefiting from the introduction of the pupil premium. Parents who are working need support with child care, and the Government are introducing 130,000 extra places for two-year-olds.

At least this motion mentions pensioners. The last time we had an Opposition motion on living standards, it neglected to mention pensioners at all. That was hardly surprising because the Government had just announced the largest cash increase in the state pension since it was introduced by Lloyd George and Asquith in 1908. The Government have a triple lock in place to ensure that pensioners always receive an increase. We will not have the embarrassment of 75p pension rises in future.

The Government are taking action on tax avoidance. I note that the motion says that everything Labour wishes for, whether on child benefit, child tax credit or working tax credits, is somehow going to be paid for through tax avoidance measures that are unspecified in the motion. That would have more credibility if Labour had voted in favour of the tax avoidance measures introduced by the Government in the last Finance Act, rather than voting against them. I want to see more action on tax avoidance in the Budget, such as a general anti-avoidance rule, and I look forward to hearing what the Chancellor has to say—

[Madam Deputy Speaker (Dawn Primarolo)]

Order.

--- Later in debate ---

[Sheila Gilmore]

There is a long-term benefit in people learning from their parents what it is to work.

We used to hear so much about the couples penalty from the Conservative party. It used to say that there should no longer be a couples penalty and to talk about how unfair it was. However, this provision creates just such a couples penalty. A couple who lose their working tax credit might look at their neighbour, who is a single parent, and think, “She’s not losing her working tax credit. That doesn’t seem fair.” Why, when we have heard so much about that, are the Government creating a new penalty for the sake of just 18 months or two years?

That all comes on top of the decision not to increase working tax credit in line with inflation. We have heard a lot, particularly from the hon. Member for Bristol West (Stephen Williams), about how wonderful it is that benefits will rise by 5.2% in the coming year, as if it is some unique act of generosity. In fact, people are simply being given the rate of inflation.

[Stephen Williams]

There were, of course, other choices that the Government could have made. There were voices —I will not say who they were—telling the Government not to raise benefits by that historically high rate of inflation. The previous Government used the lowest possible rate when they raised pensions by 75p. This Government took a different view.

[Sheila Gilmore]

I think that the hon. Gentleman would accept that the 75p increase followed the rate of inflation. I might not have made that decision if I had been the Chancellor of the Exchequer, but that is the decision that was made.

I am pleased that the hon. Member for Bristol West and his colleagues, who are remarkably absent from this debate, managed to persuade the Government that out-of-work benefits should increase by the full amount. I support that. What I find strange is that a Government who wish to support work did not take the same view about working tax credit. I am not talking about levelling down the increase for out-of-work benefits. I am talking about a decision that increases the degree to which work does not pay, when the Conservative party says that it wants work to pay. If all these things are taken together, one begins to wonder where the Government are going.

People are sceptical about universal credit and anxious about what will happen. Let us consider something else that will happen under universal credit. Somebody who is working and who qualifies for universal credit will have their universal credit reduced if they have savings of more than £6,000 and eliminated if they have savings of more than £16,000. People who have managed to save, perhaps towards buying a house or towards their retirement, will be told, “You don’t need support, so we’re going to take it away from you.” Despite all the Government’s warm words about how much they want to support hard-working people and people who save, this is another example of how their policies will not do that in practice.

I say one last time to the Minister: change now. You —the Government, not you, Madam Deputy Speaker—know it makes sense.

Banking (Responsibility and Reform)

Stephen Williams Excerpts

Tuesday 7th February 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I thank the hon. Gentleman for giving way and for remembering accurately that my right hon. Friend the Member for Twickenham (Vince Cable) warned repeatedly, in the run-up to the crash, that we were heading for a crash. Does the hon. Gentleman recall—I am sure that he did not do this—that many Labour Members used to jeer my right hon. Friend, saying that he was indeed a doom-monger and that he was wrong?

[Mr Bailey]

I acknowledge that, shall we say, continued repetition on that theme earned the right hon. Gentleman a certain notoriety among Government Back Benchers of the time. Most people would look back and say, “Yes, there was some truth in what he said,” but they would also say, “Let’s see if he lives up to what he said.” That is what my Committee and I will seek to find out.

The situation is profoundly worrying and contravenes the sense of fairness in this country. To most people in the street, there is something perverse about a system that punishes people on low and medium incomes for something for which they were not responsible, yet those who were responsible are rewarded. Even worse, that sense of injustice is compounded when the taxes of people on low and medium incomes finance that reward. It not only offends a deep sense of fairness but, it could be argued, it is socially and economically dysfunctional. That is the context of the debate.

