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Oral Answers to Questions
(12 years, 10 months ago)
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Matthew Hancock (West Suffolk) (Con)
1. What progress his Department is making in implementing the recommendations of Lord Levene’s report on defence reform.
The Secretary of State for Defence (Dr Liam Fox)
Before I answer my hon. Friend’s question, I confirm to the House that a British serviceman is missing in Afghanistan and that an extensive operation to locate him is under way. The individual was based in central Helmand and was reported missing in the early hours of this morning. His next of kin have been informed and will be updated as the operation continues, so no other family need be concerned. I recognise that there will be many questions, but speculation on an issue of this nature is unhelpful. I urge restraint from colleagues and the media, and assure the House that the United Kingdom and the international security assistance force are taking all necessary and appropriate action.
In answer to my hon. Friend, all parts of the Ministry of Defence, civilian and military, are committed to making the reforms happen, and some have already been put in place. I have chaired the first meeting of the new Defence Board; we have introduced the new infrastructure organisation and corporate service models; and the new Defence Business Services organisation stands up today. We will put all the other elements in place as quickly as possible. Lord Levene’s recommendations will mean the biggest change to the MOD in a generation. It will take time to do it all and get it right.
Matthew Hancock
As a member of the Public Accounts Committee, I know that our reports have frequently shown that attempts to reform the MOD have failed through lack of consistency and leadership, and that as a result the Secretary of State is having to deal with the shambles that he inherited. Will he assure me that he will not make the same mistakes as the previous Government, and instead see through the radical reform that is needed?
Dr Fox
The new operating model incentivises delivery by accountable senior leaders. We understand entirely the need for the transformation process to be rigorous and for the reforms to be pushed through. I assure my hon. Friend that we will give all the energy required to ensure that that happens.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
How many people will be made redundant as a consequence of the Levene report?
Mr James Arbuthnot (North East Hampshire) (Con)
When will the Ministry of Defence’s three-month review of procurement projects report? Will it, as the name implies, take three months? If so, when did it begin?
Dr Fox
We are approaching the end point of that review, and it will certainly be in the next few weeks. There are a number of complex issues to sort out, as my right hon. Friend understands, not least how to go about setting a long-term budget that allows the MOD to plan with certainty. When we have finished those deliberations, we will make them known.
Angus Robertson (Moray) (SNP)
The Secretary of State is aware that the decision on military basing is imminent and that an all-party submission has called for the retention of RAF Lossiemouth as an air base on defence and security grounds. He is also aware of the unique economic threat to the economy of Moray and the north of Scotland of a double base closure. Will he take this opportunity to say when he will make a statement to the House on the military basing review?
Dr Fox
I fully understand all the hon. Gentleman’s arguments. As I have always said, we regard the military elements as having paramount importance, but we understand the other elements. Having taken a number of the key decisions over the weekend, I hope that we will make progress very shortly.
Nicholas Soames (Mid Sussex) (Con)
I warmly commend my right hon. Friend for the determination he is bringing to bear to push through the Levene reforms. Does he agree that one of the most important issues affecting the three services is the need for “purple” command and control and for decisions to be taken on a tri-service basis, and that that should be pushed through?
Dr Fox
That is the natural way in which defence is developing in this country, as in others. We wanted to set up the joint force command to carry that process forward in a constructive and transparent way. It will also, as I said in my statement to the House, allow career progression right up to four-star level for those who might not get preferment through the traditional single-service structure. It is therefore not only good for defence but a thoroughly meritocratic reform.
Mr Jim Murphy (East Renfrewshire) (Lab)
I associate the Opposition with the Secretary of State’s comments about our missing soldier in Afghanistan, and I appreciate the fact that he took the time to brief me personally earlier this afternoon. We all know that our forces are both brave and brilliant, and this is a reminder of the daily danger they face. The Opposition, the entire House and, more importantly, everyone in the country, regardless of their view on the conflict in Afghanistan, will wish the Government and our forces well in rescuing this individual soldier.
Will the Secretary of State assure us that not a penny piece that is currently planned for supporting the operation in Afghanistan will be affected by the implementation of the recommendations of the Levene report?
Mr David Crausby (Bolton North East) (Lab)
2. What role he expects his Department to play in establishing post-conflict security in Libya.
The Secretary of State for Defence (Dr Liam Fox)
We are in discussions with Whitehall colleagues, international organisations and allies regarding a post-conflict solution in Libya. It is too early to speculate on what might be required and who might be involved.
Mr Crausby
Can the House be assured that the plan for peace in Libya will be as robust as the plan for war? Is the Secretary of State absolutely certain that we will not underestimate the size of the task in the way that pretty well everybody did in the case of both Iraq and Afghanistan?
Dr Fox
The hon. Gentleman asks a key question. How the transition occurs is of key importance. If there is some political settlement and an orderly handover to a new authority in Libya, the chances of maintaining order are much greater. We are working towards that with the contact group and others, and it makes sense for NATO and the United Nations to plan for all eventualities when we see the back of Colonel Gaddafi, as we all hope will soon happen.
Mark Lancaster (Milton Keynes North) (Con)
I am sure the Secretary of State will join me in paying tribute to the work of the stabilisation unit on post-conflict security in Libya. Given the restrictions of the existing United Nations resolution, does he feel that a further UN resolution might be required to carry out that work?
Dr Fox
It will depend on the situation on the ground and how benign the environment is. At the moment we do not envisage the need for another UN resolution, and we believe that the orderly handover to the UN and a new Libyan authority should be possible without one. Of course, that is constantly kept under review by my right hon. Friend the Foreign Secretary.
Mr Bob Ainsworth (Coventry North East) (Lab)
Although it is understandable that the Secretary of State might be a little reticent, it is worrying that he says it is too early for planning. The situation in Libya could go on for some time yet, but equally the forces of the uprising could be in Tripoli at any time. Is he seriously suggesting that we still have to wait to plan for the conflict’s aftermath? I do not think it is going to be like what happened in Tunisia—it will be a lot more difficult than that, and somebody will have to provide some support.
Dr Fox
A great deal of planning, looking at a range of scenarios, is being undertaken by the National Security Council and across Whitehall Departments, and a range of important discussions are being held with our allies, not least at the large gathering of military leaders in London last week. We could well see the collapse of the Libyan regime over a short period, but it could take some considerable time yet. I am afraid that I think it is unlikely that the opposition forces will enter Tripoli in the near future.
Karen Lumley (Redditch) (Con)
3. What recent assessment he has made of the security situation in the middle east and north Africa; and if he will make a statement.
Paul Uppal (Wolverhampton South West) (Con)
8. What recent assessment he has made of the security situation in the middle east and north Africa; and if he will make a statement.
Robert Halfon (Harlow) (Con)
16. What recent assessment he has made of the security situation in the middle east and north Africa; and if he will make a statement.
The Minister for the Armed Forces (Nick Harvey)
As the Foreign Secretary has said, demands for greater political, social and economic participation will continue in the middle east and north Africa. We assess that the security situation will remain fragile unless Governments in the region work to fulfil the aspirations of their people.
Karen Lumley
Will my hon. Friend assure the House that the UK has sufficient resources in place to honour its commitment under UN Security Council resolution 1973 and continue operations in Libya for as long as is necessary?
Nick Harvey
I am pleased to give precisely that confirmation. As the Chief of the Defence Staff has said, we can sustain the operation for as long as necessary. We have flexible and adaptable forces. That is not to say that sustaining operations will not put stress on people and assets, but we are perfectly capable of doing so, and nobody should be in any doubt about our determination.
Paul Uppal
It is as well to remind the House that the international community came together to avert an injustice and a massacre in Benghazi. Does my hon. Friend agree that it is essential that we keep that international community cohesion and effort on this most pressing issue?
Nick Harvey
My hon. Friend makes a good point. The international community acted very speedily to deter the threat to civilian life in Libya. The sustaining of that effort in Libya is absolutely international in nature. It is essential to a successful outcome that all involved retain that cohesion and determination of purpose, and that all involved plan for what will follow, which was questioned a minute ago.
Robert Halfon (Harlow) (Con)
Does my hon. Friend agree that a Palestinian state with Hamas in part control is a major defence threat, not just to Israel but to the wider region? Does he also agree that there should be no recognition of a Palestinian state until Hamas recognises Israel’s right to exist, renounces violence and recognises existing treaties?
Mr Speaker
Order. I am sure the Minister will answer with reference to the responsibilities of the Ministry of Defence.
Nick Harvey
Those are pre-eminently matters of foreign policy which my hon. Friend should put to the Foreign Secretary, who will have heard the question and will reflect upon it.
Mr Denis MacShane (Rotherham) (Lab)
In terms of the killing of civilians, torture, repression, and the export and support of terrorism, does the Ministry of Defence draw any distinction between Colonel Gaddafi and Bashar al-Assad of Syria; and if so, what is it?
Nick Harvey
Again, that is predominantly a question of foreign policy, but clearly the foreign policy circumstances are very different in the two countries. In the case of Libya, a regional power invited an intervention and a UN Security Council resolution authorised all necessary force. In the case of Syria, no regional body is inviting an intervention; more to the point, as yet, there has been no progress on a UN resolution, although the UK has a draft before the UN.
Keith Vaz (Leicester East) (Lab)
As the Minister knows, the situation in Yemen is now critical. Have the Government received any request from the acting President of Yemen for military assistance by way of advisers or any other assistance whatever?
Nick Smith (Blaenau Gwent) (Lab)
Does the Minister recognise that new threats to the UK following the Arab spring make the national security strategy out of date? Will he update the strategy in the light of those recent events?
Nick Harvey
The national security strategy anticipated a variety of threats from different parts of the globe throughout its 10-year time frame. It proposed that we should have flexible and adaptable forces that are capable of responding to different scenarios in different ways at different times. The momentum of activity following the uprisings in north Africa and the middle east has called us into action, but that action has so far shown to be perfectly manageable within the arrangement that the strategic defence and security review laid down. No reason has been provided at this stage for anybody to contemplate a different arrangement.
Jack Lopresti (Filton and Bradley Stoke) (Con)
4. What steps his Department is taking to promote defence exports.
Chris Skidmore (Kingswood) (Con)
11. What steps his Department is taking to promote defence exports.
The Parliamentary Under-Secretary of State for Defence (Mr Gerald Howarth)
We are supporting defence exports through an active and innovative defence diplomacy initiative, working closely with the UK Trade & Investment Defence & Security Organisation. Exports help to build and enhance relations with allies, to support UK defence industry, and to reduce the cost of equipment for Britain’s armed forces.
Ministers and officials from across Government, including my right hon. Friend the Prime Minister, are already actively promoting British defence exports overseas. We are also embedding exportability into the early stages of the Ministry of Defence acquisition cycle. By considering export issues early and offering partnership at the design stage, we aim to increase export opportunities, which should result in reduced acquisition costs to the MOD.
Jack Lopresti
I thank my hon. Friend for that response. The Government have made positive changes in how they work with the UK defence industry to achieve better mutual benefits. However, what more can the Government and industry do so that we take an even better approach to exports throughout the whole of the UK defence sector, including MBDA and many other companies in my constituency, to maximise opportunities for the UK?
Mr Howarth
I am glad that my hon. Friend noted the extraordinary efforts that I and my ministerial colleagues across all Departments are making. There is no complacency. The defence exports support group was set up by my right hon. Friend the Secretary of State specifically to act as a forum for Ministers to plan and focus their support to defence exports. I would like to take this opportunity to congratulate MBDA on the fantastic job it is doing in supporting current operations in Afghanistan through the provision of some outstanding equipment. I hope that he will convey that message to his constituents. I am working with MBDA to see what we can do to help promote further exports.
Chris Skidmore
Airbus has recently set up a new research and development centre at the national composite centre in my constituency at the Bristol and Bath science park. Will the Minister welcome this development, and does he agree that effective research and development is crucial to promoting defence exports?
Mr Howarth
I assure my hon. Friend that I am very aware of the work going on his constituency—I have been briefed on it—and I think it is a sector in which the United Kingdom enjoys outstanding strength. I have also visited the Airbus facility at Filton, where the wings for the A400M are built. That aircraft has fantastic export potential, and I hope that it will be a world-beater.
John Woodcock (Barrow and Furness) (Lab/Co-op)
How does the Minister expect successfully to sell British industry abroad when his muddled defence review is squeezing firms at home? Is he aware that the pioneering lighting firm in my constituency, Oxley, has been forced to shed another 13 jobs and cites the difficulties created by the Government’s defence review as a key factor in that decision?
Mr Howarth
It might have escaped the hon. Gentleman’s notice that the difficulties that the MOD faces are entirely the fault of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), the former Prime Minister, who destroyed the country’s public finances and forced the Government to take measures to try to restore them. We are ensuring that we maximise the defence industry’s opportunities for first-class British kit in the export market. If he would like representatives from Oxley to come and tell me about it, I would be happy to meet them.
Mr Russell Brown (Dumfries and Galloway) (Lab)
The Secretary of State has made his position clear: defence procurement will be based on open competition in the global market and buying off the shelf. How does that square with supporting UK industry? The hon. Member for Kingswood (Chris Skidmore) asked whether he recognises the absolute necessity for ongoing support for research and technology within the sector to make it clear to companies in the sector that the Government are firmly behind what they are doing.
Mr Howarth
We fully recognise the importance of research and technology, which is why the Government have sought hard to protect that budget and why my hon. Friend the Minister with responsibility for defence equipment, support and technology is also working hard and will shortly produce a White Paper on the subject. I assure hon. Members that nobody is more aware than the Government of the importance of the British manufacturing defence base as a basis upon which to generate wealth for the UK through exports.
Jack Dromey (Birmingham, Erdington) (Lab)
5. What steps the Government have taken to strengthen the defence industrial base; and if he will make a statement.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
We will publish a White Paper later this year, following up the recent public consultation on last December’s “Equipment, Support and Technology for UK Defence and Security” Green Paper. The Government are already taking effective steps to provide much greater support to UK defence exports and to make it easier for smaller enterprises to do business with the public sector, including with the MOD.
Jack Dromey
Britain’s defence industries lie at the heart of our economy. The Government are delaying vital defence orders for our armed forces, and the Secretary of State has said that he will buy off the shelf using open competition in the global marketplace. Does the Minister not recognise the anxiety and uncertainty that this is causing to tens of thousands of defence workers all over Britain who, like our armed forces, give outstanding service to this country?
Peter Luff
First, I am happy to say that the shelf is stacked high with British products, and that makes us extremely successful in the international market. Britain is the second greatest exporter of defence equipment—and long may that be the case. On the other comments of the hon. Gentleman, whom I hold in high regard—we have had discussions on British industry before—I would point out that our life would be so much easier had we not inherited a total mess of a defence budget, including a £38 billion black hole. The things he is complaining about were the fault of the previous Government.
Richard Fuller (Bedford) (Con)
The previous Labour Government sold the defence contractor QinetiQ to a City firm that, a couple of years later, sold it for eight times the value and closed its plant in Bedfordshire with a consequential loss of employment. Will my hon. Friend ensure that he does a better job of defending our defence industrial base than the previous Labour Government?
Peter Luff
Speaking as someone from Worcestershire, where QinetiQ also has a very large presence, I absolutely understand what my hon. Friend is saying. It certainly would not be difficult to do a better job than the last lot did.
Michael Dugher (Barnsley East) (Lab)
The Government promised a White Paper on defence procurement in the spring of this year, but it still has not appeared. They are continuing to take major decisions on procurement and the process of procurement in the MOD before they have set out any strategy on the industrial base. Will the Minister tell the House exactly why the White Paper has not yet been published? Is his definition of “spring” the time of year when the clocks go back and the leaves come off the trees?
Peter Luff
I am delighted to be able to tell the hon. Gentleman that I can give him an answer to that question. We have delayed publication because of the large number of defence-related reviews that the MOD is conducting at present, including the Levene review, the reserves review and the basing review. These will all lead naturally to the defence equipment and support White Paper, which will be published later this year. The Yellow Book review on non-competitive contracts will be released at the same time, not in July as originally intended, because the two documents will naturally sit together.
Dr Julian Lewis (New Forest East) (Con)
6. What assessment he has made of the shape and size of the future surface fleet of the Royal Navy; and if he will make a statement.
The Minister for the Armed Forces (Nick Harvey)
As we set out in the strategic defence and security review, under Future Force 2020 the future surface Navy will have a world-class carrier strike capability, with 19 frigates and destroyers, including the state-of-the-art Type 45 destroyer; an amphibious fleet able to land and sustain a commando group from the sea; 14 mine countermeasures vessels; a global oceanographic survey capability; and a fleet of resupply and refuelling vessels. Work is also under way on the requirements and design of the Type 26 global combat ship, our next generation frigate.
Dr Lewis
I am encouraged by that response. Does the Minister remember when he and I sat on parallel Opposition Benches under the previous Government as the size of the frigate and destroyer fleet went down successively from 35 to 32 to 31 to 25 and then to 19? Will he specifically confirm that that figure of 19 frigates and destroyers will not be reduced to a pathetically inadequate baker’s dozen, as posited in some parts of the press?
Nick Harvey
I can certainly confirm that the situation remains unchanged from the SDSR. The future force will comprise 19 destroyers and frigates. It was a matter of great regret that the Government had to make a range of cuts in the SDSR, but that was a result of the general economic climate and, specifically, of the defence black hole that we inherited.
Mr Kevan Jones (North Durham) (Lab)
On the size of the surface fleet, the First Sea Lord told the Defence Committee on 11 May:
“We would be challenged to find further platforms to rotate through, and to continue to maintain the overseas commitments that are standard operating requirements.”
Will the Minister tell the House exactly how the Royal Navy will sustain its operations in Libya, and what impact those operations are having on the Royal Navy’s ability to deliver what was set out in the SDSR?
Nick Harvey
As I said in answer to an earlier question, there is no denying that the pace and longevity of operations in Libya put a stress on the fleet. However, the Libyan operation is a high priority, and we will ensure that it has the necessary resources. HMS Liverpool remains on task in the Mediterranean in support of the NATO-led operations. We have plans for her relief in due course but, for operational security reasons, I am not going to say which ship will be involved.
Mr Philip Hollobone (Kettering) (Con)
7. What assessment he has made of the Typhoon and Apache platforms in Operation Ellamy.
Mr Douglas Carswell (Clacton) (Con)
18. What assessment he has made of the performance of Eurofighter Typhoon in Operation Ellamy.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
Typhoon aircraft and Apache attack helicopters have performed very well in Operation Ellamy, proving their military worth and fulfilling all the operational tasks asked of them. Typhoon, in its first multi-role mission in providing both air defence and ground attack, has demonstrated exceptional levels of survivability and, in its ground attack role, a targeting capability with minimal collateral damage, proving that it is a truly formidable aircraft.
Mr Hollobone
Given that both platforms are being deployed in theatre in roles beyond their original specification, will my hon. Friend please comment in more detail on the ground attack role of the Typhoon, and on the Apache being deployed for the first time at sea?
Peter Luff
The Apache has been on about 20 sorties with no known civilian casualties—an exceptional testimony to that aircraft. Typhoon is performing exceptionally well in Libya. My hon. Friend is right that it was originally conceived as an air defence aircraft; it is now in its first multi-role combat aircraft role, and it is performing superbly. As Wing Commander J Attridge, the operational Typhoon detachment commander said,
“the Typhoon has come of age”
over the skies of Libya and we are seeing the maturation of the RAF’s first multi-role combat fast jet aircraft since world war two. We are all delighted with its performance.
Mr Carswell
Given that historically we have invested many billions in cold war era Eurofighters, but perhaps a little less on the unmanned aerial vehicles we need, does the Minister have any plans to switch resources from the former to the latter?
Peter Luff
It is not an either/or situation. UAVs have their role to play, but Typhoon is not a cold war legacy; it has proved to be an exceptionally capable modern aircraft, taking on the world and proving its exceptional worth in Libya. I am very confident of success in the large number of ongoing export campaigns around the world. Typhoon is a remarkable modern aircraft with a very bright future ahead of it.
Mr Jim Cunningham (Coventry South) (Lab)
9. How much his Department spent on accommodation in London for military officers and staff of his Department in the last 12 months; and if he will make a statement.
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
Over the last 12 months, the Ministry of Defence spent some £25 million on renting 3,000 service family accommodation properties and 1,000 substitute family and single accommodation properties in London for entitled service personnel. Substitute properties were rented only when no suitable MOD accommodation was available. We seek to get best value for money. Travel and subsistence payments for service and civilian personnel relating to short-term detached duty, permanent transfer, which involves move of home, or temporary transfer in London cannot be identified separately. However, for civilian personnel in London, the MOD imposes a monthly rental ceiling of £1,250. Personnel based in the London area are undertaking essential duties in a range of locations.
Mr Cunningham
Given the financial difficulties of the MOD and the worldwide economic situation that we inherited, the present Government have made the position worse. With all these defence cuts going on, particularly among specialist police in the MOD, how does the Minister justify spending £500,000 on a trip to America, which was cancelled last year?
Mr Robathan
I am not entirely sure how that question relates specifically to my previous answer, but I will of course answer it. As I understand it, the trip is part of the Defence Academy course, and 300 people went to America for a week or whatever. It seems to me that this is a reasonable use of defence expenditure to ensure that people are properly trained at the Defence Academy and that they gain a proper understanding of the United States, which is, after all, our most important ally, with which we are much engaged in Afghanistan at the moment.
Neil Carmichael (Stroud) (Con)
10. Whether he has discussed with ministerial colleagues the effectiveness of co-operation between French and UK armed forces; and if he will make a statement.
The Secretary of State for Defence (Dr Liam Fox)
I have regular discussions with my ministerial colleagues about our bilateral co-operation with France, following the signature of the defence and security co-operation treaty last November. The aim of the treaty is to develop further co-operation between our armed forces and to improve their ability to work together more effectively.
Neil Carmichael
I have considerable experience of dealing with our allies, as my wife is French. Does the Secretary of State believe that this alliance means making better use of our budget for cost-effectiveness and for strategic planning?
Dr Fox
I am pleased to hear about my hon. Friend’s personal entente cordiale, and I hope that the relationship we have with France in defence will turn out to be as fruitful. We certainly aim to ensure the best use of money in future procurement and the development of projects, but above all we have been looking at the respective doctrines of our armed forces to ensure greater interoperability. France is a natural partner of the UK in being willing both to spend and deploy, which cannot be said of a number of our other European partners in NATO.
Alison Seabeck (Plymouth, Moor View) (Lab)
Will any of the discussions with the French Government on working more closely together and on cost cutting lead to the scenario suggested in Jane’s that 3 Commando Brigade Royal Marines could be disbanded? I hope that the Secretary of State will reassure my constituents, who have close links to the Royal Marines currently serving in Afghanistan, that that will not happen.
Bob Russell (Colchester) (LD)
Will the Secretary of State clarify whether the co-operation between the French and the UK armed forces will enable in 2015 celebrations of that great away win over the French—the battle of Waterloo?
Dr Fox
It is for the Department for Culture, Media and Sport to celebrate, and carry the budget for celebrating, historic events. It does no country a disservice, however, to remember that we have benefited from our armed forces in security not only today but throughout our history.
Mr David Hanson (Delyn) (Lab)
12. What recent assessment he has made of the likely date for achievement of the objectives set for Operation Ellamy.
The Secretary of State for Defence (Dr Liam Fox)
Operation Ellamy is helping to enforce UN Security Council resolution 1973. We have made it clear repeatedly, and I have done so in the House, that we will continue operations until Gaddafi stops attacking the Libyan people and they can live in peace and security.
Mr Hanson
I assure the Secretary of State that the Opposition support the objectives of the operation. For clarity, however, will he tell the House the cost to date of the operation, its ongoing monthly cost, and the financial provision he is making for the hopeful post-conflict activity that we discussed earlier?
Simon Hughes (Bermondsey and Old Southwark) (LD)
13. What input his Department has had to the arms export review being undertaken by the Foreign and Commonwealth Office.
The Minister for the Armed Forces (Nick Harvey)
MOD officials have engaged with Foreign Office colleagues on the review of export licensing previously announced on 16 March by the Foreign Secretary.
Simon Hughes
Given the considerable interest that there has been in export licences in relation to the middle east and north Africa, and the desire of many of our constituents to see a change in the old regime and system and a reduction in arms sales abroad, will my hon. Friend tell us whether we are likely to have the results of the review before the summer recess, and whether we will have an opportunity to debate them on the Floor of the House?
Nick Harvey
I understand that the intention is to publish the findings of the review before the summer recess, but whether there will be the opportunity to debate them in the House is not a matter for me. I assure my right hon. Friend, however, that we continue to operate on a case-by-case basis in the middle east in relation to fresh applications for export licences.
Duncan Hames (Chippenham) (LD)
The recent joint report by the Committees on Arms Export Controls recommended that the Government publish a full statement on how they apply criterion 8 relating to sustainable economic development when making decisions about arms export licences. Will the Minister give his commitment that the Department will follow and adopt that recommendation?
Nick Harvey
I must make it clear that the responsibility for defence export licences lies with the Department for Business, Innovation and Skills, which consults the Foreign Office on specific criteria and the Ministry of Defence on other criteria. I assure my hon. Friend that, in so far as is relevant to the issues on which we are asked to advise, the Ministry of Defence agrees entirely with the points that he makes, but such matters are pre-eminently for the Department for Business, Innovation and Skills.
David Rutley (Macclesfield) (Con)
15. What recent assessment he has made of the security situation in Afghanistan; and if he will make a statement.
The Secretary of State for Defence (Dr Liam Fox)
I visited Afghanistan in recent weeks and gained a clear sense of the progress being made. I was also able to thank our armed forces in person and on behalf of the House for their fine efforts. Following that visit, I am in no doubt that the transition of security lead to the Afghans remains achievable by the end of 2014.
David Rutley
Given this country’s strong efforts to create a secure environment in Afghanistan, and our commitment to withdrawing British troops by 2015, will my right hon. Friend tell the House what progress is being made in building the capability of local Afghan forces, and in ensuring a clear transition in military command?
