Finance (No. 3) Bill

Stephen Williams Excerpts

Tuesday 5th July 2011 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I thank the hon. Gentleman for giving way three times on the same point. My recollection of the Committee stage upstairs was that he and his colleagues did not oppose the Government’s reduction in corporation tax and actually thought it a good thing. Perhaps he will recall that the reason the bank levy was increased was to take account of the fact that some banks might benefit from that reduction.

[Frank Dobson]

They “might” benefit?

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[Stephen Williams]

I want to make some brief remarks on the amendments. The hon. Member for Nottingham East (Chris Leslie), who leads for the Labour party, mentioned that youth unemployment has grown to roughly a fifth of 16 to 24-year-olds. Of course we all deeply regret the wasted talent that that represents, whether of young people who have qualified at school or college or have left university with a degree and cannot find jobs or those who have not acquired any training or education—the so-called NEETs, those not in education, employment or training. Over the years, I have worked with many charities, such as Fairbridge and the Prince’s Trust, which try to help such people in my constituency. I must gently tell the hon. Gentleman that many of his points were made in the previous Parliament when I used to sit where his hon. Friend the Member for Leyton and Wanstead (John Cryer) is sitting now and I spoke for the Liberal Democrats on skills and higher education. The number of NEETs and the rate of youth unemployment increased year on year throughout the previous Parliament; the number just about touched 1 million before the general election.

I am sure the hon. Member for Nottingham East was not trying to give the impression that youth unemployment had reached 1 million purely because of the actions of the Government. It has been a problem in some cohorts of young people for a long time and has seemed intractable for Administrations of many parties, but the Government are trying to do some good things to tackle it, such as investment in apprenticeships and in the Work programme that will come in shortly.

[Bill Esterson]

I am glad the hon. Gentleman has given way, because I cannot believe he has the nerve to say what he has just said. One of the first actions of the incoming Government was to scrap the successful future jobs fund, which was bringing down youth unemployment. If he reads Professor Wolf’s report, he will see that her worry is about what is happening to 16 to 18-year-olds. We are in danger of repeating the mistakes of the ’80s when youth unemployment peaked four years after the middle of the recession.

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[Stephen Williams]

I have spoken on platforms with Alison Wolf, and indeed launched a book with her during the previous Parliament. I think she would be surprised to hear the Labour Opposition citing her in support. Yes, the Government are phasing out some of the previous Government’s programmes, but they are being replaced by the Work programme, which brings together many people who can work with the long-term unemployed or unemployed young people. They have a holistic approach and are bringing social enterprises into the programme, which may be more successful than the many initiatives that took place under the previous Government. I repeat: youth unemployment just about reached 1 million just before the previous Government left office. It is not a new problem created by the present Government.

[Chris Williamson (Derby North) (Lab)]

But does the hon. Gentleman at least acknowledge that as a result of the measures brought in by the previous Government, through the future jobs fund, youth unemployment was falling? Surely, that is something we should celebrate, so was it not a mistake for Government Members to support the move that got rid of the future jobs fund, which was having such a positive impact on youth unemployment?

[Stephen Williams]

As I understand it, the future jobs fund was a temporary measure and it has now stopped. It is being replaced first by the Work programme, which will come in shortly, and by the Government’s investment to create hundreds of thousands of new youth apprenticeships. I hope that the hon. Gentleman has visited in his constituency, as I have in mine, the many employers—including, in my constituency, the city council—who are taking on apprentices for the first time to give those young people a chance. Indeed, the Government have increased the minimum wage some of those people receive; they have also increased the apprentice wage, which the previous Government did not do.

[Chris Williamson]

Of course we all celebrate the fact that some young people are getting apprenticeships. We obviously support anything that helps young people get into employment, because it is a waste of talent for people to languish on the dole, but as my hon. Friend the Member for Sefton Central (Bill Esterson) pointed out, the Government’s Wolf review said that those apprenticeships are not going to the youngest school leavers; they are going to an older cohort, so clearly the Government need to take additional measures to ensure that we do not have a whole generation of 16 and 17-year-olds who are simply thrown on the scrap heap.

[Stephen Williams]

I thank the hon. Gentleman for his rather long intervention. As well as the Work programme and investment in apprenticeships, the Government have a growth strategy to develop the new jobs of the future—into which, incidentally, the future jobs fund was not necessarily placing people. For instance, there are many initiatives in the green economy, with the green deal that has come along as well, that will help the young unemployed. I mentioned the situation to emphasise that the problem is not new. The previous Government struggled hard with it as well, as I pointed out in the previous Parliament. I have been consistent in what I have said across both Administrations.

The purpose of amendment 13 is to reintroduce, or at least to examine the case for reintroducing, the bonus tax that the Labour Chancellor introduced in 2009. As I recall, the purpose of that bonus tax was not to raise revenue, but to change behaviour. It was an attempt to persuade the banks that they should not be introducing bonuses at that time, when many of them were dependent on state funds to continue in existence. I also recall that the anticipated proceeds of that bonus tax were about £500 million. In fact, as we have heard on many occasions, it raised in gross terms more than six times that amount, so it did not change behaviour at all. It seems that the Labour party in opposition has switched the underlying purpose of a bonus tax.

I share the moral outrage that many people feel about the level of bonuses being paid by some institutions. I am a free market liberal, so I believe it is up to a company to decide its own remuneration package and justify it to its shareholders, but in the current climate, when many families around the country are facing difficulty, some of the decisions taken by remuneration committees in the City cross the threshold at which it is right that some of us in this place express moral outrage at what they have been doing.

The culture of people paying huge amounts of money to themselves is not a new phenomenon in this Parliament. I remember Lord Mandelson, before he became the Trade Secretary in the previous Parliament, saying that new Labour was “intensely relaxed” about people becoming filthy rich. The hon. Member for Nottingham East looks faintly embarrassed at my reminding him of that phrase, but when the Labour party was in government it encouraged that culture. We should not let Opposition Members forget that.

[Frank Dobson]

I cannot help myself, in these very unusual circumstances, leaping to the defence of Lord Mandelson. If the hon. Gentleman had continued quoting from the sentence, Lord Mandelson went on to say “provided they pay their fair share of tax.”

[Stephen Williams]

I was not aware of the continuation of that quote. However—[Hon. Members: “Withdraw!”] Rather than withdraw, I shall expand on my point and make it more strongly. The previous Government engendered the culture of get rich quick by slashing the rates of capital gains tax and making a virtue of cutting income tax and holding down higher rate taxation. Ironically, it is under the Conservative-Liberal Democrat coalition that capital gains tax has gone up and the 50p top tax rate has been levied in this Parliament.

[Bill Esterson]

The hon. Gentleman called himself a free market liberal. Another Member of the House who described himself as a free market liberal is the right hon. Member for Haltemprice and Howden (Mr Davis), who describes the current arrangements in this country and the way in which capitalism operates as wealth extraction, rather than wealth creation. Does the hon. Gentleman agree with that assessment when it comes to bankers’ bonuses, and will he support the amendment on the reasonable grounds that my hon. Friend the Member for Nottingham East (Chris Leslie) set out?

[Stephen Williams]

I thank the hon. Gentleman for his intervention, but I have already stated clearly for the record that I share the moral and ethical outrage at the level of bonuses being paid by certain firms in the City and elsewhere. The question is whether reintroducing the bonus tax designed by the Labour Government would make any difference, because the evidence suggests that it made absolutely no difference to the bonus culture. It was a handy device for raising rather more than the expected revenue, but it certainly did not change behaviour.

As a free market liberal, I think that companies should be free to decide their remuneration policies, but they must justify them to their shareholders. One way that behaviour might change would be if shareholders took a more active interest in the bonuses that the remuneration committees award within their companies, whether they are banks or not. As was mentioned in yesterday’s debate, the people on those committees are often executive directors of other companies and so have a vested interest in the magic circle of super bonuses being justified in other companies. If the shareholders of the banks that we own, Lloyds Banking Group and Royal Bank of Scotland, were able to express a view, that would introduce a new dynamic into capitalism.

I hope that the Government will seriously consider giving each citizen a share in RBS and Lloyds Banking Group when the time comes for both banks to be divested from the state—this is another plug for the pamphlet I published in March, “Getting your share of the banks: giving the banks back to the people”. I had an interesting meeting with officials from UK Financial Investments last Wednesday in the Treasury in order to discuss that.

Amendment 31, tabled by the hon. Member for Hayes and Harlington (John McDonnell), proposes a Robin Hood tax. I fully support such a tax, as I have mentioned in many debates in the House. I have spoken with many non-governmental organisations in my constituency and at lobbying events, such as the one that took place last week and has already been mentioned. A Robin Hood tax has three elements. The first is a levy on banks’ balance sheets, and the Government introduced that in the form of a bank levy. We might disagree about the level of the levy, but the important fact is that the coalition Government have legislated for it to exist and said that it will be permanent, in the sense that it will last for the lifetime of this Parliament. The rate has been changed once, as I mentioned in an intervention, and I hope that it might be increased again.

The second element of a Robin Hood tax is a financial activities tax—FAT, as opposed to VAT, which the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) might have phonetic difficulty with when speaking in Welsh, in distinguishing between an F and a V. I hope that the Minister can update us on what discussions are taking place on that between Finance Ministers across the European Union and what progress has been made on the introduction of such a tax, which is a tax on certain profits of the banks.