--- Later in debate ---

[Stephen Williams (Bristol West) (LD)]

Here we are again in another Opposition-day debate centred on the economy, banks and bonuses. The handwritten notes I prepared earlier this afternoon read, “And yet again we hear no contrition from the Labour Front Bench.” However, as this is a debate and we have to respond to it, I will at least acknowledge that there was some contrition from the hon. Member for Streatham (Mr Umunna). I guess it must be easier for him, and indeed for his Front-Bench colleagues, who were all elected in 2010, to wash their hands of the last Labour Government’s decisions and offer at least some apology for what their predecessors did in office. However, it would be good to hear a collective apology from the Opposition, including those Members who were here in the previous Parliament, for the ineffective regulation and supervision of the banking industry, which was a major factor in the collapse of the banks and the economic failure and contraction that happened four years ago.

[Chris Williamson]

On the point about contrition, will the hon. Gentleman not also call on Government Front Benchers to apologise for calling for less regulation prior to the banking crash in 2008? While on the subject, what about having some contrition from him about tuition fees?

[Stephen Williams]

I am responsible for my party’s statements and, indeed, my party’s mistakes in certain instances but, as I said in my intervention on the hon. Member for West Bromwich West (Mr Bailey), in the previous Parliament, my right hon. Friend the Member for Twickenham (Vince Cable) warned consistently about the coming economic catastrophe. The hon. Gentleman was not here at the time, but I think that he would have been ashamed to hear the jeering and cat-calling that my right hon. Friend had to put up with at the time.

It was the culture, not just the lax regulation, that led to some of the problems we have experienced in recent years. During the last decade of the Labour Government, executive pay rose on average by 13.6% per annum, while the FTSE share index rose by just 1.7% a year. In 2002-03, the bankers bonus pool, which is at the centre of the motion, totalled £3.3 billion. In 2006-07, the year before the crash and everything starting to go wrong, the pool was £11.4 billion. In the year of the crash itself, when all the bankers were staring into the abyss, the pool was £11.5 billion. I do not recall any Minister at the time being worried about the size of the bonus pool or the distorting effect it must have had on executive behaviour.

[Mr Holloway]

I do not know whether the hon. Gentleman finds this attitude terrifying, but I do, and it is on both sides of the House. We can blame the bankers all we like, but the truth about the problems across the developed world and the reason we are in schtuck is that successive Governments have not been able not to give in to demands to spend more money. In a global economy savvy investors and taxpayers—the best people—run off when they see a lynch mob. This is crazy.

[Stephen Williams]

My hon. Friend makes an interesting philosophical point about the whole culture that we have perhaps all grown up in over the past 30 years. It would require more than an eight-minute speech in a three-hour debate to deal seriously with those issues, but I am trying to raise some of them. For instance, when considering how to respond to the outbreak of collective madness on the streets of some of our cities last summer, we should recognise that some of what he says is relevant to the feelings of dislocation and despair that some people felt, but it was also about out-of-control remuneration, lax regulation and complacent political oversight. Opposition Members do not like me saying this, but I say it every time and will say it again: a previous Labour Business Secretary, Peter Mandelson, said that new Labour was intensely relaxed about people getting filthy rich. Because of that, we saw the dislocation of director and shareholder interest.

[Mr Umunna]

Will the hon. Gentleman give way?

[Stephen Williams]

No, because I have given way twice and I have a time limit, and the hon. Gentleman took rather a long time making his opening speech.

All of this happened under the previous Government, and the coalition Government are now having to clear up the mess. We have heard once again that all that is needed is the magic wand of the bankers bonus tax but, as my hon. Friend the Minister has pointed out, in every year of this Parliament, under the coalition Government, more money will be raised—£2.6 billion—from the permanent levy on the banks’ balance sheets. It is the behaviour of the banks, and their boards in particular, that needs to change, rather than necessarily the pay and remuneration of their employees, which I remind the House is now taxed at a higher rate than it was when Labour was in government.

The behaviour in the boardroom needs to change, especially in the remuneration committees. As I understand it, the Walker report, which is mentioned in the Opposition’s motion, simply recommended that remuneration of bank employees over £1 million should be disclosed in broad pay bands, which is hardly revolutionary.

