Public Sector Pensions
William Bain Excerpts(12 years, 11 months ago)
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Mr William Bain (Glasgow North East) (Lab)
I apologise to the hon. Member for Arfon (Hywel Williams) for missing the first few moments of his opening remarks. Let me begin by paying tribute to the contribution made by those who work in our public services, including 595,000 in Scotland, such as those who care for the sick and elderly in hospitals and care homes, those who provide inspiration to children through the gift of teaching and those who clean up our communities. They are the backbone of our society. They had no part in causing the great recession or the slump in tax revenues and demand in 2008-09. They deserve better treatment from the Government, whose economic policy is based on a further 310,000 of them being made redundant by the end of this Parliament, and their families suffering an uncertain future, and all because of the Chancellor’s adherence to a deflationary economic theory that is not working and is sapping hope and potential from communities across our country.
Mr Graham Stuart (Beverley and Holderness) (Con)
I agree with the hon. Gentleman’s sentiments towards public sector workers and the excellent work they do, but they were a part of unsustainable Government spending, even in years of boom revenues. Does he accept that they deserve an apology for the role that he and his party played in giving us unsustainable public funding, which has now led to hard decisions having to be made by the Government?
Mr Bain
The current Chancellor agreed with every penny piece of spending from 2005 to 2008. He decided to change course on public spending only when the recession was beginning to hit. We can see from the economic illiteracy of the previous Budget and the autumn statement that to have adopted a deflationary policy at that time would have seen unemployment and public sector redundancies soar even higher. That is not the approach that would have safeguarded a recovery, and it is one that we were right to reject.
Mr Bain
I will give way to the hon. Gentleman later.
Today’s concessions by the Secretary of State for Health on NHS pension contributions show that the Government’s plans are already unravelling under the weight of their own contradictions and injustices. Is it not disgraceful that the Chief Secretary to the Treasury did not come to the House today to make a statement on the details of this partial climbdown, instead of the Government briefing the press?
At first sight, the concessions stand up to no more scrutiny than the Government’s previous partial climbdown, which would have required a near 50% increase in annual contributions from affected workers, for up to eight years longer, with the claimed increased pensions paid for as much as eight years fewer, losing real terms value each year due to uprating in line with the consumer prices index rather than the retail prices index. Unison has already said in response to today’s announcements that a one-year delay before low-paid workers will pay higher contributions is cold comfort.
This is the Government who refuse to impose a tax on bank bonuses, but believe that nurses, teachers and catering staff should face additional tax rises instead. This is the Government who in the autumn statement sought to slash £1.2 billion a year from the tax credits of these same workers, hurting women and children four times more heavily than the balance sheets of the banks. We need a negotiated solution in which both sides give ground. The Opposition accept many of Lord Hutton’s points, but the Government pre-empted this with the hike in contributions, which must be subject to negotiations.
Let me set out the reasons why we find the Government’s current proposals unacceptable and urge them to produce plans for the future of public sector pensions that genuinely do not penalise those who are least able to shoulder the burden. First, the Chancellor’s proposals are not about fairness or long-term stability. They are motivated by a reckless plan of spending reductions that are made worse by his failure to grow the economy in the last year and the slump in growth that the Office for Budget Responsibility predicts for this year, next year and the year after. The Chief Secretary to the Treasury set out in the comprehensive spending review last October cuts in the public sector pension bill from next April of more than £1 billion, rising to £2.8 billion by 2014-15, coming from the 3.2% hike in contributions paid by 750,000 public sector workers, all as part of the Government’s plan to take £81 billion out of the economy by 2015 through public spending cuts. However, given that the lack of demand and growth is the biggest problem facing the country today, how will reducing the living standards of hundreds of thousands of public sector workers on top of the two-year pay freeze increase consumer confidence or strengthen the retail and service sectors, which will be harmed by this tax on public sector workers?
David T. C. Davies
How much will this plan B that the hon. Gentleman is outlining add to the national debt, and what will be the increase in interest payments each year as a result of the money he wants us to borrow from the banks that he despises?
Gordon Banks (Ochil and South Perthshire) (Lab)
Does my hon. Friend agree that it is all about priorities and that the Conservative party has the wrong priorities and we have the right ones?