The third element of a Robin Hood tax is a financial transactions tax, which is the subject of the amendment. As the hon. Member for Hayes and Harlington said, that has traditionally been called a Tobin tax. It would be the most problematic component of a Robin Hood tax to introduce. It might impede liquidity, which is not necessarily a good thing, and the other barriers he mentioned would be difficult to surmount without international agreement between the major trading nations.

Another problem with a Robin Hood tax is the question of how much it would raise, as I have heard a wide variety of figures for that which are in the billions. The hon. Gentleman referred to the great coalition of NGOs that support such a tax, and many of us support them, but I wish that they would agree a figure for what the different components of the tax could reasonably be expected to raise.

[Mark Durkan (Foyle) (SDLP)]

Does amendment 31 not afford the Government the possibility of coming up with such a figure? They could do the very scoping work that the hon. Gentleman says is needed, and surely that is the Government’s job, not the job of all those NGOs.

[Stephen Williams]

The hon. Gentleman makes a reasonable point, and I am sure that the Minister will tell us what work has been done in the Treasury and his estimate of what the proposal from the hon. Member for Hayes and Harlington might raise.

My point is that it is not helpful to present MPs or our constituents with such a range of sums—from the low billions to in excess of £100 billion—that the Robin Hood tax could raise, because they raise false expectations of what it might actually achieve.

[John McDonnell]

I was encouraged by the hon. Gentleman’s earlier statements, but I was waiting for the “but” and it has come. Amendment 31 simply asks for a report to be prepared exploring all the issues that he has quite rightly and properly set out, so I see no reason why he cannot support it in order, as I said earlier, to move the debate on.

[Stephen Williams]

I have not said, and I hope that the hon. Gentleman does not think, that I do not support what he is trying to achieve. We will have to hear from the Minister what work the Treasury is doing, or may have already done, to produce the facts and figures that we all want.

My final point on the amount that a Robin Hood tax could raise is about what it should be spent on. I have heard about a range of problems at home and abroad that could be solved by such a tax, but I entirely agree with the way in which the hon. Gentleman has refined those objectives down to dealing with poverty at home and abroad. I think we can agree at least on that.

[Mr Robinson]

It is interesting—if not more than that—to follow the hon. Member for Bristol West (Stephen Williams), who calls himself a free-trade liberal, or words to that effect. He is a “good doer”, in other words, and he means that he is in favour of every good sentiment expressed in this House but believes that neither he nor any Government can do anything at all about this issue, other than consult the shareholders. If the shareholders—the electorate—were consulted at the moment, his party might not be as pleased with the idea as it seems to be.

Nothing can be done, it is said, and the hon. Gentleman, while agreeing with every sentiment, will not even vote for amendment 31, spoken to by my hon. Friend the Member for Hayes and Harlington (John McDonnell), who I think is going to press it to a vote if he can catch your eye, Mr Deputy Speaker. It calls for exactly what the hon. Member for Bristol West wants, and he would not have to listen to his new masters in the Treasury, because we would be able to have an independent inquiry.

I had the luck to study with Tobin at Yale university when he first advanced these ideas, and they generated a lot more attention and interest in those days, but if the hon. Gentleman is serious about his wishes, and about the good will that he bears towards every serious intent to put things right, including bankers’ bonuses—which we are discussing in relation to amendment 13, of which I am speaking in support—he should vote with us, and also for amendment 31, in the name of my hon. Friend the Member for Hayes and Harlington.

The strange thing about this debate is that before the election, and even during it, the current Financial Secretary to the Treasury and the current Chancellor spoke with great vehemence and passion about how offensive the whole banking culture was and how, once they were in office, they were going to get tough with the bankers.

As in other matters, however, the Chancellor talks a good talk but does not walk a good walk: one puff of wind from the Governor of the Bank of England and the Chancellor gives in on regulation. One meeting with the bankers and he says, “Okay, we’ll do Merlin, but meanwhile we’ll agree with you on the level of bonuses: I won’t tax your bonuses; we’ll go for a corporate bonus tax instead.”

Of course, we wholly endorse the effect of that tax and fully support the bank levy, but it has an impact on banks’ balance sheets, because as we are asking them to build themselves up, we are taxing them, quite rightly. We can achieve both, however, given the unusual and inexplicable profitability in the banking sector. The joy of what we would do, through amendment 13, is that we would tax the bankers—and so we should—but not impact on the business per se.

My hon. Friend the Member for Nottingham East (Chris Leslie), who introduced amendment 13, said that under this Government about £40 million had been paid in net remuneration—or it may be even gross, I am not sure—to the top five employees of Barclays bank. Some £40 million has been paid in bonuses alone. If anything is offensive, that is, and yet the Government refuse to do anything about it. What they should do is staring them in the face. We are not, in the amendment, asking them to agree with every single purpose to which we would dedicate the use of the funds. They may disagree with us on regional development or on the growth fund for new jobs; they can disagree on any number of items. However, surely no one in this House who is serious about tackling the bonus culture that has become so poisonous in the banking industry, and is spreading increasingly to the rest of the commercial and private sector, can disagree with the need to tackle those bonuses.

We heard the hon. Member for Bristol West speak for the Liberals, but it is interesting to note that there is not another Government Back Bencher anywhere in the House. When my hon. Friend the Member for Nottingham East spoke to the amendment, not a single Government Member, Liberal or Conservative, rose to oppose it. Not only have the Chancellor and his Financial Secretary caved in to the banks, but the whole coalition has fled the Chamber in fear and trembling of saying something that will offend the bankers. There is not one Member there—where have they all gone? What has happened? Are they, like the Chancellor and his Financial Secretary, afraid of offending the banks? I do not know; all I can see is that the serried ranks have fled and the Financial Secretary is left on his own to defend the indefensible—of which he is no doubt perfectly capable.

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[Stephen Williams]

I am quite proud to call myself a free-market liberal, but just to make it clear and to differentiate myself from the right hon. Member for Haltemprice and Howden (Mr Davis), who was mentioned earlier, I am also a social liberal. I wonder what label the hon. Lady would apply to herself. Is she a socialist, a democratic socialist or perhaps a social democrat?

[Alison McGovern]

That is probably the easiest intervention that I will ever get. In so far as I believe in the needs of society above the needs of capital, I am a socialist. However, as a socialist, I think that it is important to consider how the economy actually works, because unless we understand the functioning of the economy and what makes our society work well, we will not be able to live up to the needs of society or the demands of our fellow people. As my hon. Friend the Member for Coventry North West (Mr Robinson) mentioned earlier, something has gone wrong when we see such large bonuses and when a small group of people in the City of London can arrange extremely high salaries for themselves.

However, this is not just a market imbalance; it is a power imbalance too. Something is going on that enables a small group of people to argue for a much higher salary than anyone else in society. As someone who cares about how the economy works, I call that market failure. Something is going on, and the situation needs to be questioned, thought through and rebalanced. That needs Government intervention. There could be an insider-outsider problem, in which some people are outside the small group who are able to arrange bonuses for themselves in this way and use their position as insiders to argue powerfully for the maintenance of their position, while others remain unable to enter the market. That is what makes me think that Government action is important in this regard.

My hon. Friend the Member for Nottingham East (Chris Leslie) said that there was also a failure of transparency. Markets work well only in conditions of perfect information, but we do not have perfect information, and we have seen the lengths to which some people have gone in order to prevent transparency over pay and bonuses. The case for Government action on bonuses has been well made today by other hon. Members. I would argue that that, too, is politically uncontroversial. In fact, the Secretary of State for Business, Innovation and Skills told the BBC earlier this year that the coalition Government were “fully signed up” to “robust action” on curbing bonuses. Well, that is great. Our amendment should therefore be pretty uncontroversial, and I hope that hon. Members on both sides of the House will support the principle of what we are trying to do.

My worry is that the Government have just not done enough. They have straightforwardly not lived up to the public’s expectations on bankers’ bonuses. I am also worried that the corporation tax cut that they have introduced will effectively hand money back to the profitable banks, and that not enough action is being taken to rebalance our economy. I could talk for many hours about manufacturing and the fact that the financial service sector should serve the productive economy, rather than the other way round, but my hon. Friends have already done that subject justice, so I will not detain the House further on that.

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[Stephen Williams]

I shall make some brief remarks in this Third Reading debate on yet another Finance Bill. Unlike the hon. Member for Nottingham East (Chris Leslie), who is lucky not to have sat through every stage of the Bill, I have endured all of it, from the Budget and Second Reading right the way through to the upstairs and downstairs stages. I too congratulate my hon. Friend the Minister on being named tax personality of the year, which is indeed an exalted position. The tax personality of the year should, of course, know that 5 July is the end of a tax month; in fact, it is also the end of the first quarter of the traditional tax year, so he could have mentioned that too. I can only assume that the judges made their decision before they heard his Bananarama joke. Unfortunately you were absent at that point, Mr Speaker, so you will have to look in Hansard to see what I am talking about.

In the spirit of cross-Chamber harmony, I too briefly congratulate the right hon. Member for Delyn (Mr Hanson) on his birthday. He has also been with us for all stages of the Finance Bill, apart from this one. I can only assume that he has thought of somewhere better than the Chamber of the House of Commons from which to watch the final stage of the Bill.