The Merlin agreement, an interim measure while we await the implementation of more wide-ranging banking reforms, now states that a bank’s five highest-paid executives, as well as its chief executive and chairman, have to disclose their remuneration, so at least seven people each year now have to do so. That is the highest number in any global financial centre and more than in the United States, and, as the Minister pointed out, bonuses at the banks that are under effective state control, such as Lloyd’s Banking Group and the Royal Bank of Scotland, are limited to £2,000 in cash, with anything beyond that having to be offered on a deferred basis in shares.

My right hon. Friend the Business Secretary has responded to the High Pay Commission with a series of measures that were announced a couple of weeks ago, and central to those is changing the behaviour and composition of the remuneration committees, so that on the forward pay agreements that they recommend for approval they have binding votes: not the advisory votes that were in place under the Labour Government, but binding votes, so that shareholders really are empowered to make a difference and to instruct directors, who are supposed to have stewardship of their investments in those companies.

That will end the revolving door, whereby executives of one company become non-executives and sit on the remuneration committees of another, and whereby inevitably it is in everybody’s interests constantly to bid up pay in each quoted company. Indeed, they will also have to state how they have involved and consulted employees of what, in many cases, are global companies.

Labour, in its manifesto at the most recent general election, said—I had someone check this for me before the debate—that it would

“strengthen the 2006 Companies Act where necessary”.

I remember that legislation, which, along with the Crossrail Bill, was probably the least popular Standing Committee on which a Member could sit, because it was such a fat Bill and its proceedings went on for so long, but there was nothing in it proposing the regulation of corporate pay. Throughout the previous Government’s 13 years in office, they did little to act on that issue, and despite the huge legislative opportunity that they had in 2006 they did not seek to strengthen shareholder power.

The manifesto went on to state that Labour would strengthen the UK stewardship code for institutional investors so that they would have to declare how they vote on remuneration policies, which in turn should be approved by directors. It was silent on the interests of employees, and the shadow Business Secretary did not say much about that this afternoon, either. He certainly did not commit to having an employee on the board of every company.

It is the behaviour of the banks, not just their remuneration policy, that needs to change. One of the first acts of the coalition Government was to set up the Independent Commission on Banking. We have now had the Vickers report, but in our proceedings on the Financial Services Bill, which received its Second Reading last night, we went through all those issues, so I shall not go through them again today.

We also need a change of behaviour at company annual general meetings, whereby shareholders really engage with the power that they have over their companies. Recently I met the charitable group FairPensions, which is urging institutional investors, the pension fund managers who act on behalf of many of us, our constituents and local authorities, to use their power at company meetings in order to control executive pay and to act as responsible investors.

Some hon. Members may have noticed that I tabled early-day motion 2678 last week, supporting the Move Your Money UK campaign. Mr Speaker, you and I are of roughly the same political generation—although from different points on the spectrum. We would first have become involved in politics during the 1980s. So we would have been students at the time of the Boycott Barclays campaign, and indeed I had a Boycott Barclays poster up on my bedroom wall as a student. I suspect that you did not, Mr Speaker, but people of my generation will remember that the behaviour of consumers can make a real difference to the behaviour of companies, so I urge all hon. Members—I hope this is a cross-party issue—to support my early-day motion and to urge all our constituents as consumers to consider the behaviour of companies when they use their purchasing power as well as when they exercise their power as shareholders.

There has been systemic failure for quite some time, as the Opposition Front Bencher at least acknowledged. There was reckless behaviour by Mr Goodwin, but there was reckless behaviour also in the Cabinet room by the last Labour Government. The coalition Government are clearing up the mess. We are putting in place regulations and legislation to control pay policy, to introduce transparency into the implementation of that policy and to regulate the banks so that we have a sustainable financial services sector and sustainable banks, which are so essential to supporting the businesses that are required to grow our economy.

Oral Answers to Questions

Stephen Williams Excerpts

Tuesday 24th January 2012 Commons Chamber

[Danny Alexander]

One of the striking things about how the climate of opinion on this subject is changing in recent times has been the change in attitude of institutional investors. The comments of Otto Thoresen, the head of the Association of British Insurers, for example, to the banks in this remuneration round suggests that such investors are interested in and seized of the importance of ensuring that proper levels of remuneration are paid, not unfair rewards for failure.

[Stephen Williams (Bristol West) (LD)]

The Business Secretary’s announcements will give more power to non-exec directors and shareholders to control pay in the private sector. The Government effectively discharge those roles in the public sector, so what measures is my right hon. Friend undertaking to control high pay in the public sector?