Dr Fox
I have had the opportunity over time to see the Afghan national security forces—both the Afghan national army and the police—and as anyone who visits them will recognise, their capability is enormously enhanced. Things that may appear small to us, such as literacy training, have phenomenally increased their capability. When I look at the Afghan national training mission, I have cause for great hope that we will achieve the levels of security competence required for that transition.
Graham Jones (Hyndburn) (Lab)
Will the Secretary of State give us some idea of the percentage of children who are attending schools in Helmand province as an indication of how successful we have been in the operation there?
Dr Fox
It is difficult to give an accurate figure, but I will try to obtain one from the provincial reconstruction team and write to the hon. Gentleman. What is clear is that, while we have taken a large amount of military equipment and money to Afghanistan, perhaps the most important thing that we have taken there is hope: hope for a generation who may be able to be educated and to have some economic capabilities of their own in the future, which events have denied to recent generations in Afghanistan.
Mr Jim Murphy (East Renfrewshire) (Lab)
We read in the newspapers this week that the Prime Minister plans to announce a further troop withdrawal from Afghanistan. The whole country will feel disappointed that our forces have again had to learn of news through media leaks. As we head towards the 2014 deadline, can the Secretary of State repeat his guarantee that decisions about troop numbers will be based on conditions on the ground and on best available military advice, not on politics or other arbitrary factors?
Dr Fox
Given the last Government’s record, for the right hon. Gentleman to talk about troop numbers in Afghanistan being leaked to the newspapers is a bit like the pot calling the kettle black. We said very clearly that there would be a reduction of 426. Some 200 troops have already been withdrawn, largely because they were involved in logistic tasks above and beyond our core number. Any reduction in the core number, particularly in our force in Helmand, will be announced after discussions in the National Security Council between the relevant politicians and Departments and the military.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
17. What recent assessment he has made of the export prospects for Eurofighter Typhoon.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
Typhoon has already been exported to Saudi Arabia and Austria, where it is in operational service. It is also competing in a number of other important markets. Oman has announced its intention to buy Typhoon, and India has selected it for the final phase of its medium multi-role combat aircraft competition.
I expect an increase in interest in Typhoon following its highly successful air defence and ground attack roles in current operations, in which it has consistently demonstrated exceptional levels of reliability, performance, accuracy, and overall cost-effectiveness.
Stephen Metcalfe
SELEX Galileo in Basildon, along with many other businesses throughout the United Kingdom, will benefit hugely from increased exports of the Eurofighter Typhoon, and my constituents will also benefit from improved job opportunities. Will my hon. Friend update me and the House on the progress of the tender process with India?
Peter Luff
The Indians are sticking to their timetable, and we are very optimistic about the prospects for Typhoon. My hon. Friend is right to stress the importance of the contribution of companies such as SELEX Galileo. We already have a highly capable radar on Typhoon which matches, or exceeds, many electronically scanned radars operating elsewhere, but SELEX Galileo is on track with Europe’s first and only second-generation scanned radar, which will make Typhoon a truly outstanding, indeed unmatched, multi-role fast jet and a world-beater in the export markets as well. I hope that that includes India.
Mark Pawsey (Rugby) (Con)
19. What recent representations he has received on arrangements for members of the public to pay final respects to fallen servicemen.
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
Over the last two weeks we have received a number of e-mails and letters following a campaign on Facebook about arrangements for members of the public to pay their final respects to fallen servicemen and women.
Mark Pawsey
I recently spoke to a lady in my constituency who is a member of the War Widows Association. She expressed concern about the forthcoming change which would mean repatriation flights arriving at RAF Brize Norton. Like many other people, she believed that it was important for the British public to continue to be able to pay their respects to fallen military personnel. Will the Minister assure us that that will still be possible under the new arrangements?
Mr Robathan
I can certainly assure my hon. Friend and the House that that is the case.
Because of the number of e-mails that we had received, I went to Brize Norton on Friday to reassure myself about the plans that are being made. The RAF is spending £3.2 million on a new repatriation centre specifically for the families of the bereaved, who must be the focus of our attention. It is an excellent centre, which will give them a very good view of what is happening when the aircraft land. There are private chapels of rest where they can go and be with their loved one’s remains. The cortege will then head down a very dignified avenue of limes to the nearest gate, which is being refurbished and will be called the Britannia Gate. It is dignified, respectful and solemn.
Once the cortege has left Brize Norton, it will be the responsibility of the police and Oxfordshire county council. The county council is building a memorial garden with a great deal of car parking so that people who wish to show their respect—the general public and the Royal British Legion, which approved the arrangements—will be able to do so in a dignified and proper place.
Paul Flynn (Newport West) (Lab)
The Minister misses the point. As recently as 12 o’clock today a representative of the people of Brize Norton expressed his disappointment and anger, because they wish the very moving scenes that took place at Wootton Bassett to be replicated at Brize Norton. That cannot happen because the cortege route is being taken through rural roads and not through the urban area. Should not the people of Brize Norton and the surrounding areas have the right to express the grief of the nation, in order that we are all reminded of the true cost of war?
Mr Robathan
First, as I have said, the families of the bereaved must be the most important consideration. Oxfordshire county council has carried out a great deal of consultation. The hon. Gentleman mentions Brize Norton and, as it happens, the route will go straight through the village of Brize Norton. It will not go through the nearby village of Carterton, whose streets are both very narrow for a modern village and have speed bumps, which are not suitable for corteges. This has been decided by Oxfordshire county council in consultation with local people, and there is no suggestion of its having been done covertly. If I may say so, I think the hon. Gentleman should go to Brize Norton—as I did—and see the alternatives, as he would find that we wish to allow the British public the right to show their respect for these heroes, but we are not necessarily going to be driven by one person on the radio.
Mr James Gray (North Wiltshire) (Con)
There can be no finer sight than the last four Hercules from RAF Lyneham flying down the line of the high street of Wootton Bassett on Friday afternoon on the way to Brize Norton, but does the Minister agree that it might not be possible, nor indeed quite right, to seek to replicate the Wootton Bassett effect elsewhere, as that was a chapter in our history? I am not sure we necessarily want to see it repeated elsewhere.
Mr Robathan
My hon. Friend makes a very good point. The route from Lyneham to Oxford passes straight through the centre of Wootton Bassett, and the route from Brize Norton to Oxford is being drawn so that it can go past somewhere where people can pay their respects. As my hon. Friend will know, the facilities at RAF Lyneham were fairly ad hoc, but we have now built a repatriation centre which, I have to say, is very impressive. It will be finished at the end of July, and I think people will come to realise that this is a different situation, and that the RAF, Oxfordshire county council and the police are doing the right thing for the bereaved and the servicemen who have been killed.
Simon Kirby (Brighton, Kemptown) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Defence (Dr Liam Fox)
My departmental responsibilities are to ensure that our country is properly defended now and in the future, that our service personnel have the right equipment and training to allow them to succeed in their military tasks, and that we honour our armed forces covenant.
Simon Kirby
Has the Secretary of State considered the effects of off-the-shelf procurement on UK jobs, UK tax revenue, and the future capability of UK manufacturing?
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
The creation of the office of the chief coroner would make a significant difference to the families of fallen service people as they go through the very difficult inquest process. The Royal British Legion believes this is a matter of priority, not of cost. When will the Secretary of State stop passing the buck to his colleagues in the Justice Department and make this one of his priorities?
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
As you will understand, Mr Speaker, this is not a question of passing the buck: the Ministry of Justice is responsible for the coroners department. This has been the subject of much consultation, and the MOJ must answer on it. [Interruption.] The right hon. Member for East Renfrewshire (Mr Murphy) asks what it is doing: it is ensuring that coroners are better trained, as training was the problem beforehand.
Jason McCartney (Colne Valley) (Con)
T2. Does my right hon. Friend the Secretary of State agree with me and the British Veterans National Defence Medal Campaign that the recent MOD medal review was wrong to suggest that there is little appetite or desire in this country to recognise our brave service veterans with a UK national defence medal?
Mr Robathan
I would not agree with my hon. Friend on that. What I would say is that groups such as the British Veterans National Defence Medal Campaign are being consulted on the medal review. What that campaign proposes would mean that some 4.5 million to 5 million people would qualify for a national defence medal, and we have to take into account all representations before determining whether that is the right thing to do.
Pamela Nash (Airdrie and Shotts) (Lab)
T3. On 24 June, The Daily Telegraph reported that a £10 billion black hole in the defence budget will lead to cuts having to be increased beyond the current 8%. Can the Secretary of State confirm or deny that report?
The Secretary of State for Defence (Dr Liam Fox)
I am delighted that the Labour party now studies The Daily Telegraph in great detail, as it may be able to learn something from that side of the press. There is no doubt that the size of the budget deficit we inherited—about £38 billion of unfunded liability, on the assumption of flat real growth between now and 2020—had to be tackled. We have taken a huge amount out of that already and we will work, not only through this strategic defence and security review, but into the next one, to ensure that as we progress towards the end of the decade we eliminate that horrific inheritance from the Labour party.
Miss Anne McIntosh (Thirsk and Malton) (Con)
T4. Will the Secretary of State give the House an assurance that enough British-trained RAF pilots are operating in Libya, especially at the moment? If there are not, will he ensure that even more pilots will be trained by RAF Linton-on-Ouse, in my constituency? Will he also assure the House that that base will remain one of the top training bases for the RAF for years to come?
Dr Fox
Not only can I give the assurance that we have sufficient British pilots and sufficient British assets in Libya, but I can tell the House that as we go ahead with the greater devolution of powers to the single service chiefs it will be up to them to determine, and make it clear to me, that they have proper training mechanisms in place to ensure that that position remains.
Thomas Docherty (Dunfermline and West Fife) (Lab)
T8. Given the widespread opposition in west Fife to becoming a nuclear submarine graveyard, will the Secretary of State confirm that the Ministry of Defence will be using the same principles for identifying the long-term waste store as are used by the civil industry? Will he specifically confirm that the store has regulatory support, makes financial sense and has community buy-in?
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
The hon. Gentleman will understand that two sites have been identified as potential candidates for submarine dismantling—Devonport royal dockyard and Rosyth royal dockyard. I can give him the assurance he seeks: we will be following a similar approach to that of the civil nuclear sector and we will take account of a wide range of factors. I do not have time to enumerate those in this answer, but I would be happy to talk to him in detail later, if that would be of help to him. I can particularly reassure him on the subject of consultation, because we recognise the keen local interest in this subject and are keen to ensure that local people have the opportunity to express their views. We will work with all the local authorities and the devolved Administration in Scotland before and during public consultation.
Neil Carmichael (Stroud) (Con)
T5. My constituency is home to a large number of reserve armed forces members, who welcome the review of their role. May I ask the Secretary of State whether that review will recognise their capacity, capabilities and willingness to integrate with the regular armed forces?
The Minister for the Armed Forces (Nick Harvey)
I entirely agree with my hon. Friend about the excellent work done by our reserve forces. I have been thoroughly impressed with the commitment and skill that they have shown when I have met them, including in Afghanistan. As he knows, a review is being led by the Vice-Chief of the Defence staff and my hon. Friend the Member for Canterbury (Mr Brazier), and their report is in the process of being finalised. I expect them to deliver that report shortly and it would be inappropriate to comment further at this time.
Dan Jarvis (Barnsley Central) (Lab)
Will the Secretary of State confirm whether he has any plans to reduce the size of the Army post-2015?
Stephen Gilbert (St Austell and Newquay) (LD)
T6. Like many in the House, I welcome the recent removal of arms export licences to Bahrain. However, given the earlier answer by the Minister for the Armed Forces, may I ask Ministers how many times they have raised concerns about arms export licences to Saudi Arabia with their colleagues in the Department for Business, Innovation and Skills?
The Parliamentary Under-Secretary of State for Defence (Mr Gerald Howarth)
On Bahrain, I can tell my hon. Friend that a cross-Whitehall review of export licences to that country was held on 18 February, and licences for equipment that could be used for internal repression were revoked—to date, 23 single licences have been revoked and 16 open licences have had Bahrain removed from them. On Saudi Arabia, I can tell him that, like all other countries, we subject all defence exports to a rigorous review against the criteria set by this country and elsewhere.
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)
On 28 April, I received an answer from the Minister to a request for a breakdown of outsourced transport costs from the Bicester logistics centre. The response was that £4 million had been saved and that the amount spent by Bicester on private couriers between 2008 and 2010 was zero. In my office, I have copies of literally thousands of transport documents that show that the answer is millions of pounds. The answer I was given therefore could not be further from the truth. Will the Minister provide urgent clarification on this very important matter?
Peter Luff
I share the right hon. Gentleman’s concern, based on what he has told me, and would be delighted to meet him to discuss the matter in more detail. He has brought a very serious matter to the attention of the House and I look forward to meeting him to discuss it further.
Graham Evans (Weaver Vale) (Con)
T7. Following recent debates about the restructuring of NATO, will my right hon. Friend confirm that the future of Northwood as a key NATO command headquarters is secure?
Dr Fox
In the recent discussions at NATO ministerial, the maritime headquarters for NATO were going to be in Lisbon, Naples or Northwood. First, Northwood is an effective and efficient place from which to carry out that command and, secondly, the UK Government do not believe that it is acceptable to see another northern European command move to the south of Europe at a time when many northern European forces are carrying more than their fair share of operations in Libya or Afghanistan.
Toby Perkins (Chesterfield) (Lab)
I was pleased to be at Staveley Armed Forces day on Saturday, where I met a soldier who had recently returned from his third tour of duty in Afghanistan. He expressed his fear that political expediency would outweigh the military concerns about troop withdrawals from Afghanistan and, specifically, about the impact that was having on their efforts to train up Afghan nationals. His fear was that those nationals would return to the Taliban if they felt that Britain had withdrawn from Afghanistan prematurely. Does the Minister share that fear?
Dr Fox
I think the key element is the confidence we can give the people of Afghanistan that the international community’s relationship with that country will not end when our combat forces leave at the end of 2014. As we have trained up the Afghan national security force to have greater capability, there is now greater emphasis both on the political space and on redevelopment and reconstruction, rather than on the purely military arguments.
Andrew Selous (South West Bedfordshire) (Con)
T9. What plans do the Government have to mark the 200th anniversary of the battle of Waterloo, which ended a quarter of a century of conflict in Europe and packed Napoleon off to St Helena?
Mr Robathan
My hon. Friend may know that I spent some 15 years in the Coldstream Guards and he will know—he has historical knowledge—that the Coldstream Guards shut the gates of the chateau, or the farm, of Hougoumont. Wellington said that the battle would have been lost had that not happened. Our relationship with France has changed a little since the Napoleonic wars, and this is now an historical matter. I understand that our colleagues in the Department for Culture, Media and Sport have set up a Waterloo 200 committee to discuss the commemoration, but it will certainly be commemorated by the Coldstream Guards, among others.
Jim McGovern (Dundee West) (Lab)
May I thank the Under-Secretary of State for Defence, the hon. Member for Mid Worcestershire (Peter Luff), for agreeing to meet me yesterday to discuss the potential implications of the SDSR on organisations that depend almost entirely on Ministry of Defence contracts for their survival? I was perhaps a tad parochial at that meeting in stating the case for the Remploy factory in my constituency. Is the Minister in a position to give any assurances and an update to the people employed at Remploy in Dundee West and to me?
Peter Luff
I am afraid I cannot go beyond what I said at the meeting with the hon. Gentleman, which I greatly enjoyed. I look to him to carry on making the case for an important facility and factory that does excellent work for the people it serves and who work for it.
Mark Pawsey (Rugby) (Con)
T10. Like the hon. Member for Chesterfield (Toby Perkins), I had the honour of joining Armed Forces day celebrations and, in my case, they were at Bulkington in my constituency. Does my right hon. Friend agree that this annual event not only raises public awareness of the contribution made to our country by those who serve and have served in the armed forces but gives the opportunity for the entire country to show its support for all the men who make up that community? [Interruption.] And women.
Dr Fox
Men and women. I completely agree with my hon. Friend, who makes a valid point that will resonate throughout the country. Armed Forces day gives us all a chance to be aware of what the armed forces do and gives the public the chance to thank them. I visited the Armed Forces day celebrations in Edinburgh, which were magnificent. The city put on a great display and I look forward to seeing what Plymouth is capable of doing next year.
Jim Sheridan (Paisley and Renfrewshire North) (Lab)
The Secretary of State may be aware of the excellent research carried out by Professor Al Rowland into the exposure of our atomic test veterans. Since conducting that research, Professor Rowland has been honoured by the Queen. The UK Government are now the only Government refusing to accept their responsibilities for Christmas island, so will the Secretary of State now agree to do so?
Mr Robathan
I do not entirely accept what the hon. Gentleman says, and I happen to know that neither do those on his party’s Front Bench. What happens in New Zealand is, of course, up to the people of New Zealand. However, I note from the article in The Times today, which he might have read, that Neil Sampson of Rosenblatt says that he wants a compensation fund worth £30 million to be set up. It should be asked of Rosenblatt—perhaps the hon. Gentleman himself might wish to ask this question—how much its fees are, because I understand that they would take up more than half that compensation fund, and would—I think everybody in the House would agree—therefore probably be a little large.
Sir Menzies Campbell (North East Fife) (LD)
My right hon. Friend will not be surprised to learn that RAF Leuchars in my constituency continues to fulfil its responsibilities for the air defence of the northern half of the United Kingdom with the professionalism and commitment that we have come to expect. Has he assessed the extent of the effect on the ability of Leuchars—or, indeed, of any other air base in Scotland—to operate if Scotland was not under the umbrella of NATO?
Dr Fox
I had a chance to visit Leuchars recently to thank those who carry out those duties on our behalf. My right hon. and learned Friend raises an important point. Those in the Scottish National party in the Scottish Government who pretend that they can enjoy both the security of the Crown forces and the luxury of talking about leaving NATO leave a lot to be desired intellectually.
Mr Bob Ainsworth (Coventry North East) (Lab)
What is the status of the Chinook helicopter order?
Peter Luff
Nothing has changed since the strategic defence and security review.
Business of the House
(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Leader of the House of Commons (Sir George Young)
With permission, Mr Speaker, I should like to make a short business statement. The business for tomorrow and Wednesday remains unchanged to that announced previously. However, the remaining business will now be:
Thursday 7 July—Proceedings on the Supply and Appropriation (Main Estimates) Bill, followed by consideration of a business motion, followed by all stages of the Police (Detention and Bail) Bill.
I can advise the House that my right hon. Friend the Home Secretary will make the final draft of the Bill available to hon. Members in advance of its formal introduction and publication tomorrow. I have been advised by the Home Office that copies of the final draft will be available in the Vote Office by 6 pm this evening. I will of course make my usual business statement on Thursday.
Hilary Benn (Leeds Central) (Lab)
I am grateful to the Leader of the House for his statement and for advance sight of it, which responds to the point that I raised with him last Thursday. It has taken Home Office Ministers far too long—six weeks now—to respond to a court judgment that was originally given on 19 May. The result has been a complete mess, with doubt about the enforcement of bail conditions—for instance, in domestic violence cases—and the Leader of the House having to make this statement, completely changing the business for Thursday. Can he give us any news on the application to stay the judgment pending the appeal hearing, which I understand is scheduled for 25 July, because it might have a bearing on Thursday’s business?
As I indicated last week, we are very willing to assist in getting the legislation on the statute book as quickly as possible, because we all want to ensure that the law is restored to what everyone thought it was before the judgment. However, let me ask the Leader of the House two questions. First, can he confirm that the Home Secretary will be leading the debate? We see from his statement that all stages will be taken in one day, including the Committee stage on the Floor of the House. Secondly, when does he anticipate the Bill being considered in the other place?
Sir George Young
I am grateful to the right hon. Gentleman for his renewed offer of support for getting the legislation on the statute book. On his first point, the timeline was dealt with on several occasions on Thursday by the Minister for Policing and Criminal Justice.
On the application to the Supreme Court, the greater Metropolitan police are asking for a stay of execution. It would not resolve the main issue, and it would not happen until later this month, by which time the House will have risen. The Home Secretary will indeed be taking Second Reading. I anticipate that the Bill will then go to the other place on Thursday evening, and I hope that it will be dealt with early next week.
Mr Speaker
Order. May I just remind the House that this is a narrow business statement and that questions should relate exclusively to announced changes to the business on Thursday? The wider, routine business statement will, as the Leader of the House has made clear, be on Thursday.
Mr James Gray (North Wiltshire) (Con)
The very important business that the Leader of the House has announced will mean that an hour and a half debate on the use of electronic devices in the Chamber will not now occur. Will the Leader of the House tell us when he intends to allow that debate to occur?
Sir George Young
First, may I say that in replying to the shadow Leader of the House I should have said the Greater Manchester police, not the greater Metropolitan police?
I am sorry that the debate on Thursday will not now take place. I will make my normal business statement on Thursday outlining the business for forthcoming weeks.
Jeremy Corbyn (Islington North) (Lab)
In his business statement on Thursday, could the Leader of the House tell us what the Home Secretary seems not to be capable of telling us about the case of Sheikh Raed Salah, including when she signed an order that he was to be deported from this country, why he has been held for some days in Her Majesty’s Prison Bedford, why he is being denied legal access until tomorrow and why, and under what pressure, she decided to make what I believe to be a retrospective decision?
Mr Speaker
Order. I think this is a question for Thursday, unless the Leader of the House has any plans to indicate that the matters will be debated on Thursday.
Mr Peter Bone (Wellingborough) (Con)
I assume that the Leader of the House is not going to move item No. 2 on the Order Paper tonight, but has he considered whether it could be moved and tacked on to whatever time we finish our debate on the emergency Bill?
Sir George Young
My hon. Friend is quite right that there is now no need to move the motion that protects the Backbench Business Committee debate for 90 minutes. We do not propose to add that debate to the end of business on Thursday; it will have to be dealt with on another occasion.
Mr John Spellar (Warley) (Lab)
Obviously, no leader of the House likes having to change business, although that is often necessary under the force of circumstances. We fully understand why that is being done in this case and the Opposition have indicated that they support that. However, I hope that the Leader of the House has satisfied himself regarding this question: did officials, when they knew about this decision, not tell the Minister, or is it the case that the Minister was told and did not act on it? What is the answer?
Sir George Young
If the right hon. Gentleman looks at Hansard for last Thursday, he will see the timeline outlined by the Minister for Policing and Criminal Justice. Ministers were told on 24 June.
Clive Efford (Eltham) (Lab)
I have Hansard for last Thursday, and the Minister made it quite clear that the original decision was on 5 April and that a judicial review gave oral confirmation of that decision on 19 May. Can the Leader of the House say whether he was alerted, after 19 May, to the possibility of the need to legislate on the Floor of the House to reverse that decision?
Sir George Young
This is rehearsing to some extent the arguments that were dealt with on Thursday. As my right hon. Friend the Minister said on Thursday, we had to wait for the written judgment to follow the oral one.
Mr Philip Hollobone (Kettering) (Con)
When will the House consider Lords amendments to the Fixed-term Parliaments Bill? Given that the Leader of the House has effectively included an extra day of legislation into Parliament’s proceedings, does he anticipate that the House will run for longer than intended in the current Session?
Sir George Young
That is not the Government’s intention. We plan to adjourn on the day that has already been announced.
Mr Gerry Sutcliffe (Bradford South) (Lab)
We had a statement last Thursday. Why are we waiting until this Thursday when we could have debated the exceptional Bill today? There is an increased cost to the police in not understanding what the position is and having to do bail at the doorstep level. Could we not have had the opportunity at least to see the draft Bill given that the Minister had the statement ready on Thursday?
Sir George Young
The Bill had to be drafted before it could be presented to the House. We have worked as quickly as we could and the Bill will be available to Members by 6 o’clock this evening—in good time for discussion on Thursday.
Diana Johnson (Kingston upon Hull North) (Lab)
I do not understand why we cannot have the Bill earlier in the week. I am particularly concerned about the people who are suspected of domestic violence and have conditions on their bail, which I understand will not be enforced. That is clearly a major problem and I wonder why it is taking so long—until Thursday—to bring forward the Bill.
Sir George Young
The announcement was made on Thursday and the Bill will be available later today. I think that is moving at good speed. On the specific issue the hon. Lady raised, the police service is dealing with the implications of the ruling, including in the circumstances that she outlines, and the Home Secretary has been told that the police will be able to manage operationally in the meantime.
Mr Dave Watts (St Helens North) (Lab)
Can the right hon. Gentleman explain why it has taken five weeks to deal with this matter? Is an investigation going on to find out why this important legislation has taken five weeks, and is it true that the Government are only acting on the back of the report and legal advice of the Association of Chief Police Officers?
Sir George Young
Again, this is rehearsing to some extent the exchange we had on Thursday, and an exchange that can take place again this Thursday. The announcement that I have just made relates to the business we are dealing with on Thursday; the substantive matters will be dealt with on that day.
Chris Leslie (Nottingham East) (Lab/Co-op)
Although it will be good to have time to debate the Bill—that is all very well—can the Leader of the House allow us time for a separate debate about the general shambles in the Home Office and which Ministers and Law Officers were clearly asleep on the job?
Sir George Young
If the hon. Gentleman comes along on Thursday, he can put in a bid for such a debate. I am not sure whether he was here last Thursday, but there was a protracted exchange involving the Minister for Policing and Criminal Justice on precisely the issues that the hon. Gentleman and his colleagues continue to raise.
Keith Vaz (Leicester East) (Lab)
Two promises were made last Thursday. The first was on the request from the police that they should have the best legal advice from the best legal brains. I am sure that refers to the Solicitor-General. The second promise was that the Bill would be discussed with the Select Committee on Home Affairs and with the shadow Home Secretary before the final draft appeared. As the Home Secretary will be appearing before us tomorrow morning, could she please bring her latest version to the meeting?
Sir George Young
Indeed, the Home Secretary will be bringing a copy of the Bill with her, and I hope that the right hon. Gentleman will also have his copy—available from 6 o’clock this evening.
Toby Perkins (Chesterfield) (Lab)
With regard to the timing of the debate on Thursday, is it not true that parliamentary business is being lost and legislation is being made in an emergency because the Home Office was not on top of its brief in the first place? Is any investigation going on to make sure that next time round we get legislation to protect the police earlier?