This is a good opportunity to weigh up the credibility of both the official Opposition and the coalition Government, after all the various stages of the Bill. We have heard many times that the Labour Opposition believe that fiscal tightening and a reduction in the budget deficit are needed. However, although we have heard from many Opposition Members about the cuts that they oppose, we have not heard from any of them about the cuts that they favour. We have also heard about their difficulties with the various tax changes that the coalition Government are making. As my hon. Friend the Minister pointed out, the Opposition pulled a rabbit out of the hat in the middle of our proceedings when the shadow Chancellor announced a great new policy with a flourish. His policy was that the Opposition would, after all, oppose the VAT increase to 20%. However, first the Scottish National party gave the Opposition an opportunity to vote against the increase and they abstained, and then Plaid Cymru gave them another opportunity and they abstained again. Indeed, the Opposition could have given themselves an opportunity to vote against the increase, but they failed to get their amendment in on time. That is two official abstentions and one botched attempt to oppose the Government’s policy, so the next time any Labour MP says that they oppose the rise in VAT, they will not have much credibility.

The Opposition also even opposed tightening a tax avoidance measure in Committee, and this morning the last vestige of Labour credibility—if Labour had any—in dealing with the economy was stripped away by the hon. Member for Nottingham East, when Labour refused to support the extension of special drawing rights arising from Britain’s contribution to the IMF. Of course, that was part of the initiative launched by the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when he supposedly saved the world—I think that was the phrase—at the London G20 summit in 2009. And today, his successor spokespersons for the Labour party refuse to support the spirit of internationalism in dealing with bail-outs around the world.

[Chris Leslie]

I hope the hon. Gentleman will allow me to put on record something that he admits has been conspicuous by its absence—namely, the fact that the UK’s subscription to the IMF is rising from, I think, £10.7 billion to more than £20 billion. I hope he will explain that figure to his constituents and tell them, at a time when we are also on the hook for the other European bail-out arrangements, why we should be paying twice in that regard. I would be interested to hear his point of view.

[Stephen Williams]

I would be happy to invite the hon. Gentleman, as well as any other hon. Members and my own constituents, to read my blog, where I explained exactly that point straight after this morning’s debate. The explanation is of course a movement between the Government’s reserves and the reserves that we denominate in special drawing rights at the IMF. That does not involve additional Government borrowing or additional cuts, as the hon. Gentleman very well knows. What we saw this morning was the Labour party making a cheap, opportunistic point on a very serious issue.

[Chris Leslie]

I am grateful to the hon. Gentleman for being so nice about me just a moment ago. The Minister refused to tell us this morning, but does the hon. Gentleman know how much British taxpayers’ money is on the hook, via our IMF support for Greece? How many pounds sterling are on the hook? Does he know what our liability is?

[Stephen Williams]

The hon. Gentleman will have heard exactly what I heard this morning from the Financial Secretary to the Treasury, which was that, in its whole history since 1945, the IMF has never lost its money because it is always the first creditor to be paid. Our money is therefore not at risk, but our providing it is essential in order to ensure that the international economy stabilises. That is also in our own national interest.

I have dealt with the Labour party’s credibility, but what about that of the coalition Government? The points that the hon. Gentleman has just made lead me neatly to compare this country with Greece. During the passage of the Bill, we have seen the sad events in Athens, with the Greek Government having to make difficult and unpopular decisions. Greece’s bond rating, which reflects people’s willingness to lend to it, is CCC, while ours is AAA, even though our budget deficit is much higher than that of Greece. The difference is that our Government have a credible plan for repairing our public finances, and that is what gives us credibility in world markets and at home.

The Finance Bill and the Budget have also confirmed one of the most important measures that the coalition Government will introduce—namely, making the income tax system fairer. That was the No. 1 commitment that my Liberal Democrat colleagues and I stood on in the general election. We believe that work should pay, and that the lowest-paid employees in this country should be shielded from income tax. I am therefore pleased that the Bill takes another step towards making our pledge of £10,000 of tax-free income come true during the lifetime of this Parliament.

The Bill also puts in place a bank levy, so that the bankers will pay something back towards the problems that they helped to create during the last Government’s period in office. The budget is now under control. That is why the coalition Government were formed in the first place. Many of us might have thought at the time that it was a somewhat unlikely coalition, but it was put together to take these difficult decisions, to repair our public finances, to bring back international confidence and to give confidence to our own constituents that our country could get back on track. The difficult decisions have now been made, and we will see the job through.

Finance (No. 3) Bill

Stephen Williams Excerpts

Monday 4th July 2011 Commons Chamber

We also know how vulnerable many in our community are to a change in interest rates. Some 30% of those buying a property in 2007-08 relied on 100% mortgages, so they are especially vulnerable to signs of change. A 2% rise in interest rates would lead to a £307 increase in monthly mortgage payments across the country, and already people are struggling to pay their mortgages and using high-cost credit to meet their costs.

[Stephen Williams (Bristol West) (LD)]

The hon. Lady just made the hypothetical point that a 2% increase in interest rates would cause those costs to rise. Undoubtedly that might be true were rates to rise, but they have not risen, and one reason market interest rates have not risen is that the Government are dealing with the deficit at a time when the Labour party has not come forward with any policies to tackle the emergency.

[Stella Creasy]

I hope that the hon. Gentleman is not being complacent about the cost of living, its impact on people in his constituency and the fears of many about what an interest rate rise would mean for their monthly mortgage payments. One thing that worries me is that a lot of people are borrowing just to make ends meet; they are borrowing not for investments, holidays or fancy televisions, but to pay their rent and mortgages and to put food on their families’ tables. His complacency about interest rates not rising any time soon is misplaced.

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[Sheila Gilmore]

I am afraid I do not share the hon. Gentleman’s confidence that the review will indeed cover the issues, although something might be pending. The hon. Member for Solihull (Lorely Burt) is no longer in the Chamber, but I was interested to hear her say that “we” would all be happy to see the regulations “we” would be bringing forward. I do not know who “we” were, but it suggests that the Government’s plans are quite well advanced and that the hon. Lady is privy to their thinking, as we are not. At the end of the debate, I hope we shall hear what the regulations are and what will happen.

Warm words are not enough. Some of the organisations involved have tremendous resources behind them, yet there is so little control of their operations. Their services can seem attractive because they “solve” people’s immediate problems. Regrettably, at this stage credit unions cannot compete. Castle credit union in my constituency had to give up its shop-front premises in the main street because it did not have the resources to continue to pay the rent. It has moved into an office in a community building and is still functioning, but it has much less presence than it would have if it were still on the high street, where people would be able see it from the bus and pop in when they were doing their shopping. Now that it is tucked away in the community office, people might not know where it is. The situation is not helped by the fact that the local community newspaper, which used to advertise such facilities, has had to shut up shop owing to cuts in its funding. That will make it even harder for people to find the credit union.

[Stephen Williams]

I agree that sometimes it might be hard to find a credit union, although the one in my constituency is based on Cheltenham road, a main road. Perhaps credit unions need to go out and find customers; for instance, Bristol credit union had a stall at St Paul’s carnival this weekend.

[Sheila Gilmore]

Indeed. On Saturday, I was at just such a festival in my constituency. It was a beautiful day—the first sunny Saturday for some time. Volunteers from Castle credit union, who help to keep it going, were there for exactly the reasons the hon. Gentleman suggests. However, if, unlike credit unions, high-cost lenders have a high street presence—extremely attractive, brightly lit and hardly missable—it is much easier for people to find them.

Regrettably, only 2 % of people in the UK are members of a credit union. We can all work harder to increase that number, but one thing that would clearly help would be real resources to build the movement. Experience in my city is that real resources, far from being put in, are declining, and there are even fewer members. Despite the efforts of the volunteers who man stalls at local fairs and festivals, credit unions are not providing the competition we want with high-cost lenders. I should dearly like people to use credit unions instead of those institutions.

I understand that this is politics, but when Opposition Members make proposals we meet the accusation that Labour should have done things over the past 13 years, and it is suggested that the fact we did not debars our making proposals and expecting them to be listened to. I am sure that if my hon. Friend the Member for Walthamstow had been a Member during our period in government, she would have been harrying Ministers in exactly the same way as she has harried the Government over the past year. She would not have been afraid to speak.

We should not accept too lightly the suggestion that the previous Government did not look seriously at financial inclusion. The present Government say that they are interested in it too, but they do not put in the means to make it happen. It is not good enough to say they are interested. In my Westminster Hall debate, I referred to our manifesto proposal to oblige banks to provide basic bank accounts. The Minister’s response was, “Oh, we don’t really want that sort of regulation. We want it to be voluntary and we want to work with banks.” That is all too often the Government’s response. They say they want the ends, but they are not prepared to put in the means.

The previous Government did a lot of work on financial inclusion, but no one thing is enough: credit unions will not do it; basic bank accounts will not do it; and taking action against high-cost lenders alone will not do it. We need a range of measures.

Some of the steps that would help have been positively stopped by the Government. The growth fund, which helped to boost credit unions and other community-based financial institutions, has not been renewed or extended.

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[John McDonnell]

My amendment proposes examination of the whole range of taxes, indirect and direct. It is interesting that the direct taxation system can be progressive in redistribution, but that the indirect system is so regressive in this country. It has a considerable impact on ensuring that we see these vast extremes of poverty and wealth.

It is not only the lobbyists from various organisations who have expressed their concerns about this inequality, because the general public are averse to high levels of inequality too. In recent surveys, 80% to 90% have been in favour of a more equal distribution of wealth in our society. We have had various discussions in this House about the impact of inequality, and none better than the debates around the work by Richard Wilkinson and Kate Pickett, “The Spirit Level”, which was ground-breaking.