Mr Bain
I want to make some progress and will give way again in a moment.
The Government are attempting to create the politics of division between low-paid workers in the private and public sectors and to engage in a race to the bottom on public sector pensions instead of focusing on increasing provision among employees in the private sector, but the public will not be fooled. Cutting a dinner lady’s pension will do nothing to increase the pension of a call centre worker or end unfairness in private pension provision. Two in three private sector workers are not in a workplace pension scheme. Two in three public sector staff earning between £100 and £200 a week are in a pension scheme, but only one in seven private sector workers in the same wage band are in a pension. Only 11% of private sector employees are in defined benefit pension schemes. The Government simply fail to grasp or take action on the unfairness in the pension packages of top directors in the private sector, who have pensions worth nearly £4 million on average.
Mr Bain
I will give way to the hon. Gentleman a little later, because I want to make more progress with my argument.
The average public sector pension in local government is £3,000 a year, and half of female public sector pensioners receive less than £4,000 a year, or £80 a week. As Lord Hutton’s report makes clear, the notion that current public sector pensions are gold-plated is entirely wrong. The Government’s plans mean that a part-time 45-year-old school dinner lady with five years’ service, who is in the local government pension scheme and on a salary of £8,000 per year, would receive £400 a year less in her pension by the age of 65, or £672 a year less if she took it at 68, while she would pay £5,500 more in contributions by her retirement.
In April, the Government altered the indexation of public sector pensions from the retail prices index measure of inflation to the consumer prices index measure. The TUC estimates that the change has reduced the average value of public sector pensions by 15%, and the OBR has assessed the reduction to be 8.7% by 2017.
Dr Whiteford
If the hon. Gentleman is so concerned about the switch from RPI to CPI, why did he not vote against it on 17 February?
Mr Bain
Sadly, this Government will have had another three Budgets and, perhaps, another three autumn statements by the next general election, so we will make our spending plans clear at that general election—[Hon. Members: “Ah!”] We will, and those plans will not involve the massive cuts in capital spending that have put construction workers on the dole in Scotland—which the Scottish National party has made over the past two years.
Mr Bain
I accept that Liberal Democrat Members might be prisoners of a coalition agreement that they have signed up to for five years, but the hon. Gentleman has to explain to the Scottish people why the Chief Secretary to the Treasury now proposes further austerity, with £23 billion more in cuts in the first two years of the next Parliament, and to explain its effect on the lives of the Scottish people. The switch is a permanent change that will still hurt ordinary families even after the public finances have been restored to stability. The Government’s proposals harm those who are within 10 years of retirement and would have to pay the 3.2% increase in contributions for a pension that would be 15% smaller due to the Government’s changes to contributions and indexation.
The Government’s plans are a further attack on the living standards of women, as 90% of those affected are women, and they add to the effect of the Chancellor’s other cuts in spending, which hurt women twice as hard as men.
Mr Bain
I will in a second. I just want to make further progress on this point.
The Government’s plans measure income with reference not to gross pay, but to full-time equivalent earnings, treating a part-time employee on a salary of £14,000 a year as if they were a full-time employee on a salary of £28,000 a year. The Office for National Statistics’ own figures from last year show that 806,000 public sector workers who work part-time earn less than £15,000 but have full-time equivalent earnings above that amount. Of that number, 91% are women. Only 16% of public sector workers have full-time equivalent earnings of less than £15,000 a year and would escape the rise in contributions. The 3% hike in contributions means that some women would pay almost 50% more in pension contributions.
Secondly, the OBR’s fiscal sustainability report, published this July, makes it clear that, even without implementing the recommendations in the Hutton report but taking into account the likely rise in the elderly population, the cost of providing public sector pensions as a proportion of GDP will fall from 2% to 1.8% by 2030, and to 1.6% by 2060. Lord Hutton has not disagreed that, even without those changes, the costs of providing public sector pensions in the long term are sustainable.
The previous Government signed an agreement with civil service unions, ensuring that new civil servants entered a career-average scheme with a pension age of 65 years old, thereby benefiting low-paid workers whose pay rises are generally less than inflation and who are unlikely to benefit from regular promotions. The agreement helped in particular women, black and ethnic minority workers and people with disabilities. The National Audit Office, in December 2010, evaluated that 2007 deal and concluded that it
“reduces costs to taxpayers by 14 per cent”,
saving £67 billion over the lifetime of existing schemes.