Sir George Young
Again, these issues were raised last Thursday, and the hon. Gentleman will have an opportunity this Thursday to discuss the background to the Bill. My responsibility is simply for announcing the changed business on Thursday, and in response to requests from some of the hon. Gentleman’s colleagues we are dealing with this as quickly as we possibly can.
Mark Tami (Alyn and Deeside) (Lab)
Why did it take the Home Secretary so long to tell the Leader of the House that there was a need for this change?
Sir George Young
The moment the statement was made last Thursday, and it was clear that legislation was needed, we decided to change the business of the House, and a statement was made at the earliest opportunity.
Vernon Coaker (Gedling) (Lab)
What a fiasco! Why does the House have to wait until Thursday before it debates the emergency legislation when the Home Office has known about this for six weeks? Will the Home Secretary be able to tell us what the current situation is with respect to those on police bail? How many people are being let out who should not be? How many people do not know what is happening? Should there not be an emergency statement now, rather than waiting until next Thursday?
Sir George Young
Yes to all the questions except the last one, which is no.
Reform of Social Care
(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Health (Mr Andrew Lansley)
With permission, I wish to make a statement on the reform of social care.
The coalition Government have from the outset recognised that reform of the care and support system is needed to provide people with more choice and control and to reduce the insecurity faced by individuals, carers and their families. By 2026, the number of people over 85 years old is projected to double. Age is the principal determinant of need for health and for care services. It is further estimated that in 20 years’ time, 1.7 million more people will have a potential care need than do today.
People often do not think about how they might meet the costs of care in later life. They assume that social care will be provided free for all at the point of need, but since the establishment of the welfare state that has never been the case. Currently, people with more than £23,250 in assets, often including their home, face meeting the whole cost of care themselves.
The cost of care can vary considerably and it is hard for people to predict what costs they may face. The average 65-year-old today will face lifetime care costs of £35,000, but as the Commission on Funding of Care and Support notes, costs are widely distributed: one in four will have no care costs, but one in four will face care costs of more than £50,000 and for one in 10 it will be more than £100,000. The lack of understanding of how the system works and uncertainty about costs means that it is difficult for people to prepare to meet potential care costs, and there are currently few financial products available to help them. This means that paying for care can come as a shock to many families and have a severe impact on their financial security.
Change is essential. That is why we took immediate action last July by establishing the Commission on Funding of Care and Support, which was tasked with making recommendations on how to achieve an affordable and sustainable funding system for care and support for all adults in England. In response to its initial advice, we allocated an additional £2 billion a year by 2014-15 in the spending review to support the delivery of social care as a bridge to reform. This represents a total of £7.2 billion of extra support for social care over the next four years, including an unprecedented transfer of funds from the NHS to support social care services that will also benefit health.
Since then we have taken forward wider reform. Last November we published our vision for adult social care, setting out our commitment to a more responsive and personalised care and support system that empowers individuals and communities, including the objective that all those who wish it should have access to a personal social care budget by 2013. In May, after three years of work, the Law Commission published its report on how to deliver a modernised statute for adult social care. Making sense of the current confused tangle of legislation to deliver a social care statute will allow individuals, carers, families and local authorities to understand more clearly when care and support will be provided.
Andrew Dilnot’s report comes at the same time as the final report from the palliative care funding review, which I received last week. Tom Hughes-Hallett and Sir Alan Craft have made an excellent start in looking at this complex and challenging issue. We want to see integrated, responsive and high-quality health and care services for those at the end of life. We will now consider the review team’s proposals in detail before consulting stakeholders on the way forward later this summer. We will also consider how best to undertake substantial piloting, as recommended in the report, in order to gather information on how best to deliver palliative care services.
We are also responding to events at Southern Cross, which have caused concern to residents in Southern Cross care homes and their families. We welcome the fact that Southern Cross, the landlords and the lenders are working hard to come up with a plan to stabilise the ownership and operation of the care homes. We have also made it clear that we will take action to ensure proper oversight of the market in social care. That is why we are seeking powers through the Health and Social Care Bill to extend to social care the financial regulatory regime that we are putting in place in the NHS, if we decide that that is needed as part of wider reform.
A central component of those wider reforms will be the long-term funding of care and support. Over the past 12 months Andrew Dilnot, who chairs the Commission on Funding of Care and Support, together with the noble Lord Warner and Dame Jo Williams, has engaged extensively with many different stakeholders. They have brought fresh insight and impetus to this most challenging area of public policy. We welcome the commission’s excellent work and its final report. I would like to thank Andrew Dilnot, Lord Warner and Jo Williams for their work, which has made an immensely valuable contribution to meeting the long-term challenge of an ageing population.
The report argues that people are unable to protect themselves against the risk of high care costs, leaving them fearful and uncertain about the future. The commission’s central proposal, therefore, is a cap on the care costs that people face over their lifetime of between £25,000 and £50,000—it recommends £35,000. Under the commission’s proposals, people who cannot afford to make their personal contribution would continue to receive means-tested support, but it proposes that the threshold for receiving state help for residential care costs would rise from £23,250 to £100,000. People would make some contribution to their general living costs in residential care, but the commission suggests that this should be limited to between £7,000 and £10,000.
The commission also proposes the following standardised, national eligibility for care, which would increase consistency across the country; universal access to a deferred payments scheme for means-tested contributions; improvements in information and advice; improved assessments for carers and better alignment between social care and the wider care and support system; and considering changing the means test in domiciliary care to include housing assets. The commission makes recommendations about how as a society we can organise and fund social care. We will consider the recommendations as a priority.
The commission recognises that implementing its reforms would have significant costs. In the current public spending environment, the Government will have to consider the recommendations carefully against other funding priorities and calls on our constrained resources. The commission’s recommendations present a range of options, including on the level of a cap and the contribution that people make to living costs in residential care, which could help us to manage the system and its costs. We intend to engage with stakeholders on those issues, including on the trade-offs involved.
Reform in this area will have to meet a number of tests, including whether the proposals would promote closer integration of health and social care and increased personalisation, choice and quality; support greater prevention and early intervention; whether a viable insurance market and a more diverse and responsive care market would be established as a result of the proposals; what is the level of consensus that additional resources should be targeted on a capped costs scheme for social care; and what a fair and appropriate method of financing the additional costs would be.
The Government have set out a broad agenda for reform in social care. We want to see care that is personalised; that offers people choice in how their care needs are met; that supports carers; that is supported by a diverse and flourishing market of providers; that has a skilled work force who provide care and support with compassion and imagination; and that offers people the assurances they expect of high-quality care and protection against poor standards and abuse. Andrew Dilnot’s report was never intended to address all those issues, but it forms a vital part of that wider agenda.
To take the matter forward, we will work with stakeholders in the autumn, using Andrew Dilnot’s report as the basis for engagement and as a key part of the broader picture. That engagement will look at the fundamental issues for reform in social care, such as improving quality, developing and assuring the care market, integration with the NHS and wider services, and personalisation. We want to hear stakeholders’ views on the priorities for action from the commission’s report and on how we should assess the proposals, including in relation to other priorities for improvement in the system. As the right hon. Member for Wentworth and Dearne (John Healey) and I have discussed, the Government will engage directly with the official Opposition to seek consensus on the future of long-term care funding.
We will set out our response to the Law Commission and the Dilnot commission in the spring. There will be full proposals for the reform of adult social care in a White Paper and a progress report on funding reform. It remains our intention to legislate to this effect at the earliest opportunity. The care of the elderly and of vulnerable adults is a key priority for reform under this Government, and I commend this statement to the House.
John Healey (Wentworth and Dearne) (Lab)
I thank the Health Secretary for the copy of his statement, and for making it to the House himself.
We welcomed the Hughes-Hallett report last week and we welcome the Dilnot report on social care today. The Dilnot report sets out important recommendations on capping the catastrophic costs of care; lifting the wealth threshold for state help; immediate free support for children with care needs on becoming adults; universal disability benefits continuing as now; a standard national needs test; and better information and advice, led by local councils.
The important elements in the Dilnot report are similar to the plans that we set out in government in the care White Paper in March last year. Our concern was and is to protect the one in 10 people who have to pay more than £100,000 for the cost of their care in older age; our concern was and is to protect hard-working people on modest incomes, who are more likely to care for their relatives and a lot less likely to get any help in doing so; and our concern was and is to protect people from the lottery of where they live, rather than what they need, determining their assessment for care and the level of support.
It should be a cause for celebration and pride that one in five of us in this country who are alive today will live to 100, and that our children are likely to spend a third of their lives in retirement. Instead, too many of us approach our older age in fear—fear that we will need care that will not be there; fear that our savings will be wiped out by the open-ended costs of care; fear that we cannot protect our families from that risk; and fear of becoming a burden or being left alone.
Today’s report from Andrew Dilnot is a starting point, but it is what the Government do with it now that counts. My right hon. Friend the Leader of the Opposition has made a big offer to the Prime Minister to put politics aside and work to see a better, fairer and lasting system of support for our older and disabled people in England. Labour is willing to talk to and work with the Government and all other parties to do so, because we know that any new system of care must give all of us long-term confidence about what will be on offer for us and our families as we plan and prepare for older age.
That requires the Prime Minister to give the lead, because discussing and agreeing an affordable, sustainable system and how we pay for it involves important parts of Government beyond the Health Secretary. It requires the Prime Minister to give a guarantee that the Government will not kick Dilnot’s recommendations into the long grass, because as Dilnot says, the system needs “urgent and lasting reform”. If the Government are serious, we are serious; and if they are serious, we need to hear more. Dilnot recommends a White Paper by December this year, so why are the Government already saying that it will be spring before publication?
Any solution is a solution only if it is available and affordable to everyone, so what assurance can the Government give that the voluntary insurance protection will be an option for all? Dilnot states that the current system is
“under extreme strain, and people are experiencing tightening eligibility and reduced care packages.”
Do the Government accept his conclusion that additional public funding for the means-tested system is urgently required?
The corporate crisis at Southern Cross is causing extreme anxiety for many people living in its homes. Do the Government accept that there is a case for regulating business standards as well as care standards, to give people greater confidence in their care?
The Secretary of State said that he would engage directly with me. I thank him, but this is a big challenge not just for him but for the Chancellor and the Prime Minister. Will the Government accept that cross-party talks are required across Government? This is a once-in-a-generation chance, and the House and the public will need to hear from the Prime Minister himself to believe that his Government are determined, as we are, to build a better, fairer and lasting system of care in our country.
Mr Lansley
I am grateful to the right hon. Gentleman for the welcome that he gives to the report by Andrew Dilnot and his colleagues, and indeed to the report that Tom Hughes-Hallett and Alan Craft produced on palliative care. They are both immensely valuable.
The right hon. Gentleman rightly says that it is important for us to move beyond many of the suggestions that have been made in the past. One of the essential purposes of the Dilnot commission was to seek something that was affordable and sustainable, that met tests of choice, fairness, value for money and ease of understanding, and that would be sustainable for the longer term. Dilnot has responded immensely well to the issues that we put to him, but that is part of a broader process of reform. In that sense we have not waited for Dilnot, because we have made progress on the wider aspects of reform. Now we have to ensure that we bring them together in a way that is coherent and works to deliver long-term, sustainable reform across the whole social care sphere.
The right hon. Gentleman rightly points to the fact that we inherited a fragile system in which there had already been a substantial tightening of eligibility and loss of care and support, with increasing levels of unmet need. That was precisely why, in an interim report last year, Andrew Dilnot and his colleagues asked us to make additional resources available in the spending review. I set out in my statement precisely how we have done so.
The concerns in relation to Southern Cross are particular to that company, and the Minister of State, my hon. Friend the Member for Sutton and Cheam (Paul Burstow), has made clear to the House how we are interacting with those who are involved with the company. We are making it very clear to the public—I reiterate it today—that we are prepared to act to secure the interests of individuals if there were any threat to their position in care homes. We are working with the Association of Directors of Adult Social Services and local authorities to ensure that those contingencies are in place. What I said today in the statement, and which people have not previously recognised, is that as early as last year we set out in the Health and Social Care Bill that we were prepared for regulatory powers to be available to ensure the future viability of social care providers, as we intend to do in relation to health care providers.
Let me may make one final point. I believe that my statement makes it absolutely clear that we will engage on the basis of the Commission on Funding of Care and Support, and that we will do so on a timetable that will work and that gives stakeholders and the public, and indeed the Government and the Opposition, an opportunity to come forward with a consensus. I discussed that timetable with Andrew Dilnot, and he is clear that he supports it. It will lead to a White Paper in the spring and an associated progress report on funding reform. I am clear that that assures stakeholders that we will take this forward as a priority.
Sarah Newton (Truro and Falmouth) (Con)
I very much welcome the report and the Secretary of State’s statement. It was the previous Government who kicked the fixing of our broken care system into the political long grass. Will my right hon. Friend reassure me that we will work with all parties in both Houses to find a lasting solution?
Mr Lansley
Yes, I agree with my hon. Friend. That is indeed what we will set out to do. There have been many false starts, and not just under the previous Government. It is important for us to make progress, and for us to do so on a basis that is sustainable for the longer term.
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
The Secretary of State will be aware that all sorts of new and innovative ways of caring for elderly and disabled people are developing. The terms “domiciliary care” and “residential care” will become obsolete as services are provided in different ways. Will he ensure that whatever funding mechanism is being developed does not limit the type of services that can be provided, because providing for elderly people to be cared for in their own homes and in settings where they can live in a more normal way will be enormously important in future?
Mr Lansley
The hon. Lady very well illustrates one reason why Andrew Dilnot’s commission is, among its recommendations, looking to eliminate discrimination between residential and domiciliary care services. We should not have a system that tends to provide perverse incentives to go into residential care, or indeed one that prevents that from happening when it is the right thing. However, part of the reason why the Dilnot commission should be seen in its wider context is that we are looking towards innovative and more effective means of supporting people’s independence at home. The Department is now looking towards the evaluation of the telehealth whole system demonstrator pilots, the world’s largest randomised controlled trial of telehealth, which should come in a matter of weeks.
John Pugh (Southport) (LD)
Will the Secretary of State acknowledge that it will be easier to get agreement on the principles underlying the proposals than on the mathematics and the cost? Does he agree that only a renewed NHS focus on the chronic diseases of old age will ultimately make the latter bearable?
Mr Lansley
My hon. Friend is absolutely right. Although we are looking to ensure that we have a sustainable system of social care and support both for social care and the NHS, the linked priority of our Department and our Government is to improve and increase the effectiveness of our public health services. That is why I was this morning with the Faculty of Public Health to discuss precisely how we can improve health planning at local level, not least with local government, to try to reduce the prospective burden of disease in future.
Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)
As a vice-president of the Alzheimer’s Society, and like many hon. Members, I am aware that it is dementia awareness week. The most enormous resource is needed to help both individuals and their carers, particularly with residential support. Is not my hon. Friend the Member for Sheffield, Heeley (Meg Munn) entirely right to draw attention to the fact that even within Andrew Dilnot’s acknowledgement of the perverse incentives, there is still an emphasis on the care market and the drive to encourage people to take up, or to consider the option of, residential care? Do we not need to put the glue back by supporting families and neighbourliness, so that we can keep people independent in their own homes as long as is humanly possible?
Mr Lansley
I understand the point that the right hon. Gentleman makes and in the past some of the criticisms of previous proposals have been made because they would have led to a situation in which informal care and family care would not have been properly supported—indeed, there would have been perverse incentives for people not to have family carers. We need to support family carers rather than bypass them.
I am glad that the right hon. Gentleman raises the issue of dementia. It is tremendously important that we understand it is one of the principal reasons for such a rising burden of disability and requirement for care and support. It is why we are looking to the longer term, not least to improve research into dementia. I am grateful to the Minister of State, my hon. Friend the Member for Sutton and Cheam, who has chaired the work on research into dementia, and he was able to announce substantial additional funding to support dementia research just the week before last.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
I declare an interest as I have an elderly step-mother who is in a home and this will be very important news for her family and my family. Have there been discussions with the Treasury, and does it recognise that this is one of the key issues? How far have those discussions reached, or if they have not started, when will they do so?
Mr Lansley
My hon. Friend will be pleased to know that the statement I have made is the product of collective discussion, which of course fully involved the Treasury.
Mr Dennis Skinner (Bolsover) (Lab)
Does the Secretary of State agree that it would be a big mistake to miss this opportunity for root-and-branch change of the present system? Would it not be handy if local authorities played a bigger role than the billionaires who run Southern Cross, Winterbourne and the rest? Would it not also be nice for him to acknowledge that when he blurted out about the death tax he got it all wrong?
Mr Lansley
On the hon. Gentleman’s point about local government, he should remember that the overwhelming majority of the residents in Southern Cross care homes are funded by local authorities, and that is precisely why we are working with local authorities to ensure that those residents’ interests will be protected. I recognise the problems that we have seen with Southern Cross, although I do not know of any other companies in a similar position. None the less, it is one of the reasons why we seek the powers in the Health and Social Care Bill to regulate social care provision in the same way as health care provision.
Mrs Anne Main (St Albans) (Con)
If we are to see elderly and disabled people needing more carers, my right hon. Friend will need to work with the Secretary of State for Education to enhance the status of those who work in the care industry, because we will need far more people willing to work in it and with the skills, qualifications and commitment needed to give the enhanced care that people would like to receive.
Mr Lansley
I am grateful to my hon. Friend. During the engagement that we are undertaking, one of the areas that we should certainly pursue is the work force development strategy in relation to care and support—and we will do that.
Mr Ronnie Campbell (Blyth Valley) (Lab)
Can the Secretary of State tell us why one part of the UK gets care free and the other has to pay? Is it because the other part—Scotland—pays more taxes?
Oliver Heald (North East Hertfordshire) (Con)
I welcome the fact that the Secretary of State has gone wider than the Dilnot report today. It was at least two years ago that the Commission for Social Care Inspection, the regulator, called for wider powers to deal with financial regulation, and it is very welcome that that is to happen. Does my right hon. Friend agree that the level at which the cap is set under the Dilnot regime will be important in deciding whether an insurance market can develop? If it is set too low, the risk that is being shared will not be great enough, and if it is set too high, it will be too expensive.
Mr Lansley
I am grateful to my hon. Friend. That is precisely why we drafted the Health and Social Care Bill in the way we did. I hope that people will bear that in mind when debating the need for, and appropriateness of, this further regulatory measure. He made a perfectly valid point, and it is one reason we need to ensure engagement. It is not only a matter of whether the insurance and financial services industry would respond: along with stakeholders and the public, we need to understand what the public’s attitude would be were they to have greater clarity about potential care costs and if they were willing to engage with financial services products in meeting those care costs. If they were, significant benefits would be derived, not least through bringing additional resources to bear and through creating organisations with a direct incentive to undertake more prevention.
Jack Dromey (Birmingham, Erdington) (Lab)
Dilnot offers a new dawn but not for three years, and in the meantime the fabric of social care is coming apart at the seams because the Government have imposed a 28% cut on local government, leading to such councils as Birmingham cutting care all over England. Will the Secretary of State act now to ensure that in the meantime the elderly and the disabled get the support that they deserve and which any civilised society should provide?
Mr Lansley
The hon. Gentleman should be aware that the maximum reduction in local authorities’ spending power this year compared with last year is 8.8%. We removed the ring fence from Department of Health social care grants but we did not reduce the scale of those grants. In addition, he must remember that, as is not always recognised, the NHS is making specific provision to support social care. This financial year, £150 million will go to support reablement, and £648 million will be transferred, as I said, to support social care, which will also have health benefits. That will be spending power in the hands of local authorities to support adult social care.
Margot James (Stourbridge) (Con)
I welcome the Dilnot proposals, but does my right hon. Friend agree that he should resist the demands from the shadow Health Secretary to rush into a White Paper this side of Christmas? It is more important to get it right, and there may well be ways to improve on the Dilnot proposals, particularly with regard to the cap and by making provision more affordable and fairer.
Mr Lansley
My hon. Friend makes a fair point. It was clear that had we sought to publish a White Paper before Christmas, the net effect would have been that we did not give the public, stakeholders or the official Opposition the time needed to discuss the issue and to do the job properly .
Barbara Keeley (Worsley and Eccles South) (Lab)
It is clear that there are two issues: not just the future funding of social care but the current funding—the crisis referred to by my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). Only 15% of councils are now meeting moderate need, but that figure used to be 50%. The Secretary of State cannot say that there is no crisis. It seems to me that building a future funding solution rests on not letting current provision deteriorate much further—but it is deteriorating rapidly. What, then, will Ministers do beyond the excellent cross-party work that probably will go forward to do something about the resources that are leaking away and the current crisis in provision?
Mr Lansley
I do not believe I did say that there was no crisis. The hon. Lady and the House must recognise, however, that last year the Dilnot commission, in an interim report, sought additional support specifically for social care and that we provided it through the local government grant and a transfer of resources from the NHS. She says that few authorities now provide social care for those with moderate needs, but that has been the product of years of change—it has been happening for many years. That creates a risk, but we are addressing that risk through the transfer of NHS resources and by helping people with lower levels of need through home adaptations, community equipment and reablement if they leave hospital, in order to make certain that we avoid the risk that we are running: of large numbers of people with moderate need falling rapidly into severe need.
Dr Sarah Wollaston (Totnes) (Con)
I understand the need for the timetable to allow for adequate consultation, but Andrew Dilnot’s excellent report draws attention to several areas including a lack of transparency, a lack of information available to families making decisions about care homes and, in particular, a lack of portability, which results in many patients being trapped and unable to move closer to loved ones. Does the Secretary of State feel that he could expedite any of the report’s recommendations to allow such proposals to receive more detailed consideration?
Mr Lansley
I entirely understand my hon. Friend’s point. In the course of the engagement during the latter part of this year, some of those issues will certainly come to the fore. My colleagues and I felt that it was better for us not to cherry-pick Andrew Dilnot’s report now, but rather for us to give people an opportunity to comment on the recommendations in full. That will, however, take place over the space of weeks rather than many months.
Emma Reynolds (Wolverhampton North East) (Lab)
I should remind Government Members that this issue has already been delayed because the Conservatives broke ranks before the election in order to score political points. However, there is now cross-party support for the recommendations, so why has the Secretary of State let the timetable slip from the autumn to next spring? Can he reassure the House and the country that there will be no further slippage in the timetable?
Mr Lansley
I am afraid that I do not accept the hon. Lady’s premise. I am not going to revisit the past, but the truth is that, since I became directly involved, I initiated cross-party discussions before the election on the reform of social care, and I did not leave those discussions. It was her former Prime Minister who effectively broke them down.
Tony Baldry (Banbury) (Con)
I think everyone knows where we want to get to on palliative care. We want to provide those people who want it with a much better opportunity to die at home or to die in a hospice while being properly cared for and supported. How does my right hon. Friend see us getting from here to there? What process will be involved, and who is going to drive that process to improve palliative care?
Mr Lansley
I am grateful to my hon. Friend for his question. This is very much about ensuring that, at the same time as engaging on the palliative care report, we build pilots that will enable us to see how the proposals would work in a number of places across the country. I know that some areas of the country are ready and willing to do that. The essence of what we are doing is to be increasingly clear about what quality services for those at the end of their lives look like, and to be sure that we can integrate those services by developing a system of per-patient funding. That would enable the providers to work together within the funding framework, without the current constraints and demarcations, and without the silo system that currently divides palliative care and end-of-life care services in a way that makes the system immensely confusing and difficult for people at the end of their lives. This is a real opportunity that has been fashioned by Tom Hughes-Hallett and Alan Craft’s report.
Alison McGovern (Wirral South) (Lab)
Funding for care is clearly a hugely important issue, but so is the quality of the care that older people receive. The parliamentary ombudsman and even the Financial Times have reported the need for greater respect and dignity for those receiving care. When will the Secretary of State return to the House and inform us in detail of the standards of care that older people can expect?
Mr Lansley
The hon. Lady will know that we are continuously seeking to improve the standards of care that older people receive, and, in so doing, we sometimes have to tackle what are clearly serious abuses. In the wake of the Winterbourne View events, for example, we will bring forward a report to Parliament on standards and the means by which they are to be met. With regard to hospital care, it was I who asked the Care Quality Commission to undertake specific unannounced nurse-led inspections to look at dignity and nutrition. We will work continuously to ensure that we deliver the standards of care that people have a right to expect.
Nick de Bois (Enfield North) (Con)
My right hon. Friend might be aware that more than 100,000 people a year are not receiving the palliative care that they need. Can he assure the House that that will be a key priority, following the issue of this report?
Mr Lansley
My hon. Friend is right. I very much welcomed and encouraged the dialogue that took place between Andrew Dilnot’s team and Tom Hughes- Hallett’s team, and they have made complementary recommendations. My hon. Friend is absolutely right to say that, as far as end-of-life care is concerned, there is widespread unmet need. The disparity in the quality of care and the services provided in different parts of the country is staggering. Just as the Dilnot commission deals with care and support, we certainly aim to deliver greater consistency in eligibility and in the quality of care provided.
Mr Jim Cunningham (Coventry South) (Lab)
I am sure that the Secretary of State is aware that there are concerns nationally—and locally in Coventry—about Southern Cross. Can he be more positive, because so far the answers we have received from the Government have been very vague? Equally, there is concern about the regulator being undermanned, so how does he intend to improve that and improve the quality of care?
Mr Lansley
I am sorry if the hon. Gentleman feels that the Government have been anything other than absolutely clear about what we are setting out to do. This is a problem that derived from the commercial decisions that the company made and it should be resolved by further commercial discussions between the company, its landlords and its lenders. We are constantly in touch with all of those, but it is not the Government’s responsibility to step in and take those decisions. What is the Government’s responsibility, which we are clear about and ready to take action as necessary, is to ensure that individuals in those care homes and their families are not abandoned and do not fall through the gaps or find themselves without access to the care and support they need. I hope that, in the midst of the perfectly legitimate concerns being expressed, people do not stray into causing people to be more fearful than they need be.