Richard Wilkinson was an adviser to my party in the early 1990s, when he did the earliest work on the impact of inequality on health. That was revisited in 2005, when he came to the House and briefed several MPs. “The Spirit Level” confirmed what he had suspected in the 1990s and started the debate. The Prime Minister and the Leader of the Opposition have both accepted that inequality is an issue that must be addressed. In 2009, the Prime Minister quoted from Richard Wilkinson’s book in a major speech, demonstrating that the Conservative party at that time was keen to address some of the issues of inequality. He said that

“among the richest countries it’s the more unequal ones that do worse according to almost every quality of life indicator.”

In his first major speech as leader, the Leader of the Opposition said:

“I do believe that this country is too unequal and the gap between rich and poor doesn’t just harm the poor, it harms us all.”

That is based on the work in “The Spirit Level”.

The argument in “The Spirit Level” is straightforward—that when people in the same social class, at the same level of income and education, are compared across countries, those in more equal societies do better on every measurement, be it health, mortality, obesity, teenage birth rates or mental illness. Their quality of social relations is better too. Inequality is socially divisive, increasing the rate of homicide, hostility and racism. The level of trust in unequal societies is lower than in societies that are more equal, and social capital is less —the engagement in civil society and even in political processes. That is why we need to address the issue of inequality when we consider taxes and our financial strategy.

I realise that this has been a contentious debate, and I have read the arguments made by the TaxPayers Alliance, which has tried to rebut Wilkinson and Pickett’s work, but I have also read the more recent independent research studies that have simply reinforced the inequality argument. Whichever side of the argument Members fall, it is clearly an issue to be considered, and that is why I suggest that we look at taxation as a whole—

[Stephen Williams]

I agree with virtually everything that the hon. Gentleman has said. I have “The Spirit Level” at home and it will be part of my summer reading as I have not had time to read it yet. Does he at least acknowledge that one of the good things that the coalition Government have done is reduce the exposure to income tax of the lowest paid in society, while at the same time increasing capital gains tax? His Government did the reverse.

--- Later in debate ---

[Stephen Williams]

indicated dissent.

[John McDonnell]

No. The previous election?

[Stephen Williams]

indicated assent.

[John McDonnell]

The hon. Gentleman clearly has not been reading my alternative Budgets that I table year after year and which address some of those issues, although he is not alone in not having read them—but there you are!

The purpose of amendment 14 is to examine the issue again and regularly. The equality assessments that we receive from the Government in the budgetary papers consist of one sentence telling us who will gain and who will lose. They do not address the issue of inequality. A wider debate is needed, however, and my amendment would ensure that that debate is revisited and kept in close focus as we determine our financial policies. There have been previous attempts at this, and various reports by various governmental bodies have partly addressed the issue, but they have not been related to specific policy decisions or policy development.

This is more of a plea. The previous Government, of which I had occasional criticisms, set up an excellent initiative in founding the national equality panel under its chair, Professor John Hills. The panel still exists within the Home Office, and it produced a major report in January 2010 entitled, “An Anatomy of Economic Inequality in the UK”. It was extremely detailed and brought together the evidence on economic inequality in our society. It was enlightening and depressing but at the same time motivating. It was enlightening because it exposed not only the scale of inequality but the trend growth over time, which, as I said, was only arrested in the previous decade, not reversed. It was depressing because, as the report stated, the sheer scale of inequalities in outcome—for instance, the sheer scale of differences in wealth—was shocking. The report even implied that it might be impossible to create a cohesive society given the scale of inequality.

The report identified a backdrop of widespread ignorance of the scale of inequality and the lack of awareness in society as a whole among the rich and the poor. It was not just the poor who did not realise how unequal society was; it was also the richest. The report was motivating because it demonstrated that public policy interventions can reduce inequality, particularly interventions around tax and welfare benefits. They can narrow gaps between the rich and the poor and create a more cohesive and successful society. My plea, through this amendment, is that before we agree tax levels, we address the issue of inequality and that we bring forward a further report. I suggest that the national equality panel continues its work, assesses the taxation policies set out in the Budget and brings a report back to the House so that we can be sure that the policies we are pursuing are addressing inequality in our society.

I am obviously aware that through the Child Poverty Act 2010 the previous Government set up the Child Poverty Commission, the remit of which has now been extended to include the issue of social mobility. I am sure that the commission could play a valuable role in assessing the tax decisions in the Finance Bill and their impact on inequality.

Civil List

Stephen Williams Excerpts

Thursday 30th June 2011 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

Unlike the shadow Chancellor, I have not spent the last 48 hours carefully considering what to say in the debate, so I shall keep my remarks short. I have not been enjoying the tennis either; my mind has been occupied with other matters.

I welcome the approach that the Chancellor has outlined, and the prospect of the longer debate that we shall have on Second Reading when the Bill has been published. I want to place on record, on behalf of the Liberal Democrats, the affection and esteem in which Her Majesty the Queen is held throughout the country. Every time I visit a primary school in my constituency, two questions are entirely predictable, and have been asked throughout the last decade. They are “Do you know the Prime Minister?” and “Have you met the Queen?”. There is a subtle but profound difference between those questions, which shows that young children can be very perceptive about the relative influence of Members of Parliament and the Queen. The Queen has visited the city of Bristol many times throughout her reign, and has always been warmly received.

Although I welcome the Chancellor’s approach, I think there is an important point to be made about the future finances of the monarchy. I agree with what the right hon. Member for Barking (Margaret Hodge) said about the importance of transparency. The reformed system of financing the Head of State—and this may be the first major reform since the accession of George III —must be transparent and open to scrutiny. Three years ago we discovered in a very painful way that resisting transparency does no institution in our land any good, and I believe that the institution of the monarchy will be enhanced by transparency over its financing.

Both the right hon. Member for Barking and her predecessor as Chairman of the Public Accounts Committee referred to the royal palaces. Thanks to the initiative of Mr Speaker, this palace is now open on more occasions during the year so that members of the public can come and see the place with which we are so familiar, but Buckingham palace is still only open for one month a year, except to those who are fortunate enough to be invited there for a formal occasion. I hope that consideration will be given to whether it would be possible for grand places such as, in particular, Buckingham palace to be open to the public on more days during the year. That would both enhance the income of the royal palaces and the royal arts collection and enable more people from all over the country to see what is probably the most famous building in the world.

I look forward to our Second Reading debate and to perhaps making a longer contribution on that occasion.

Finance Bill

Stephen Williams Excerpts

Tuesday 28th June 2011 Commons Chamber

[Mr Hanson]

It is very interesting that my hon. Friend makes that point about the VAT increase, because following that reckless gamble, inflation, which was 3.1% in September, was 4.5% in April and May, hitting savings, pensions, incomes, jobs and people’s livelihoods. He will know that confidence is important and that consumer confidence is now at minus 31%. Overall confidence was three points lower in April than in March, and lower than at any time since spring 2009.

[Stephen Williams (Bristol West) (LD)]

Confidence is a measure of sentiment and opinion, but spending power is a fact, so will the right hon. Gentleman explain how in January, February, March and April consumer expenditure went up?

[Mr Hanson]

The hon. Gentleman will know that the Office for Budget Responsibility and every independent forecaster have already shown that growth in the economy has flatlined over the past 12 months, following the impact of the Labour Government’s measures at the end of their time in office at the beginning of 2010. Since then, growth has flatlined and unemployment is projected to increase by 200,000 over the next year.

[Stephen Williams]

I thank the right hon. Gentleman for giving me a second chance to pose my question to him. The Library’s statistics show that, in the four months since VAT was increased, consumer expenditure in shops increased month after month, so how can he say that consumer confidence has declined? That is not about economic growth, which is how he answered my first question; it is about consumer confidence and spending. Will he deal with that point, please?

[Mr Hanson]

I suppose that is why the Federation of Master Builders only today—[Interruption.] Just for the record, on my uttering “Federation of Master Builders”, Conservative Members fell about with laughter, but the FMB’s members build houses and employ people in the construction industry. Only today—in a brief dated today—it stated:

“The situation for small construction firms has been made more perilous by the VAT increase at the start of the year,”

and that we risk

“11,400 construction job losses and 34,000 total potential job losses”

because of the VAT increase. The hon. Member for Bristol West (Stephen Williams) and his colleagues may recall that the OBR expects some 200,000 additional people to become unemployed this year. The lack of consumer confidence, the impact of VAT and the lack of consumer spending will be critical to those potential job losses in the community.

--- Later in debate ---

[Mr Hanson]

There have also been job losses at Borders. There have been job losses across the board in the retail sector as a result of the impact of the VAT increase.

[Stephen Williams]

I thought I heard the right hon. Gentleman say Borders, but Borders went bust under the previous Labour Government. Would he like to retract that?

[Chris Ruane]

I said Thorntons.

--- Later in debate ---

[Nia Griffith]

I fully understand that businesses reclaim the VAT, but the consumer purchases the end product for a composite price that reflects everything that has been done to produce the thing in the first place, as well as the transport costs—that was explained by my hon. Friend the Member for Chesterfield (Toby Perkins)—and, of course, the VAT. The customer pays the VAT in the end, but the business has already been affected by the rise in costs that it is incurring, which do not include VAT. The price of raw materials, particularly fuel, has risen, and every business is being squeezed to the limit. Every penny counts, and businesses are asking themselves, “At what point can I put the price up? At what point does the purchaser not buy?”