Thirdly, a 3.2% increase in contributions by public sector workers in return for a lower pension would fail the test of fairness at a time when people on low and middle incomes face the biggest squeeze in living standards since the 1920s. For a public sector worker on average pay, the effect of this further attack on living standards is to the tune of a £3,000 cut in gross pay. A worker on a salary of £18,000 per year could lose more than £1,500 over the years from next April.
Fourthly, average incomes are set to fall by 7.4% by the end of this Parliament—the largest slump on record, and all because of this Government’s economic failure; and disposable incomes are set to fall by 4%, according to the Institute for Fiscal Studies in data published last Wednesday. Imposing a higher tax on public sector workers at such a time, with those trends in falling disposable income, is grossly inequitable. The hike in pension contributions, together with the current pay freeze and the future 1% pay cap, will lead to an average 16% cut in living standards by 2014 for public sector workers.
Mr Graham Stuart
Will the hon. Gentleman share with the House his party’s views? I know that he is putting off an awful lot until near the next general election, but, given his level of criticism, will he explain why he did not vote against the RPI-CPI change, as he has singularly failed to do, and whether he thinks that the system of public sector pensions which this Government inherited was entirely fit for purpose and in need of no reform whatever?
Mr Bain
The responsibility for the hike in pension contributions, and for the loss in pensions that public sector workers are going to suffer, is the responsibility of this Government, and I will not be deflected from ensuring that they take full account of it.
The Scottish National party should also—
Mr Bain
I have been generous enough in giving way. With respect, I encourage the hon. Gentleman to catch Madam Deputy Speaker’s eye if he wants to make further points.
The Scottish National party should thoroughly disown the proposals submitted by the Scottish Public Pensions Agency, which is accountable to Scottish Ministers, as its recommendations would be even more unfair for tens of thousands of Scottish public sector workers. The Scottish Government have power over the NHS, teachers, local government, police and firefighters pension schemes, with the exception of the local government pension scheme. They have not yet declared what they intend do in relation to local government workers, who face the possibility of paying additional contributions to their pensions, so they should end that uncertainty and make their position clear now.
The Government need to change course, to sustain and not destroy the living standards of public sector workers and to recognise that the crushing austerity that they seek to entrench for years to come will leave a legacy of higher child and family poverty. This country deserves better than a Government who are out of touch, out of growth and out of ideas for the future.
The Parliamentary Under-Secretary of State for Wales (Mr David Jones)
This has been a lively and at times impassioned debate—quite understandably, because the issue that we have been discussing is of the most extreme importance.
I should like to put a number of matters squarely on record at the very start of my remarks. First, I wish to make it absolutely clear that Government Members greatly value the services that the public sector performs, both in contributing to the economy of this country and in providing the services that each and every one of us needs. To suggest that we do not is grossly to misrepresent the case.
Secondly, I wish to object most strongly to the expression “gold-plated pensions”, which has been bandied about on the Opposition Benches. No one on the Government side of the Chamber is in any way suggesting that public sector workers enjoy gold-plated pensions—I have not heard that expression voiced by Government Members. Nevertheless, it was clearly a deliberate tactic on the part of Opposition Members to misrepresent the position by suggesting that Government Members regard the public sector as feather-bedded—we do not.
The fact of the matter, as one hon. Member mentioned some time ago, is that this time bomb has been ticking for a very long time indeed. The previous Government sought to address it but did so only partially. This Government are taking the difficult decisions that will be needed to put public sector pensions on to a sustainable footing for the years to come.
The hon. Member for Arfon (Hywel Williams), who opened the debate, suggested that it was positively Government policy for public sector workers to work longer, pay more and get less in return. The fact is that the Government’s proposals are aimed at ensuring that this generation and future generations of public sector workers receive pensions that properly reward their efforts after a lifetime’s work.
I echo the congratulations offered on the arrival of Jack and Rosie, the grandchildren of the hon. Member for Central Ayrshire (Mr Donohoe), but I should point out that they will benefit from the Government’s proposals. As the hon. Gentleman says, at the age of 70 they will require sustainable pensions, and they will thank this Government for taking the necessary decisions to put pensions on to a sustainable footing.
