Global Economy

Tom Blenkinsop Excerpts

Thursday 11th August 2011 Commons Chamber

[Mr Osborne]

It would of course have been ruinous, not just for individuals but for the Government. One of the largest items of Government spending I inherited, unfortunately, was debt interest. We are raising taxes in order to pay our international creditors and that interest is forecast to rise, sadly, over the Parliament, as we reduce the deficit. That is why it is so important to try to get debt falling by the end of the Parliament. Of course, any reduction in our gilts yields is good for the Government and saves us money, too.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Can the Chancellor explain why his own Office for Budget Responsibility forecasts £46 billion of more borrowing?

[Mr Osborne]

The Office for Budget Responsibility makes its independent fiscal forecasts and, I think, one of the great policy developments of this Government has been the creation of that independent body, which will make its autumn forecasts in the usual way.

Finance (No. 3) Bill

Tom Blenkinsop Excerpts

Tuesday 5th July 2011 Commons Chamber

Other Ministers from the Department for Business, Innovation and Skills and from the Department of Energy and Climate Change have said on the record in the Chamber, as well as off the record in talking to us all informally and in ministerial meetings, that they want the Government to produce a mitigation package as soon as possible. They understand the problem. We want to hear from the Treasury tonight that it understands it as well, because those Departments will not be able to put that package before the House until the Treasury agrees to it. I appeal once again to the Minister’s heritage: what she says tonight will mean a great deal not only to Members representing constituencies affected by the proposals but to the representatives of those industries who are probably listening now and waiting to hear her give some reassurance about their future.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I should like to speak to amendment 12. It is a great pleasure to talk about places that I know well, such as the Teesside Cast Products plant in Redcar, Stocksbridge, Hartlepool and Scunthorpe, as well as Skinningrove in my own constituency.

The chemical industry is no longer the dirty industry depicted in Ron Angel’s “Chemical Worker’s Song”. On Teesside, between 35,000 and 45,000 workers are directly or indirectly employed in the industry, and over the past 18 years, it has reduced its emissions by some 75%. That has been matched by the steel sector’s reduction in energy per tonne of steel produced from 31.7 GJ in 1973 to 19.4 GJ in 2010.

[Ian Swales]

Does the hon. Gentleman agree that those industries need no further encouragement to reduce their energy use, because, by definition, they already spend a large proportion of their money on energy? They all have a good record in reducing their energy use.

[Tom Blenkinsop]

I thank the hon. Gentleman for his comment, and I entirely agree with him. The industries are in it to make money, and it is obvious to anyone who knows them that they need to reduce the amount of energy that they expend to make their products.

British manufacturing output as a whole has been growing for decades, according to figures from the Office for National Statistics. Why is that? Output in the chemicals industry has increased, unlike in other sectors. During the 2008-09 downturn, the industry suffered the second smallest decline in production. The development of the chemical industry over the last decade under Labour has been largely unreported. Only now is it being seen as a sexy subject. However, in places such as Middlesbrough, Redcar and Billingham, we have always referred to ourselves as proud smoggies, in the knowledge that our manufacturing endeavours have far more worth than the machinations of the City.

According to DECC statistics on greenhouse gas reduction, the disappearance of the chemicals sector would directly save an average 10.79 million metric tonnes of CO₂ equivalent, out of the total UK generation of 627.85 million metric tonnes of CO₂ equivalent. Across industry, the chemicals sector is responsible for only 3.9% of energy-related emissions. The growth reviews in November and December last year gave good signals to manufacturing. However, the rhetoric contained in those reviews assumed that a low-carbon economy could emerge only by pricing energy-intensive users out of the market. The flaw in that logic is the assumption that the full substitution of fossil fuels will miraculously come about if intensive energy users are strangled. A further flaw is that the technology that will develop green industries actually flows from the existing energy-intensive industries, their research and development, and their skilled work forces, but they will obviously no longer exist in the UK if we force them abroad.

The December growth review stated that high energy prices were a barrier to advanced manufacturing growth, yet the Secretary of State for Environment and Climate Change said at the same time that recovery does not come from old industries “bouncing back”, and that the low-carbon industries would be an important part of our growth story over the next 10 years. That was in his speech to the Institute for Public Policy Research on 1 December last year.

For every tonne of CO₂ emitted in producing insulation, 233 tonnes of CO₂ are saved, and, as my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) said, for every tonne of CO₂ emitted in producing a wind turbine blade, 123 tonnes of CO₂ are saved. For every tonne of CO₂ emitted in the production of energy-saving tyres, 51 tonnes of CO₂ are saved—and so on, and so on. In the case of insulation, one year’s CO₂ emissions created producing insulation saves 2.4 billion tonnes of CO₂.

At the heart of the issue is the lack of understanding in the Treasury and DECC that these chemical companies cluster, as they always have done, and as they previously did within the large-scale set-ups of ICI. As NEPIC—the North East of England Process Industry Cluster—has proven in my region, locally produced products often feed on-site sister businesses or other company-owned plants. That integration produces better economies of scale, efficiency, profitability and technological development. It is regional clustering, as exemplified by NEPIC in north-east England, which was set up by One North East, that exemplifies industrially-led industrial activism. The Government’s carbon floor pricing policy, on the other hand, fragments industrial integrative clustering.