[Danny Alexander]

Ministerial salaries were cut by 5% and then frozen for the whole of this Parliament. As Chief Secretary, I now personally sign off any new pay above £142,000, the equivalent of the Prime Minister’s pay. That is a vital deterrent to the cycle of ever higher pay at the top of the public sector—so much so that in central Government alone the number of people paid more than £150,000 has dropped by 55 since May last year. When applications come in, I can and do reject them if I think they are too high. In fact, since May 2010 83 like-for-like cases have sought my approval. Pay was lowered in 45 of those cases and frozen in a further 23, saving more than £1 million a year for the taxpayer, including a £100,000 cut in the pay for the new chief executive of Royal Mail.

Youth Unemployment and Bank Bonuses

Stephen Williams Excerpts

Monday 23rd January 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

The motion links the issue of bankers’ bonuses and youth unemployment. With my constituents in Bristol West, I agree that the levels of both are currently excessive.

I shall deal with bonuses first. Executive pay is meant to be the reward for company growth and shareholder return. Over the past decade, executive pay has gone up by an average of 13.6% each year, but the growth in the index of the top 100 companies on the London stock exchange has gone up by only 1.7% each year. Executive pay has vastly outstripped the underlying growth in the companies over which the directors have presided.

Bonuses, of course, are usually the worst manifestation of spectacular reward—sometimes for just modest return for the company’s shareholders, or even a paltry return. Even worse, they can be a pay-off for corporate failure. Today my right hon. Friend the Secretary of State for Business, Innovation and Skills announced the Government’s action to deal with that excess in the boardroom. The boardroom is the place where that excessive behaviour should be tackled and reined in, and shareholders need to take action in shareholder meetings.

The coalition Government will implement or consult on 10 of the recommendations of the High Pay Commission. Taxes, of course, have a role to play, but it is a subsidiary one. The behaviour itself needs to change. Under the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), the bonus tax was a failure according to the terms that he used to describe it when he announced it in the Budget. It was meant to curtail behaviour in the boardrooms of banks, but it failed completely.

At that time, the underlying rate of income tax and national insurance on the recipients of bonuses was 41%; under the coalition Government, the figure is 52%. When we factor in employers’ national insurance, we see that roughly two thirds of the value of a bonus comes back to the Treasury. In addition, the permanent bank levy will raise £2.6 billion for each subsequent year of this Parliament, which is more in net terms than the bonus tax raised under the Labour Government.

The previous Government were, of course, in office for 13 years. They had ample opportunity to do something. I sat through five Queen’s Speeches, in each of which a raft of legislation was announced by Her Majesty, but not once did I hear of an attempt to tackle corporate greed. Indeed, I would say that the Labour Government, certainly for their first eight years, positively encouraged corporate greed. We just heard from the right hon. Member for Wolverhampton South East (Mr McFadden). The Cabinet Minister to whom he reported in the latter years of the Labour Government, Lord Mandelson, said famously that he and new Labour were

“intensely relaxed about people getting filthy rich”.

It was the Labour Government who gave a knighthood to Mr Goodwin.

[Mr McFadden]

I have heard that quotation twice today and I think that it is time to complete it. Lord Mandelson went on to say,

“as long as people pay their taxes”.

--- Later in debate ---

[Stephen Williams]

That makes it all right, does it? Is it okay to encourage the culture of corporate greed and excessive behaviour as long as people pay their taxes? Of course, the former Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), reduced the rate of income tax that those people were paying. All that Labour promised for shareholders was an advisory role to rein in such behaviour, whereas the Government have today announced binding votes for shareholders so that they have some control over the executives who are supposed to report to them for the value of their companies.

Youth unemployment needs to be set in the overall context of unemployment in the United Kingdom and in other developed economies. The overall unemployment rate in the United Kingdom is 8.2% of the work force. In the United States it is 9.1% and in the eurozone it is 10.1%. In many eurozone states, the rate is much higher than the average. Youth unemployment tends to follow the same trend. It tends to be roughly double the rate in each country. What is happening in this country is not unique among our main competitors.