Lord Hutton’s analysis—many hon. Members said that they agreed with the general thrust of his report—shows that there are three drivers for reform, the first and most important of which is longevity. The average 60-year-old in this country will live 10 years longer than the average 60-year-old in the 1970s lived. Over the same period, the annual cost of public service pensions has increased by a third—it reached £32 billion last year. That simply must be addressed.
The second driver is flexibility, because public sector pension provision no longer reflects how the modern labour force work and live. The third driver is fairness, which is also important. The current schemes, which are predominantly final salary schemes, mean that lower-paid public sector workers effectively subsidise the pensions of the higher paid.
The reforms implemented by the previous Labour Government have not been sufficient to reverse the huge increase in the costs of public sector pension schemes as a consequence of increased longevity. The position is straightforward: either public service pensions are reformed, or our children and grandchildren—Jack and Rosie—will bear the cost of a virtually unsustainable financial benefit.
Mr Bain
The OBR fiscal sustainability report, which was published in July, makes it quite clear that public sector pensions are affordable. I refer the Minister to the chart that illustrates that the public sector pension share of gross domestic product will fall to 1.6% by 2060. Surely that does not tie up with his last remark.
Mr Jones
I refer the hon. Gentleman to the comments of Lord Hutton, who pointed out that his commission felt that there was a rationale for short-term cost savings in recognition of a substantial, unanticipated increase in longevity. In practice, these savings can be realised only by increasing member contributions. To suggest that it is impossible to address this problem in any way other than by increasing contributions is frankly fallacious and deceitful, and the Opposition know that.
The hon. Member for Arfon and others asked what negotiations were taking place. It is important to put it on the record that my right hon. Friend the Secretary of State for Health has met the NHS unions today, and my right hon. Friend the Minister for the Cabinet Office is also meeting the civil service unions later today. Negotiations are indeed proceeding apace, and to suggest that they are not—as the hon. Member for Hayes and Harlington (John McDonnell) did—is wrong.
The hon. Member for Angus (Mr Weir) claimed that 27% of workers will leave public sector pension schemes as a result of increased contributions. The Government have set out that those earning less than £15,000 will see no contribution increase whatever, and those earning less than £21,000 will see a maximum increase of 1.5 percentage points by 2014-15.
Scotland (Poverty)
William Bain Excerpts(12 years, 12 months ago)
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Mr William Bain (Glasgow North East) (Lab)
It is a pleasure to serve under your chairmanship for the first time, Mr Robertson, and to reply from the Opposition Front Bench to this important debate.
I pay tribute to my hon. Friend the Member for Ayr, Carrick and Cumnock (Sandra Osborne) for securing this debate and for speaking with such passion and commitment about the effects that material inequality, lack of money, lack of resources and lack of opportunity have on the quality of life of her constituents and many thousands of people across Scotland. She referred in her speech to a historical figure—Nye Bevan, of course. Today, it might be fitting to recall the words of another historical figure, former US President Franklin Roosevelt, who once said:
“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have little.”
That is what the Government are failing to do in its policies today.
I also pay tribute to the contribution from my hon. Friend the Member for Glasgow North (Ann McKechin), who spoke movingly about the impact that housing benefit changes and lack of money are having in driving up levels of food poverty in Glasgow, and also to my hon. Friend the Member for Aberdeen South (Dame Anne Begg) and my right hon. Friends the Members for Coatbridge, Chryston and Bellshill (Mr Clarke) and for Stirling (Mrs McGuire), who spoke with great passion and eloquence about the effects of deindustrialisation in Scotland and the damaging effects of the Government’s reforms of disability, housing and sickness benefits. My right hon. Friend the Member for Stirling impressed the House this afternoon with her historical sweep and with the notion that she very ably tied between equality and liberty—the fact that they go together and that one simply does not exist without the other.
I recently had the privilege of attending a briefing arranged by the Resolution Foundation, which is hosting the Commission on Living Standards. The presentation gave some staggering statistics from the foundation’s ongoing work. There is an increasing dislocation between growth and living standards. In the past three decades, for every £1 of growth generated in our economy, just 12p is going into wages in the lower half of the income scale, which is a fall of a quarter. Those trends have been exacerbated by the squeeze on jobs and the squeeze through increased taxes and lower tax credits that have been in the Chancellor’s Budgets so far and, sadly, in the autumn statement yesterday.