Unfortunately, the Government assume that secondary industries will not leave the UK, even if the primary chemical industries do. Indeed, the Secretary of State for Energy and Climate Change has said that

“quite a few of the high energy users have forms of natural protection like high transport costs so the impact is rather less than you might expect.”

Unfortunately, empirical evidence wholly contradicts the Government’s stance. As Jeremy Nicholson, director of the energy intensive users group has said:

“The idea that downstream industries are likely to remain here indefinitely if primary production goes might have a theoretical case but I’d say just look at the empirical evidence: downstream manufacturing thrives on co-location with primary industry and why would you expect that to cease in the future?”

Real life examples clearly show just how fragile downstream companies are. Let us consider Wilton, the former ICI site in the constituency of the hon. Member for Redcar (Ian Swales). The plants were balanced with the ICI ethylene cracker at the top of the production pyramid; as foreign ethylene became cheaper and producers produced offshore, the requirement for the cracker was reduced, leading to other plants downstream such as the Dow plant also being affected.

When Dow closed, 55 direct jobs were lost. That is not as big a media story as the events that unfolded at the mothballing of the Redcar blast furnace at the then Teesside Cast Products Corus plant, but the repercussions of Dow were just as profound. An estimated 2,500 jobs were lost downstream as a result of the closure of Dow’s ethylene oxide production plant—the only ethylene oxide plant in the UK. NEPIC has bounced back, bringing in other investments to Teesside, but it is acutely aware of the loss of primary chemical production and of lost opportunities for technological developments that could be made on Teesside, securing new green markets in turn.

More than this, however, the Secretary of State’s comments condone the loss of primary chemical production as a result of the carbon floor pricing while actually actively pursuing it. The question I must ask is: if industry flees within two years, as feared, how on earth will this carbon floor pricing levy taxation apply when the energy-intensive industry is no longer here? An industry cannot be taxed if it will not hang around to be taxed, which leaves Britain with neither the tax nor the industry.

As many primary raw chemicals are very expensive to transport and in some cases are banned from transportation, the Secretary of State’s relaxed approach appears uninformed. Many secondary production companies are small and medium-sized enterprises, often with fewer than 10 employees, and economies of scale for the transportation of such vast quantities of chemicals are just not viable, making the whole operation futile and highly costly for such small operations.

Amendment 12 would ensure that the Government look at the immediate impact of the provisions in the schedule on energy-using manufacturing industries and on employment in those industries; and at how the moneys raised by those measures will be used to mitigate the immediate impact of the schedule on consumers and on manufacturing industries and to encourage green investment. At the very least the Government must monitor and review their own policy and its consequences, which I fear will be devastating for energy-intensive industry and for my area of Teesside. A review will allow the Government to take stock.

[Ian Lavery (Wansbeck) (Lab)]

Is my hon. Friend aware of the double whammy of the European trading scheme and the carbon floor price, which will have a devastating effect not just on Scunthorpe and Teesside but on Lynemouth in my constituency? Rio Tinto Alcan is the company there and it makes a current profit of £50 million a year, which will be totally wiped out as a consequence of this double whammy, putting 600 quality jobs at risk. Does my hon. Friend agree that special measures must be put in place to overcome these unjust taxes?

[Tom Blenkinsop]

I thank my hon. Friend for his intervention. Yes, I certainly do. To finish, let me say that a review will allow the Government to take stock of the policy and to make quick changes to it, as I fear they might have to before it is too late.

[Nia Griffith (Llanelli) (Lab)]

There have been many excellent contributions, so I shall keep my comments short.

As secretary of the all-party steel group, I want to speak to amendment 12, in particular to subsection 4(c) and (f). We are asking for the Finance Bill to be amended because of the very significant negative impact that the carbon floor price, at the level set, is likely to have on heavy industry, such as the Trostre steelworks in my constituency and similar steelworks and energy-intensive industries throughout the UK.

The Economy

Tom Blenkinsop Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

It is encouraging to see so many Members wearing “Yes to High-Speed Rail” badges. That is a much-needed programme to encourage growth, but it absolutely flies in the face of the argument that the Chancellor has made today. The campaign is contrary to his supposed economic growth strategy because it supports a public finance-led project that aims to encourage follow-up investment by private sector capital. There are very few examples of that now, unlike under the previous Administration, when public sector capital was used to encourage and attract private sector investment.

We have heard today that, 12 months after the decision to cut further and faster than any other major economy, the recovery has been choked off, with zero growth over the past six months. The VAT rise has helped push inflation up to more than double the target rate, consumer confidence has fallen and both manufacturing output and retail sales fell last month. There was a welcome fall in unemployment in the last two months, mainly in part-time working, which the Government have started to refer to as “mini-jobs”. Vacancies are down, job creation has slowed in the six months since the spending review and unemployment is set to increase over the coming years to 200,000 higher than was expected in the past few months.

[Ben Gummer]

Will the hon. Gentleman state the precise source of the 200,000 figure that he has given for the increase in unemployment?