Many of my hon. Friends have mentioned the impact on hard-pressed families, and they have indeed been hit very hard. The hon. Member for Redcar (Ian Swales) recited a long list of goods that do not attract VAT. Was he suggesting that every middle-income and lower-income family should exist solely on food and children’s clothing? Has he not thought of the numerous household items—

[Stephen Williams]

Will the hon. Lady give way?

[Nia Griffith]

I will, on that point.

[Stephen Williams]

The hon. Lady’s Front-Bench colleague, the right hon. Member for Delyn (Mr Hanson), said that there would be a £450 increase per “hard-pressed family”, if I may use her phrase. That means that families would have to spend £18,000 a year on VATable items—not VAT-exempt or zero-rateable items. Can the hon. Lady give us an example of the sort of items on which those hard-pressed families would spend £18,000 a year?

[Nia Griffith]

When we arrived at the £450 figure, we were taking account of the total impact of all the tax changes introduced in the emergency Budget last June. However, if Members look around their bathrooms and kitchens, they will see numerous items that do not last for ever and need to be repaired. For example, adults will need to replace some items of clothing.

The Economy

Stephen Williams Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

The hon. Member for Hartlepool (Mr Wright) rightly set much of his speech in the international context. I want to start by doing much the same, by comparing the UK’s record with that of our fellow EU member states, particularly the unfortunately named PIGS—Portugal, Italy, Greece and Spain—around the Mediterranean periphery. We have all seen or read about the extraordinary scenes in Greece in recent weeks and hours. The Greek Government debt currently has a triple C rating from Standard and Poor’s, which is as low as it can go without it effectively being a recommendation that no one should buy, whereas the UK has a triple A rating. That might surprise hon. Members given the underlying economic data on our budget deficit. Even after the difficult decisions that the coalition Government took in their first year in office, our budget deficit is currently 9% of GDP for 2011, as compared with the eurozone, where the figure is 4.3%, and Greece, whose budget deficit is lower than the United Kingdom’s, at 8.4% this year. That surprising difference in bond ratings is accounted for by the fact that people who want to lend to countries are just the same as those who want to lend to companies and individuals. They are looking for the confidence and certainty that comes when an institution that is in trouble realises that it is in trouble and takes the necessary measures to get to grips with it. That is what this coalition Government are doing.

[Sheila Gilmore (Edinburgh East) (Lab)]

Is the hon. Gentleman concerned that Ireland and Greece, the two countries with the greatest difficulties, have both gone through austerity programmes that were not enough, both had to have further bail-outs and implement more austerity programmes, and both still have difficulties? Does that not give him pause for thought about whether austerity programmes will lead to recovery?

[Stephen Williams]

I specifically mentioned Greece, and those who have been following events in Greece from afar will know that the reason why the international community is so concerned about Greece is that it has felt until recently that the Greek Government have simply not got to grips with the plan, or have announced a plan but not adhered to it. That is the key difference. This Government have announced plans—difficult plans—to deal with deficit reduction and we are sticking with them, no matter how painful they might be.

[Margot James]

My hon. Friend mentions the views of the bond market, and the previous speaker talked about what PIMCO thinks. Is he aware that PIMCO said just days ago,

“we think the U.K. is implementing what is probably the best combination of fiscal and monetary policies”?

[Stephen Williams]

I thank my hon. coalition colleague for her intervention, which reinforces my points.

The Government response to the stark situation that we inherited in May 2010 has been to tackle the deficit—the yawning gap—in our public finances, but also to build a business climate that is conducive to growth, because as several hon. Members have said, it is through growth that the economy will provide the resources to get our finances back on track.

[Clive Efford (Eltham) (Lab)]

Will the hon. Gentleman give way?

[Stephen Williams]

I have taken two interventions, so I will take no more until near the end, perhaps.

This Government do have a growth strategy: we want to rebalance growth, including rebalancing it geographically. We have just heard about the plight of the north-east. Perhaps it was a failure of the last Labour Government not to rebalance the economy sufficiently, away from the south-east of England and towards other regions and nations of the United Kingdom. Perhaps the hon. Member for Hartlepool (Mr Wright) ought to have a stiff word with some of his colleagues. After 13 years, the economies of some of our regions were still very fragile and unable to withstand external shocks. We also wish to rebalance the different sectors of the economy, away from over-dependence on the City of London, important as it is, and the resources that it generates towards more sustainable parts of the economy, in particular growth from digital media. The Government have announced the establishment of a network of enterprise zones around the country. My local enterprise partnership—the West of England Local Enterprise Partnership—has just announced that it will be based around Temple Meads station in my constituency, where we want to build the country’s leading media hub and business growth area, with a particular focus on digital media.

We also want future growth to be sustainable in a green way. This country has a huge economic opportunity to grow a low-carbon economy. In the Energy Bill, which is just completing its passage through the House, we have something quite revolutionary: the green deal, which gives every household in the country a fantastic opportunity to retrofit their houses to reduce energy bills and help us cope with meeting the demanding climate change targets that we have set, on which there is cross-party consensus and agreement. There is also a fantastic opportunity for British business, and for people to be trained in the skills needed to retrofit our housing stock. On a rather larger scale, the Government have also announced—the Chancellor confirmed this in the Budget—the creation of the green investment bank, in order to provide finance for schemes that might otherwise find it difficult to secure funds in the market. As the country’s green capital, the city of Bristol has a good case for being made the future home of the green investment bank.

A further way in which the coalition Government are going to make a fundamental difference in turning the economy around and reducing unemployment is by making work pay. My hon. Friend the Member for Thurrock (Jackie Doyle-Price) mentioned that the coalition agreement would deliver the Liberal Democrat policy of reducing income tax and taking out of income tax completely those people who are earning up to £10,000 a year. That will be achieved before the end of this Parliament. Our programme of welfare reform and the introduction of universal credit was mentioned earlier by the Chancellor in his confrontation with the shadow Chancellor. The Opposition rather recklessly voted against the entire Welfare Reform Bill.

Reform is also needed in the banks. The Opposition motion calls for a reintroduction of the tax on bankers’ bonuses. It is worth pointing out, however, that the people receiving large bonuses will now pay 50% income tax, rather than 40%, that national insurance has doubled for those on the higher rate of tax, and that employers will pay more national insurance on those bonuses as well. The taxation on those bonuses will certainly increase.

[Alec Shelbrooke]

If a banker pays 50% income tax on his bonus, does not that represent a greater tax take than if the money were left in the bank, where it would be liable to only 28% corporation tax?

[Stephen Williams]

My hon. Friend makes a good point.

What should we do with RBS and the Lloyd’s banking group, which were bailed out in 2008 adding £67 billion to our national debt? Earlier this year, I wrote a pamphlet on what the Government should do with their holdings in the banks. It was called “Getting your share of the banks: giving the banks back to the people” and it was published by the think-tank CentreForum in March. My proposal was to give those shares to every citizen in our country and, when they sold them in the future, the Government would get back the cost of their investment in 2008 while the citizens would keep the result of any growth. That would mean that we would reduce our national debt by £67 billion over time, and that every citizen in the country—each of us who has felt the pain of bailing out the banks—would see some benefit from this upside to the situation. I am pleased that my right hon. Friend the Deputy Prime Minister has been endorsing that proposal today on his trade mission in Latin America.

What have we heard from the official Opposition today? What is their grand idea for turning round the country’s finances and getting our economy back on track? They have opposed all the cuts that we have debated in the Chamber. I have never heard a Labour Member of Parliament stand up and say that they are in favour of any of the measures in our Bills, whether in this Chamber or in the Bill Committees on which we serve. Today, the Opposition have come up with a completely reckless proposal for an unfunded cut in VAT. It has no economic justification and there is no evidence that it would make any difference to the economy. Let us contrast that with the record of the coalition Government. We are determined to have a fair tax burden, and we have plans for sustainable growth and deficit reduction. Both plans have international credibility. That is what this country needs right now: credibility at home and abroad, rather than the reckless opportunism that we have seen from the Opposition today.

Oral Answers to Questions

Stephen Williams Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Osborne]

First, the announcement was made with the consent of the Independent Commission on Banking. Secondly, it is established that the Chancellor is able to give the Mansion House speech each year. I seem to remember that the last-but-one Chancellor announced the renewal of the nuclear deterrent at the Mansion House without coming to the House of Commons to do so. If the hon. Gentleman will allow me to say something about banking reform at the Mansion House in the years to come, I will therefore be grateful.

[Stephen Williams (Bristol West) (LD)]

The spending review said that employee contributions to public sector pensions would need to increase in order to make the funds sustainable for the future. Does my right hon. Friend agree that that rate should not be applied uniformly in order to protect the lowest-paid public sector workers and encourage them to stay within public sector pension schemes?

[The Chief Secretary to the Treasury (Danny Alexander)]

I am grateful for the question. I agree with my hon. Friend. In fact, a similar point has been made by several trade union representatives in the very constructive talks that we are having at the moment, which will be going on over the next few weeks. In applying the increase in pension contributions, it is very important to protect the low-paid so as to minimise the risk of opt-out.