From that event, there also emerged three themes that are necessary to drive an increase in living standards and reductions in poverty in coming years: full employment, the importance of income transfers—including the tax credits system—and rising wages. The foundation has estimated that the squeeze on living standards that is being imposed by this Government—the steepest since the 1920s—means that to make good the gap, the level of the minimum wage would have to rise to £6.29 per hour by 2015. That is the extent of the squeeze that is impacting on people in this country today. The words of the US economist Lane Kenworthy are very important, reflecting that income transfers—the tax credits system—have been critical in this country and across the western world to seeing an improvement of the living standards of those in the lower half of the income distribution scale.
I also want to endorse some of the findings of UNICEF Scotland’s recent report, which points out the damaging effects of failing to tackle asset-based inequality. The Government have scrapped the child trust fund and introduced an inadequate replacement in the form of junior ISAs, and we will see damaging effects for young people in their failing to build up that nest egg of savings that would help them go to college or university, to start a job and to pay for the necessary expenses for a good start in life.
The key to tackling poverty and to seeing a fairer distribution of wealth in our society is to increase levels of good jobs in our economy and to aim for full employment. Yesterday, the Office for Budget Responsibility downgraded its forecasts for levels of employment throughout this Parliament. It revealed that 710,000 public sector workers will be thrown on to the dole queues in this Parliament. Overall, unemployment will surge by a further 500,000, destroying the lives of people who are claiming benefits when they could be providing services and paying taxes instead.
Scotland will suffer hugely through the absurd economic theories that underpin such devastating choices. As a result of the Chancellor’s failure to change course on public spending and to introduce a proper plan for jobs and growth, Scotland is likely to suffer from rising unemployment, lower growth and the biggest attack on the living standards of ordinary people since the 1940s. The Chancellor said yesterday that he would like to tackle the causes of poverty, but he has slashed support for hard-pressed Scots families who are burdened by big rises in child care costs.
This week, the Social Market Foundation stated, in its report entitled “The Parent Trap”, that average families face an increase in child care costs of more than £600, a rise of up to 62%, which is more than the cost of a family Christmas for average families in Scotland. Yesterday, the Government failed to cut VAT to boost consumer confidence and failed to increase demand amid slumping growth.
Sandra Osborne
My hon. Friend is answering some of the questions of the hon. Member for Argyll and Bute (Mr Reid), who seemed to think that the Labour party had no alternative proposals to put forward. I am pleased to hear my hon. Friend telling the House about what we would do if we had the opportunity.
Mr Bain
My hon. Friend is entirely right. Yesterday, the OBR’s figures revealed that if we had followed the public spending plans of my right hon. Friend the Member for Edinburgh South West (Mr Darling), borrowing would be £37 billion less. There is an alternative—based around growth and job creation—that would not have visited the damaging effects of increased poverty and inequality which this Government are waging on the people of Scotland.
Mr Reid
None of us wants to see poverty or inequality, but the only solutions that the hon. Gentleman has brought forward are to cut taxes and to increase public spending. Please will he tell us where the money would come from to do all that, without getting the country even deeper into debt and the mess that his Government left behind?
Mr Bain
Thankfully, there are more enlightened Governments in Europe. For example, the newly elected Socialist-led Government of Denmark, who have introduced a stimulus package, have seen bond rates lower that those of the United Kingdom and have entirely defeated the arguments of the right-wing parties in Denmark, which predicted that bond rates would rise if a Socialist-led Government introduced such a stimulus package. The reality does not bear out the hon. Gentleman’s point.
Mr Bain
It is very clear that this Government are borrowing to cut, not borrowing to grow. The entire theory that the Chancellor has drawn on from some of the extremes of right-wing economics in America in the 1980s and 1990s—essentially, that Governments should shrink and shrivel the public sector and that the private sector will take up all the slack—has simply been destroyed by what the OBR published yesterday. That theory does not work, and it is causing increased poverty and inequality in our country. The hon. Member for Argyll and Bute (Mr Reid) should disown it today.