Mr Marcus Jones (Nuneaton) (Con)
Will my right hon. Friend confirm that the Government are taking the action necessary to ensure that residents in Southern Cross care homes, such as Harmony house in my constituency, will not be left without the care that they need?
Mr Lansley
My hon. Friend is absolutely right. I have a Southern Cross care home in my constituency and I am sure that most Members do. We cannot know precisely how the commercial discussions will turn out, but what we can be sure about is that we have put together with the directors of social services in local authorities clear contingency plans to protect the residents if need be.
Mr Dave Watts (St Helens North) (Lab)
The Secretary of State will be aware that many people both inside and outside the House believe that this matter is going to be kicked into the long grass by the Government. Can the Secretary of State set out the time scales for the consultation process and for the introduction of the legislation that will be needed?
Mr Lansley
Many people would therefore be wrong in that respect, because we are clear about taking this report forward as the basis for engagement in the autumn, publishing a response and carrying out other related work on palliative care in the spring, publishing a White Paper and a progress report on funding reform and legislating at the first available opportunity thereafter.
Julian Sturdy (York Outer) (Con)
Through the broad principles of the Dilnot report and the work already carried out by the Government, we at last have a framework that we can work towards to bring security, dignity and fairness back to elderly care, which I believe is really important. Will my right hon. Friend assure us, however, that we have a sensible and workable time frame within which to deliver?
Mr Lansley
My hon. Friend is absolutely right. At the heart of this, we know that additional resources have to be brought to bear and that given the financial circumstances we face, we also know that this will have to be a partnership between taxpayers, families and individuals—it cannot simply be handing costs over to the state. Although Andrew Dilnot makes no specific recommendations about how to pay for his proposals, he is very clear that even if it were to be through a tax mechanism, he believes it should come from an existing tax and should bear particularly on the same groups of older people rather than be a further intergenerational transfer from working age adults. What that immediately points to is the necessity of engaging fully with some of the stakeholder groups such as Age UK and others and of engaging properly with the public so that before we embark on this major reform, they can feel confident that they understand those trade-offs and precisely how these costs are to be met.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
The increased availability of care at home is to be welcomed, but it also poses increased challenges for safeguarding vulnerable adults. Given that personal budgets can be spent on unregistered and therefore unregulated care providers, what steps will the Secretary of State take to ensure that taxpayers money can be spent only on good quality and safe care provision where the rights of care workers are also fully respected?
Mr Lansley
The hon. Lady makes a number of important points. As the Minister of State, my hon. Friend the Member for Sutton and Cheam, made clear recently, one purpose of legislation in due course will be to put the safeguarding on a statutory basis, which is important. Working with the CQC, we must ensure that in domiciliary care as well as in residential care homes, mechanisms are in place that enable us to assess the quality of care and get feedback from residents. The social care outcomes framework must be developed in a way that captures an understanding of the experience of care users, their families and supporters.
Nicky Morgan (Loughborough) (Con)
I thank the Secretary of State for his statement and I welcome the Dilnot review. As other Members have said, however, hundreds of thousands of families across the country are already worrying about how they will pay for care bills for their relatives, including the Strachan family in my constituency, who said publicly this morning that they have only two months’ money left to pay care home bills and are not sure what they will do after that. When my right hon. Friend launches the consultation, may I urge him not to forget the needs of those already in the care system who are worrying about paying bills, as well as being rightly concerned about those facing future care bills?
Mr Lansley
My hon. Friend’s point relates to the degree of uncertainty and insecurity that the current system tends to engender. It is important that we deal with that, and that people understand the circumstances in which the state pays and will continue to pay. We should not give people who have no assets the sense that they will be required to pay when they have no means of doing so. The state will be there to support them. There will be a safety net, and the commission makes recommendations about how further to develop it in future. Beyond that, we must arrive at a place where people are able to understand better the nature of the care costs that they might meet, and where there are good, affordable, secure mechanisms through which they can prepare for those costs, so that they do not have the gross insecurity that exists at the moment.
Mr David Nuttall (Bury North) (Con)
Does my right hon. Friend agree that improved palliative care will be enormously helpful to those of us who wish to resist the calls for the legalisation of euthanasia, and that a reduction in the number of deaths in hospital could save tens of millions of pounds each year for reinvestment in patient care?
Mr Lansley
I share with my hon. Friend the feeling that if we can improve the quality of end-of-life care and give people an understanding of the recent great developments in symptom control at the end of life, people’s perception of the decisions that they might have to make about end-of-life care might change, and that might give them greater confidence that they can have what most people would regard as a good death.
Anne Marie Morris (Newton Abbot) (Con)
I welcome the Dilnot report’s many practical suggestions, which will be very important in Devon because it has the highest level of retired people—22%. With regard to the need for any new funding proposal to cover a range of different provision, given the change in relation to when people need to go into residential care, the contracting will need to be looked at carefully. Does the Secretary of State agree that if we are to have contracts, they need to be standardised? For example, the contracts that councils enter into with care homes are not standard, so although in theory they offer the same quality of care—
Mr Speaker
Order. I am extremely grateful to the hon. Lady, but I think that that is an excellent subject for her to pursue in an Adjournment debate, and I feel sure that she will.
Mr Lansley
There is the nub of a very good question there. If we develop greater national consistency in eligibility and in assessment, we might also start to engender greater consistency in quality, including the contracting that supports it.
Bob Stewart (Beckenham) (Con)
My local borough, Bromley, tries very hard to use its resources for social care as efficiently as possible. Might boroughs such as Bromley and others throughout the country be given more resources to help them to ring-fence funds for social care, particularly palliative care?
Mr Lansley
As my hon. Friend will know, local authorities were keen for many of the grants that we provided not to be ring-fenced in future, including the social care, public health and learning disability grants. We aim to give local government more flexibility, but, through the NHS, we are providing additional resources—in Bromley and elsewhere—to support preventive interventions that benefit both social care and the NHS, and I think that that will make a big difference in Bromley. As we know, however, all local authorities are, of necessity, having to seek greater efficiencies, and we are working with local government to identify where they can be delivered. There is still a dramatic variation between the costs of care services provided in different parts of the country.
Charlie Elphicke (Dover) (Con)
As we know, going into a home is long on cost but short on life expectancy. I particularly welcomed my right hon. Friend’s comments about greater prevention. What more can be done to promote access to—and promote in general—day care and respite care?
Mr Lansley
We have made specific additional provision to support respite care. I hope that people will be given more independence and support at home not only as a result of NHS support—the £648 million that will be provided this year is a great deal of money, which will substantially increase access to such facilities as community equipment, home adaptations, reablement and rehabilitation —but through, for instance, telehealth, which I mentioned in response to an earlier question. I think that we can transform the quality of care and health services provided at home.
Christopher Pincher (Tamworth) (Con)
Because Haunton Hall nursing home in Tamworth is owned by Southern Cross, its fate is of grave concern to residents and their families. Will my right hon. Friend confirm that any advice he receives from the regulator about companies such as Southern Cross, which the Labour party unfortunately ignored, will not go unheeded by him?
Mr Lansley
In the past, Governments received advice from the regulator about the desirability of their being able to undertake proper scrutiny of the financial circumstances—the financial viability and sustainability—of organisations. No powers in that regard have been taken in the past, but we are seeking such powers in the Health and Social Care Bill, and one of the debates that we will need to have concerns the extent to which it will be right for us to use them in the future.
Mr Philip Hollobone (Kettering) (Con)
How will the Secretary of State ensure that the very best examples of the hospice movement, such as Cransley hospice in Kettering, can become involved in the establishment of the new framework for palliative care, so that best practice is extended throughout the country?
Mr Lansley
As my hon. Friend will know, Tom Hughes-Hallett, the chief executive of Marie Curie Cancer Care—who is leading the palliative care review—has engaged fully with Help the Hospices and the hospice movement. I understand from my conversations with hospice representatives over a number of years that they do not want their funding to be subject to the vagaries of public expenditure. Individual block grants that vary from year to year give them no confidence about the services that they provide. They do not want additional resources as much as clarity about what resources will be provided for the individuals who seek their care. They particularly hope that there will be a corresponding transfer of resources to hospices which provide services that replace the NHS and support people at home, as many are increasingly doing.
Graham Evans (Weaver Vale) (Con)
I have four Southern Cross homes in my constituency. Does my right hon. Friend agree that the Southern Cross situation highlights the need for a dedicated financial regulator for social care services?
Mr Lansley
As I said earlier, this is one of the issues on which I hope we will have further discussion as part of the debate on wider social care reform leading to the White Paper.
Jason McCartney (Colne Valley) (Con)
End-of-life care is massively enhanced by Kirkwood hospice in my part of west Yorkshire, and the construction of a new children’s hospice has just begun on the outskirts of Huddersfield, funded by the West Yorkshire Forget Me Not Trust. Does my right hon. Friend agree that when considering the hospice movement in our country, we must always remember the children’s hospice movement?
Mr Lansley
My hon. Friend is absolutely right. The children’s hospice movement has done immensely good work over the years. I am aware of that in my own constituency through the work of East Anglia’s Children’s Hospices, and I am sure many Members also completely understand. That movement’s work has been done in circumstances in which a very small proportion of the resources for children’s hospices comes from state sources. The palliative care funding review addresses both adult’s and children’s end-of-life care and palliative care and identifies per-patient funding for children as well as adults, and it therefore offers children’s hospices precisely the same kind of security in the future as adult hospices.
Paul Uppal (Wolverhampton South West) (Con)
Does my right hon. Friend agree that the Dilnot report goes some way to addressing the long-standing issue that for many years the current system has been punitive to those who have been prudent and frugal in planning for their old age?
Mr Lansley
Yes I do, and one of the essential reasons why the Dilnot commission was rightly established is that there are many people who have worked hard, saved and accumulated assets and expected to be able to enjoy them in their older age or to pass them on to their families, but who instead found that all those assets were destroyed as a result of the sheer chance event of, for example, long-term disability or dementia. That is a tragic situation, and as Andrew Dilnot well puts it, if people have a health care need and are seriously ill the NHS will look after them, and if their house burns down or they have a car crash there is insurance for that, but here we have a potential catastrophe in people’s lives for which the state will not provide and nobody else is willing or able to offer them that similar kind of protection. It is therefore vital that we take forward the Dilnot recommendations in the way we are proposing.
David Rutley (Macclesfield) (Con)
I welcome the statement, and it is particularly welcome in Cheshire east where we anticipate a 120% increase in the number of people living beyond 85 in 10 years’ time. The Dilnot report stresses the importance of the awareness campaign. Does my right hon. Friend envisage an active role for third sector organisations such as Age UK and Citizens Advice not only in delivering the awareness campaign, but in helping to shape it, and is there also a wider role for such organisations within the Dilnot framework?
Mr Lansley
My hon. Friend makes a very good point, and I hope we will be able to take up and develop that during the coming weeks.
Neil Carmichael (Stroud) (Con)
Does my right hon. Friend agree that in a modern, responsive and caring social care system, we need more transparent and effective decision making and improved integration with the NHS, so that the person in need of care can navigate their way around the system?
Mr Lansley
I agree with my hon. Friend, and in his county the early implementation of health and wellbeing boards, which are to be legislated for under the Health and Social Care Bill, will provide precisely that opportunity for the integration of health and social care services.
Andrea Leadsom (South Northamptonshire) (Con)
A constituent of mine who is 61 years old is the full-time carer for both her disabled husband, who lives with her, and her elderly mother, who does not. Since she drew her state pension, she has not been allowed any kind of carer’s allowance. Will my right hon. Friend join me in praising all retired people who do such work, which saves the taxpayer a fortune, and will he look into what we can do to provide more support for such people?
Mr Lansley
I am grateful to my hon. Friend for asking that question, and I will, indeed, join her—and, I am sure, the whole House—in expressing our support for those who care for their relatives. It is absolutely vital work, and we should understand and support it. As my hon. Friend will know, my right hon. Friend the Secretary of State for Work and Pensions is currently reforming welfare, and he has made it clear that although carer’s allowance does not form part of universal credit, it is important for us to continue to understand how it should in future meet its aim of supporting carers.
Mr Speaker
I am grateful to the Secretary of State and all colleagues who participated.
Points of Order
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
On a point of order, Mr Speaker. Both you and “Erskine May” have made it very clear that, by a resolution of this House, Ministers should be as open as possible with Parliament, refusing to provide information only when disclosure would not be in the public interest. Nineteen days ago, this House completed debate on the Welfare Reform Bill, including a measure to place a cap on benefits. During the debate, on 17 May, the hon. Member for Cardiff Central (Jenny Willott) said that she had “heard” that Department for Communities and Local Government estimates forecast a rise in homelessness of 20,000 if the measure was introduced and that the policy would cost more than it saved. The Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling) replied by saying
“I have no clear evidence that further information is available”––[Official Report, Welfare Reform Public Bill Committee, 17 May 2011; c. 985.]
beyond the impact assessment.
Yesterday, we learned that the DCLG had, in fact, written to the Prime Minister’s office, ahead of a meeting of the Prime Minister, the Deputy Prime Minister, the Chancellor and the Chief Secretary to the Treasury, to say that, yes, the DCLG’s assumptions were that homelessness would rise by 20,000 and the policy would cost more than it saved. It seems inconceivable that this cast list and the hon. Member for Cardiff Central all knew about this and the Department for Work and Pensions Ministers did not. In addition, the Secretary of State has signed an impact assessment which makes no mention of the DCLG’s concerns. He said that his picture was
“a fair and reasonable view of the expected costs, benefits and impact of the policy”,
even though it does not contain the warning that was issued to the heart of government. My question is, therefore, very simple: how do we in this House bring Ministers to account for who knew what and when, and why did they not disclose crucial, material information to this House?
Mr Speaker
Order. I am grateful to the right hon. Gentleman for his point of order and I will take other points of order in a moment. First, I would say to him that he has recourse to the Table Office and may want to avail himself of that opportunity to see how, through the Order Paper, he can pursue the matter. Secondly, he has raised, on the Floor of the House, an extremely important issue. He will appreciate that I have not had the opportunity to study in detail the force and potential significance of what he reveals, but I am happy to look into it further, reporting back to him and, if necessary, to the House. Thirdly, Ministers on the Treasury Bench will have heard what he has said, and the text of it will very soon be available to them, and it is for them to decide whether, on the back of his observations, they think it necessary to say something to the House sooner rather than later.
Jeremy Corbyn (Islington North) (Lab)
On a point of order, Mr Speaker. Last Monday, the Home Secretary answered an oral question from the hon. Member for Finchley and Golders Green (Mike Freer) by giving the view that she was able to consider whether or not to grant an exclusion order against an individual—in this case, Sheikh Raed Salah. He was subsequently arrested and is now being detained in prison. Only after great difficulty are his lawyers being allowed to visit him tomorrow morning, and no other visitors have been allowed. I realise that the House cannot debate the matter today and I understand that no legal process is before any court on this matter but, at the very least, do you not agree, Mr Speaker, that the Home Secretary should, out of courtesy, come to the House to explain what she has done and take questions on the subject? She seems to find great difficulty in communicating with MPs on this issue, despite the fact that the gentleman in question was invited to this House by a number of colleagues to address a meeting here last Wednesday evening.
Mr Speaker
I am grateful to the hon. Gentleman for his point of order. Whether the Home Secretary chooses to make a statement on the matter or not is a judgment for her, and it is not something in relation to which I have any formal power. As he will be aware, I, too, was conscious of the fixture of the individual in question. He was to address a meeting in the House, which was perfectly orderly so long as he was not a person of concern, and was freely at large and legitimately so. When that situation changed, the arrangement whereby he would address the meeting also changed. All I would say is that the hon. Gentleman has raised an important point. I know that he has sought communication with the Home Office and at least an explanation of the situation. That approach seems to me to be entirely reasonable, and I hope that his legitimate curiosity on this matter will not for long remain unsatisfied.
Mr Tom Watson (West Bromwich East) (Lab)
On a point of order, Mr Speaker. In the past few minutes, it has been revealed by The Guardian newspaper that Milly Dowler’s phone was hacked by private investigators working for the News of the World. The company subsequently revealed the information to the Surrey police, who were investigating the matter. As well as being a despicable and evil act that will shock parents up and down the land to the very core, it also strongly suggests that Parliament was misled in the press standards inquiry held by the Select Committee on Culture, Media and Sport in 2010. Is it possible to know how we can address that matter?
Mr Speaker
My response to the hon. Gentleman is threefold. First, the first I heard of this was when he courteously sidled up to the Chair to mention it to me fewer than five minutes ago. Secondly, my initial procedural advice to the hon. Gentleman is that he might wish to take the question up with the Culture, Media and Sport Committee, which he judges to have been misled or misinformed in this matter. Thirdly, in view of the gravity of the issue he has raised, the detail of which I was not previously familiar with, I can say only that it will have been heard by Ministers on the Treasury Bench and if they judge in the circumstances that some sort of public response is desirable—as they might—I hope that that response will be made on the Floor of the House of Commons before it is made anywhere else. I hope that that is helpful.
Finance (No. 3) Bill
(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
19:31 - The House divided: - Ayes: 228 / Noes: 273 - Question accordingly negatived.
22:00 - The House divided: - Ayes: 229 / Noes: 298 - Question accordingly negatived.
Chris Leslie (Nottingham East) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
We do not often find the issue of high-cost credit lending in the headlines, but it is critical for many people up and down the country. Many of our constituents would expect to see it addressed in the Finance Bill, because there is growing concern that a large number of some of the poorest people in society are becoming prone to high-charging payday lending, doorstep lending, new variants of hire purchase and illegal loan-sharking, especially as the mainstream banks restrict credit availability.
I gather that since 2007 we have seen a fourfold rise in payday lending. The high-cost credit sector is now estimated to be in the order of £8.5 billion in value. The situation is familiar to many hon. Members across the House and particularly so to my hon. Friends, who represent some of the poorest and most challenged constituencies in the country. In my constituency, Nottingham East, the citizens advice bureaux and other advice organisations, such as Advice Nottingham and the St Ann’s advice centre, have recently published an anthology of modern poverty as they encounter so many stark stories of personal indebtedness daily. There are too many instances of companies—legal ones—preying on the vulnerability and desperation of stressed consumers who need to bridge their spending with short-term but, unfortunately, ultra-high-interest credit. A quarter of consumers who use high-cost credit cannot access any other form of borrowing. Apparently, 7 million people in the UK are denied credit and bank accounts that many of us would take for granted.
Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)
May I lend my support to my hon. Friend’s endeavours on this critical issue? Is it not a fact that the pressure on debt advice in our constituencies has increased dramatically because of the economic circumstances and the tightening of the criteria for social fund and care grants, and that this situation will get worse as people get caught up in a spiral of borrowing to pay existing debt?
Chris Leslie
My right hon. Friend, who has an excellent track record in raising many of these issues, is completely correct. The vice in which many of our poorest constituents find themselves being squeezed is very much apparent. The changes to the social fund that he mentions are part of the context in which we would want to review the circumstances in which high-cost lending takes place. That is the objective of our new clause 11: we want to examine the possibility of regulatory and/or tax measures to address this problem.
Richard Fuller (Bedford) (Con)
The hon. Gentleman mentioned the fourfold increase in payday loans. Would he acknowledge that a substantial amount of that increase occurred in the period 2007 to 2009, at the start of the recession, and that although the rate has subsequently increased, its growth has tapered off somewhat? Does he also agree that payday loans are but a sub-segment of the sub-prime, high-cost credit sector?
Chris Leslie
Yes, payday lending is indeed a facet of the broader problem. I am not sure about the trends and how things have been moving—the hon. Gentleman may have other statistics that it would be worth sharing if he makes a contribution to this debate—but there is no doubt about the trajectory of that growth, which has been quite marked, which I know is a concern for all Members, in all parts of the House.
Lorely Burt (Solihull) (LD)
Government Members share Opposition Members’ concerns about this issue, and we want to do the best that we can. However, new clause 11 asks for a report on the impact of all tax and non-tax measures on the cost of high-cost lending when we have not yet heard the response to the Government’s call for evidence. I am hopeful, as are many Members, that this will address the issue and provide further help, so does the hon. Gentleman not feel that his new clause might be a little premature?
Chris Leslie
The hon. Lady makes an interesting point, because it is important that we engage with the Government properly on this agenda. We are still waiting for that report, although I hope that new clause 11 has been framed in such a way as to be pretty harmless and to command widespread support. Ultimately, all that we are looking for is a review of the circumstances; and indeed, some of the tax measures that may need to be included—although they may not—would not currently be part of the arrangements that I understand her hon. Friends are reviewing. New clause 11 is simply about ensuring the widest possible capability for those policy levers that the Government would be able to consider. There are so many measures necessary to help protect the consumer. They include not just action on payday lending or interest rates, for example, but the support needed for financial literacy education—something to which the Government have regrettably taken the axe, by terminating the £26 million financial inclusion fund. That decision is a particular regret, given that it will hit citizens advice bureaux up and down the country, along with other face-to-face advice agencies. Indeed, the financial inclusion fund was an essential bit of seedcorn funding, so I would be grateful for the Minister’s clarification about its future.
The Financial Secretary to the Treasury (Mr Mark Hoban)
There is no need for clarification: if the hon. Gentleman had done his research properly, he would know that the Government have extended the funding for debt advice for a further year, and it is the intention that the Money Advice Service—which is funded by the financial services industry—will take on that work.
Chris Leslie
I did indeed know of the hon. Gentleman’s announcement of some time ago—not quite a full year yet. We are now into July, and the funding is due to run out next April, expiring at the beginning of the financial year 2012-13. Many advice agencies are quite anxious about what will fill the gap. It is clear that he has kicked the issue to the Money Advice Service, although we do not yet know what its approach will be. One crucial point is whether it will be interested in face-to-face advocacy and supporting such activity.
Yvonne Fovargue (Makerfield) (Lab)
Does my hon. Friend agree that the Money Advice Service now constitutes an online source of advice for those who have money on where to invest it and does not address the issue of people who are in debt?
Chris Leslie
My hon. Friend makes an important point. In addition, it does not necessarily address the face-to-face advice that is given by many citizens advice bureaux and other agencies that have been reliant on the financial inclusion fund. The Minister says sotto voce that it will do face-to-face advice as well; I will be interested to see whether the £26 million of investment is maintained. No doubt he will want to clarify that when he addresses the new clause.
I pay tribute to my hon. Friend the Member for Walthamstow (Stella Creasy), whose tenacity is to be commended for the fact that this issue remains front and centre on the political agenda. The Back-Bench motion that was passed last February called on the Government to introduce measures to increase access to affordable credit and to take regulatory action to control non-competitive examples of excessive charging, but we still have not seen any action since then. That is another reason why it is important to move forward and get a sense of priority and urgency into this issue, and this Bill is a good opportunity to consider these matters.
My right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) spoke earlier about why some of this action is needed now. The changes to the social fund and crisis loans that were announced in March—after the Back-Bench motion was passed in February—mean that social fund crisis loans will no longer be available to pay for basics such as cookers and beds, and the living expenses rate is being cut from 75% to 60% of the benefit rate, thereby limiting the number of loans that can be applied for. In addition, there is a backlog of unprocessed claims and the Government are planning to cut the discretionary social fund from £872 million last year to just £183 million this financial year—all under the axe of a Liberal Democrat Work and Pensions Minister of State, the hon. Member for Thornbury and Yate (Steve Webb).
At the same time, thousands, if not hundreds of thousands, are being disfranchised from access to credit. After the credit crunch, as the banks recapitalise, we see withdrawal from anything vaguely “sub-prime”, as it may be categorised. However, it is also known that there is money to be made from vulnerable customers. Many hon. Members will have experienced pushy sales calls, which are randomly generated, and text messages, which many people are receiving. It is about the desperate customers that I worry most and their responses to some of those apparent offers of help and assistance. It is all part of the allure of high-cost credit, which we need to regulate far more effectively.
It had been hoped that the promises of mutuality and support for the credit union movement in the coalition agreement would by now have tried to make some inroads into this problem, but despite the promise in the coalition agreement that
“detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry”
would be brought forward, all we have seen from the Government so far is the Northern Rock trade sale, local authority discretionary help for credit union squeeze because of the cuts to their budgetary position and, of course, the Treasury’s pre-emption of the Lloyds Banking Group disposal. The Vickers commission was looking at how to handle that particular issue, but Ministers have pressed on with the disposal of 620 branches rather than pausing and waiting for that report.
At the same time, funding for advice and financial education is falling away, as we have been discussing, as local authorities cannot pick up the tab. The basic problem is that not all customers are informed and logical when it comes to financial issues. The Money Advice Service, as my hon. Friend the Member for Makerfield (Yvonne Fovargue) mentioned, may well be there as a guide for people who have the time and space to make those decisions, but many of our constituents are not only busy but often confused about financial services. They can be distracted and stressed and in many cases they have an aversion to small print. Coupled with that, there is massive inertia in credit services.
There are some fantastic charities, such as Citizens Advice, which I have mentioned, and the Consumer Credit Counselling Service, of which I was a board trustee for five years. They pursue a number of ways to help those in most distress. Creditor-funded consolidation is a very good approach, but we need other reforms in the sector; facets include, for example, the fee-charging, customer-charging debt management plan providers. Charging customers rather than looking to the creditor to cover the administrative costs is an unacceptable business model in this day and age. The practice should be phased out and I hope the Minister agrees.
Lorely Burt
I entirely agree. I had a meeting with Wonga the other week. The company advocates a maximum of three rollovers. It is in nobody’s interest, not even the lender’s, to have people in a cycle of debt, because they are less and less able to pay it off. Perhaps something like that could be included in the regulations.
Chris Leslie
The sector itself ought rapidly to produce suggestions for self-regulation. I hope the new clause will make the sector aware of the seriousness with which the House takes the issue. We have had enough of people in desperate circumstances being exploited. The House of Commons passed a motion in February. We should pass the new clause, simply to ask for a review and a report on the range of regulatory and financial powers that the Government ought to take to stamp out some of the worst practices.
Customers need a fair deal from financial services generally, but our duty is to start with the people who are most at risk—the vulnerable and the exploited. If Parliament cannot stand up today to protect those most in need, who will?