Youth unemployment is also not a new problem. At least the right hon. Member for South Shields (David Miliband), who was with us earlier, has had the grace to acknowledge that under the Labour Government youth unemployment rose, even during times of strong economic growth and the longest sustained boom since the second world war. In the more than 20 years since 1992, the rate of youth unemployment among 16 and 17-year-olds has remained stubbornly flat and has barely changed, whatever the underlying economic conditions. [Interruption.] The hon. Member for Edinburgh East (Sheila Gilmore) is shaking her head. I suggest that she looks at the Library’s statistics on this matter, specifically for 16 and 17-year-olds.

[Sheila Gilmore]

In the early years of the Labour Government, did not youth unemployment fall far below the level inherited from the previous Conservative Government because measures were taken?

[Stephen Williams]

Before the hon. Lady intervened, I repeated that I was talking specifically about 16 and 17-year-olds. The Library’s youth unemployment statistics show that from 1992 to the current year the rate of youth unemployment has remained stubbornly at about 200,000, whatever the underlying economic conditions. For 16 to 24-year-olds, the broader group, the unemployment figure did not fall below 600,000, even at the height of the boom.

[Sheila Gilmore]

rose—

[Stephen Williams]

I will not give way again because the time would count against me.

Youth unemployment is a long-term problem and we need long-term reform to tackle it. That is why the coalition Government are right to introduce the pupil premium, which will enable young people from disadvantaged backgrounds who are on free school meals, as I was, to get a leg-up in life. It is right that the coalition Government are embarked on a programme of welfare reform. We already have in place the Work programme, which offers assistance to people who are unemployed after nine months or, for 18-year-olds, after six months. It is right that we are raising the threshold at which people start to pay income tax. It is when people enter the jobs market for the first time that they are likely to be on the minimum wage or on low average earnings if they are working part time. The rise in the income tax threshold will disproportionately affect young people who are entering the labour market. It is also right that the coalition Government are massively expanding the number of apprenticeships. However, we also need short-term help for people who, through no fault of their own, find themselves unemployed because of the economic circumstances. I am therefore pleased that my right hon. Friend the Deputy Prime Minister has announced the youth contract, which will start in April, with 410,000 places over the rest of this Parliament, 160,000 of which will be wage subsidies of £275 per new job created.

What will help the young unemployed most is economic stability and recovery, together with the confidence that this coalition Government are putting in place the policies to deliver those two things. The low rate of interest that we currently have helps not only households but businesses that are seeking to expand. The Government have a clear focus on stable finances and growth. We should contrast that with Labour’s somersaults, U-turns and ever-elastic bonus tax, which has no credibility as it seems to have funded every single promise that the party has made since the general election.

As the hon. Member for Wigan (Lisa Nandy) said, unemployment is a tragedy for every young person who has experienced it. I grew up in a community scarred by youth unemployment. I witnessed it among my friends—I even experienced it myself at one point in my career—and I do not want another generation to be blighted by it. The Government are taking action, and credibility is a key part of that.

Banking Commission Report

Stephen Williams Excerpts

Monday 19th December 2011 Commons Chamber

[Mr Osborne]

I would not say that what we are undertaking is of biblical proportions, but we are acting now to deal with those problems. We are changing the system of regulation, which will be in place once the draft financial services Bill is passed next year; we are changing the competition remit, which will be in place by 2013; and we are committed to introducing all that legislation, including the secondary legislation, in this Parliament. We are undertaking those reforms, but in the years in the desert, which were the years under the Labour Government, none of those things was proposed at all.

[Stephen Williams (Bristol West) (LD)]

I congratulate my right hon. Friends the Chancellor and the Business Secretary on working together to provide a secure future for our banking sector and to put behind us the failures of the past. Uppermost in the public’s mind from the past will have been the £45 billion bail-out of the Royal Bank of Scotland, and, given that it is now under state ownership, could not the Chancellor consider its break-up to establish a challenger bank on the high street for lending specifically to small and medium-sized businesses in order to provide the finance for future growth and economic recovery?

[Mr Osborne]

I have already set out the Government’s view on the Royal Bank of Scotland, and the issue of what to do when we come to dispose of the shares will be one that we can all address at the time.

The document and the process have been a very good advertisement for the coalition Government. The Business Secretary and I have worked incredibly closely on the document, which is a joint one from us both, and people will not have read in the newspapers lots of stories about the “splits between us on the issue”—

The Economy

Stephen Williams Excerpts

Tuesday 6th December 2011 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

It is a great pleasure to follow the former Chancellor. We can contrast his thoughtful and authoritative approach with what we heard earlier from the shadow Chancellor, who has just left the Chamber. We are asked to believe that he cries during the “Antiques Roadshow”, but anyone watching our debate would have cried with despair at the pantomime act we were treated to earlier. Before one of the shadow Chancellor’s assistants gets up to tell me how many people in Bristol West receive child tax credits, let me tell the Labour Front-Bench team that people in Bristol West are far too smart to fall for the illusion that an increase of 5.2% in tax credits somehow amounts to a cut.