With both Governments—the one here and the one in Edinburgh—simply not having done enough about youth unemployment, we have a rate of youth unemployment across the UK of 20%, but it is even higher in Scotland, at 21.3%. Nothing speaks more to this Government’s failure of ambition to cut child poverty than yesterday’s cruel grab by the Chancellor on the promised uplift on child tax credits and working tax credits. For the coalition parties to slash the tax credits of low and middle-income mums and children in Scotland at a time when the real value of wages declining by 3.5% this year, as revealed by the Office for National Statistics last week—is an act of brutal contempt for the plight that the poorest are facing, with spending cuts that are too far, and too fast for ordinary families to bear.
In 2009-10, 153,000 families in work in Scotland received working tax credit and child tax credit, and this helped 250,000 children in Scotland. People in Scotland cannot see how it will be fair to snatch £1.2 billion in tax credits from low and middle earners while the Government have raised the bank balance sheet levy by a paltry £300 million in the same autumn statement. They will wonder how the Prime Minister can ever again have the brass neck to claim that we are all in this together. Scottish families will lose the extra £110 per child that they were promised in the Budget this year and expected to receive next year. Freezing the working tax credit will cut working families’ income by an additional £100.
As the Resolution Foundation established yesterday, more than three quarters of the burden in new cuts in tax credits is faced by people in the lower half of the income scale, with those in the top 10% simply meeting 3% of that burden. Total tax credit cuts next year will amount to £2.9 billion, a tenth of the entire tax credit expenditure. This afternoon the Institute for Fiscal Studies has given its verdict on the Chancellor’s squeeze on the living standards of ordinary people: average incomes will fall by 7.4% between 2009 and 2030. Based on the OBR’s own figures, it has calculated that families face a slump in the value of their household disposable income of 3% this year compared with a predicted 1.1% at the time of the March Budget, a fall of 1.1% next year compared with a predicted rise of 0.7% in March. Most damning of all is the finding by the IFS that the distributional effects of the changes announced by the Chancellor yesterday will punish those in the lowest two income deciles. Unbelievably, those in the wealthiest 10% are among the few gainers. Unsurprisingly, it is families with children who take the biggest hit. As Paul Johnson of the IFS said on BBC Radio 4’s “World at One”, this afternoon,
“failure to index some elements of tax credits…will leave some poorer families worse off, and will lead to an increase in measured child poverty…The Government have no chance at all of reducing child poverty.”
What a damning finding on what the Chancellor did yesterday.
In terms of public services, on which the poorest rely most heavily, the IFS has today discovered that the Government are planning a huge assault on public service spending, a 16.2% real-terms cut over the next seven years, far beyond the previous record of 7% real-terms cuts in the 1970s. The Chancellor’s promise not to balance the books on the backs of the poorest lies in tatters this afternoon. His own Treasury figures show that the poorest fifth of the population are amongst the biggest losers from the tax and benefits measures in his Budgets and autumn statements, and inequality is on the rise. He could not even bring himself to admit in his statement yesterday that his own figures show that child poverty will rise across the UK by a further 100,000 in the next tax year as a result of his cruel cuts in tax credits and housing benefits.
This Government have made their choice: slumping growth, rising poverty and higher unemployment are the prices worth paying for a failed economic theory that is letting Britain down and offering nothing but despair for the jobless millions. Now, Scotland can see them as they truly are—the downgraded Chancellor of a deflationary and uncaring Government.
Oral Answers to Questions
William Bain Excerpts(13 years ago)
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Michael Moore
My right hon. and learned Friend makes a very important point. The idea that we would somehow simply get membership of the European Union with complete agreement, without discussion and without needing to worry about the terms of negotiation is quite fanciful. It is a journey into the unknown and we need to have the detail.
Mr William Bain (Glasgow North East) (Lab)
One of the many benefits associated with the Union is the certainty provided by Scotland’s continuing membership of the European Union. Has the Secretary of State seen the impartial Library research published yesterday, which indicates that Scotland may have to go through an accession process to stay in the EU if it becomes a separate state? That research also shows that if Scotland were accepted as a member state, according to the most recent data, net annual contributions to the EU from Scottish taxpayers would rise to £92 per capita compared with only £57 per capita from the rest of the UK. Would it not be contrary to Scotland’s national and economic interests to separate from the rest of the UK if it meant Scotland ended up out of the EU or paying more to stay in the EU, and only if it adopted the euro?