Neil Parish (Tiverton and Honiton) (Con)
I rise not to support the new clause but to say to Ministers that I would like to hear exactly what they intend to do about doorstep lending. The hon. Member for Solihull (Lorely Burt) mentioned Wonga, which can charge up to 4,500% interest on its loans. Uncle Buck can charge 2,500% and PaydayUK can charge 1,200%. With a base rate of 0.5%, how can charging such inordinate interest be justified? These companies—I call them all loan sharks, to be blunt—travel around our poorest areas. I would be the first to admit that my constituency is not the most deprived in the country, but I have many poor and vulnerable constituents, and I think that Members on both sides of the House are concerned about what action we should take.
I know that Ministers are not keen on dealing with this problem through regulation, but perhaps we should consider our approach to smoking: we do not stop people smoking—although we have banned it in public places—but we put large health warnings on cigarette packets. The Financial Services Authority, or whichever body will be responsible, should at the very least take action so that there are serious health warnings for those considering taking out these loans.
Mr Jim Cunningham (Coventry South) (Lab)
Does the hon. Gentleman agree that one aspect that should be looked at is television advertising?
Neil Parish
The hon. Gentleman is right that the advertising and promotion of these products is a great concern. These products can seriously damage someone’s financial health, because they not only get them into huge debt, with huge interest to pay, but can often prevent them from securing mainstream credit, which can affect them enormously.
I am not greatly in favour of regulation, but I do not think that we can stand idly by and let some of the most vulnerable people in the country be exploited. They are desperate for money, and people knock on the door and offer them it. In fairness, many of them do not look at all the details or consider the fact that they will have to pay such high interest if they do not repay the loans. They do not realise that they will probably be charged even more interest if the loan is renegotiated, and that if they do not pay on time the loans company is likely to impose huge fines. That is unacceptable in this day and age and we must do something about it.
About 50% of the population in Ireland are involved in credit unions. In the US and Canada, the figure is about 40%, in Australia and New Zealand it is about 25%, but in the UK it is only 2%. I know that the Government are looking into increasing the availability of credit unions across the country, but we need to act much faster. In the meantime, we have to act against these companies, the loan sharks, because people who take out the loans sometimes have to pay back 10, 20, 30 or 100 times as much as they originally borrowed.
If the loan sharks’ argument is that they lend on those terms because the people to whom they lend are a security risk, we must question whether they should lend the money in the first place, and certainly at such massive amounts of interest. They must take the view that if 25 of the 100 people to whom they lend are forced into bankruptcy they will make enough money from the other 75 to make a profit. Is that moral and right? The answer is certainly not. Regardless of one’s political persuasion, that cannot be right in this day and age.
I have mixed views on the new clause, but I do not want Ministers to wring their hands and say that there is nothing they can do. In fairness to the Government, I should point out that the Opposition cannot hold their heads high, because they had 13 years in which to do something about this issue. It is right for the coalition Government to take the issue on. Instead of wringing our hands and saying we can do nothing, let us do something.
Lorely Burt
My hon. Friend is talking, almost interchangeably, about loan sharks and high-cost credit lenders regulated by the FSA. The Government have put even more money into the loan shark operation to clear them from the streets. It is important that we do not mix the two, because whatever one thinks about high-cost credit loan companies they are at least regulated and we are doing things to improve them. Loan sharks are totally unacceptable in this country.
Neil Parish
I agree with the hon. Lady to some degree, but I say to her bluntly that charging 4,500% interest, whether it is done legally or not, is theft. As a farmer, perhaps I have slightly jaundiced views about bankers, who offer an umbrella when the sun is shining and want to take it away when it starts to rain. We cannot go on letting vulnerable people be exploited—it does not matter whether it is being done legally.
David Rutley (Macclesfield) (Con)
My hon. Friend makes a powerful point. The challenge is that people always say that we have to do something about this issue, but it is never clear what that thing is. For me, the vital thing is awareness. The issue is not just loan sharks but extends to organisations such as BrightHouse. Does my hon. Friend agree that people need to understand the true cost of what they are borrowing?
Neil Parish
I share that view entirely. At the start of my speech, I spoke about a financial health warning on a loan, including what the rate of interest will be. There should also be an example, perhaps showing what the principal amount would be to repay if one started with £100.
Stella Creasy (Walthamstow) (Lab/Co-op)
I support the hon. Gentleman. Does he agree even when people know the rates, they have little choice because they cannot borrow from any other type of organisation? Research shows that a quarter of these companies’ customers cannot get credit elsewhere, so even when they know the rates they have no option.
Neil Parish
The hon. Lady is right that parts of the population cannot borrow elsewhere, which is a problem. That is another reason for clear warnings, if not restrictions, on the rates of interest charged.
The problem is not just that there is a population who cannot borrow from anywhere else but that many companies and loan sharks knock on people’s doors. Credit is often dished out in cash, which is very tempting. Some people could, if they went to a great deal more trouble, secure money from proper lending companies at a competitive rate.
Mr Jim Cunningham
People also borrow against their wages, which puts them on a financial treadmill that is hard to get off when there are such extortionate interest rates.
Neil Parish
The hon. Gentleman refers to payday loans, which also incur huge amounts of interest.
I am not against people being able to borrow. In a capitalist system, people need to be able to do that, but we must stop companies exploiting people’s vulnerability and lending at such vast rates of interest. That can be achieved either by legislation or by companies having to provide a clear statement of what a loan will cost when their representatives arrive on somebody’s doorstep and try to lend them money. If someone who borrows £100 will end up paying £2,000 back, that should be absolutely clear. That is the very least I should like the Government to do.
I have made, I hope, many good points, and I hope too that the Government will not just wring their hands but do something to help vulnerable people and stop legal loan sharking companies taking money from people in a way that I believe is theft.
Stella Creasy
I have come here today to speak in favour of the new clause, and to vote for it, too, which I believe will be a powerful expression of the need to act to tackle the problems caused across our country by high-cost credit companies, or so-called legal loan sharking.
I promised when the House debated the issue previously that I would congratulate those who took action to protect vulnerable consumers, and I want to do so. I welcomed the announcement of the consumer credit review and the coalition agreement promise to tackle the cost of borrowing on store cards and credits, but it worries many of us that it is already overdue. To meet the timetable, that work will have to be done within the next two weeks.
Even more worrying for the Opposition is the fact that we have had to drag the Government kicking and screaming to the table to discuss high-cost credit, because the coalition agreement made no commitment to tackle it. There is still uncertainty about whether it will be tackled in the consumer credit review.
Andrew Percy (Brigg and Goole) (Con)
I am a huge supporter of what the hon. Lady is trying to do. I agree that there is concern about how quickly we are moving, but we had 13 years of her party’s Government. Can we try to keep this a cross-party matter? Members of all parties are concerned about it, so let her not bash the Government, and when I speak I will not bash the Labour Government for their inaction. Let us all try to keep it positive.
Stella Creasy
I very much hope that there will be cross-party agreement, but, as I will explain, I fear that that consensus is being broken for the purpose of choreographing coalition conferences. That worries me greatly. I hope the hon. Gentleman will agree that when so many people are suffering by having to pay the high costs of credit that companies charge, any delay is unacceptable, and I hope he will vote accordingly.
I know that we are not alone in wanting action as soon as possible. The campaign has the widespread backing not just of MPs or policy makers but of debt experts, campaigners and members of the public. They are deeply concerned that doing nothing to regulate these firms is feeding a growing crisis of personal debt for families across the country, and they want action.
I fear that I am going to end up condemning the Government today, because we are debating not whether to act, or whether regulating for a cap on the cost of credit would be effective, but when to do so: debating when, not if, is unforgivable.
Neil Carmichael (Stroud) (Con)
I am concerned that the action that the hon. Lady recommends might well drive people into the worse position of having to appeal to really rather unpleasant loan sharks. That must be the great worry.
Stella Creasy
The evidence on which that presumption —that myth—is based is very uncertain. I would argue that there is a strong parallel with the debates on the minimum wage and the fear that its introduction would drive companies out of business. We now know that that is simply not the case. Evidence shows that a cap on the cost of credit would lead to a fairer deal for consumers, for which we are arguing today. It is important that we get it right, given the number of people involved in the market. I ask Members to support the new clause because it proposes regulatory action now, given the consensus that there is a problem. It states that it covers
“other measures relevant to the high cost credit lending sector that may prevent consumer detriment.”
By consumer detriment, we mean lending that drags people into debt.
We might all agree that there is a problem in the market, and that something needs to be done, but the coalition’s choreography is getting in the way, and I fear that our constituents will lose out. In making the case for Government Members to change their mind about the political fancy footwork and instead dance with us to action now, I want to set out what the problem is, what is causing it, what could be done about it and why doing nothing, or even delaying doing anything, should not be an option.
This question is important when we are debating a Finance Bill, because we can use taxation and regulation to deal with social and economic problems. For example, we could tackle problem drinking by raising taxes on high-strength alcoholic drinks. Indeed, in Committee, the Economic Secretary to the Treasury said:
“We can see that such a measure will have a disproportionate impact on tackling problem drinking, because the change in taxation will make it less attractive for producers to make such strong products.”––[Official Report, Finance (No. 3) Public Bill Committee, 17 May 2011; c. 166.]
By the same principle, the Treasury could tackle problem lending by penalising companies that fail to meet certain standards in their provision of consumer credit.
The problems in the lending market make the issues clear. The UK has one of the highest levels of personal debt in the world. As of April last year, Britain owed more than £1.4 billion in private debt. As the hon. Member for Tiverton and Honiton (Neil Parish) pointed out, borrowing money is sometimes essential, whether to enable someone to pay for training or a house, or to start a business. Indeed, borrowing is critical for our future economic recovery. I am therefore saying not that we want to stop people borrowing, but that we want to stop problem borrowing. However, the current signs are that personal debt is on the rise, and that is a problem.
Pat Glass (North West Durham) (Lab)
Does my hon. Friend agree that the evidence suggests that this country is now becoming a haven for such companies, which are targeting this country because of the lack of regulation? Does she also agree that that is making things far worse for our constituents?
Stella Creasy
My hon. Friend is exactly right. It is not just evidence; the companies have specifically said that the lack of regulation in the UK compared with other countries makes it a target market for them.
We know that borrowing is becoming a problem for people. More than four in 10 people are worried about their current debt, and in recent months 4 million have taken on more debt than they ever have before. One third of families say that they have no emergency savings whatever. However, this debate is not about a lack of rainy-day money. The number of people who say that they are likely to exceed their overdraft limit has more than doubled in the past year, and the number of people who say that they are likely to use an unauthorised overdraft this month has nearly doubled since July last year, from 900,000 to 1.6 million.
That means that more people are getting into financial difficulties. In recent years, personal insolvency in the UK has reached a record high. On average, there are more than 160 personal insolvencies every year in each constituency, which is a dramatic increase since the start of the last decade.
New clause 11 covers not only those who are formally in financial difficulties but those who are affected by debt and who have not sought help. The proposal reflects the growing inequality in our society between those who can borrow affordably and those who cannot. Research by the Department for Business, Innovation and Skills shows that most households have a debt-to-income ratio of 10% or less, but that one in five households have debts worth more than 100% of their annual household income. There is growing evidence that such households are using multiple forms of unsecured credit—a mixture of high-cost credit and credit cards. Thirteen per cent. have four or more types of debt.
The question for many of us is this: who is borrowing? Eleven per cent. of lone parents use non-mainstream loans compared with just 3% of households overall. The Consumer Credit Counselling Service tells us that one in eight people who contacted it during the first half of 2010 were claiming jobseeker’s allowance. However, one thing that might concern many hon. Members is the growing evidence that the people who are suffering in this market are not just those whose incomes have always been fragile, but many middle-class families. Experian data show that the biggest increase in insolvency is among those with suburban mindsets—people who are in work, married and have kids, and who are trying to make ends meet.
Lorely Burt
Is it a matter of regret to the hon. Lady that the previous Labour Government presided over the greatest expansion of consumer credit in the history of this country? In their 13 years, the previous Government tried to do a number of things, but rejected the proposal in new clause 11. Does she agree that this Government, one year in, should be given the opportunity to finish their consultation and make proposals of which she might approve?
Stella Creasy
I am interested in the hon. Lady’s impression that consumer credit is a bad thing, because I do not agree. I would also be interested in her views on research by the Office for Budget Responsibility, which shows that as a direct consequence of the Government’s Budgets an extra £10,000 of debt is being put on to households. Perhaps she would like to comment on the implications of that for family finances. No? Then I will continue.
The problem is not just the high-cost credit industry but the nature of the industry and the way in which it operates, which is causing so many problems. What most worries many Opposition Members is that so many families are struggling. Indeed, we know that 46% of families say that they do not earn enough in a month to pay all their bills. Crucially, of that 46%, 10% say that the reason they are struggling is the repayments on high-cost credit. It is those very products that are pushing them into financial difficulty.
For the avoidance of doubt, I say clearly that I am not trying to put Wonga and the other companies out of business. I do not hold with the constituent of mine who argued that we should learn a lesson from Dante and put them in the seventh circle of hell, but we can make the credit market fairer for all concerned. It is important to set out, therefore, the kind of companies we are talking about and just how quickly this industry is growing in the light of recent economic circumstances.
Many people know about payday lending—the form of credit whereby a borrower gives a creditor a cheque or an authorisation to make an automatic withdrawal from their bank account. That is used as security for a short-term loan to be repaid, supposedly on the next payday. It is a long-established form of credit in other countries, but it is relatively new to the UK—and it is growing rapidly. By 2009, the payday lending industry was worth more than £1.2 billion, and the figures I have gathered from the Department for Business, Innovation and Skills, which were released under a freedom of information request rather than being put in the public domain, show that it is now worth £1.9 billion. Indeed, in its “Keeping the Plates Spinning” report, Consumer Focus estimates that payday lenders are expected to quadruple the scale of their operations in the UK in the next few years alone.
Richard Fuller
The hon. Lady says that the payday lending market was £1.2 billion in 2009. According to the Office of Fair Trading review of the payday loan market, it was £600 million. To clarify the situation, and for my education, will she explain the difference between the two numbers?
Stella Creasy
I will happily explain the difference between the two numbers. The hon. Gentleman might have heard me say that I made a freedom of information request to obtain the most up-to-date data from the Department, and it is a source of concern that Ministers did not share the information with MPs. Research shows clearly that the market has grown to £1.9 billion. If I tell the hon. Gentleman that 5% of the population have taken out a payday loan in the last year, representing 2 million, perhaps he will understand the discrepancy. Perhaps he might like to account for why the Government did not want to put that information in the public domain.
Richard Fuller
I just wish to point out to the hon. Lady that I think there is a lot of consensus, which I hope she does not destroy in her passion for this issue.
As a point of clarification, the 5% figure in the OFT’s analysis came not from the payday loan market but from participation in the high-cost credit market, which includes credit unions and credit cards. Given that my source is the OFT, perhaps she will clarify that point too.
Stella Creasy
I am happy to share the figures with the hon. Gentleman, although I am afraid to say that his interpretation is incorrect. One of the things that I have done—perhaps I am getting a reputation for it in the House—is my homework on this market, and I have sought as much accurate information as possible. That was why I made the freedom of information request, and I would be happy to share the data with him. One of the challenges is that the Government have information about how quickly this market is growing, but they are timid about confirming it.
Nic Dakin (Scunthorpe) (Lab)
My hon. Friend is setting out carefully and deliberately the challenges that people face. Does she agree that the exponential growth in this high-cost credit lending is the very reason the Government need to act to address this issue sooner rather than later, in line with the consensus across the House?
Stella Creasy
I absolutely agree. I am quoting research by the consultancy practice, R3. It is conducting surveys because it is worried about the mix and range of credit that people are taking out and the high-cost credit itself, which is causing people to get into debt. That is why I am passionate about tackling the problem sooner rather than later. Contrary perhaps to some of the briefings that hon. Members might have had from the payday industry, the majority of people borrowing from these companies are on comparatively low incomes. In particular, one in 10 UK payday customers has an income of less then £11,000, and 46% have incomes of less than £15,000 a year. It is evident how quickly high repayment charges eat into an already meagre wage.
Stephen Williams (Bristol West) (LD)
The hon. Lady just made the hypothetical point that a 2% increase in interest rates would cause those costs to rise. Undoubtedly that might be true were rates to rise, but they have not risen, and one reason market interest rates have not risen is that the Government are dealing with the deficit at a time when the Labour party has not come forward with any policies to tackle the emergency.
Stella Creasy
I hope that the hon. Gentleman is not being complacent about the cost of living, its impact on people in his constituency and the fears of many about what an interest rate rise would mean for their monthly mortgage payments. One thing that worries me is that a lot of people are borrowing just to make ends meet; they are borrowing not for investments, holidays or fancy televisions, but to pay their rent and mortgages and to put food on their families’ tables. His complacency about interest rates not rising any time soon is misplaced.
David Rutley
I have heard the hon. Lady speak with passion in this debate and others, and I respect the point being made. However, some of the points being made by Government Members are important, particularly those concerning fiscal constraint and household spending constraint. The gap in her argument is that it is vital that households bear down on their spending. It is not just about the cost of financing a television or whatever else; it is about not going for it in the first place. There is a wider scope for this argument. This debate is not just about the cost of the debt, but about people avoiding it in the first place by lowering their expectations of what they need.
Stella Creasy
I would be interested to hear the hon. Gentleman’s advice to the nearly 500,000 Londoners who are having to use their credit cards to pay their mortgage or their rent. Right now, people are borrowing to pay for everyday essentials, and I fear that he sounds a bit like Marie Antoinette saying that people should just eat cake. That is very misplaced, given the dire financial situation that many people are finding themselves in, certainly in my constituency and, I will wager, in his as well.
Indeed, Shelter’s research shows that it is not only people in London who are using their credit cards to pay their mortgages. There are 2 million people in this country who are doing it. It is horrifying to think of the situation that those people are getting themselves into, given the interest rates that they are paying on their mortgages, let alone the rates that they are paying on their credit cards.
We also know that changes in the cost of living affect some more than others. The Resolution Foundation points out in its low earners audit that those on low to middle incomes spend a higher proportion of their incomes on the goods and services that are hard to cut back, such as their housing, their fuel, their transport to work or the food that they put on their children’s plates. That is what the hon. Gentleman is talking about. Those low to middle income earners spend 40% of their spending on those everyday essentials, compared with the 26% spent by higher earners. One in five pensioners have had to cut back on essentials such as food because of the rising cost of living.
This is not just a demand-side issue; it is also about the way in which the high-cost credit market is stacked against the consumer. That is why I believe that the market merits regulation. In order to make its profits, the high-cost credit market makes use of a number of the attributes of the people who have to borrow from it and of the way in which the market is structured. As has been mentioned, a quarter of the customers of high-cost credit companies cannot access any other form of credit. Indeed, Consumer Focus’s research shows that many users of payday loans are unable to access mainstream credit such as overdrafts because they have already maxed them out. That means that they have no choice; they have no power to shop around for a cheaper loan. Also, they cannot build up a credit history that would show a mainstream lender, who might lend at a lower rate, that they could be trusted to pay a loan back.
Because high-cost credit companies have fixed costs, they make their money by repeatedly lending to people. That means that their business strategy is geared towards encouraging repeat borrowing and the rolling over of loans. Friends Provident has found that 29% of payday loans are refinanced, with the refinancing rolling over on an average of two occasions. Some 15% of home credit loans are refinanced and rolled over into a new loan before the end of their term. It is worth explaining what that means for the cost of borrowing from these high-cost credit companies.
One person who got in touch with me took out a loan of £650 with Wonga, in two instalments, to be paid back within a month. When the repayment date arrived, he found that he could afford to pay only the interest that had accrued on the £650, which was £163. The original £650 loan was then rolled over for another month. At the end of that month, he paid off the loan, which cost him another £858. That was the original £650, plus interest of £208 accrued in the second month. The clock starts ticking in the first month of these interest payments, which is how 4,500% interest rates are reached. The longer a loan is rolled over, the closer it can get to the 4,500% APR that Wonga charges. The process of rolling over meant that he had paid £1,021 for borrowing £650 over two months. It is difficult to see what level of cap on the number of roll-overs would make a difference in this market, because the industry consistently refuses to release information about its business model. We can therefore only guess at the impact that the number of roll-overs has on people’s debts.
Furthermore, we know that the rates charged by high-cost credit companies often do not reflect an economic rate, due to a lack of competition in the market, a lack of regulation to drive down costs, and the absence of any ceiling being set. I recognise that using APR is problematic in understanding the cost of borrowing, especially in the payday loans industry, but as a yardstick it can help us to illustrate the issue. We know that payday loans can cost 4,500% from Wonga. They can cost 2,100% from Uncle Buck, 1,200% from Payday UK, and 1,700% from KwikCash.
John Woodcock (Barrow and Furness) (Lab/Co-op)
I apologise for coming in late to the debate. My hon. Friend uses the same tube line as I do. Did she notice on the way in that one company was advertising on the tube, offering a decision by text within a minute for a loan at an APR of 1,734%. That cannot be right; we have to do something to crack down on it.
Stella Creasy
I agree absolutely with my hon. Friend. There is no ceiling on this market, which means that company rates are going up, not down. We also know about the lack of competition with other sections of the market. Provident owns 6% of the market. In 2004, the Office of Fair Trading referred the doorstep lending industry to the Competition Commission and, in 2006, its report confirmed the lack of competition. As Citizens Advice argues, however, the fact that these problems are getting worse, not better shows that the measures suggested in 2006 have not worked and that it is time to strengthen the intervention we make in this market.
Although I am an avid supporter of the credit union movement, it cannot at this moment present any kind of alternative to this market within any relevant timetable. Credit union membership is growing by 8% a year, but the payday lending industry alone is three times as big as it was two years ago. Credit union lending therefore remains relatively small scale, equivalent to just 5.9% in value terms of the high-cost commercial sector. As a consequence, it is unlikely to exercise any real competitive restraints on the prices in the high-cost credit sector.
With all the signs that this market is growing exponentially, this new clause and the review it recommends would allow us to look at a number of issues on how to tackle it effectively. First, it could consider excess profits—
Neil Carmichael
I thank the hon. Lady for giving way. I think that credit unions are really important. I have promoted them in my own constituency and I will continue to do so. I have joined one myself to demonstrate that it is something that we should all think about. Surely it would be a good idea to put out a more positive message about the role credit unions can play and encourage people to start thinking about being responsible in the management of their finances through the use of credit unions.
Stella Creasy
The hon. Gentleman is being a little unfair to accuse me of not putting out a positive message about credit unions, given that I worked long and hard to set up the Waltham Forest community credit union and to secure it more than 4,000 members from my borough. My point is that when only 2% of the British public are part of a credit union, it cannot be the answer to the problems caused by these companies. The question is how to get the right mix, and I believe that regulation needs to be part of that mix. Of course extending access to affordable credit is part of the solution, but it will take decades for credit unions to provide a serious alternative to these companies from which people are borrowing and getting into debt with now.
Frank Dobson
In response to the intervention by the hon. Member for Stroud (Neil Carmichael), is it not a further problem that because of the cuts to citizens advice bureaux, welfare rights units and law centres, good advice, which might help people to steer clear of loan sharks, is less and less available? As the years go by and the cuts continue, the problem will get even worse and the inequalities will grow.
Stella Creasy
There is a real concern about the lack of advocacy services and about people’s inability to get help in negotiating with their creditors. I believe that we have to make credit affordable for all; payday lenders could be part of the mix if they were properly regulated. That is all that the new clause calls for.
Let me present some figures that might tempt Treasury Ministers when they see what could be achieved in the way of tax through this review. The Competition Commission inquiry into the lack of effective price competition in doorstep or door-to-door lending estimated that companies were making an excess profit of at least £150 million a year. The commission considered that 90% of that excess profit was made by Provident Financial alone. On that basis, Provident has made £675 million in excess profit out of low-income communities since 2005—a sum greater than the total amount of credit union lending that took place in 2010.
The Competition Commission’s findings showed that excess profits amounted to additional costs to the consumer of approximately £9 for every £100 lent. A cap on that basis would have allowed Provident to charge no more than £53 for every £100 lent in 2006—still a lot of money. Even allowing for inflation at about 4.5%, taxing credit lent at a rate of £63 per £100 lent in this market would save consumers some £18.80 on every £100 borrowed or about £94 on the cost of a typical £500 loan. Even if Ministers rejected looking at tax measures, they could look at how to introduce an effective cap on the cost of credit.
Let me be very clear: I do not want to see a cap on interest rates. I know that Members have been lobbied extensively on this and been given information about capping the costs of credit based on caps on interest rates. I do not believe that caps on interest rates work effectively. The European research shows that low caps in America have been problematic, but it points out that the more flexible caps in Europe have been effective in controlling the market.
There are many myths about capping the costs of credit, as there were about regulation and the minimum wage. To those who argue that capping the costs of credit would cut lending and put firms out of business, I say that they should look at Poland, France and Germany, which all have such caps. To those who fear that caps would encourage all banks to start charging 4,000% interest, I say that that clearly would not happen. The EU research shows that interest rate caps have in some cases led to less illegal lending, as consumers are better able to manage their borrowing requirements without turning to informal sources of credit.
Tracey Crouch (Chatham and Aylesford) (Con)
Having listened to the lengthy speech made by the hon. Member for Walthamstow (Stella Creasy) in the Public Bill Committee, and having checked Hansard to find that it was almost identical to the speech that she just made, I congratulate her on raising, yet again, both her profile and the issue of unscrupulous and high-cost lending. As she knows, she has a great deal of cross-party support on the underlying problem, but I fear that her new clause has little to do with identifying a workable solution, and I found her speech today disappointingly partisan.
I have been rather bemused by the hon. Lady’s recent Twitter stream, which refers to the campaign to persuade Members to vote for her Consumer Credit (Regulation and Advice) Bill. Perhaps she does not realise that we are voting today not on her Bill—although many of us may agree with its principles—but on amendments to the Finance Bill. For reasons that I shall give later, her new clause is fundamentally flawed.