--- Later in debate ---

[Tom Blenkinsop]

The estimate will be from the OBR, so it is from a Government-sponsored body that assesses the Government’s own figures.

[Ben Gummer]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I am sorry, but I want to continue. I will give way to someone else later.

The Tories are creating a vicious circle in our economy by cutting too far and too fast, hitting families and costing jobs. In fact, they are set to borrow £46 billion more than they had planned last autumn because of slower growth, higher inflation and higher unemployment, which are the consequences of the decision, announced in the Chancellor’s first Budget, to cut too far and too fast.

In the 12 months since the emergency Budget, all the key economic forecasts have worsened. On borrowing, for example, the OBR has steadily increased its forecasts for Government borrowing over the next five years, which means that the Chancellor is now forecast to borrow £46 billion more than he expected to last November.

[Gordon Birtwistle (Burnley) (LD)]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

Sorry, no.

That is because slower growth and higher unemployment, which means more people claiming benefits, makes paying down the deficit harder.

[Gordon Birtwistle]

On that point, will the hon. Gentleman give way?

[Tom Blenkinsop]

No.

The best way to reduce the deficit in the long term is by focusing on growth and jobs in order to get people into work and off benefits. Since the emergency Budget, the UK’s GDP for this year has been downgraded twice by the OBR, and three times since it analysed Labour’s plans. It is not only the OBR that has downgraded its growth forecasts; other respected organisations have done the same. The OECD, in its most recent forecast, downgraded the UK’s growth in 2011 to 1.4%, and to 1.8% for 2012. The British Chambers of Commerce, in its recent quarterly forecast, downgraded growth in 2011 to 1.3%, and to 1.2% for 2012. The International Monetary Fund, in its latest report on the state of the UK economy, downgraded its growth forecast to 1.5% in 2010, down from 2% last autumn. The OBR is now forecasting higher unemployment and a larger number of people claiming jobseeker’s allowance in every year of this Parliament. Its latest forecast now expects inflation to peak at 4.2% this year, up from 1.6% last June when it evaluated Labour’s plans.

The international comparisons are stark. Recent figures show that in the first quarter of 2011 the French and German economies grew by 1% and 1.5% respectively, compared with the 0.5% growth in the UK, which merely cancelled out the 0.5% contraction of the previous quarter. Over the past six months, the UK’s growth has been flat. The Business Secretary has admitted that it is “worrying” that we are lagging behind France and Germany. The OECD’s deputy secretary-general and chief economist told The Times that he sees merit in slowing the pace of fiscal consolidation if growth continues to be slow.

[Gordon Birtwistle]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

No.

This pattern is borne out in my constituency and the local area. Recent figures from the Office for National Statistics show that the volume of new construction orders in the first quarter of 2011 fell by 23%, compared with the fourth quarter of 2010. Orders are also down 18% from that time last year. That coincided with 1,500 job losses in the steel industry at the Skinningrove steel works in my area, in Hartlepool, at the Teesside beam mill, and also down the road in the constituency of my hon. Friend the Member for Scunthorpe (Nic Dakin). This Government have taken away public sector orders in steel that provided 46% of the Teesside beam mill’s orders, which have just vanished. Figures published on 10 June show that the seasonally adjusted index of production in April 2011—

[Gordon Birtwistle]

Will the hon. Gentleman give way?

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Mr Birtwistle, just to save your legs, I do not think that Mr Blenkinsop is keen on allowing you an intervention.

[Tom Blenkinsop]

Figures published on 10 June show that the seasonally adjusted index of production in April 2011 fell by 1.2% when compared with April 2010. In addition, the seasonally adjusted manufacturing figures saw output fall by 1.5%, and in my area, again, Teesside beam mill has shut down, the Ensus biofuels plant is on a four-month shutdown and the former Enron-run Teesside power station has been half mothballed. That has all happened during the tenure of this Government. We heard from the Chancellor how he believes that the economic ramifications of his policies occur within weeks, so it would be quite refreshing to hear Ministers take responsibility for the manufacturing downturn in my area.

Prospective packages from INEOS have been blocked, because it is looking for certainty, and a Government who rely on a weak pound for exports to lead their economic recovery are living in a fantasy land, given the constant credit squeeze from the Asian growth markets. The governing parties are quite willing to take the credit for manufacturing output increases, but they are still below 2008 levels and also match other manufacturing increases across the globe. They have nothing to do with the Government’s policies; they are about manufacturing at this moment in time across the globe.

The British Chambers of Commerce described the latest trade figures as “mediocre”, adding that

“the monthly underlying fall in the volume of exports is a matter for concern.”

What concerns me is that a Government who laud the benefits of manufacturing are also imposing ahead of their EU competitors a carbon floor-pricing policy that will stifle the very industries on which they rely for their growth. How are the Government going to get tax revenues from those industries when they no longer exist or move abroad? That is the stark reality, and we have to wake up to the fact that the biggest sectoral exporter in the country is the chemical industry, which will also be the most affected industry as a result of that policy.