Michael Moore
I welcome the hon. Gentleman to his new role, in which he is already demonstrating his forensic attention to detail. I am delighted that he has put his point across, and I completely agree with him about the uncertainty that all this causes.
Oral Answers to Questions
William Bain Excerpts(13 years, 2 months ago)
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Mr Speaker
Order. The House is in a very excitable state, and it is not even lunchtime yet. Members must calm down and compose themselves.
Mr William Bain (Glasgow North East) (Lab)
12. What assessment he has made of the effects on job creation in Scotland of the employer’s national insurance holiday scheme.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
As of 7 September 2011, Her Majesty’s Revenue and Customs has received 922 successful applications for the national insurance holiday scheme from new businesses located in Scotland. Of the 396 applications received for the 2010-11 financial year, 386 claimed the national insurance contributions holiday, supporting approximately 1,300 new jobs.
Mr Bain
Should not the Minister be lobbying the Chancellor to create a proper strategy for growth for Scottish manufacturing and construction, instead of offering such complacent support for a scheme that has created less than 10% of the jobs that were forecast and that has been described by the Federation of Small Businesses in Scotland as badly designed and failing to deliver at a time when the country needs the creation of new jobs?
David Mundell
We will certainly not be taking any lectures on national insurance from Labour, a party that sought to introduce a jobs tax in 2009. [Interruption.] I had the benefit of visiting the hon. Gentleman’s constituency last week, and I would have thought that he welcomed the fact that these jobs that did not exist before and that they have a better chance of becoming permanent with the NIC holiday—[Interruption.]
Oral Answers to Questions
William Bain Excerpts(13 years, 5 months ago)
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Mr William Bain (Glasgow North East) (Lab)
Q7. Is the Prime Minister aware that 670,000 people, two thirds of whom, according to his Government’s equality impact assessment, have a disability, will lose up to £13 a week because of his changes in housing benefit under-occupancy rules? Is not that a complete betrayal of his Chancellor’s promise not to balance the Budget on the backs of the poor?
The Prime Minister
I have looked carefully at that issue, and I know there are concerns, but the point I would make is this: I think it is right that we reform housing benefit, because the costs had got completely out of control under the previous Government, rising to £22 billion; and I think it right that housing benefit reflects the size of a family rather than the size of a house. But, we have actually made an exception for people with carers so that allowance is made for that in housing benefit. So, I think that that is fair, but I have to say to Opposition Members, it is no good saying that you are in favour of welfare reform and cutting the costs of welfare while never being able to find a single part of the Bill to agree with.
Scotland Bill
William Bain Excerpts(13 years, 10 months ago)
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Mr William Bain (Glasgow North East) (Lab)
It is a pleasure to follow my near parliamentary neighbour, my hon. Friend the Member for Glasgow North West (John Robertson). Before I address the substance of the Bill, let me place on record my thanks for the great work done by the previous Government. In particular, I thank my hon. Friends the Members for Rutherglen and Hamilton West (Tom Greatrex)—I thank him in the capacity in which he assisted that Government— and for Glasgow North (Ann McKechin), and my right hon. Friend the Member for East Renfrewshire (Mr Murphy), along with those Members from other parties who took part in the Calman process and the leaders of the parties in Scotland. A great deal of thanks for the impetus behind the Bill, as for the original Scotland Bill, should go to Wendy Alexander. It is important that we should thank her from the Labour Benches in this debate for her great efforts on devolution.
The key principle of the constitutional reforms that were adopted by the previous Government was cross-party support. As my hon. Friend the Member for Glasgow North stated, there is a real contrast between the great cross-party consensus that has been achieved in the preparation and discussion of this Bill, and some of the frankly gerrymandered changes that we have seen in the Parliamentary Voting System and Constituencies Bill and the Fixed-term Parliaments Bill. I hope that right hon. and hon. Members on the Government Benches will recognise that when they bring forward further constitutional legislation in this Session, such as the House of Lords Reform Bill.