Eurozone Financial Assistance

Stephen Williams Excerpts

Tuesday 24th May 2011 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

The background to this debate is the extreme financial turbulence that took place all around the European Union—and, indeed, around the world—in 2008. Since then, the vast majority of EU member states have become stable. They are growing and have deficit reduction plans in place. It is also important to recognise—I am quite surprised that no one from the Government Benches has said this yet—that the UK has not needed assistance from the IMF nor from the European financial stability mechanism, which we theoretically could have called on from our fellow EU member states, or indeed any bilateral assistance, precisely because the coalition Government have put in place a realistic deficit reduction plan to put our finances on to an even keel. However, other EU member states are still struggling and have needed that international assistance—I refer, of course, to Greece, Portugal and Ireland. Today’s debate is concerned with European Union assistance, but we should remember that many fellow member states have also needed IMF support and bilateral loans, from us and other member states.

[Graham Stringer (Blackley and Broughton) (Lab)]

Is not the reason why Greece, Portugal and Ireland have needed money that they cannot alter their exchange rates or control their interest rates because they are in the euro? Some of those countries are cutting even faster than this Government, and it is not helping. The answer to those countries’ problems is to get out of the euro and return to their old currencies.

[Stephen Williams]

I thank the hon. Gentleman for his intervention. I suspect that I may be alone in the Chamber—at least on this side of the Chamber—in being for the euro. I believe that Britain could have benefited from joining back in 1999, but I none the less recognise that the coalition agreement contains a strong statement on how that is simply not up for discussion during the course of this Parliament. I would therefore agree to differ with the hon. Gentleman. Surely one of the reasons why the three states that he mentioned are unable to deliver deficit reduction is not just their membership of the euro, but the fact that their Governments have not been as willing as this Government to take the necessary painful medicine to put themselves back on an even keel.

We have, of course, made bilateral loans as well, recognising that, as the hon. Member for Orpington (Joseph Johnson) said earlier, it is in our own selfish national interest to support our fellow EU member states. Many of those points were made last year in the debates on the Loans to Ireland Act 2010. One statistic, which I thought was implausible when I first heard it—I have now heard it so many times that it must be true—is that Ireland is more significant to our trade than China, India and Brazil, so it is indeed in our national interest to continue to support Ireland.

[Henry Smith (Crawley) (Con)]

My hon. Friend talks about our bilateral and multilateral arrangements. Surely it is in this country’s interest to be flexible and not to get locked into multilateral arrangements, but to have the freedom to make bilateral arrangements when it is in our national interest to do so.

[Stephen Williams]

I thank my hon. Friend for that intervention. He is right to say that we need flexibility. Because we are not in the euro, we are not a participant in the far greater funding of the facility. I think that the figure involved is €400 billion. Our exposure is therefore quite limited.

That leads me on to my next point. The loan to Ireland involves about €7 billion, which is roughly equivalent to the maximum theoretical exposure of the United Kingdom to the loans that we have participated in under the European financial stability mechanism. So what is the cost to the UK? I have already mentioned our IMF and bilateral loan contributions, which we make irrespective of our EU or euro membership. We are outside the EFSM, as I have said, and our EFSM contribution is restricted to the UK share of the European Union budget, which is roughly 12.5%. Our total theoretical exposure is therefore about €7.5 billion, which is roughly equivalent to the bilateral loan that we have decided, of our own volition, to give to our close friend and neighbour, Ireland.

Our contribution to those loans—I emphasise that they are loans—is at risk only if there is a default on the part of the member states receiving them. It is the expectation, when loans are made in the ordinary course of business, and certainly between nation states, that they will be repaid without default, and that they will be repaid with interest. If Ireland and Portugal repay those loans in a timely manner and with interest—the interest rate is quite a hefty one—it will be important to ensure that the interest is credited back to the United Kingdom.

A real cost would be incurred if we did not support our fellow EU member states, which are, after all, our closest trading partners. It would simply not be in the UK’s national interest to watch the eurozone fail and even break up, as I suspect some of my coalition colleagues would like it to do. The resulting massive instability among our closest trading partners on our doorstep would not be in our national interest. I plead with the ministerial team to make the case more strongly on behalf of the Government that UK assistance at this time is in the British national interest, and that it is not merely the result of some philosophical commitment to the European Union, whether by the Liberal Democrats—whom I heard being blamed earlier—or by anyone else. Indeed, if we were not making those contributions via the European financial stability mechanism, it is possible that we would be making higher bilateral contributions or having a higher call on our funds because of our treaty obligations relating to the IMF. It is also right, however, that any such support should be temporary, and that, from 2013, the eurozone should be able to wash its own face and support itself through the proposed new European stability mechanism. It will then be up to Britain to decide whether it wishes to give bilateral assistance, when it is in our national interest to support our closest friends and neighbours.

Oral Answers to Questions

Stephen Williams Excerpts

Tuesday 10th May 2011 Commons Chamber

[Mr Gauke]

I know that the hon. Gentleman is close to the former Prime Minister, but it really is disappointing that he is such a deficit denier. He even seems to suggest that the Greeks should not be doing anything about their deficit. If we do not have a credible plan, then the economy is at risk. We do have a credible plan.

[Stephen Williams (Bristol West) (LD)]

First, Mr Speaker, may I associate myself and my Liberal Democrat colleagues with your remarks about David Cairns at the start of Question Time?

On the deficit, the Government’s plans will reduce the fiscal deficit from last year’s figure of 9.6% to 7.9% this year, but that will still be roughly double the eurozone average and higher than the figures for Germany, France, Italy and Spain. Does the Minister agree that if we did not take this action to reduce the deficit, it would undermine international confidence in this country and our ability to borrow the funds that we still need to fund our programmes?

[Mr Gauke]

My hon. Friend is absolutely right. Even now, our deficit is higher than Portugal’s and it is perfectly clear that we on the Government side are united and determined to bring that deficit down.

Finance (No. 3) Bill

Stephen Williams Excerpts

Tuesday 26th April 2011 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

After the sound and fury of the Budget debate, every year we follow it up with a Finance Bill with its technical clauses, amendments to previous Finance Acts and anti-avoidance measures, that does not grab people’s attention in the way that the Budget does. All this will be considered when we reach the Committee stage, which I am sure will drag on for many sittings, as those who have served on it before—some of us have done that on many more occasions than others—will know from past experience. However, the Bill proposes many far-reaching and fundamental changes to the taxation system, paving the way for further reform, as the right hon. Member for Croydon North (Malcolm Wicks) said, in what was quite a thoughtful speech. I want to dwell on three of the Bill’s provisions: those dealing with income tax and national insurance—which we just heard about—environmental taxes, and taxation of the banks.

Clause 3 raises the income tax threshold to £7,475 this month, April 2011. That raising of the income tax threshold was the cornerstone of the coalition agreement between the Liberal Democrats and the Conservatives, and implements the Liberal Democrats’ No. 1 manifesto commitment from the 2010 general election. The benefit of that commitment being implemented in government will be felt by wage and salary earners up and down the country in their payslips at the end of this month. Some 900,000 people will be raised out of the income tax bracket altogether, while those still in the basic rate bracket will see a tax cut of up to £200. The Budget also announced next year’s rise in the threshold—which will no doubt be implemented by next year’s Finance Bill—in April 2012, lifting a further 1.1 million people out of tax. This Finance Bill and this Budget help the poor and reward work.

I look forward to the review of the operation of income tax and national insurance which was announced in the Budget, which the right hon. Gentleman also spoke about. National insurance was introduced in 1911. This year is the centenary, which would be a good point for that review to announce its ending, at least for employees. Although I agree with quite a lot of what the right hon. Gentleman said, there was a touch of Victorian values in some of what he said about the contributory principle, which is what the founders of national insurance—he mentioned Churchill and Lloyd George—wrestled with. They were very much products of the Victorian era, but the right hon. Gentleman’s own party forebears—Aneurin Bevan in particular—rejected the contributory principle when founding the national health service, insisting that it should be based on broad taxation, not individual contributions into an insurance fund.

The right hon. Gentleman made many thoughtful points that will have to be considered in the review of national insurance, but the contributory principle has failed. He mentioned women and the fact that people sometimes find that they have not accrued the pension rights that they might reasonably have expected. He talked about citizenship, and that is where a citizen’s pension will be relevant. I hope that this Government will introduce one. However, it would be right to recognise the contributory principle for unemployment benefit, which he did not mention. I would not want someone in short-term unemployment to have to undergo a means test to claim unemployment benefit. One benefit of the contributory principle at the moment is that people who are unemployed for up to six months do not have to undergo a means test to claim a benefit to which their national insurance records prove they are entitled.

We will therefore need to retain some contributory benefits in the existing national insurance scheme for employees to which the right hon. Gentleman referred. None the less, the scope of the changes in the Finance Bill and the Budget to our income tax and—if we get them—our national insurance regimes represent the biggest shift in our direct taxation system for many decades. The reforms in the 1980s, particularly to income tax, tended to favour the better-off; the reforms of this coalition Government will help the low-paid.

The second area in the Bill to which I want to refer contains the provisions dealing with environmental taxes. Clause 25 raises landfill tax from £56 to £64 next year, giving local authorities a further incentive to achieve a step change in recycling. My local authority—Bristol city council, which is controlled by the Liberal Democrats—has shown a steady increase in the rate of recycling. We now have the best record of any city authority in the country, recycling close to 50% of our recyclable domestic waste, and we are aiming for 90% over the next few years. In the Easter recess, the Chief Secretary to the Treasury and I visited the plant being built at Avonmouth, just outside my constituency, by New Earth Solutions, which will screen the residual waste that people have not recycled from their doorsteps in order to extract the remaining recyclable materials. Landfill tax is a well-established tax that is achieving its aim, but we know that we have some way to go in many parts of the country.