In last year’s Budget, the Chancellor chose to increase VAT to 20%, despite the Tories repeatedly denying in their election that they had any plans to do so. The Treasury’s own figures show the estimated impact of the rise in VAT. The 2.5 percentage point rise will cost an average couple with children £450 a year and a pensioner couple £275 a year.

The rise will also have an impact on growth. The Office for Budget Responsibility forecasts that the increase in VAT to 20% will have the effect of reducing GDP during this financial year by about 0.3%. If we had a temporary reduction in VAT across the board, we would provide a boost for consumers by putting more money directly into people’s pockets, and we would be able to maintain it until there were certain figures, proved empirically, to show that an economy recovery was beginning.

The fact that this Government are not prepared to give former regional development agency assets to local enterprise partnerships, which are supposed to be this country’s local economic drivers, is an absolute demonstration that the Chancellor has no confidence in his own economic plan. The LEPs will have no rights to those assets, and that means that the Chancellor has no confidence in those local businesses that are engaged with them.

Eurozone (Contingency Plans)

Tom Blenkinsop Excerpts

Monday 20th June 2011 Commons Chamber

[Mr Hoban]

My hon. Friend is absolutely spot on in his analysis. I believe that the 10-year gilt rates fell to 3.2% at the end of last week, which reflects the markets’ vote of confidence in the UK economy and particularly the fact that we took the difficult decisions that the Labour party shied away from when they were in government. We took those decisions, which is why the market rates are similar to those in Germany, yet our deficit is more in line with that of Portugal.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Can the Minister give an assessment of what effect a Greek default will have on the German and French economies, which are more exposed to such a default, and in turn on UK manufacturing?

[Mr Hoban]

The hon. Gentleman is right to say that German and French banks have a greater exposure to the Greek sovereign debt than the UK banks do. The French exposure is, I think, four times that of the UK, while the German banking sector’s exposure is about five times ours. That is why it is important that, as we go through the process of stress testing European banks, we look very carefully at the level of capital that our banks hold to ensure that they are in a position to withstand shocks and thus to support and sustain the economy.

Amendment of the Law

Tom Blenkinsop Excerpts

Monday 28th March 2011 Commons Chamber

[Caroline Flint]

It is amazing how Conservative MPs are picky about which part of our budget they want to suggest would go different ways. On the one hand, the hon. Gentleman claims that the difference between our budget and theirs is £2 billion, and on the other hand, the Chancellor boasted in the previous Budget that there was a £40 billion difference between our plan to halve the deficit over four years and his plan to eliminate it entirely. They cannot have it both ways. We need a Budget for growth, and a few facts tell us all we need to know.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Government Members have mentioned export-led recovery. Only last week, in the Budget debate, the right hon. Member for Wokingham (Mr Redwood) warned the Front-Bench team that such an export-led recovery will peter out very soon and for the next two years, as credit contracts in China, India and Brazil, among other countries. However, does my right hon. Friend agree that at the heart of the Budget and the growth strategy lies the privatisation of the Royal Mail, the privatisation of the NHS and the attempted privatisation of the forests?

[Caroline Flint]

They have already U-turned on the forests; let us see how much they respond to the elections in a month when the people of this country will make it loud and clear what they think of the past 10 months. The sad thing is that we have had to wait 10 months for a so-called plan for growth. In those 10 months, we have seen unemployment and borrowing rise and growth fall. That does not bode well for anybody in the country, be they those with families, those in the public or private sectors, those with a business trying to grow or those trying to start up a business.

Fuel Prices and the Cost of Living

Tom Blenkinsop Excerpts

Wednesday 16th March 2011 Commons Chamber

[Mark Pawsey (Rugby) (Con)]

It is a pleasure to follow the hon. Member for Scunthorpe (Nic Dakin), but I am disappointed that he chose to repeat the remarks of Opposition Members on the attendance of Front Benchers in this debate. It is pretty reasonable for us to expect that they would be working hard on a most important Budget, which will be delivered in this Chamber in only a week’s time.

I want to concentrate on the effects of fuel costs on small businesses. The success of our small businesses will be crucial to our work in rebalancing our economy, achieving economic growth and clearing up the economic mess left behind by the Labour party. Certainty and stability in the price of fuel are critical for small businesses—in some cases, they are more important than the price itself, although small businesses suffered massively as a result of rising fuel prices implemented by the previous Government over the past few years. In 13 years, the duty increased from 36p to 57p a litre.

Let me give the example of a medium-sized business in my constituency, Rugby. It is a business that I know well, because I owned and ran it for 25 years before arriving in this place. With 10 vehicles—five delivery vans and five cars for representatives—we served customers around the midlands, and the cost of fuel was a major budget consideration for us. In November each year, I would set my budgets for the following year, and try to estimate the price of fuel over the coming year. In recent years, that became almost impossible. In just the past two years—between January 2009 and January 2011—fuel costs have increased by £1,000 a month. The price per litre went up from 98p to £1.29 in that period; it is now closer to £1.40. The business is now spending £3,000 a month on fuel instead of £2,000. That is £12,000 in additional annual costs attributable to fuel alone. That comes directly from the bottom line; it is a reduction in the profitability of the business, which means that there is less available to reinvest in the business.