The problem of vulnerable consumers being preyed on by high-cost credit lenders is not new. It did not suddenly appear following last year’s general election. It is a problem about which Members in all parts of the House have felt strongly for some time. My constituency contains areas of severe deprivation, and I deal regularly with case work relating to debt. I am active locally in trying to ensure that those with debt understand that there are good people to turn to, such as local credit unions and citizens advice bureaux, and that they need not rely on high-cost credit lenders.
Through the local media I have highlighted my own earlier debt problems, incurred when I worked as a researcher here in the House of Commons in the mid-1990s. I have received messages from local people saying that it was brave and courageous of me to be so honest, but I do not think that it was anything of the sort. I saw it merely as a way of removing some of the stigma from debt, and demonstrating not only that anyone from any background can get into debt, but that there are good people out there who can help to put those in debt back on the right track.
Increasing debt is an issue that should concern Members in all parts of the House. It, too, is not a new issue. I remember talking about the nation’s personal debt topping £1 trillion before I entered the House. For some time my local citizens advice bureau has been advising clients with debts totalling £1 million per week, including priority and non-priority debts, but the figure is now nearing £3 million per week. Unfortunately, Medway has a high repossession rate: on average, about 70 repossession hearings take place each week. In these worrying times, what we do not need are unscrupulous credit lending and, indeed, debt management companies taking advantage of those who are in financial trouble and at their most vulnerable.
The new clause proposes taxation measures as a means of clamping down on, or even stamping out, the industry. I fear, however, that the Opposition have not thought it through in any great detail. For a start, they have not addressed its unintended consequences. It is likely that any additional tax on the companies in the industry, just six of which control about 90% of the market, would simply be passed on to the consumer in the form of even higher rates. What is being proposed as a solution to the problem could exacerbate it by increasing the cost to the consumer and creating an even larger debt.
Sheila Gilmore (Edinburgh East) (Lab)
The new clause asks for a review and a report. It does not suggest that the proposed measures should be implemented immediately. I fail to see the detriment that the hon. Lady seems to have identified.
Tracey Crouch
The hon. Lady obviously did not listen to the Minister’s response to a point made earlier. As he said, a review is currently taking place. The new clause proposes
“a review of all taxation measures contained in this Act”.
I think that, on this occasion, the hon. Lady is wrong.
Andrew Percy
Surely any tax review is likely to come up with a suggestion for raising taxes. It is unlikely to propose that taxes should be cut. If that is on offer, however, I certainly do not intend to vote for a measure that would cut the taxes of the people whom we are discussing.
Tracey Crouch
My hon. Friend makes a good point. Whether or not the tax goes up following a review—and the hon. Member for Walthamstow will probably say that it will go up—the result will be passed on to the consumer.
Organisations such as Citizens Advice recognise that the problem of debt is not confined to the high-cost credit industry. It is also caused by other practices, such as irresponsible lending, the imposition of high contingent charges, and the mis-selling of debt management services. I am not a supporter of the high-cost credit industry, but a tax on one part of the sector would not only be anti-competitive, but would not address problems in other parts of the consumer credit market.
The simple truth is that the industry needs better, if not more, regulation. Although the House may not often hear Conservatives say that we need more regulation, a number of Government Members believe that in this context, and particularly in the context of debt management, it is the appropriate solution. We have met the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), and have told him that.
Duncan Hames (Chippenham) (LD)
The hon. Lady is right to refer to the need for regulation. What troubles her more, the profitability of high-cost lenders or the techniques that they use to entrap their customers? Does that not provide a clue to where we should focus any Government interventions?
Tracey Crouch
That is a good point. In fact, what troubles me most is the impact on consumers. As we have been told by Members in all parts of the House, these companies prey on people who are incredibly vulnerable, and we need to ensure that the industry behaves much more responsibly.
A response to the Government’s call for evidence on consumer credit is due shortly, and I look forward to the findings of the review. I have always had some sympathy for the proposal of a rate cap. However, it is interesting to note that Citizens Advice does not share the hon. Lady’s view, and nor does the money-saving expert Martin Lewis.
Stella Creasy
It is true that Citizens Advice opposes a cap on interest rates, but I think the hon. Lady will find that both it and Martin Lewis have been very positive about the proposal for a cap on the total cost of credit, which the new clause would allow to be investigated. I hope that the hon. Lady will correct the record accordingly.
Tracey Crouch
The total cost of credit involves more than just the high-cost lending industry, but the hon. Lady spent most of her speech talking about individual high-cost credit lending companies such as Wonga. We must find a focus, and the fact is that wider issues of consumer credit are involved. I hope that the review will come up with a solution on which we can all agree.
The Government are considering specific product regulation as part of their draft Financial Services Reform Bill. Under the proposals to establish the financial conduct authority, a new model of conduct regulation will be established that will use early and proactive intervention to ensure that consumers are protected. That is a far more pragmatic solution than the blunt instrument of taxation, which, as I noted earlier, could have the adverse and opposite effect of creating a greater problem.
Oliver Heald (North East Hertfordshire) (Con)
Does my hon. Friend share my concern about the fact that it is often very convenient, and made very easy, for a person to take out a loan? A door-to-door salesman may appear and try to build a relationship with someone. Part of the battle is to provide responsible institutions such as credit unions, and to ensure that people know how to contact them. I think that there should be far more advertising and signposting so that people know how to get in touch with their local credit unions.
Tracey Crouch
I met the members of Kent savers credit union on Saturday, and look forward to meeting members of the Medway credit union in the autumn. I am a keen supporter of credit unions, and I think that all of us here are responsible for ensuring that our constituents are aware of alternatives such as lending and debt management advice. Citizens advice bureaux also offer a fantastic service. We should take it on ourselves to ensure that the message reaches our constituents.
The House should know that there is a cross-party consensus on this issue, and that the consumer credit market—particularly the high-cost credit industry—is an area of concern. In Committee, new clause 11 was billed by the hon. Member for Walthamstow as a measure in line with nudge economics. While there are some taxes that have arguably altered behaviour, such as those on cigarettes, it is highly unlikely that a tax that could be passed directly to the consumer will halt the growth or the unscrupulous practices of the industry. It would be far better to concentrate on regulation rather than taxation, and it is for that reason that I urge Members to vote against the new clause.
Mrs Jenny Chapman (Darlington) (Lab)
I congratulate my hon. Friend the Member for Walthamstow (Stella Creasy) on initiating and devising this new clause. The UK is a long way behind other countries in its regulation of this sector. Action is being taken in the United States and elsewhere in Europe, and therefore increasing numbers of companies are seeing the UK as the ideal place to operate because they know we are behind in respect of regulation. Indeed, as they do not anticipate regulation any time soon, they also do not anticipate leaving the UK in the near future, and they consider now to be a good time to invest in the UK market. Therefore, BrightHouse says it will triple its number of high street shops here in the UK. That is not only a worry for consumers, who are, by and large, exploited by these companies; it is also a threat to our high streets, because I for one do not want my high street to have signs saying “Cash for gold” and shops such as BrightHouse; I do not want what I would call unscrupulous companies populating our high streets.
The high-cost lender lobby is lobbying within an inch of its life. It is inundating those of us who are speaking out on these issues with documents, offers to meet, conversations and phone calls about why it is right and we are wrong. However, Members who represent places such as Darlington see the effects week in, week out in our surgeries, so we know the impact that these companies are having. They are not doing what they do for the benefit of the consumer, as they would lead us to believe; they are doing it because it is a pretty good business for them. I do not have an issue with their having a good business and making money, but I do have an issue with people who are least able to make such financial decisions being exploited in this way, and that is what is happening.
I am not a big fan of Jeremy Kyle, but in the interests of research I have sat through a bit of morning television, and I was disgusted at what I saw on our screens. Such companies are deliberately targeting people who are at home during the day and who they know are on low incomes. They are making their products look affordable, easy and cheap, which they are certainly not, and, most disturbingly, they are making them look the norm. They are making these products appear to be an everyday solution of which people from all walks of life throughout the country are taking advantage. That is the single most concerning aspect of this market.
Lorely Burt
I must confess, somewhat ashamedly, that I have also seen Jeremy Kyle’s show and the advertisements that accompany it. I want to pick up on the fact that Labour Members do not feel it appropriate to meet short-term loan companies. I do not tweet, but it is my understanding that the hon. Member for Walthamstow (Stella Creasy) says that Wonga has refused to meet her. That is not the case, however. [Interruption.] This is my understanding; I am just going on a letter from Wonga, and I do not want to get involved in the dispute. My point is that we must fully understand the situation. The hon. Lady knows it intimately; I do not deny that.
Madam Deputy Speaker (Dawn Primarolo)
Order. This is supposed to be an intervention, not a speech. I call Jenny Chapman.
Mrs Chapman
I am unclear as to the point that was being made, but I recommend that the hon. Lady follows my hon. Friend the Member for Walthamstow on Twitter, as she might therefore become more familiar with my hon. Friend’s efforts to secure meetings with senior officials at Wonga and might also understand the frustration felt by Labour Members. It is frustration not only with the high-cost lenders, but with the Government too. Five months ago, the Backbench Business Committee initiated a positive debate on this issue, but there has been no movement since then—no announcements and no indication that something is in the pipeline. That fosters a great deal of frustration and a lack of trust among Opposition Members.
Neil Carmichael
The hon. Lady is expressing her case very well, and I sympathise with everything she is saying. However, is she not impressed by the work of, for example, the Office of Fair Trading in issuing its guidelines, and does she not recognise that it has the power to withdraw licences if the guidelines are not respected? I could also draw her attention to a number of other possible actions that have been put in place to enable movement in the direction in which she rightly wishes to proceed.
Mrs Chapman
All those steps are very welcome, but they do not go very far at all in addressing the fundamental issue. The Competition Commission says that what the OFT wants to do is nothing like enough. I understand the hon. Gentleman’s intention: it is to give the Government a background against which they can decide not to support this new clause, but we are trying to force this issue to the fore and get something done about it. We are all for cross-party consensus—that is wonderful when it can be achieved—but what we actually want is something to be done. I hope the hon. Gentleman will therefore forgive Opposition Members if we are sometimes slightly intemperate in the way we express our views on this issue.
As I said when talking about my ten-minute rule Bill, for me the key issue is the advertising of these products, which is irresponsible. It might be argued that people are being given a choice, but people are not making that choice on value-for-money grounds. They are not shopping around. They are not thinking, “What’s the best product for me?” They are instead thinking, “What will get me an answer to my problem as quickly as possible, and who will say yes to me? I don’t want to go to the bank and be told ‘No’ or ‘You can’t have this but you can have something else and do you want to make an appointment to come back next week?’” These people have very immediate financial difficulties, and these products are deliberately targeted at them.
Damian Hinds (East Hampshire) (Con)
First, may I apologise for missing some of the earlier speeches?
I have a great deal of sympathy with much of what the hon. Lady has said, but the fact that these companies have high costs and in particular high marketing costs, and the fact that there is no evidence that consumers are making rational choices based on which is more or less expensive, suggests that taxation is not the answer to the problem. There may well be an answer to the problem, but hiking up taxes is almost certainly not it.
Mrs Chapman
The new clause does not only address taxation. The hon. Gentleman should read it thoroughly, as it talks about other measures too. I do not think there is any one measure alone that will address this problem; there will have to be a package of measures.
There is no real competition in this market, as there are only a few companies in it. On Friday my attention was drawn to a company operating in the north-east called Provident. I was very disturbed to hear that last Christmas Provident representatives were going door to door deliberately targeting single mothers—as members of political parties, we all know that can be done. Its representatives were knocking on doors just before Christmas, saying, “We can offer you £500 and you don’t have to pay it back until after Christmas.” They were saying it could be paid back in a number of easy payments, thus making it seem attractive and ordinary. That is completely exploitative, and it will happen again this year unless the Government do something about it; indeed, it will happen Christmas after Christmas after Christmas. This House should neither accept nor tolerate that.
All Opposition Members are big supporters of credit unions.
Mrs Chapman
Yes, Members on both sides of the House are, of course. The people behind the credit union movement are hard-working and honourable. I work somewhere where everybody is honourable, but these people really are hard-working and dedicated—many of them are volunteers—and they work in our communities to promote low-cost credit to people who are left out of mainstream credit. However, even with the best will in the world credit unions are not going to be able to compete with Wonga and Uncle Buck and so forth, because they lack the high street and web presence.
Mrs Chapman
I understand that the experience is different in Northern Ireland, and I shall give way to the hon. Gentleman, whom I suspect will explain that further.
Mark Durkan
The low membership of credit unions in Great Britain has been mentioned. Credit unions in Northern Ireland have a high membership; well over a quarter of the population—in some constituencies the figure is more than 50%—are members of the very well-developed and well-funded credit unions. The credit union movement in Northern Ireland has made it very clear that it expects Parliament to take action against the predatory credit sector. The movement does not expect Parliament just to wave to credit unions; it says, “Tackle the sharks, don’t wave to the dolphins.”
Mrs Chapman
I am very grateful to my hon. Friend for that intervention, as he put it extremely well. I was aware that credit unions in Northern Ireland were incredibly advanced. I have found that although the fledgling credit unions in my constituency are doing a marvellous job, they are unable to do the very thing that he says is unable to be done in Northern Ireland. That strengthens the argument for accepting this new clause.
Stella Creasy
I wonder whether my hon. Friend would like to comment on the irony that credit unions have a cap on what they can charge, yet these legal loan sharks do not.
Mrs Chapman
That is an excellent point, with which I shall finish my remarks. I am aware that many colleagues would like to contribute and, having heard my hon. Friend’s comprehensive speech, I will allow others to do so.
Justin Tomlinson (North Swindon) (Con)
I welcome the opportunity to debate this new clause. I have worked with the hon. Member for Walthamstow (Stella Creasy) on a number of occasions to highlight the need to protect the most vulnerable people in society, and we have been supported by hon. Members from both sides of the House. Let us be clear that a consensus is essential, as has been said by the hon. Member for Scunthorpe (Nic Dakin) and my hon. Friend the Member for Macclesfield (David Rutley). This is an extremely complex and challenging issue, and although we all agree that action must be taken, we need to be careful not to make the situation worse. I will set out a number of reasons why that could happen.
The new clause would require the Government to review how taxation could be used to penalise high-cost credit that is detrimental to consumers and competition. However, the current consumer credit review is examining all the options through which we can hope to secure a measured and effective response. I first wish to highlight the need to use credit reference companies, because it is unacceptable that so many of these loan companies do not even simply check whether the person borrowing the money can actually service the debt. We would all agree that we are not against people borrowing money if that is what they wish to do, but they should have the opportunity to be able to service that debt. Secondly, we need to limit the number of customer extensions and roll-overs, as a number of hon. Members have said. It is unacceptable that people can be trapped into a cycle of increasingly expensive debt. Thirdly, there needs to be a cut-off point, when fees and the interest stop being accumulated. Too often we have seen people borrow a relatively small sum that has built up over many years. Many horror stories have been related in previous debates.
Mr Robert Buckland (South Swindon) (Con)
Does my hon. Friend agree that there has been far too much of a rush to litigation by credit companies and that a far better approach would be to seek mediation before pressing the button to go to court? Such an approach would relieve a lot of the burden and pressure on the hard-pressed consumers.
Justin Tomlinson
My hon. Friend makes a very important point, with which I absolutely agree. Help should be provided at the point where we freeze that debt, and there should be an examination of the reasons why a consumer was unable to service the debt before that debt gets even further out of control.
Another crucial element is to make sure that those who can pay early are not penalised for doing so. That would mean that if circumstances change to benefit them, they would be able to break away from high-cost lending. A number of hon. Members have mentioned the need for there to be greater access to credit unions, and I know that my hon. Friend the Member for East Hampshire (Damian Hinds) has highlighted the issue on a number of occasions. Interestingly, and aptly, the hon. Member for Darlington (Mrs Chapman) made the point that we should be encouraging those organisations that will lend with the consumer’s interest at heart.
The particular issue I wish to discuss, which was mentioned by my hon. Friend the Member for Chippenham (Duncan Hames), is the need to examine the techniques that are being used. In previous debates, I have directed the majority of my anger at doorstep lenders and their nudge-nudge sales techniques. They build up personal relationships, face to face, in the homes of vulnerable consumers, suggesting ways in which people can borrow money. For example, in the run-up to Christmas the lender will ask people whether they have organised the Christmas presents for their children, the consumer will say that they are not sure whether they can afford them, and the lender then says, “It’s lucky I’m here. Just add another £3 a week and you can get the presents that your children want.” These lenders continuously build up people’s dependency on high-cost lending, so we really have to look at these techniques.
Stella Creasy
Is the hon. Gentleman saying that it is not acceptable for banks to do what he just described? What does he make of the evidence suggesting that one of the challenges in this market is the fact that a quarter of their customers cannot borrow from banks, so even if they wished to use unauthorised overdrafts, they could not actually do so and the only source of credit available to them are predatory lenders such as Wonga?
Justin Tomlinson
Absolutely, and that highlights my first point about using credit reference checks. These people should not be getting money from high-cost lenders. Many of the more reputable high-cost lenders will not lend to them, but many of them do and prey on these people—that is particularly true of the doorstep lenders. We have to try to ensure that more people have access to the affordable banking arrangements—the credit union arrangements—but we must not fall into the trap of thinking that the banks always get things right because, as in the example I just gave, they can prove a lot more expensive—
Justin Tomlinson
The hon. Lady may shake her head, but my interest lies in ensuring that people get the clearest information and the cheapest possible price. I will not defend any organisation that is going to exploit the most vulnerable people.
Unsurprisingly, the final item on my tick-list is the need for financial education. I chair the all-party group on financial education for young people, and I thank the 224 Members who are now signed up to the group. People do not understand APR and, as I have argued, it needs to be removed and replaced by a transparent approach. In addition, we need consumers to be able to understand the implications of what they are signing up for, its true cost, how to source alternatives and the best way to address the situation if they get into difficulties.
I am conscious of the time so I will conclude. We are all agreed that action is needed—nobody, from either side of the House, disputes that. I welcome the consumer credit review, but we must not fall into the trap of a quick fix to chase political headlines which simply makes matters worse. We need a measured and wide-ranging response that puts the vulnerable consumer first. Let us not chase a fix that makes things a hell of a lot worse for the most vulnerable people.
Jon Ashworth (Leicester South) (Lab)
May I commend my hon. Friend the Member for Walthamstow (Stella Creasy) for her tenacity in pursing this issue and say that her speech was a tour de force? Equally, I commend her for getting this issue discussed on Twitter, as this must be the first new clause on a Finance Bill to have generated this much interest on that site.
I wish to make only a few brief remarks, because a lot of what I wanted to say has been covered by my hon. Friend the Member for Darlington (Mrs Chapman), in particular, and by some Members on the Government Benches. Early on, I want to pick up on one point made by my hon. Friend the Member for Walthamstow in her speech and at business questions last week, which is the suggestion that some funny business is going on and that the Government are deliberately delaying making a decision to help the Deputy Prime Minister at the party conference—[Hon. Members: “Rubbish!] Some hon. Members are shouting from a sedentary position, so I would be grateful if the Financial Secretary, who will, I presume, respond to the debate, could guarantee that the Deputy Prime Minister will not make an announcement on this matter in his conference speech. That would help Opposition Members—[Interruption.] I invite the Financial Secretary to make a few remarks on that point in his closing speech.
There is some consensus on this issue on both sides of the House. I was not a Member of Parliament when it was debated in February, although I have read many of the speeches. Many Members, on both sides of the House, take the issue very seriously—and rightly so. Before the general election campaign, the then Leader of the Opposition took it very seriously. When he was rebranding the Conservative party, he did not only hug hoodies and huskies. The party launched a campaign about resisting—I hope this is not unparliamentary language—your “inner tosser”, which encouraged people not to fall into the trap of personal debt that we have discussed. At the time, the current Prime Minister said that—and I paraphrase—although the campaign was provocative, we needed to do something about personal debt. The Opposition agree.
Today I visited a money advice centre in my constituency to talk about some of the issues faced by many of my constituents who are getting themselves into trouble. I was told stories about how Wonga and quickquid.com target many vulnerable people in my constituency. Members might not be aware that my constituency contains some of the most deprived estates in the country and we have had many examples of such companies targeting people such as single mothers, as in the cases mentioned by my hon. Friend the Member for Darlington, when they have no choice but to sign up to such deals. Such people end up in great difficulty.
Another issue mentioned at the centre, although it does not fall within the narrow confines of the new clause, was illegal loan sharking. The problem is that many people who find themselves in deep trouble through legal loan sharking feel that they have no alternative but to turn to illegal loan sharks. I hope we will be able to debate that in future. I was told many tragic stories about people who have fallen foul of illegal loan sharking. Such people might be in work—it is not always a matter of gangs preying on vulnerable out-of-work people on estates. One example involved somebody who took out a loan from an illegal loan shark for £7,000, which soon became £70,000.
Lorely Burt
I agree with the hon. Gentleman about illegal loan sharking, which is a scourge of this country. Does he welcome the fact that despite the cuts the Government have made in other areas, we have increased the amount of money we are using to fight illegal loan sharks?
Jon Ashworth
My hon. Friend the Member for Nottingham East (Chris Leslie) tells me that the Government have cut the financial inclusion grant. I always welcome action to tackle illegal loan sharking, so I would be very disappointed if the money going into those funds was cut.
This is an important issue, which particularly affects my constituents. As my hon. Friend the Member for Walthamstow said, it is not just the constituents we would traditionally think of as the most vulnerable in society who are being hurt. Increasingly, the money advice centre I visited today is finding examples of people from lower and more middle income-backgrounds getting themselves into trouble and falling prey to such organisations.
Alison Seabeck (Plymouth, Moor View) (Lab)
Does my hon. Friend accept that that income group—some of whom claim housing benefit and will be hit by the housing benefit changes and will have to find a lot of additional money to pay their rent out of their own pockets—could well fall victim to both official and unofficial loan sharks simply to meet their rent?
Jon Ashworth
I know that my hon. Friend has a good track record in raising such issues, particularly those to do with homelessness, and she is right to bring that matter to the attention of the House.
I want to focus on the point made by my hon. Friend the Member for Walthamstow about lower and more middle-income people being hit. Increasingly, such people are turning up at the money advice centres in my constituency in a way that they had not in recent years. That might reflect our economic climate, with inflation running at twice the rate of earnings and with the cost of living, food and utilities putting a great strain on the budgets of many people in my constituency. Those issues came up time and again in my by-election campaign and the Asda income tracker, which my hon. Friend mentioned, shows that families are some £165 a month worse off than they were a few years ago.
The final point raised with me today concerned credit unions. Labour Members have always been huge supporters of credit unions—the co-operative values on which they are based are values that we share—and I concede that Government Members support them, too. If we simply say, however, that credit unions can step up and fill the gap, we are somewhat mistaken. They do not have the capacity to compete with organisations such as wonga.com and quickquid.com. I would welcome it if more resources went into credit unions so that they could compete, but realistically they cannot carry out the door-to-door activity that wonga.com and so on can. Although we are great supporters of credit unions, I do not think they are the answer, although they are part of it.
In conclusion, I would welcome it if the Government could give us some indication of what is happening with the review, if they will not support the new clause. We need some regulatory reform of the sector. People in my constituency, in particular, are being hit. The situation is getting worse and unless the Government take action, I am worried about the future.
Andrew Percy
I was not sure when I came into the debate whether I was going to speak—[Interruption.] Well, I can never resist the temptation to hear the sound of my own voice. I have found this an interesting and fascinating debate with some very good speeches from Members on both sides. Some speeches have been a little political at times and it is best that we brush over that, because the issue should not be political. The hon. Member for Walthamstow (Stella Creasy) is, I know, passionate about this matter and I agreed entirely with a great deal of her speech. She has been in a Twitter conversation with a constituent of mine in Snaith. Very sound people live in Snaith—very sound people, because they re-elected their Conservative councillor with a massively increased majority in May, but we will gloss over that.
The issue has sparked an interest across the whole country. The letters and tweets we are getting from our constituents reflect the fact that a lot of people are interested in this matter. This has been a good debate and the hon. Member for Darlington (Mrs Chapman) made a particularly good speech, I thought, which was very consensual. I look forward to hearing the hon. Member for Makerfield (Yvonne Fovargue). I always listen to her on such matters because of her vast experience. I know that my hon. Friend the Member for North Swindon (Justin Tomlinson) has a huge interest in the subject, as does my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch), who used to work with me at McDonald’s in Hull when I first started to get into debt. Although I have never personally had to borrow from a high-cost credit company, I certainly understand having debts to the tune of tens of thousands of pounds.
In my case, it was credit card debt, and I am not alone in that. It started at university and I went down the line of paying off one credit card by transferring it to another on 0% for a year or a number of months before conveniently forgetting that and maxing out the one that I had just cleared. I now pay about £600 a month to clear all my credit cards, which I have had to roll into a loan since my election. I understand what debt is like and I know how once someone is on the conveyer belt, it is difficult to get off, and that is just with credit card debt. That conveyer belt moves faster for those on the high-cost credit side of things—I guess that is the only difference.
A lot of my constituents come to me with debt issues, which is why, following the lead of my hon. Friend the Member for North Swindon, I am getting the staff in my constituency office trained in the debt management side of things—not so that we can issue particular advice, but so that we can point people towards the most appropriate advice.
Mrs Chapman
I have found myself wondering who the hon. Gentleman disagrees with in this debate.
Andrew Percy
I am feeling the love in the Chamber today, which is a good thing—there must have been something in the water in Goole this morning. However, the serious point is that that hopefully proves that although there are concerns, and although lots of Members who will vote differently from each other this evening have made incredibly passionate speeches, they clearly all want to see the same thing. We might disagree on how to get to there, but the fact that I am agreeing with so many people is perhaps a sign that there is consensus on this issue, which is a good thing.
Stella Creasy
At the risk of increasing the love in the Chamber, does the hon. Gentleman agree that the new clause would put beyond doubt—along with other measures that could be taken to tackle the problems that we all agree exist—tackling the question of regulation and acting on it by the Government? At the moment, we have no guarantee that that will happen in the consumer credit review; rather, we have only vague assertions that they are thinking about it. The review proposed by new clause 11 would guarantee that that would happen, which is why we want action now.