A new tax in the Bill that several people have mentioned is the setting of a carbon floor price, at £16 a tonne this year, which it is proposed should rise to £30 a tonne by the end of the decade. There will obviously need to be much debate and thought about how the carbon floor price will operate, but it is an essential reform if we are to incentivise a switch to a low-carbon economy and make renewable sources of electricity generation competitive with carbon-intensive forms of electricity generation. There is an important debate to be had about how that affects nuclear power, and I am meeting Greenpeace later this week to discuss its concerns. I am also working with party colleagues to develop Liberal Democrat ideas on how the carbon floor price and carbon taxes can operate, in order to inform the debate as it unfolds.

A third aspect of the Bill that I want to mention briefly is the introduction of something that has been talked about for some time over the past year—the bank levy; it is almost hard to believe that a statutory basis for it did not exist until now. The detailed provisions governing how it will operate are in schedule 19, which I am still trying to plough my way through and understand. [Interruption.] Judging from their facial expressions, I am sure that Opposition Front Benchers are trying to get their heads round it as well. I am sure that they will be well advised by colleagues outside the Chamber.

The operation of the bank levy is incredibly important, but its introduction is incredibly important as well. The shadow Chief Secretary to the Treasury referred earlier—as does the Opposition amendment to the motion—to the bonus tax that the previous Government introduced. This bank levy will raise more money year on year than that bonus tax. It is also renewable every year, unlike the windfall tax, which could be levied only once, in the unique circumstances of 2009. Such a levy on the balance sheets of banks is the first component of something that many people, including myself, have campaigned for—a Robin Hood tax. I hope that the Government will now move towards adopting the second component of such a tax plan—a financial activities tax—in order further to bring about reform in this area. That would require European Union co-operation, and I hope that the Government are seeking to achieve that co-operation among our fellow member states.

The Bill contains 91 operational clauses and 26 schedules. It is a particularly fat Bill, although not actually a record-breaker. As is the nature of Finance Bills, probably not much of it will endure in the memory. Several elements of it will stand the test of time, however. The reform of income tax, the reform of national insurance promised in the Budget, the lifting of the low-paid out of taxation and the further reforms to environmental taxes will be an enduring legacy of the coalition Government.

Amendment of the Law

Stephen Williams Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

I appreciate being called so early in the debate, Mr Deputy Speaker. In Northern Ireland we are in competition with neither the Conservative party nor the Liberal Democrats when it comes to elections, so I suppose I can afford to be a little more objective in my assessment of the Budget. As we know, the allies of the Conservative party in Northern Ireland have now abandoned them, and the hon. Member for Belfast East (Naomi Long), who had some association with the Lib Dems, has abandoned them since coming to the House, so I hope that I can be objective on this.

The Chancellor made it clear in his speech today that his ambition for the Budget is that it should promote growth in the economy, and I wish him well in that. Coming from a part of the United Kingdom where growth has been most sluggish and, as a result, unemployment is rising faster than in any other part of the UK, I know that success for the Chancellor will mean success for our economy. It will reduce the deficit so that huge resources will not go simply on paying interest, put people back into work, increase living standards and, in the long run, provide funding for vital public services.

I wish the Chancellor well in that, but I think it is a little ironic that the Budget has been headlined as a Budget for growth, because one of its major statistical announcements is that growth forecasts have been downgraded once again. Indeed, the Chancellor optimistically indicated last June, and again in October, that the measures he would undertake would give us growth of around 2.5% or 2.3%, but in the six months since then we have had a 33% reduction in his forecast. There is a certain degree of irony in that, which is one of the reasons I believe that some of the criticisms that have come from the Opposition about the speed and depth of deficit reduction have some merit. I remember that when I used to teach economics I would say that there are always two sides to the economic growth coin. First, there is the question of how to increase the economy’s potential to produce more. If we do not increase potential, once demand goes up, all we get is inflation, or we will suck in imports.

The Chancellor outlined a number of measures today—I will not go through them all—some of which are contradictory. The measure that he held out as the beacon at the start of his speech was the decrease in corporation tax, which he argued will give firms the ability to keep more profits and, therefore, the opportunity to invest in new equipment, new markets or research and development. According to the Red Book, the decrease in corporation tax should put £1.075 billion into the coffers of companies over the next five years, so it could certainly be argued that the Chancellor has released resources for companies to invest if they choose to do so.

However, on the next page we see that, as a result of wanting to be a trendy green, or I suspect of looking for a stealth tax, he is imposing a carbon floor price. By 2015, all the additional revenue that firms will have from the decrease in corporation tax will be more than absorbed in the carbon price floor tax—£1.41 billion. On the surface, the measure appears to be a way of releasing resources to companies, but closer examination shows that companies will not be much better equipped.

[Stephen Williams (Bristol West) (LD)]

Will the hon. Gentleman concede that the whole purpose of a carbon tax is to incentivise firms to change their behaviour so that those that do change their behaviour by producing goods more sustainably will pay less carbon tax and benefit from reduced corporation tax and those that do not will pay more?

[Sammy Wilson]

That is clearly not what the Chancellor intends, because he hopes to raise £1.4 billion. If the hon. Gentleman is saying that this is all about changing behaviour so that firms do not get the money, there is an immediate hole in the figures the Chancellor is presenting to the House today. I suspect that it is not all about that at all, but is another way of raising tax. What appears on the surface to be a good supply-side measure will be more than offset by some of the other measures undertaken. Of course, the kinds of firms that are most likely to be hit by this are the very firms that the Chancellor says he wishes to promote: those in manufacturing industry. The service industry will not be hit by those measures as much as manufacturing will, and, given Northern Ireland’s reliance on gas and oil to fuel and power manufacturing industry, and the fact that our energy costs are already higher than in other parts of the United Kingdom, that will gravely disadvantage manufacturing firms in Northern Ireland, at the very time when the Executive in Northern Ireland is trying to rebalance the economy.

--- Later in debate ---

[Stephen Williams (Bristol West) (LD)]

This is, of course, the second Budget of the Liberal Democrat-Conservative coalition Government. The first Budget was put together in the extraordinary circumstances that followed the 2010 general election, when the two parties came together to co-operate in government and clear up the mess left by the Labour Government. In that Budget we dealt with the emergency, and set out a plan to restore fiscal credibility and put Britain back on track. Today we begin the next phase of this coalition Government. Over the next four years we will build a stable economic future, with growth in our economy that is regionally balanced, encourages innovation, and is green and sustainable. We have moved from the rescue stage. We are now on to recovery, and we look forward to reform.

[Sheila Gilmore (Edinburgh East) (Lab)]

When the hon. Gentleman stood for election last year and his leader said that making deep and fast cuts in public services would be dangerous, did he believe it? If he did, but then came to a different view, what made him change his mind?

[Stephen Williams]

I would remind the hon. Lady that we can all be selective with quotations from different party leaders or finance spokesmen in the general election. Indeed, we could do that all round the Chamber. I well remember the leader of my party saying that there would need to be “savage cuts” in public expenditure to deal with the desperate circumstances that whoever won the general election would have to deal with. He was heavily criticised for using the phrase “savage cuts”; none the less, he gave a stark warning that was also timely and well made.

Despite those circumstances, we—and in particular the Liberal Democrats in the coalition—have endeavoured to ensure that all the measures that we put in place, whether in the emergency Budget, the spending review or the Budgets to come, are underpinned by fairness. It is important that we recognise people’s concerns about the cost of living and the pressures on their household budgets. That is why today Liberal Democrats in particular welcome the further step taken towards our main manifesto commitment of ensuring that nobody on an income of less than £10,000 should face an income tax bill. From April this year, almost 900,000 people will be taken out of income tax altogether, with all average earners getting a tax cut of £200. In a year’s time, 1.1 million lower-paid people will be taken out of the income tax net altogether, leading to a tax cut for everyone on average earnings of £326 a year. This measure will, as we always pledged, help the poor and reward work.

[Mr Stewart Jackson]

I warmly endorse my hon. Friend’s comments about taking low-paid people out of tax. Does he agree that it ill behoves the Opposition to criticise these measures, given that Labour’s contribution was to get rid of the 10p tax rate and import more than 1 million unskilled, low-wage workers from eastern Europe over 13 years to undercut the pay and conditions of the poorest people in this country?

[Stephen Williams]

I well remember sitting on the Opposition Benches during the final Budget of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), and being one of those who spotted the fact that the tax cut being given to higher-rate taxpayers and the cut in capital gains tax, which were cheered by Labour Members at the time, were effectively being funded by a tax rise for the poorest people in society that doubled their rate of income tax from 10p in the pound to 20p.

People are also rightly concerned about their household budgets as a result of high fuel prices. You and I will know, Madam Deputy Speaker, that it is difficult now to find petrol or diesel costing less than 130p a litre anywhere in the city of Bristol. Even the local fuel station in my constituency is now charging 140p for diesel. I therefore welcome the measures to address those concerns by reducing fuel duty by 1p and by stopping Labour’s planned further increases, leading to a further 5p reduction in fuel duty. This will be welcomed by people not only in cities, such as those I represent, but in the rural areas around Britain represented by my colleagues.