As was alluded to earlier, there is evidence from the business community that some suppliers are using the increase in the cost of delivering goods as a reason for price increases to small businesses. That is detrimental to small business profits and is inflationary. When fuel costs change, there are significant implications for distribution costs. Small businesses suffer disproportionately, because they are often in a weaker negotiating position and are thus unable to recoup the shortfall from their customers.

Certainty of price is what small businesses need, so that they can plan. That is often more important to them than price in isolation. I am therefore very sympathetic to the fuel duty campaigns calling on the Government either to freeze fuel duty or to implement the fuel stabiliser. To me, the fuel stabiliser seems a responsible decision, and although I recognise the complexity involved, I support any measure that will decrease the burden on small business.

The motion calls for a reduction in VAT on road fuel to take it back to 17.5%. As the Economic Secretary to the Treasury reminded us, a separate rate of VAT, as well as being illegal under EU law, will have no impact whatever on small businesses, because most of them simply reclaim VAT. If the motion were accepted, it would, of course, lead to additional tax complication for small businesses and make it more difficult for them to prepare their paperwork.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The hon. Gentleman makes an excellent case on small business and its financial concerns, but how does he think the price of fuel will affect the cost of running vehicles in the Home Office, the Royal Mail fleet, and the Department of Health?

[Mark Pawsey]

The point that I am making is that the most important thing in any organisation is the ability to budget accurately across the business. The stabiliser proposal will deal with that; a reduction in VAT simply will not have any effect on that at all.

It is my contention that Labour Members are to blame for the situation that we are in, because this January, the Government implemented a rise in fuel duty for which the previous Government had legislated; the previous Government raised fuel duty 12 times when in office, and they planned for six further rises to take place after the general election. Businesses are looking forward to seeing what measures the Chancellor will bring forward in the Budget in a week’s time to ease the burden on the important small business sector.

--- Later in debate ---

[Charlie Elphicke]

I cannot control the weather; God controls that. Nor can I control world oil prices; they are controlled by the global markets. Would that we could just magic away the fact that global oil prices have risen, but we cannot, and global oil prices have been rising and creating the problem felt deeply by many of our constituents. The situation has not been helped by the past decade’s 12 rises in fuel duty, which saw it go up from 36p to 57p. That is a massive, 20p increase, and on top of that there is VAT. But, to come to this House and say, “Well, why don’t we just chop the VAT by 2.5%,” knowing that is illegal and unlawful, and that it would take six years to secure such a derogation, is a shameless and craven exercise in opportunism.

[Tom Blenkinsop]

The Government are proposing enterprise action zones, so if I were to set up a petrol station in one of them, would I be able to sell petrol exempt of all taxes? That would present a problem for the hon. Gentleman’s argument that, under EU law, we are not able to roll back VAT.

[Charlie Elphicke]

I do not think the Chancellor would introduce any such enterprise zone on that basis, and nor should he; that would be a ridiculous thing to do.

Just as ridiculous is the fact that the previous Government did so little about smuggling across the border. We see it daily in Dover, where local hauliers complain to me bitterly about the people who fill up in Luxembourg but not in the United Kingdom. They bring goods in, pick up another load, leave and then fill up again in Luxembourg. They contribute nothing to duty, road funds or vehicle excise duty in this country; they come on a free pass, and the previous Government did nothing about it.

Independent Financial Advisers (Regulation)

Tom Blenkinsop Excerpts

Monday 29th November 2010 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I congratulate the hon. Member for Wyre Forest (Mark Garnier) on securing this important debate. I am pleased that the hon. Member for West Worcestershire (Harriett Baldwin) referred to the Kensington Friendly Collecting Society, which is a very good organisation in my area.

As a Co-operative Member, I represent the interests of some people on low incomes who have been denied access to financial advice and products provided by friendly societies and mutuals as a result of the qualification requirements contained in the retail distribution review. The Kensington is a friendly society that has existed in Middlesbrough for 106 years. Mark Brooks, who is the chairman of its committee of management and a constituent of mine, and James Lancaster and Phil Carey wrote to me from the Kensington to raise their situation. The Kensington has 10,000 members throughout the Teesside postcode area. It provides savings and insurance products to those members for as little as £1 per week and a maximum of £5.70 per week. It provides opportunities for its members to obtain basic financial products. Without this provision, members of the society would largely be excluded from financial services and have to go to more expensive services, namely the banks, or to loan sharks.

The RDR is currently being finalised by the FSA. Its most likely outcome will be that the society will close down, which will mean that 10,000 members will lose their ability to save small sums of money for their funeral or for a rainy day. The reason is that the FSA is proposing a blanket qualification for any person offering financial advice—a qualification that is considerably higher than the current requirement. The FSA will not permit exemptions to this qualification structure, and it will not permit a gradual increase in qualifications vis-à-vis the risk and complexity of the product being advised on. The advisers at the Kensington and other societies will be required to obtain degree-level qualifications to sell a simple endowment or whole-of-life policy for a maximum premium of £5.70 per week. This is the only type of product that they sell, and the level of qualification required is disproportionate to the advice that they give.