This Bill is good for Scotland, and that is why Labour Members will support it. As paragraph 2.34 of the Calman report states:
“the Scottish Parliament controls 60% of identifiable public spending in Scotland,”
but is directly responsible for
“only 10% of the taxation levied in Scotland.”
If the Bill is passed, thankfully that will change. The Bill will increase the level of taxes levied in Scotland to 35%, which is comparable to the level in devolved legislatures in Belgium, Italy, Spain and Australia. Added to that, the Bill provides for welcome revenue and capital borrowing powers, which will extend borrowing from £500 million a year, under the Scotland Act 1998, to £2.2 billion. That will release proceeds for much-needed capital projects in Scotland, such as a Glasgow airport rail link—a matter on which I have spoken a great deal in the past and on which I will continue to speak—and will raise the opportunity for investment in high-speed rail track between the major cities of Scotland and the Scottish border. That will be a helpful economic lever for Scotland. Added to that, the detail of the tax powers will see a variation of plus or minus 10% from 2016, and the welcome devolution of stamp duty land tax and landfill tax.
I welcome the fact that income tax is the principal lever being used to give the Scottish Parliament extra fiscal powers. Giving evidence to the Scottish Parliament on 18 January, Sir Kenneth Calman set out an important principle for where our economy should be going:
“If you change the financial levers, that in itself will not change anything; what you…need is to have in place the right policies.”
That is right. Speaking about those levers, Professor François Vaillancourt of Montreal university, also giving evidence on 18 January, said:
“I believe that the instrument that has been chosen, personal income tax, is the best one for the purpose. Corporate income tax is difficult to administer at a personal level, because of tax shifting between various jurisdictions…Personal income tax allows people to see a relationship between what they pay and what they get, and it is linked to the responsibilities of the Scottish Parliament, such as education, social services, health, long-term care and so forth. It is, therefore, an appropriate tool.”
I agree.
What we have also seen in the last two weeks is a real weakening of the argument for fiscal independence as propounded by some Scottish National party Members. Professor Muscatelli, whom I believe my hon. Friend the Member for Livingston (Graeme Morrice) has already referred to, makes it clear that the Bill does not seek to adopt some of the more volatile taxes, such as corporation tax and other taxes that would inject more risk into the Parliament’s revenues. He expressed the view at Holyrood on 18 January:
“Income tax has less impact in terms of tax spillover or tax competition, so it is the obvious place to start.” [Scottish Parliament, Official Report, Scotland Bill Committee; 18 January 2011, c.200-40]
Again, this is someone who speaks with real expertise, so the House would do well to take note of his views.
Some issues will have to be scrutinised closely as the Bill progresses, particularly if it receives a Second Reading and proceeds into Committee. It will be important to probe the precise detail of the definition of “a Scottish taxpayer” and to deal with some issues that my hon. Friends and Government Members raised earlier.
It is important to emphasise the necessity of proper economic forecasting in Scotland. Given the frankly lamentable performance we have seen from the Scottish Government and their ill-starred cast of economic advisers put together by the First Minister, we need a proper and robust system for forecasting growth and the impact of increases or reductions in income tax that the Bill, if enacted, will permit. I was impressed by the idea set out by the Scottish Council for Development and Industry when I went to meet its representatives in central Glasgow last week. It recommended the establishment of a Scottish office for budget responsibility—a devolved office that would examine the effect of devolved Government policies on growth and would be able to forecast properly and stress-test the impact of varying income tax, up or down, which I think is an idea with many attractions. I hope the House will be able to explore it further in Committee.
As my hon. Friend the Member for Glasgow North West mentioned, it is important for the Scottish Parliament to make the most of the totality of powers it has from the Scotland Act 1998, which it will still have if the Bill is passed. That must mean a real emphasis on growth. It is true that the income tax-varying power in itself will not necessarily produce additional growth, but it will be a tool, allied with investment in capital projects and skills and with diversifying the Scottish economy by providing more manufacturing and more help for construction, which the stamp duty tax might afford. All these are important if we are to avoid seeing the gap in employment and growth in Scotland widen in comparison with the UK as a whole over the last couple of years.
This is a good Bill, but by no means a perfect Bill. We shall scrutinise it closely if it reaches Committee, but it has the support of my constituents and it will have the support of all the key political parties that are in favour of a decent and decentralised system of government within the United Kingdom.