Andrew Percy
Of course that is what we all want to see, but we await the response of the Minister. At one point, some Opposition Members seemed to be saying that the Government were going to announce something at the Liberal Democrat conference, suggesting that it would no doubt be a well attended—I will not be going —and joyous occasion. Indeed, the hon. Member for Walthamstow seemed to suggest that the Government already had a solution that they were about to announce in October, so we all look forward to hearing what they have to say.
To end where I began, this is a hugely important issue for a lot of my constituents, as it is for constituents up and down the country, and it is time that we did something about it. It is appalling that people end up on a conveyor belt and seem unable to get off it. I therefore look forward to the Minister’s response, and I genuinely hope that we have some action soon, in the interests of all our constituents.
Yvonne Fovargue
At any one time there are 5 million to 7 million people in this country who are unbanked or who do not have a credit history. In the main, they are the people who turn to high-cost lenders, because they do not have a credit history and they have nowhere else to go. Personal debt is rising, with 46% struggling until pay day, up 8% this year. Again, they are the people turning to the payday lenders.
I take issue with the claim that the rate has grown in the last decade. When I started in the advice field 20 years ago, there was one high-cost lender, Provident, which targeted a specific market. Provident went round the estates, using neighbours and talking to people. The company would go in—here I also take issue with the claim that people use the money on luxuries—and find people who needed to replace their broken cooker. The neighbour would come in, look at the cooker and say, “Oh yes, I can lend you that money.” When the loan was nearly repaid, Provident would come back and say, “Tell you what, your sofa’s looking a bit shabby. It won’t cost you much more to get a sofa,” and people would get trapped in a cycle of debt. However, in one respect, Provident was reasonably easy to deal with, because there was one company with a specific target group. It was possible to go round and talk to individuals, target schools and visit the residents groups that the people concerned attended. It is much more difficult now. The explosion of advertising and the normalisation of the process have made it so much more difficult to control the market and tell people what the dangers are.
I had a constituent come to me in February, as soon as he realised my interest in the subject. He could not quite manage to the end of the month—I think his car tax was due—and he had taken out a payday loan. The company immediately took the payment and the interest out of his bank account the next month. He realised that he could not get to the end of that month either, so he took out another payday loan. That carried on and in the end he had 10 payday loans and all his salary was being taken from his bank account. That was a man who was working. Such companies are supposed to check that people can afford to pay the money back and that they do not have other credit, but that did not happen in this case. For such companies, self-regulation absolutely is not working. That company was not an illegal loan shark: it was a legal company and it did not threaten to break the man’s legs, but it left him in a cycle of stress and depression that he found very hard to get out of.
I am also concerned about the double whammy that these companies are operating, as many of the companies that put people into debt are opening debt-management arms to get people out of debt as well. When the financial inclusion fund was finishing last year, those companies were circling like sharks. I cannot tell hon. Members how many companies contacted me basically gloating and saying, “There will be no, or very limited, free debt advice, so people will have to turn to us and you will have to deal with us now.”
I welcome the Money Advice Service because any advice on budgeting is welcome, but that service does not replace face-to-face debt advice. There is a need for that kind of service to be available—and more freely available than it is now. People have what I call behind-the-clock syndrome. They get into debt and cannot face opening the letter about their debt so they put it behind the clock. When they get the next letter, that also goes behind the clock. I cannot tell hon. Members the number of people who used to come into the bureau with a carrier bag whom I would look at and think, “They are in debt”. They would have a carrier bag full of letters that they could not face opening. People are not going to deal with a telephone or online service if they cannot even open a letter. There is a need for free, impartial, face-to-face debt advice and for regulation of debt management companies. Self-regulation is not working. It did not work in America, and when America regulated, those companies started coming over here because they like what they see.
Damian Hinds
Does the hon. Lady agree that while the availability and accessibility of free debt advice are important, visibility is also important? When people do get around to opening letters and starting to seek help, if they search on internet search engines for debt advice, Citizens Advice and the Consumer Credit Counselling Service ought to come at the top of the list even though they cannot afford to compete with debt management companies on pay-per-click rates. Should we not exhort Google and others to make sure that those services are duly highlighted?
Yvonne Fovargue
I think that is an excellent suggestion, but there also have to be appointments available when people need them. It is no use searching for citizens advice bureaux if appointments are not available for six to eight weeks because funding to provide the very specialist advice that is needed has dried up. We have to make sure, first, that people get information about where they can go, and, secondly, that appointments are available.
Regulation of debt management companies is needed. They come at the top of Google and other search engines on the basis that they will be going out of business in two years’ time anyway, so they might as well make as much money as possible by charging up-front fees and charging as much as they can. If they do go bust, as two have recently, it does not really matter to them. I had a client come to me who had been paying £40 a month to a debt management agency for 18 months, at the end of which he owed his creditors more than when he had started. Those companies need to be regulated.
The new clause is one of the range of measures we need. We have to keep this issue high on the agenda because the longer we leave it, the more people will go to high-cost lenders and debt management companies and the more people will get themselves into a spiral of unaffordable debt. We have to act now. It is no use leaving this for another five or six months—how many thousands more will have got themselves into debt in that time?
Oliver Heald
In the circumstances, I shall not trespass on the House’s good will for too long.
I want to start where the hon. Member for Makerfield (Yvonne Fovargue) did by making the point that if a child of people on low incomes or on benefits needs a pair of trainers or some piece of equipment is broken, it is often a disaster and the money is needed right away. That is the background to this issue. The social fund does a good deal. [Interruption.] I think the hon. Member for Makerfield would acknowledge that 400,000 people a year make more than three claims on the social fund, so they are obviously finding it useful. It is important that a credit facility is available, and it is excellent that in Northern Ireland mutuals and credit unions are so well established. We need to do more in this country to develop that idea; otherwise, we will be in the hands of the high-cost operators we have been hearing about.
Yvonne Fovargue
Does the hon. Gentleman agree that many people do not realise that some credit unions offer loans to people who have not saved with them? The growth fund has been very useful in that regard, but many credit unions do not have access to the growth fund with which people have to save before they can get a loan. That makes the situation impossible for many people.
Oliver Heald
The hon. Lady makes an important point, which I imagine will be considered by the consumer credit review. I am a member of a credit union, and I think that all MPs should be because it is a good way of illustrating—
Oliver Heald
I am a member of one, and membership is a good way of trying to convey knowledge about credit unions. I pay tribute to the all-party group on credit unions, chaired by my hon. Friend the Member for East Hampshire (Damian Hinds). We need to do more to increase the amount of credit that is available on reasonable terms.
I am a member of the all-party group on financial education for young people, chaired by my hon. Friend the Member for North Swindon (Justin Tomlinson). The move to teach children the basics of budgeting from quite an early age is long overdue. In households that are chaotic and at the bottom of the economic pile there is very little understanding of basic budgeting, which we must resolve.
Finally, I want to support the point about advice. In the past, I have given free legal advice and dealt with welfare rights. I have experience of the people the hon. Member for Makerfield described, who come to see us carrying bags of documents from companies and unpaid invoices. The people who sit down with them, go through everything carefully and present their case to creditors do a marvellous job. The other day, I went to the Shelter facility in Hatfield, which offers debt advice in that part of Hertfordshire. Someone there had been working on debt advice for 29 years and she had lots of letters on the wall from people saying how grateful they were to her for trying to sort things out for them. We must certainly support debt advice, but we need to do other things in relation to education and credit unions. I would like more regulation in this field and, possibly, a cap.
Sheila Gilmore
Unfortunately, it seems that debates on this subject are beginning to follow a pattern: we all agree that high-cost lending is terrible and a scourge of many of our communities and that we would like something to be done about it, but the problem arises in agreeing to act. In February’s Back-Bench debate, the teeth were drawn from the motion proposed by my hon. Friend the Member for Walthamstow (Stella Creasy). The amendment agreed by the majority of Members of the two Government parties removed any impetus for immediate action or any agreement that the regulator should consider doing something. I see exactly the same pattern beginning to emerge. We are told that we all agree that high-cost lending is bad, but when Opposition Members want something to be done about it we are accused of breaching the consensus. In the words of the hon. Member for Brigg and Goole (Andrew Percy), we are the ones who are being political.
Andrew Percy
That is not quite what I said. I said that if we were to be political, we could bandy about the suggestion that all Governments had done nothing. I argued that we should await the Government’s response to the consumer credit review. We can condemn them if they do not do what we want, but until then we should at least try to pretend to be on the same side.
Sheila Gilmore
I am afraid I do not share the hon. Gentleman’s confidence that the review will indeed cover the issues, although something might be pending. The hon. Member for Solihull (Lorely Burt) is no longer in the Chamber, but I was interested to hear her say that “we” would all be happy to see the regulations “we” would be bringing forward. I do not know who “we” were, but it suggests that the Government’s plans are quite well advanced and that the hon. Lady is privy to their thinking, as we are not. At the end of the debate, I hope we shall hear what the regulations are and what will happen.
Warm words are not enough. Some of the organisations involved have tremendous resources behind them, yet there is so little control of their operations. Their services can seem attractive because they “solve” people’s immediate problems. Regrettably, at this stage credit unions cannot compete. Castle credit union in my constituency had to give up its shop-front premises in the main street because it did not have the resources to continue to pay the rent. It has moved into an office in a community building and is still functioning, but it has much less presence than it would have if it were still on the high street, where people would be able see it from the bus and pop in when they were doing their shopping. Now that it is tucked away in the community office, people might not know where it is. The situation is not helped by the fact that the local community newspaper, which used to advertise such facilities, has had to shut up shop owing to cuts in its funding. That will make it even harder for people to find the credit union.
Stephen Williams
I agree that sometimes it might be hard to find a credit union, although the one in my constituency is based on Cheltenham road, a main road. Perhaps credit unions need to go out and find customers; for instance, Bristol credit union had a stall at St Paul’s carnival this weekend.
Sheila Gilmore
Indeed. On Saturday, I was at just such a festival in my constituency. It was a beautiful day—the first sunny Saturday for some time. Volunteers from Castle credit union, who help to keep it going, were there for exactly the reasons the hon. Gentleman suggests. However, if, unlike credit unions, high-cost lenders have a high street presence—extremely attractive, brightly lit and hardly missable—it is much easier for people to find them.
Regrettably, only 2 % of people in the UK are members of a credit union. We can all work harder to increase that number, but one thing that would clearly help would be real resources to build the movement. Experience in my city is that real resources, far from being put in, are declining, and there are even fewer members. Despite the efforts of the volunteers who man stalls at local fairs and festivals, credit unions are not providing the competition we want with high-cost lenders. I should dearly like people to use credit unions instead of those institutions.
I understand that this is politics, but when Opposition Members make proposals we meet the accusation that Labour should have done things over the past 13 years, and it is suggested that the fact we did not debars our making proposals and expecting them to be listened to. I am sure that if my hon. Friend the Member for Walthamstow had been a Member during our period in government, she would have been harrying Ministers in exactly the same way as she has harried the Government over the past year. She would not have been afraid to speak.
We should not accept too lightly the suggestion that the previous Government did not look seriously at financial inclusion. The present Government say that they are interested in it too, but they do not put in the means to make it happen. It is not good enough to say they are interested. In my Westminster Hall debate, I referred to our manifesto proposal to oblige banks to provide basic bank accounts. The Minister’s response was, “Oh, we don’t really want that sort of regulation. We want it to be voluntary and we want to work with banks.” That is all too often the Government’s response. They say they want the ends, but they are not prepared to put in the means.
The previous Government did a lot of work on financial inclusion, but no one thing is enough: credit unions will not do it; basic bank accounts will not do it; and taking action against high-cost lenders alone will not do it. We need a range of measures.
Some of the steps that would help have been positively stopped by the Government. The growth fund, which helped to boost credit unions and other community-based financial institutions, has not been renewed or extended.
Damian Hinds
Is the hon. Lady aware of the modernisation fund of up to £73 million?
Sheila Gilmore
I might be wrong, but I understand that the fund is not a substitute for the money that was available through the growth fund. When it was introduced, it was hoped that banks would lend to community-based lending organisations; they have not done so, yet high-cost lenders can get finance to expand their businesses to make them attractive.
Stella Creasy
Does my hon. Friend agree that it is a cause of concern that the Wellcome Trust, which is supposed to advance charitable endeavours, has lent £73 million to Wonga so that it can expand its operations in the UK? Such companies can easily access credit; indeed, that sum is the entire amount left from the growth fund for credit unions across the UK.
Sheila Gilmore
I thank my hon. Friend for that helpful intervention. If we are to put the money where our mouth is, it is extremely important that we do not just sit in the House constantly agreeing about how bad something is; we need to take action. On that basis, I urge Members, and perhaps even the Government, to accept the new clause.
Steve Rotheram (Liverpool, Walton) (Lab)
I thank the House for its indulgence. I was at a meeting of the Select Committee on Communities and Local Government so I missed the beginning of the debate. I shall try to be as brief as possible, because I am sure that Government Members will have heard the compelling case made by my hon. Friend the Member for Walthamstow (Stella Creasy) and my colleagues and will have been won over by the powerful arguments they articulated.
Those outside the Westminster bubble sometimes question what we as Members of Parliament do in this place. I am sure that there are moments when even we wonder what it is all about and why we parliamentarians put ourselves through the rigorous demands of elected office. I realise just how privileged I am to be here and to represent not only the people of my community, for whom I have the highest regard, but a great city such as Liverpool, and then I have the opportunity, such as the one put forward tonight, to change the lives of ordinary people and realise that my time here is anything but wasted.
Oliver Heald
There is of course wide acceptance across the House that some regulation is needed in this area, but why should it be about taxation? A Finance Bill obviously provides an opportunity to raise the issue, but does the hon. Gentleman not agree that there is a risk—[Interruption.] He should at least let me ask the question before learning the answer from the hon. Member for Walthamstow (Stella Creasy). Does he not agree that there is a risk, through the law of unintended consequences, of high-cost companies simply passing on the costs of higher taxation to the poor people in Liverpool he is worried about?
Steve Rotheram
I always listen to my hon. Friend the Member for Walthamstow, as she is much more of an expert on these matters than I am. I hope that the hon. Gentleman’s intervention is not indicative of the thinking of all Government Members.
I have a particular reason for wanting to see a cap on the cost of credit. I come from a family of eight kids, and unfortunately my beloved mum was often a victim of door-to-door credit. She took it not to pay for luxury goods, but so that she could afford to buy us things like school blazers and winter coats. She would get a Provident or Sterlers cheque and pay it back on the “never-never”, as it was known colloquially. This meant paying back hundreds of per cent. of the original loan in interest charges, but like millions of others she did not really understand the rudimentary economics and looked only at how much she could afford to pay back each and every week, rather than the interest rate or the cumulative payment total. Unfortunately, she was not unique in this respect and, even four decades on, far too many people are still caught in this poverty trap.
The high cost of credit has not improved much for families at the wrong end of the socio-economic ladder. Home credit lenders often charge astronomical annual percentage rates of up to 3,000% or 4,000%. I had to check those figures, because the current bank base rate is only 0.5%, but I found that interest charges of thousands of per cent. are not uncommon. In fact, the UK’s poorest pay the highest price for credit in Europe. This is an obscene state of affairs and the Government must act. Before we hear the same old mantra from Government Members, I admit that we in the Opposition did not do enough to tackle the issue head-on when we were in power. However, as my hon. Friend the Member for Makerfield (Yvonne Fovargue) rightly pointed out, this is an escalating problem that needs to be tackled immediately.
I urge Members on both sides of the House to support what my hon. Friend the Member for Walthamstow is trying to do to stop this most socially iniquitous of practices. Even Boris supposedly supports measures to protect the financially vulnerable, and if he can do it, there should be nothing stopping Government Members doing the same.
Members on both sides of the House have highlighted the problem and provided examples of the unfairness, but it is worth reiterating that credit lenders can charge, in real terms, £82 in interest and collection charges for every £100 lent. A gentleman came to my constituency advice surgery only last Friday and told me that his wife was suicidal because of the level of debt that they had got themselves into. I highlighted last week in a Westminster Hall debate the fact that the banks are failing to meet the Project Merlin targets for lending and the adverse effect that this is having on the construction sector. The banks are also failing ordinary families as they are refused credit from high street lenders, which often results in them taking the only option left: high-cost lending through payday and doorstep loans and hire purchase.
The rising cost of credit traps those least able to cope with the pressures of economic stagnation as they struggle to make ends meet, and believe me, the VAT increase has not helped those families. Some payday lenders are rubbing their hands at the expansion in their “target audience”, as one put it, 70% of whom have a household income below £25,000. I know that we will never completely stop this most lucrative of immoral trades, but we can certainly put a cap on lending to regulate the total amount that can be charged for supplying credit.
This is one of the occasions on which I do not understand how a proposal could not receive unequivocal support from both sides of the House. I have listened to some of arguments against taking action, such as the suggestion that it might make things worse or restrict credit to those who need it, but that is an absolute cop-out with no basis in evidence. Therefore, I ask Government Members to support the new clause to ensure that consumers are protected and simply pay a fair price for credit.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I think that the debate has demonstrated the potential for cross-party support for the analysis underpinning the discussion we have had this afternoon, but I gently point out to Opposition Members who seek to turn this into a partisan political issue that their Government had the opportunity over 13 years to tackle this. In fact, we had a debate on it while the Financial Services Act 2010 was going through Parliament, not long before the general election, during which my opposite number at the time ruled out acting on interest rate caps because of the impact of depriving the most vulnerable of credit services. It is not a new issue, or one that is fresh to this Parliament. Ministers in the previous Government were opposed to the idea of caps because, as the hon. Member for Liverpool, Walton (Steve Rotheram) indicated, it could restrict the supply of credit, forcing those who need it into the hands of illegal moneylenders, an outcome that Members on both sides would not want to see.
Let us be clear that credit can be a good and positive force that enables people to meet needs when there is a sudden shock, such as an unexpected expense or a cut in income, but it must be used sensibly and sustainably. When people decide to borrow, they must be mindful of what that means for them and realistic about their ability to repay the loan. That is true whether the loan is over 10 years, five years or a matter of days, as is the case with some instant or payday loans. However, all lenders have a responsibility in this regard. Lending more than borrowers can afford to repay does not benefit anyone. Under the recently introduced consumer credit directive, all lenders, including high-cost credit lenders, must ensure that when they decide to advance a loan they do so after making a thorough assessment of the lender’s ability to repay.
We know that consumer debt grew significantly under the previous Government, more than doubling from £620 billion in 2000 to more than £1.4 trillion by May 2010. Some of this debt is now being repaid as consumers begin to come to terms with their borrowing, with the amount of unsecured debt reducing in the past two years. Although much of this debt will be repaid without any problems, some borrowers get into difficulty. Lenders have a responsibility to help customers and treat them fairly when they get into difficulties with loans, not push them further into debt. Continuing to add excessive arrears and default charges is a lose-lose situation; the debt increases out of all proportion to the amount borrowed, the lender is less likely to be repaid and the borrower may have difficulty borrowing again. Lenders should work with borrowers, not against them.
We should all be concerned about people borrowing at high rates of interest. However, the high-cost credit market, whatever its faults, provides a service for those who cannot get credit from any other source. We should be careful about describing high-cost credit providers as legal loan sharks. We all recognise from our own communities that real loan sharks are far worse, resorting to violence and intimidation to recover their debts. High-cost lenders are licensed and operate within a regulatory framework, which provides some recourse when things go wrong.
We should be clear that action has been taken over the past year to improve consumer protection in this area. First, under the consumer credit directive, which came into force earlier this year, consumers now have a right to withdraw from any credit agreement within 14 days. If they do so, they have to pay back only the money lent and the interest accrued over that time. Secondly, consumers have a right to repay a loan early at any time, in part or in full. Thirdly, lenders now have to provide information in a standard format so that borrowers can easily compare the costs of different loans. Improving the transparency of information will help consumers. Fourthly, lenders must conduct a full credit assessment before advancing any loan. Lenders will also have to explain the key features of the credit agreement.
In addition, the Office of Fair Trading has recently published its guidance on irresponsible lending, which clearly sets out that deceitful, oppressive or otherwise unfair lending practices are not acceptable. The OFT, which is responsible for the regulation of credit—something that whoever tabled the new clause seemed to forget—has the power to remove the licence of those who breach the irresponsible lending guidance.
Much good work is going on, including the excellent work of credit unions, which many of my hon. Friends have mentioned. It is a shame that the hon. Member for Edinburgh East (Sheila Gilmore) is not in her place. My hon. Friend the Member for East Hampshire (Damian Hinds) is right that there is £73 million to help to expand and modernise credit unions. The money that the previous Government put into credit unions is diminishing, because the money that credit unions were able to earn on the debt was lower than the default rate on the loans given. I therefore welcome the money that the Department for Work and Pensions has found to strengthen credit unions.
As a number of hon. Members have said, we are reviewing the wider consumer credit landscape. At the end of last year, the Treasury and the Department for Business, Innovation and Skills published a joint call for evidence on the consumer credit and personal insolvency review, which covers all aspects of the consumer credit life cycle, including what happens when things go wrong. This is an opportunity to ensure that the regulatory framework is fair to consumers and the industry. Part of that review focuses on the high-cost credit market. Following an OFT review that took place under the previous Government, we have asked for evidence on five of its recommendations.
Mr Hoban
Let me just finish the recommendations, and then I will give way.
The first recommendation was to provide information on high-cost credit loans to consumers through price comparison websites. The second was to introduce a “wealth warning” on high-cost credit products. The third was to collect essential information on the high-cost credit sector so that the OFT can track developments. The fourth was for the Government and industry to develop a code of practice. The final recommendation was to work with credit reference agencies to explore ways in which payday lenders could provide suitable information about the payment performance of their customers. That would help those who use high-cost credit to build up a credit history that they can use to access more mainstream lenders.
Stella Creasy
I wonder whether the Minister can deal with an anomaly that has driven the new clause. I received a letter on 25 May, which set out that the high-cost credit market was not specifically included in the consumer credit review. Is the Treasury taking the lead on this and does BIS need to follow? Will the Minister clarify this matter, because the letter from the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey) said that BIS was not looking at this area per se?
Mr Hoban
Her Majesty’s Treasury and BIS have joint responsibility for this matter, which is why we issued a joint call for evidence. As I said, the consultation includes gathering further thoughts on the five areas from the OFT review.
The Government will respond to the review in the coming weeks and we are still assessing the evidence that has been provided. I can tell the House that a number of responses have been received on introducing a cap on interest rates, including from Members of this House. This is clearly an area that we will consider properly and carefully. We have been clear that we are not afraid to take action where there is evidence of consumer detriment.
I turn to the new clause that was tabled by the shadow Chancellor and a number of hon. Members. It asks the Government to review the impact of all taxation measures on lenders who are seen to engage in high-cost lending. I appreciate that this may be a probing new clause. I pointed out in Committee that the new clause as then drafted would lead to the perverse outcome of forcing up the cost of credit. The new clause before us has similar defects and unintended consequences.
I will point out the defects first. It is the Office of Fair Trading that regulates consumer credit, not the FSA. I would have thought that a Member who is so proud of her reputation for doing the homework would have got that right. It is well known that the OFT regulates high-cost credit.
Secondly, unlike the new clause tabled in Committee, which focused on the bank levy, this new clause looks at tax measures that are applicable to high-cost credit lenders. It would require each tax measure in the Budget to be assessed to see whether it is applicable. I listened carefully to the speeches of the hon. Members for Nottingham East and for Walthamstow—she is probably tweeting about this as we speak—to find out what tax measures they had in mind. I did not hear a single tax proposal being put forward by Opposition Members. [Interruption.] The hon. Gentleman says that we should propose the measures. I have been listening carefully for any sensible tax proposals from Opposition Members, but I am yet to hear one.
My concern is that there is a degree of price elasticity for those who use high-cost credit. Such people pay for high rates on their borrowing. If we increased taxes on high-cost credit, the costs would be borne by the borrowers through higher charges and the benefit would be gained by the Exchequer. That would run counter to the interests of those who use high-cost credit.
Chris Leslie
If taxes and levies are invariably passed on to the consumer, will the Minister elaborate on the banking levy? Presumably he feels that that, too, will be passed straight through to the consumer. Are there not other tax measures that disincentivise or demerit activities?
Mr Hoban
There are a number of taxes that disincentivise certain activities. We could be here all day identifying them. The challenge is to what extent an increase in tax is passed on to the consumer and to what extent it is borne by the shareholders. There is a lot of evidence that in areas where borrowers are relatively insensitive to price, such as payday lending, the additional costs of tax measures would be passed on to the consumer. I am yet to be persuaded that that would not be the case. It might help if the Opposition had some concrete proposals on tax that could be assessed, but so far they have not. Perhaps the hon. Member for Walthamstow has a proposal.
Stella Creasy
I am saddened that the Minister did not feel that any proposals were made in the debate. I thought I had caught his eye when I talked about whetting his appetite with the excess profits that companies make. I made a specific proposal on that, which I will repeat for his benefit. Provident has taken £675 million in excess profit out of low-income communities since 2005-06, according to the Competition Commission’s investigations. Perhaps he could look at taxing the excess profits that these companies are making. Does he agree with that proposal?
Mr Hoban
I listened carefully to that point, and the hon. Lady again demonstrated the problem that she is long on analysis, but short on solutions. She talked about excess profits, but of course there is a range of solutions for that, one of which is to increase competition in the market to force prices down. I am not sure that a windfall tax, which I think is what she is proposing, would have the impact that she expects.
Mark Durkan
The Financial Secretary suggests that taxation would inevitably be passed on to consumers, but Ministers insisted not so long ago that the North sea tax would not be passed on to consumers. The Chancellor himself was very clear that it would not, and that he had means and measures to ensure that it could not be. Many Government Members said that they were happy that consumers would not pay the VAT increase, because hard-pressed businesses would just have to absorb it. Why are the Government protecting the predatory credit sector?