The syllabuses of the proposed qualifications are irrelevant to the needs of those on low incomes. The exams focus on trusts, inheritance tax, capital gains tax and portfolio management. Those on low incomes may aspire to require this level of financial planning, but in the here and now they need advice on issues such as debt and benefits. The qualification requirements will mean that members of this society and others will be denied access to financial advice after 2012. The society will be unable to recruit new members because its advisers will be unable to offer advice to prospective members. A lack of new members will mean that this society and others will close. As a result, their members will lose access to financial products that they can afford and, in all likelihood, will be excluded from financial services thereafter.

That outcome seems to contradict the aims of the FSA and the Government in tackling financial exclusion. The RDR, while seeking to protect the interests of high net worth consumers, is by default taking away one of the few opportunities that those on low and insecure incomes have to obtain financial products. If the Government and the FSA are keen on promoting financial inclusion and financial literacy, then the existence of friendly societies like the Kensington is essential in delivering such benefits to those on low incomes. The concept of mutuality appears central to the idea of the big society, yet the consequences of the RDR would be to remove the remaining friendly societies that promote this notion.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Gentleman agree that the reduction in IFA numbers would also have an impact on the volume of new insurance policies and the work that would come from that?

[Tom Blenkinsop]

Yes, I certainly agree. We would lose skills and experience, as well as putting people out of jobs for no good reason whatsoever.

The qualification requirements would deliver no discernable benefit to the vast majority of consumers beyond the wealthiest few. Let me assure hon. Members that by arguing against the proposed qualifications, I am not saying that such members deserve less than the better-off, but merely stating that they require different things.

The Kensington has increased its premium income by over 40% in the past seven years despite the fact that tax-exempt premium limits have not been increased during this period. That indicates that there is a demand for the service and the products. The Kensington delivers products that fulfil real needs for those on low incomes. For example, in the Teesside area, owing to bad debt difficulties, undertakers will not proceed with a funeral unless the deceased’s relatives can provide a deposit of £750. The Kensington, among others, can fulfil that need because its minimum premium is £1 per week, which is enough to generate £1,000 of death cover. It has a local presence, which means that the agent can deliver a death claim cheque to the family directly within two working days of the member dying, and the whole process is conducted by someone whom the family knows.

The majority of members of the Kensington and other friendly societies in Teesside live in the poorest and most socially deprived council wards in the UK. Our people require honest and appropriately qualified agents who understand the benefits system, can provide advice on debt issues, and can generally assist in all forms of financial planning for those with limited disposable incomes. It is difficult to imagine that any such member would ever require advice on IHT planning, trusts, corporate financial planning, portfolio management or CGT.

The QCF level 4 is a disproportionate qualification for the home service market operating within tax exempt limits. It will not add value to consumers, nor improve the service that they receive. It will make home service sales forces even more expensive to run and will generate further financial exclusion. A more considered qualification that focused on the real, everyday financial issues that affect those on low incomes would be welcome. Current academic thinking reinforces my view, which I assume is shared by other hon. Members, that the only effective method of accessing and engaging those on low incomes in savings and protection products is a direct sales force. Indeed, the Department for Work and Pensions website states that tenant engagement teams are being piloted to increase take-up of home contents insurance,

“particularly as all other traditional methods of promotion (leaflets, flyers, competitions, prizes etc) have not resulted in large scale increases in the number of policy holders.”

In conclusion, the RDR qualification requirements for advisers selling tax-exempt, small premium assurance products are disproportionate and irrelevant to the needs of those on low incomes. The RDR will reduce the access of those on low incomes to basic assurance products at a time when significant amounts of energy and money are being invested in promoting financial inclusion in that area.

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Members for West Worcestershire (Harriett Baldwin) and for Wyre Forest (Mark Garnier) on introducing this apt motion. It has certainly galvanised a lot of interest in my constituency. Like all hon. Members, I have received e-mails, letters and phone calls, and I have held personal interviews, so I have had lots of information. My constituents have made it clear to me from the outset that this is not just about advisers who provide help to wealthy people who can stay at home and watch their money work and grow. I am speaking tonight on behalf of people who have a small sum of disposable income and who wish to enhance their small pensions at retirement age and seek help and advice from financial advisers. They have asked me to speak on their behalf, and I happen to know that some of them are watching the Parliament channel to see that I say what I said I would say.

One constituent sent me some background information, which sets out the situation very clearly. The retail distribution review appears to offer solutions—at least on paper—to matters which the FSA has identified as problematic within the industry. I am not aware of those problems, which concerns me. The FSA believes that the measures set out in the RDR proposals will provide for greater consumer confidence and engagement within the industry. It is planned that all advisers attain the qualifications and credit framework level 4 qualification by 31 December 2012.

A constituent of mine wrote:

“I have attended seminars at which RDR and the future of Independent Financial Advisers are discussed. They all have the same line…segment your client base…they give guidelines how to do this so that we have an income stream from a fee base structure. If I were to follow this suggestion I would have 3 clients left. When I question this approach, on every occasion the reply is…I need to change my market.”