[Mr Alan Reid (Argyll and Bute) (LD)]

I also welcome the fact that the rate of fuel duty on the islands will be cut by 5p a litre, starting from April 2012. That will put an extra £5 million into the economy of our islands.

[Stephen Williams]

My hon. Friend is of course referring to the derogation from the European Commission that has been applied for in order to ensure that the coalition Government’s Budget promise is deliverable under Community law, unlike the undeliverable measure to reduce VAT proposed by Labour.

Fuel duty is, however, a blunt instrument for taxing the motorist. I welcome the measures put forward today to stabilise the prices in between the oil companies and the consumer, but in the medium term, we must look for a much better way of developing a market mechanism for taxing the use of our roads.

A further issue of fairness relates to tax avoidance. Whether practised by large companies or by rich individuals, tax avoidance is an affront to fairness, when ordinary people around the country are going out to work, paying their taxes on time and making their contribution. It is an affront to them that some companies are using the tax system unfairly to avoid tax. Some rich people in society—including sportsmen whom people admire—are also using those schemes. It is therefore right that the Government should take further measures today to close down some of those avoidance schemes and introduce an increased levy on non-domiciled individuals.

Right across the age scale, from pensioners who will benefit from the triple lock, guaranteeing that their pension will go up each year, to children from the poorest families, whose schools will receive the pupil premium, this Government are delivering for all sectors of society. These are fair measures that meet the concerns of ordinary Britons, the people who, according to the term that my party leader, the Deputy Prime Minister, has recently injected into the political debate, wake up to alarm clock Britain. [Laughter.] I knew people would like that, but those are the ordinary families around the country whom all hon. Members represent, and we should not laugh. They are the people who get up and go out to work. They work hard, they want their children to do well and they want their parents to be secure in old age.

Another major element of the Budget, along with fairness, is the plan for growth in the green book that has been launched today. It is important that the plan should be regionally balanced. One of the unfortunate legacies of the last Labour Government was the overheated economy in London and the south-east of England, and the credit bubble which, as we know, eventually burst. We cannot allow that to happen again. This Government are determined that growth should be shared fairly right across the nations and regions of the United Kingdom. That is why I particularly welcome the announcement today of 21 enterprise zones and I look forward tomorrow to hearing confirmation from the Prime Minister and the Deputy Prime Minister of where they will be based. I hope that one of them will be in the Greater Bristol local enterprise partnership.

[Mr Kevan Jones]

I suggest that the hon. Gentleman read the Red Book. If he looks at the figures for the local enterprise zones, he will see that they add up to about £900,000 for each one. That needs to be compared with the funding for the regional development agencies in the last year of the Labour Government, which was more than £2 billion.

[Stephen Williams]

We will have to wait and see the detail on the local enterprise zones. What we know from the detail we have had today is that there will be a year’s tax holiday from business rates for people locating in those zones. They will also be equipped with superfast broadband and, I am sure, other measures of support and advice. This issue is bound up with other announcements already made this week about the technology innovation centres and the Manufacturing Advisory Service. There is a whole package of measures that I suggest the hon. Gentleman looks at.

[Dr Julian Huppert (Cambridge) (LD)]

Does my hon. Friend agree that the test of how well a Government policy works is not how much money is spent on it, but the benefits it has? That is why I hope my hon. Friend will join me in welcoming the steps taken to help entrepreneurs and scientific research in areas such as Babraham near my constituency.

[Stephen Williams]

I thank my hon. Friend for that intervention, and he is, of course, quite right. The question from Labour Members when they were in government was always, “How much money can we possibly spend on this situation?” rather than “What works?” That is the difference between this coalition Government and Labour. I commend my hon. Friend for the measures he has recently published on entrepreneurship.

Another aspect of growth that I want to see in the future that we have not had in the past is green and sustainable growth. I particularly support the confirmation that a green investment bank will be set up with initial capital not of £1 billion, but of £3 billion, to incentivise investment in the low-carbon economy of the future. The Red Book, quoted so much already, suggests that this will leverage into the low-carbon economy a further £18 billion-worth of investment. Before the end of this Parliament, once our finances are stabilised, that bank will be able to borrow in order to make further investments.

[Zac Goldsmith (Richmond Park) (Con)]

Does my hon. Friend share my concern that the downgrading of the Government’s flagship policy, the green investment bank, from what should have been and would have been a bank able to issue bonds from day one to what amounts to a fund for the next five years effectively reduces the prospects of our country becoming a world leader in green innovation? Does he also agree that by failing properly to back our fledgling green economy, we will find it harder to cut our emissions and harder to achieve or boost energy sovereignty, and we will be missing out on one of the greatest economic opportunities of all time?

[Stephen Williams]

I am sure that the hon. Gentleman has been making that case in private to his well-connected friends. I and my colleagues have also been making the case for a green investment bank, not a green investment fund. It has been confirmed as a green investment bank today and it will have £3 billion of seedcorn capital to get it off to a flying start. It is going to start a year earlier than originally suggested. By the end of this Parliament, it will be able to issue bonds so that if we wish, we could all deposit our funds with that bank to invest in our green future.

I also welcome the investment made in innovation and skills, particularly in technology innovation centres. I talked a lot in the last Parliament about the skilling of our young people and how we needed to get more people to take up apprenticeship places, so the confirmation of 50,000 more places today means that there will be 250,000 more in this Parliament than we were left by the last Government.

Speaking as someone who before entering this House spent 17 years in a career in the private sector, advising small businesses on how to set up and take off, I welcome the confirmation or enhancement in the Budget of many reliefs designed to help new and innovative businesses to take off and the fact that by 2014 we will have the lowest rate of corporate tax in the G7. We now look forward to a further period of reform.

The hon. Member for Aberdeen South (Dame Anne Begg) rightly mentioned the integration of the income tax and national insurance schemes, on which there is to be consultation after the Budget. It is, of course, 100 years since Lloyd George, my political hero, introduced the national insurance scheme. During the slump of the 1920s, however—this deals with the point made by the hon. Lady—the actuarial soundness of that scheme was essentially undermined, and ever since then the fiction has been maintained by Governments of all hues that it is a separate fund. In fact, it is a second income tax in all but name, and the time has come to reform it. I am very glad that the Government are going to do that; and because they are going to consult on how it should be done, all the issues raised by the hon. Lady about contributions-based benefits are likely to be dealt with.

The other reform to which I look forward is the move to a system based more on sustainability, involving a tax on carbon. I am delighted that the Chancellor has confirmed the introduction of a new carbon floor price. On behalf of the Liberal Democrats, I will shortly produce a paper fleshing out how that can work during the rest of the current Parliament.

It is disappointing that we have not been able to agree internationally on further taxes on aviation—both coalition parties wanted an aeroplane tax rather than air passenger duty—and I hope that international agreement will be secured so that that can be achieved. However, I welcome the confirmation that we are to end the absurd anomaly whereby the jets that most of us use when travelling abroad are subject to air passenger duty while private jets are not. Under the existing law, a plane full of football fans going off to watch their heroes must pay tax, while the team itself takes off in a private plane and pays none.

The measures that have already been outlined, and the reforms to which we look forward, reward hard work, incentivise enterprise, and make progress towards a low-carbon economy.

Let me deal finally with the issue of the banks. I welcome the fact that the Government have introduced a levy that will be permanent, throughout the life of this Parliament. It has been confirmed today that the banks will not benefit from the reduction in corporation tax, and that the levy will be increased in future. We shall have to wait for the results of the Vickers review to find out whether there are proposals to break up the banks.

[Helen Goodman]

How can the hon. Gentleman say what he has just said about the banks, given that the bank levy is falling from £600 million to £100 million within three years? That is patently ridiculous.

[Stephen Williams (Bristol West) (LD)]

I understand that the bank levy is about £2.5 billion a year. The Chancellor announced recently that the levy, which was £1.8 billion in its first year, would be increased to £2.5 billion, and today it has been confirmed that the banks will not benefit from the reduction in corporation tax and that the levy will be increased.

Another issue connected with the banks is what we should do with our ownership, as taxpayers, of Lloyds Banking Group and the Royal Bank of Scotland. That is an issue with which the Government will have to deal at some point in the next few years. A couple of weeks ago I published a pamphlet, with CentreForum, which suggested that the shares should be given to the people so that the state could recover the £67 billion that was invested in the banks bail-out in 2008. The citizen should enjoy the upside: the citizen should enjoy the growth in those shares in the future. I hope that my Treasury colleagues will look favourably on that proposal as they decide what to do with the legacy from the last Government.

The Liberal Democrat-Conservative coalition Government have dealt with Labour’s toxic legacy, but Labour Members seem to be still in denial about the problem. They have not acknowledged its existence, let alone shown any sign of contrition for their role in the deficit. The Leader of the Opposition produced some very good jokes today—I will give him that—but he could at least have made an apology. We have started to clear up the mess. Today’s Budget sets in train a plan for a Britain that is fairer, with a stable economy and a low-carbon future. It recognises the need to help households with their budgets now, and to give them confidence that the economy and their country are back on track.

Several hon. Members rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Before we move on, I have to announce the result of a Division deferred from a previous day. On the question relating to a stability mechanism for member states whose currency is the euro, the Ayes were 310 and the Noes were 29. Therefore, the Ayes have it.

[The Division list is published at the end of today’s debates.]

I shall call Mr Dan Jarvis next, who will be making his maiden speech, and I remind hon. Members of the normal courtesies that should be extended when hearing a maiden speech.