The state of the public finances has been mentioned several times. Before the coalition Government came to office, the deficit as a proportion of gross domestic product was 11.2%. In our first year of government, it was cut to 9.3%. According to the independent forecast from the Office for Budget Responsibility, the deficit will be 4.5% at the end of this Parliament. We will have effectively halved it over the lifetime of the present Government. The Darling plan, if I may refer to it thus, has been mentioned several times during the debate. I seem to recall that its aim was to do just that—to halve the deficit over the lifetime of this Parliament—so let us not hear too much for the foreseeable future from Opposition Members about cutting too fast and too deep.

The coalition is bringing the deficit under control, which enables us to benefit from international confidence that we can borrow cheaply and service the accumulated debt that already exists in an affordable way. In 2010 our credit rating was similar to those of Italy and Spain, and the fact that it is now so much stronger is due to the decisive action taken by the coalition Government. That improved rating is important not just to the Government’s Debt Management Office—although the billions of pounds that no longer need to be spent on servicing debt interest are now available to fund our priorities, whether they be pensions, education or the health service—but to all our constituents and the businesses that employ them. Historic low interest rates are a monetary stimulus, underpinning domestic confidence and increasing spending and investment.

One of the coalition Government’s key objectives is to make work pay in order to expand employment, and one of the key objectives that the Liberal Democrats have brought to the coalition Government is a progressive increase in the income tax threshold to £10,000 by the end of the current Parliament. That will make work pay for the low-paid in particular, and especially for women with part-time jobs, and it is fundamental to our commitment to fairness during the lifetime of this Government.

Last week, during a debate similar to this, I referred to the recommendations of the High Pay Commission. I was pleased when the Deputy Prime Minister said at the weekend that he hoped that the coalition Government would be able to implement many of those recommendations. We should also tackle tax avoidance in order to make it clear that, as well as rewarding the work done by those with low incomes, the Government are tackling high pay at the top of the income streams in the companies for which they may work.

Economic growth needs to be stimulated. I note that several Members with constituencies in the south-west are present. I am sure that none of us misses the South West regional development agency, but I have no doubt that all of us, especially those representing constituencies in greater Bristol—including the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), who is in the Chamber—will welcome the establishment of a local enterprise partnership covering the greater Bristol area, as well as an enterprise zone in my constituency to create new jobs in new media businesses.

Bristol will benefit from the regional growth fund, from Going Places funds, from the housing market stimulus, and from a new technology innovation centre. A couple of weeks ago, my right hon. Friend the Secretary of State for Business, Innovation and Skills opened the National Composites Centre, near the constituency of my hon. Friend the Minister of State, and we are also to have a university technology college. Those are examples of real actions being taken by the coalition Government to stimulate growth, particularly in new areas of the economy.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

How will regional pay in the public sector help areas of Britain that are lagging behind, such as the south-west and Wales? Surely it will only entrench regional wealth inequalities.

[Stephen Williams]

That is an interesting point. The Chancellor said in the autumn statement that a study would be carried out so that we could assess the evidence and decide what to do in the future. I do not think that we should form any firm conclusions at this point, but I would point out that regional pay differentials are the norm in the private sector.

Europe has been mentioned a few times today. It is worth our reminding ourselves that the European Union is the world’s largest single market, that it is worth up to £12 trillion—the aggregate value of the EU member states—that it has 500 million consumers, and that 50% of British trade exists with our fellow EU members. At this point it is all the more important for the United Kingdom to play a full and constructive role as a member of the EU, and I know that the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey)—who is present—plays an active role in financial services, energy, digital media and green technology. We want the single market to work in the interests of our country. Now is the time for our country to engage positively in Europe rather than hoping for some loosening of our relationship with the EU, let alone the catastrophic developments that would result from withdrawal.

The coalition Government have ambitious plans. We have restored confidence in our public finances and brought them under control, we have achieved international credibility, and we will stimulate economic growth and make work pay. These are difficult times indeed, but sustainable growth and recovery are on the way.