Did anyone ever hear such advice in all their life? Goodness me!

[Tom Blenkinsop]

Building society closures and the exodus of the large phone service companies have reduced almost to nil the supply of premium products for those on low incomes, particular the 4 million who still feel disengaged. What do the hon. Gentleman’s constituents think about that?

[Jim Shannon]

I thank the hon. Gentleman for his comments. I have the same concerns.

It is estimated that it takes 400 hours to do the exams. That is approximately 10 weeks when people do not have the opportunity to earn money or do what they normally do. Advisers in Strangford have painted a different picture to that painted by the retail distribution review. Most of the customers of advisers in my constituency are working class. I have been informed by many financial advisers that they have spent time with people without receiving any financial reward—we have heard that from hon. Members on both sides of the House tonight.

One adviser offered advice to a female client who was about to go through a separation. She was stressed out about her finances, but the adviser spent a lot of his time on the phone to her. For all his work, he earned not a penny. The road that the regulator is pushing advisers down will mean that they will be unable to afford time if they do not get paid. Will we therefore end up with people being unable to afford sound financial advice, exactly as the hon. Gentleman said?

I represent a rural area, as do many hon. Members, including the hon. Member for Aberconwy (Guto Bebb). We are aware how the proposals will affect and impact on people in rural areas. Consumers will suffer substantial and unprecedented detriment owing to the unintended consequences of the proposals. Would it not be wiser or better to protect grandparent rights, as at least two or three hon. Members have intimated? Doing so would give the protection that many need. A substantial portion of the adviser population will leave the industry. Various surveys have been conducted and although there is no consensus on the figures, it is obvious that adviser numbers will fall drastically.

One of my constituents in Strangford wrote:

“I am 54 years of age…the heavy regulation is taking its toll. I am ¾ of the way through the new exam structure. Many advisers are finding it impossible to pass these exams as many are over 55 and are finding the stress unbearable.”

Another hon. Member referred to a 63-year-old adviser for whom contemplating exams will put him away in the head. The result will be anxiety, depression and stress. My constituent predicted a drastic fall over the next three years in the number of independent financial advisers. He continued:

“Advisers are finding the regulations unbearable, and many are having problems due to”

what is taking place. He made a statement that I found moving and honest:

“We are all starting to swallow the negativity thrown at us by the regulator over the past numbers of years, which is trying to kill us off”.

Now IFAs are facing another obstacle and barrier. We cannot afford for any businesses to be lost, especially ones that will take the financial burden off the state by enabling people to supplement their pensions and not need state aid and benefit. They are the people in my constituency and across Northern Ireland on whose behalf I wish to speak.

Robin Stoakley, head of intermediary business at Schroders, said:

“I do see up to 30 per cent of the IFA market leaving”.

How on earth could we support something that would take away 30% of the IFA market? Furthermore, Aviva UK Life marketing director, David Barral, said the firm predicts that by 2013, IFA numbers will fall to 10,000, leaving middle market consumers unserviced.

Oral Answers to Questions

Tom Blenkinsop Excerpts

Tuesday 16th November 2010 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The Federation of Small Businesses North East and the insolvency trade body R3 have wound up one in 10 businesses that were unprepared for the 2.5% increase in VAT next year. Kingston university also recently showed that small businesses in the north-east intend to shed staff. Is not VAT the real jobs tax?

[Mr Osborne]

As I say, we are doing that because we need to deal with the Budget deficit. I thought it was the policy of the hon. Gentleman’s party that a greater share of the consolidation should be borne by tax rises; I thought that that was now the official policy. It is also clear that the previous Government were planning a VAT rise. Businesses have had plenty of notice of the increase that is coming in in January, and I am sure they will be able to cope in the same way as they coped with the VAT rise at the beginning of this January.

Comprehensive Spending Review

Tom Blenkinsop Excerpts

Thursday 28th October 2010 Commons Chamber

[Danny Alexander]

I do not accept that analysis. Of course, it will be for individual police forces in due course to make their own decisions—[Interruption]—but given the potential for police forces to become more efficient, we think that there is no reason why those savings should have any impact at all on the presence of police on the front line in communities.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

On the policy to give two-year-olds 15 hours of education based on free school meal eligibility, what mechanism will be used and how much will it cost to ensure that that happens, given that there is no information about two-year-olds receiving free school meals? I have asked Ministers that question twice, but I still have not had an answer.

[Danny Alexander]

That is a very good question. I imagine that the hon. Gentleman intended to preface his question by saying that he welcomed the commitment to additional nursery education for the poorest two-year-olds. There are many mechanisms available, for example within the Sure Start system, that can target those pupils, and the Secretary of State for Education will no doubt make announcements in due course.

--- Later in debate ---

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I echo the views of my colleagues who have already spoken. I concur with them about the impact that the CSR will have on the poorest people, as evidenced by the recent BBC-Experian poll placing my area and the surrounding area in Teesside and East Cleveland at the bottom of that list—evidence that my proud people who struggle so hard are in the least resilient position to deal with the Government’s harsh cuts.

Let us take the Government’s threatened public sector sackings, such as those of 180 firefighters in Cleveland fire authority, which not only affects the local economy in terms of spending and welfare, undermining the average man in the street’s confidence in the economy, but exposes the local population, massive processing sites, and the manufacturing, steel and petrochemical industries of Teesside to hugely increased fire risk and in turn only deters further future inward investment in that area. The result of such a policy will be increased unmanaged industrial risk, which will only increase the insurance costs of manufacturing industry in my area.

Inward investment for manufacturing is of real concern, from wherever it may come. Teesside is not fussy; it just wants the investment. However, on Wednesday 20 October, during Prime Minister’s questions, following a question asked by my hon. Friend the Member for Darlington (Mrs Chapman), the Prime Minister could not come up with one inward investment or new company in the north-east that had come to the region without public funds leading to and attracting private inward investment.

When the Prime Minister, at the recent CBI conference, made assurances of £60 million to the north-east as “new” money, he was being wholly disingenuous. These moneys were set aside by Labour as a result of the Prime Minister's fiscal friend Kirby Adams’s attempt to be a second MacGregor. The Prime Minister’s mate, Kirby Adams, tried to destroy steelmaking on Teesside. That £60 million was originally set aside by Labour to aid a green regeneration on Teesside; it is not new ConDem cash, as any union official on site whom I worked alongside at Teesside Cast Products will tell you.

The Secretary of State for Business, Innovation and Skills confirmed in a Select Committee hearing on Tuesday that LEPs would receive no Government funding and would have to rely on local authorities or businesses for their funds. If that is the case, LEPs are merely powerless, toothless, fundless talking shops. In Teesside, that is even more the case, as the back-up service to any potential Tees valley LEP will be reliant on the Tees Valley Unlimited staff and logistical support. However, that too has had £7 million of its £9 million budget slashed.

The regional growth fund will be expected to cover crucial areas such as roads and housing renewal, leaving little in terms of a funding pot for business to apply for. In any case, any would-be small business would have to make a submission for a bid of at least £l million, a sum most small businesses do not require, cutting out crucial small business growth.

I am also concerned at the delay in the green investment bank. The CSR referred, in small print, to the fact that the green bank will not be set up until 2013-14, missing the crucial 12 to 18-month window that we are currently in to take advantage of wind farm production and maintenance off our coastal ports, such as the port of the Tyne, the Wear and Teesport. I am also concerned that changes to the carbon reduction commitment scheme, which amounts to a £l billion tax, will delay green investment and hurt small downstream industry which aids steel production in the UK.

Only yesterday, steel producer Lakshmi Mittal called for more stimulus measures from all Governments to speed growth in the steel industry. I would impress upon the Government the need not to disturb the Thai Sahaviriya Steel Industries ongoing bid. The probable new owners of Tees Cast Products may well begin to doubt the coalition’s commitment to the ambitious investment plans, on which I have been seeking a definitive answer since May. I and other Members were promised that immediately following the CSR by the Secretary of State for Business, Innovation and Skills when he visited the north-east and made his magical mystery tour of the Beam mill at Redcar—a site totally separate from the TCP site.

In conclusion, I draw the House’s attention to another economic critic of the Chancellor. According with Chris Giles in the Financial Times, in all Departments other than Health and International Development, a 19% real-terms cut is being implemented, compared with the 12% cuts planned by the previous Labour Government. That was down to the fact that the Chancellor played fast and loose with an inconsistent definition of “unprotected”. What is clear is that the people of the north-east, and in particular Teesside and East Cleveland, have been left totally unprotected by this Government. I again agree with Chris Giles, as well as other esteemed and documented economic critics, that the Chancellor’s comparison in his oration was simply “bogus”.

Savings Accounts and Health in Pregnancy Grant Bill

Tom Blenkinsop Excerpts

Tuesday 26th October 2010 Commons Chamber

[Mr Hanson]

Indeed. That is a good point, but I would say in passing to my hon. Friend that, unless I missed something, the Minister seemed to indicate that he did not feel that women would spend the money on things that matter for their pregnancy. He seemed to take a “shoes and nail varnish” approach in relation to what the grant has done. Most women take a great interest in the development of their children—that is the most important thing in their pregnancies—and they will do things to ensure that their children have a great start in life, and the grant was an opportunity to help in that respect.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Government Members are slightly confused on this matter. The Government keep saying that these draconian cuts for the poorest children are necessary to help the deficit and laud their own policy of giving two-year-olds 15 weeks’ free education, basing access to such a service on eligibility for free school meals. How many two-year-olds receive free school meals at the moment? If those two-year-olds do not have older siblings, what mechanism must be set up across Departments to work out which two-year-olds are eligible? What is the cost of such a mechanism? How much of the money recouped from the cuts that the Government propose will be wasted on a complicated mechanism to work that out?

[Mr Hanson]

My hon. Friend makes an important point. There was a thread running through the Labour Government’s intentions to ensure help and support for children, help and support for those on low incomes to save, and help and support for families to save for their children’s 18th birthday and beyond. [Interruption.] The Liberal Democrats are down by 50% already—down to one Member present.