Mr Hoban
The hon. Gentleman needs to look carefully at the impact of tax in different sectors. Just because one rule applies to one sector does not mean that it applies to others. We know that there is real concern, for example, that if we forced excise duty up too high, people would resort to smuggling to evade it. The impact varies from tax to tax and from area to area, and we need to consider which measures will be effective.
There are broader concerns about how the Opposition want to use tax. As I said, tax is used to change behaviour from time to time, but it is a blunt instrument, and if it is not properly thought through it can lead to perverse outcomes. An increased rate of tax on lenders would not have any obviously positive impact on how consumers are treated. Studies from other areas show that lenders will find ways to circumnavigate regulations and pass costs on to borrowers. A different tax rate for those businesses would be detrimental to consumers and would raise the cost of providing credit to those who may be unable to access mainstream credit.
Members have a responsibility to take seriously the potential for such measures to drive lending underground. I am sure that no one in the House would like to see a rise in illegal loan sharking, which can so devastate lives. The risks to individuals’ financial and personal well-being would be increased by loan sharks, who do not follow regulations or take legal action when debts remain unpaid. They use whatever means they can to recover their money, often forcing borrowers into more debt, or much worse. The provision of short-term credit can prevent financial exclusion, and it has allowed more consumers to access credit in a regulated market.
A number of comments have been made about an interest rate cap. There were three separate reviews under the previous Administration that considered, among other things, price controls in the high-cost credit market in the UK. They all came to a similar conclusion—that introducing price controls may lead to unintended consequences that would not be beneficial to consumers. The OFT review found that
“introducing price controls would not be an appropriate solution to the particular concerns we have identified in this market”,
and that
“developing a system to enforce and monitor price controls or interest rate caps in the UK would be complex, expensive and difficult to administer”.
In Committee, the hon. Member for Walthamstow mentioned a recent European Commission study published at the start of this year, but it found that restrictions on interest rates could deny people access to small amounts of credit, do not reduce overall average interest rates and lead to increased fees and charges being imposed by lenders. The idea of a cap on the total cost of credit sounds appealing at first, but it would have its consequences.
Oliver Heald
Does my hon. Friend agree that two initiatives that were described earlier are valuable? One is credit unions—my hon. Friend the Member for East Hampshire (Damian Hinds) chairs the all-party group that is promoting their work—and the other is financial education for young people, which my hon. Friend the Member for North Swindon (Justin Tomlinson) and his all-party group are pursuing vigorously. Are those not two positive things that the House can get behind?
Mr Hoban
Yes, my hon. Friend is absolutely right. The provision of better education, information and guidance to help people manage their money is extremely valuable. That is why we have been very supportive of the Money Advice Service in its work to help improve financial capability and capacity.
Sustainable solutions to the issues raised by the Opposition are not simple or obvious. As my hon. Friend the Member for North Swindon (Justin Tomlinson) said, an individual making the minimum repayment on their credit card could be subject to a higher total cost of credit than someone using payday lenders. The vast majority of people who borrow from payday lenders and then re-borrow pay off the amount that they borrowed by the third time. That shows that careful and considered thought needs to be given to the impact on consumers of a cap on the total cost of credit, and how it would be implemented in practice. The majority of available research focuses on interest rate restrictions rather than such a cap, but some of the same challenges apply.
We need to gather evidence before we introduce new rules, or else risk unintended consequences. That was why we launched the consumer credit and personal insolvency review, and we are considering carefully the evidence that has been provided. The Government will announce the next stage shortly, and are committed to taking action when we can be sure that it will be effective. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), and I will continue to engage in the matter, along with the hon. Member for Walthamstow. However, I am afraid the new clause is not the right way to take things forward. It is flawed in both detail and effect. We need sensible, well-thought-through interventions to improve the functioning of high-cost credit markets and get better outcomes for consumers. The new clause would not achieve that, and I ask the Opposition to withdraw it.
I know that it cannot be easy for the Opposition to work with the Government on this issue and appear to concede on the new clause. It could seem like a climbdown for them to accept that more work is needed before action is taken, but that is the sensible, responsible approach.
Chris Leslie
I am sorry that the Financial Secretary has taken that attitude to the new clause, which is pretty innocuous in calling for a review. We have not put specific proposals in it, because we thought that in the spirit of cross-party working it would be useful to set up provisions to allow the Treasury and the OFT, working together in harmony, to work through the options and possible policy devices. Asking for a review on an extremely serious issue such as this is a bit like motherhood and apple pie; it really should not be objected to.
Tracey Crouch
Will the hon. Gentleman acknowledge that a review is already under way, and that all these issues are being considered as we speak? The new clause would serve only to delay the outcome of that review.
Chris Leslie
I must correct the hon. Lady. I know that there is a review of sorts going on, but it relates to credit card lending and high bank charges on lending. The letter that my hon. Friend the Member for Walthamstow (Stella Creasy) received in May from the Under-Secretary said that the high-cost credit market
“was not specifically included in the call for evidence”
for the current review. That was what the letter of 25 May said—from the same Minister, incidentally, who refused to meet my hon. Friend.
The Financial Secretary is far too relaxed about this issue, and the Government are not exercised enough about it.
Chris Leslie
Members of all parties, including the hon. Gentleman, to whom I may give way in a moment, have made the point that there is great concern among our constituents in our surgeries about the real suffering and punitive charges that they sometimes face. The organisations in question admittedly engage in legal lending, but their activity feels immoral to many of us.
My hon. Friend the Member for Makerfield (Yvonne Fovargue) said that help from the financial inclusion fund ought to be there for our constituents. The Minister tried to explain that that fund will remain for another nine months, but as my hon. Friend said, it will end, and for those who struggle even to open the envelopes containing the bills as they stack up, there is no substitute for such face-to-face advice. The Government need to do better to ensure that face-to-face advice services remain and do not fall away when the cuts to them are compounded by local authority cuts.
Nigel Mills (Amber Valley) (Con)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss the following:
New clause 14—Group filing for corporation tax—
‘The Chancellor shall direct the Office of Tax Simplification to report by 31 March 2012 on the potential for the introduction of a consolidated corporation tax filing for UK-resident companies meeting the current definition of a group for corporation tax purposes, to include an assessment of the potential cost savings for companies and HMRC, and the potential for reducing tax avoidance.’.
Amendment 15, in clause 4, page 2, line 16, leave out ‘is treated as having come into force on 1 April 2011’ and insert
‘shall come into effect when legislation shall have been enacted requiring that all public limited companies registered in the United Kingdom shall be required to submit the arrangements for the payment of salaries and bonuses of their directors to a binding vote of approval by their shareholders at an Annual General Meeting.’.
Amendment 20, page 2, line 16, leave out ‘is treated as having come into force on 1 April 2011’ and insert
‘shall come into effect when legislation shall have been enacted requiring all public limited companies registered in the United Kingdom to publish the current salaries and bonuses of their directors.’.
Amendment 51, in clause 7, page 4, line 6, at end insert—
‘(10A) The Chancellor shall produce, before 30 August 2011, a report on the Government’s discussions with the industry on the implementation of the increased charge’.
Amendment 17, in clause 42, page 27, line 4, after ‘appoint’, insert
‘after a Report has been submitted to the House of Commons detailing the number of EIS schemes previously approved, their total cost in terms of tax relief, the number of jobs created by the companies enjoying such relief and the number of companies that failed subsequent to relief being granted allowing for an estimate to be made of the cost of each job created under the terms of this scheme when compared to the cost of tax relief given.’.
Amendment 9, in clause 43, page 27, line 35, at end insert—
‘(11A) In section 1052 in subsection (2) after paragraph (a) insert—
“(e) incurred on premises costs
(f) incurred on design costs
(g) incurred on patent, trade mark, registered design, copyright, design right or plant breeder’s right (see section 1139)”.
(11B) After section 1142 add—
“1142A Premises costs
(1) In this part “premises costs” means rents and business rates costs of the studio where R&D is undertaken.
1142B Design costs
‘(1) In this Part “design costs” means—
(a) user interface costs,
(b) user testing costs,
(c) aesthetic costs,
(d) new business model costs.
(2) In subsection (1)(a) “user interface costs” means—
(a) costs occurred from designing the visual and functional appearance of the application,
(b) costs occurred from designing the code that reacts to user inputs.
(3) In subsection (1)(b) “user testing costs” means—
(a) costs occurred during product testing.
(4) In subsection (1)(c) “aesthetic costs” means—
(a) costs occurred from the artistic design of the product.
(5) In subsection (1)(d) “new business model costs” means—
(a) marketing of building a new business monetisation model,
(b) marketing of testing a new business monetisation model.”’.
Nigel Mills
The aim of new clauses 12 and 14 is to encourage the Government to move a little faster in simplifying our corporation tax system, which is far too complex to meet modern needs.
On a day on which we have celebrated the 100th birthday of Ronald Reagan, it is appropriate to start with a quote from that great tax reformer. He said in 1985:
“Later in this session of Congress, we’ll be presenting our proposals for tax reform that will lower tax rates, broaden the tax base and make the tax code simpler and fairer. We’re looking at a top rate on personal income taxes of 35 percent, very possibly less. And we’ll be sure that incentives for capital formation are maintained. And I just want to reemphasise one thing: Tax reform will not be a tax increase in disguise.”
Those words are as relevant today as they were 26 years ago. To be fair, the Government have received that message. The Exchequer Secretary recently said:
“Taxation in Britain is far too complex. A clearer and more straightforward tax system will bring benefits for tax payers, tax professionals and the Government alike.”
I hope that the whole House would entirely agree with those sentiments.
The Government have taken welcome steps in the right direction. We have established the Office of Tax Simplification, and I commend the work it has done. In fact I am keen to ensure that we get maximum value out of it by giving it a bit more work to do under these two new clauses. At a time when we are assessing the value of all our quangos and outside bodies, the more work we get out of them the better.
We need to hasten the work of the OTS along. We are already a year into this Parliament and we rightly have a process now whereby we consult in detail on major changes to the tax system. If we do not bring forward our proposals in the next year or so, we will struggle to get any benefit from them in this Parliament, and that is the direction in which I am encouraging the Government to go tonight.
The Exchequer Secretary has made such a great start in tax simplification that he has had the honour of being named the tax personality of the year. We could start making various jokes about accountants’ personalities, but we would probably cause grave offence to all my former colleagues, so perhaps we should leave that subject. We have had a consultation on removing a few simple tax allowances, such as the reliefs for angostura bitters and black beer—if going that far gets the Minister that award, just think what garlands could be thrown at his feet if he tackled some of the real complexities of our tax system!
It was just last week that the Government announced the next areas that they want the OTS to consider, rightly including the taxation of pensioners and employment taxes. However, at a time when we need business to drive the growth that will sort out the deficit and our economy, we need to look at the taxes that encourage—or perhaps discourage—business from making the investment that we need. That is why new clause 12 would require the OTS to consider ways to simplify the capital allowance system, or to replace it if simplification is not possible. If the Minister questions why we need that provision, I draw his attention to the Bill, in which we have had to introduce various measures that tinker with the capital allowance system, because we know it is out of date and not working. It is hard to imagine that anyone would design from scratch a system in which we have to introduce a modification to ensure a different system for short-life assets and then we have to change the definition of short-life assets to eight years. I wonder how often businesses invest in assets that they expect to have a useful life of eight years, never mind any longer. That is a clear sign that the system is not working, out of date and far too complex. It needs to change.
I am sure that Members have taken a fascinating look through this country’s tax code and seen how many types of capital allowances we now have. We have a basic regime—the general pool—which from next year will produce an allowance on a reducing balance basis of 18%, meaning that it will take a long time for a business to get the full economic relief for its investment. It would take well in excess of six years to get the majority of that relief. We then have the short-life asset pool for assets that a business thinks might have a life of less than eight years. That effectively means that it has to track those assets and work out when to scrap or dispose of them to get the final balance. We also have a long-life asset regime for assets that have a particularly long life, but which are not suitable for the general pool. Furthermore, we have different rules for cars and environmentally friendly assets, and completely different rules for assets on a finance lease, where effectively we allow account depreciation.
This range of reliefs for simple investments in plant and machinery beggars belief. Frankly, if I was an overseas business or someone with some cash wanting to start a business in the UK, and if I wanted to invest in a heavy manufacturing business, was investing in large numbers of plant and equipment and went to my adviser and said, “I want to invest in the UK. Can you tell me how I get relief for all this investment?” and I got the answer, “Well, it depends on whether it’s a long-life asset, a short-life asset, an ordinary asset, an environmentally friendly asset, and it depends whether you lease it, hire purchase or buy it outright”, I would start to wonder whether it was really worth the effort. Surely there must be a simpler and better way of doing this than having to go down all these different routes.
We know what happens. The system creates complexity for businesses having to track and make all these returns. Then the Revenue has to audit and scrutinise those returns and ensure that everything is done properly. It therefore takes work on both sides to support a system that I suspect is achieving the opposite of what we want, which is to encourage existing and new businesses to invest in new, modern and environmentally friendly equipment, and to create more jobs in the manufacturing sector that we so value in this country.
Louise Mensch (Corby) (Con)
My hon. Friend is making a powerful speech, and I share his interest in this subject because, like him, I have large amounts of manufacturing industries in my constituency. Have any businesses in his constituency made representations to him about how much such a measure could save them or help them to invest?
Nigel Mills
I can think of many things on which businesses lobby their MP, but the details of the tax system are a little way down that list. We would find that businesses take a different view of whether they benefit from the current regime. However, as we continually reduce the rate, this will become of greater interest to more and more businesses. Yes, businesses come to me and say, “The general tax system is just far too complex. The corporation tax system as a whole is far too complex.” The issue I have raised is just one particularly good example of where the system is now out of date.
If the Minister needs more encouragement to simplify the system, I would add that the more complex we make a system, the more attractive we make tax avoidance and the more loopholes we create for tax avoidance. Through the Finance Bill we have had to introduce anti-avoidance measures to try to stop people exploiting the system’s complexities. How much more attractive would it be if we simplified the regime either by retaining capital allowances that provide the attraction of a simple fixed rate of relief, or by allowing a business to relieve the depreciation charge it makes in its accounts? In previous debates, we have heard of the risk that businesses could massage their tax results to accelerate the deduction in advance of the economic life of those assets ending. These things can be tackled, however. In effect we are allowing a business with an intangible asset to take relief for its accounts depreciation. It is strange that we allow that for intangible assets that we cannot, by definition, touch and for which there is no scientific data proving the lifespan, yet for tangible assets—the core things we want businesses to invest in—people have to go down this hugely complex route.
In reducing the allowance rate from 20% to 18%, the Government think that they will more closely align rates with the economic life of assets these days. I am not sure that businesses in my constituency are saying that that is their experience. These days, things move on so fast that the life of an asset is quite hard to predict. If someone is looking for a return on an asset over six years-plus, it is hard to be confident in the current market. There are many issues with the capital allowance system, and I suspect that each year a different aspect will become the hot topic. The Minister will be lobbied by different interest groups, as I suspect he was this year in his attempt to move—quite rightly—from four years to eight years, but when he is next lobbied and gets proposals in his Red Box to add another layer of complexity to the system, I hope he will say, “Actually, there must be a better way we can do this.” This is fundamental to our corporate tax system, it is fundamental to how we encourage investment in our country, and there must be a better, simpler, fairer way that removes some of the potential for abuse. New clause 12 would get the Office of Tax Simplification to consider whether a better system could be introduced. I would strongly encourage the Government to consider carefully going down that line.
Let us step back in history to the time of President Reagan. One example of how not to simplify a tax system was his Tax Reform Act of 1986, which introduced what was called the “double-declining balance method”, switching to the straight line method at a time to maximise the depreciation allowance. I raise that issue only to show that this is not as simple as saying that we need either the current system or accounts depreciation—different things could be done that might encourage investment, although I am not sure that the double-declining balance would meet my aim of simplifying, even if it might give businesses the joy of accelerated relief. I shall not ask the Minister to respond in detail on that particular method, however, as I suspect that it will not have featured in his recent studies.
New clause 14 addresses a slightly less hot topic—groups of companies. These can range from groups with two companies through to multinationals with dozens or even hundreds of UK companies. For corporation tax purposes, we currently ask groups to file a tax return for each entity. Then we ask them to file separate claims and elections for all the various inter-group transfers and allocations. They are allowed to transfer a loss from one company against the profit of another, and they are allowed various elections on the transference of assets around the group. All these things create a huge compliance headache for taxpayers and the Revenue.
It is worth considering whether there is a simpler way of getting groups to deal with their corporation tax compliance by filing a tax return covering the whole group. There are precedents: many other tax regimes under our competitors allow groups to file a single tax return for their whole group, and in fact we allow groups to make group VAT elections and effectively file single VAT calculations. I wonder how much easier it would be for a group if it had the same basis for VAT as for corporation tax. Let us consider all the potential savings for businesses and the Revenue in not having to go through dozens of individual tax returns. We should bear in mind the fact that many entities in a group will have few entries and will add very little. Under my proposal, we would no longer require all these group relief returns when businesses allocate losses from one company to another, then make a change following submission and have to change all those returns, after which one company makes a loss the next year that changes the previous year’s return, meaning that they have to re-file them all. All these things add huge complexity and costs but very little value to the tax system.
I accept that they add some value to the Treasury, however, through the hope that, somewhere in a group, some losses or something else will not get relieved but will get trapped, whereas under a simplified system they would get used. I am not sure that our predecessors, when they passed these reliefs to support and encourage business, were aiming to put in place systems so complex and out of date that some relief would get denied when it ought to be given.
There are further reasons behind my proposals. We impose on UK group companies various requirements to review the pricing of transactions that take place between them. There is no tax at stake if company A sells something to company B for £100, then has to work out whether the price ought to have been £95 or £105. The only result is that one entity ends up with a slightly reduced profit, and the other with a slightly higher one. Both pay the same rate of tax, so the present arrangements simply result in a paper chase that creates compliance headaches for business and the Revenue alike. All such transactional requirements between group companies would disappear if they were allowed to file one tax return.
John McDonnell (Hayes and Harlington) (Lab)
I congratulate the hon. Member for Amber Valley (Nigel Mills) on moving his new clause and on the deployment of his expertise for the benefit of the whole House. He could well be a candidate for tax personality of next year, but I would advise him that it might help his prospects if he were to lay off the Reagan quotes.
I wish to speak to the amendments tabled in my name. Amendment 15 deals with directors’ salaries and payments, and proposes a binding vote by shareholders on such payments. Amendment 16 deals with the publication of information on the salaries and bonuses of directors in all public limited companies. Amendment 17 deals with a number of issues relating to enterprise investment schemes, and it would be helpful to receive certain information from the Government in order to assess those schemes in future.
I want to deal with salaries and bonuses first, as they have been a matter of contention in the House for a number of years now. Statements have been made by leading members of all political parties expressing concern, if not outrage, at the levels of increase in the pay of company directors. The Leader of the Opposition said in a recent speech that the
“danger today is that pay and performance have become detached…Over the last 12 years, chief executive pay in Britain’s top companies has quadrupled, while share prices have remained flat.”
The Secretary of State for Business, Innovation and Skills has called for greater disclosure on pay and bonuses and their link to company performance. He was reported as hitting out at the
“ethics of the wild east”
in the City. He described some directors’ pay and bonus settlements as “ridiculous”, “outrageous” and “rewards for failures”. I agree wholeheartedly with the Leader of the Opposition and the Secretary of State on this matter. I believe that the Secretary of State’s sentiments have been echoed by the Prime Minister himself.
My amendments seek to address the fact that the present system for the control of directors’ pay and bonuses by shareholders is not working. The current system for judging and rewarding remuneration in major companies is clearly not linked to performance, and evidence for that now abounds. The Business Secretary was referring to the dramatic increase in the remuneration of directors and executives of the top 100 companies. In 1998, that remuneration was 45 times the pay of the average employee in the company. By 2010, it was 145 times the average pay, and if it continues at that rate, it is predicted to reach 214 times the average salary in the company that the director or chief executive controls.
At the moment, the chief executives of the FTSE 100 companies have total remuneration packages averaging £4.2 million a year. Last August, it was reported that the financial crisis had resulted in ordinary employees’ salaries being frozen in at least one third of Britain’s biggest companies, yet the average pay of the top directors increased by £500,000. Hewitt New Bridge Street has reported that the typical bonus has now increased from 90% to 120% of salary, and the total remuneration survey conducted by pay and reward consultants MM&K showed evidence of a total disconnect between rewards, actual performance and shareholder value. Performance-related pay has just gone through the roof, however, with extremely complex packages being devised. The average top award under share allocation schemes and incentive schemes in the FTSE 100 has risen from 174% to 328% of salary.
In some instances, outrageously large awards have been agreed even before the director has demonstrated any value to the company. An example is Lloyds, which gave its new chief exec, António Horta-Osório, a welcome package worth close to £13.4 million simply for joining the bank. This is a bank that we, as taxpayers, now own. Lord Oakeshott, the Liberal Democrat peer, said that taxpayers would be “appalled” at paying someone
“£5,000 a day, just for turning up at the office for the next three years”.
I wholeheartedly agree with him on that. Ironically, Sir Victor Blank, the former chair of the Lloyds group, described top bankers’ pay in The Sunday Telegraph—not a newspaper I regularly read—as “unconscionable” and warned that the widening pay gap could lead to dangerous divisions in society and more strikes. I shall quote him directly. He said:
“You can’t have an ongoing widening gap between the top pay and the average pay…I think we are at a time now where you have a certain amount of unrest over pensions and other issues where if we don’t start early to have a degree of moderation in the levels of pay we risk more industrial unrest than we have had.”
I could not agree more.
Some shareholders have echoed those concerns. It was perhaps best expressed by a woman shareholder who was disgruntled at the Cable and Wireless annual general meeting. She complained—and it was a heartfelt plea from the floor:
“All the money and all the profit seem to be going towards the salaries of the Board, and I did not necessarily think that they were worth that amount of money.”
I believe this is undermining confidence and engendering cynicism—and, of course, division and disenchantment—in the whole process.
Clearly, the billowing packages of directors’ pay, bonuses and overall remuneration has to be addressed. The Government have acknowledged that, as have all parties in the House. My amendments are designed to prompt action and to make action more speedy and decisive.
If we are to tackle this issue, we need to understand why it is occurring. The Joseph Rowntree charitable trust funded an independent inquiry, the High Pay Commission, to which I believe a number of Members have submitted their views over the last year. It has looked at the drivers behind the trend of increases in directors’ and executives’ pay and remuneration. It provides some understanding of how the system operates to determine directors’ remuneration and puts forward the reason for the excesses.
Governments have addressed the issue over the last two decades. Legislation has been there to establish the current system of corporate governance. For publicly listed companies, it is based first on the establishment of a remuneration committee on every board to advise on appropriate remuneration; secondly, on disclosure; and, thirdly, on the shareholder having a vote on the pay and remuneration of directors. All the companies with a premium listing of shares are required on the Financial Services Authority listing rules to report on how they have applied the UK corporate governance code in their annual reports and accounts. This includes explaining how the pay was arrived at and determined.
The remuneration committees that have developed since the 1990s grew up as a result of pressure from successive Governments. They aim to overcome the conflict of interest in directors setting their own salaries. The Greenbury report on corporate governance called for them to be fully independent and to comprise wholly non-executive directors. The committees agree the pay packages for top execs and produce the report that will eventually go before shareholders.
The problem identified by the High Pay Commission and others is that the non-execs that sit on the remuneration committees are often executive directors in other companies, so setting benchmarks of remuneration is important for them. There have been charges of cronyism as executives and directors appoint each other to each other’s remuneration committees—a relationship of incestuous self-interest—while the non-execs sit alongside executive directors supporting them and unwilling to challenge them on pay. In recent years, we have seen the emergence of remuneration consultants who advise the remuneration committees on the setting of pay, but these are unregulated and they are often working for or are commissioned by the company directors on whose salaries they are giving advice.
On disclosure, quoted companies must publish directors’ remuneration reports. These appear in the annual report and are put to shareholders for a vote. This information is required to be put to companies as an ordinary resolution for approval at the AGM. The problem, however, is the UK corporate governance code guidance, according to which:
“A significant proportion of executive directors’ remuneration should be structured so as to link the rewards to corporate and individual performance. There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing remuneration packages of individual directors.”
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Will my hon. Friend’s amendments help with the sort of situation we faced with HBOS? It was driven into the buffers by its highly paid executive team, who seemed to lose nothing while the shareholders lost everything.
John McDonnell
My amendments would go some way to ensuring that the information is published, enabling the Government to look in more detail at such information, while also enabling shareholders to have at least some opportunity to hold the directors to account. As I said, the advisory vote system worked initially, but it certainly has not worked in recent years, as the HBOS example demonstrates. Having a binding vote will give the shareholders some authority. The amendments are an attempt to redress the current imbalance of power between the shareholder and the board. It will not solve all the problems of directors being unaccountable on pay or bonus awards, but it would put another weapon in shareholders’ hands to tackle the issue.
Amendment 17 relates to enterprise investment schemes and accountability. Just as shareholders need information to hold company boards to account, the House should ensure that taxpayer’s money and tax concessions are allocated wisely to groups in society and that value for money is achieved. The amendment would invite the Government to justify in more detail future enterprise investment schemes on the basis of past performance of previously approved schemes. The amendment would seek information from the Minister on the total cost of tax relief with regard to the tax income forgone, the number of jobs created by the companies that have gained tax relief under the schemes, and the number of companies that have failed after the tax relief has been given—calculating the cost of each job created compared with the cost of the tax relief given. The information provided in the paperwork in relation to the Budget and the Finance Bill is not clear. The Treasury briefing on enterprise investment schemes and venture capital trusts sets out the proposals but provides no analysis of past measures and their performance. The Treasury Committee, in its comments on tax relief for EIS under the Finance Bill , suggested:
“The measure also needs to be viewed alongside the other proposals for EIS and whether the existing EIS conditions encourage investment in growth businesses.”
The Treasury Committee, therefore, points us in the direction of undertaking a proper value for money exercise on the proposals.
The amendment would enable the Minister to respond to that. Before we venture into such schemes, particularly EIS, we must ensure that their objectives are achieved with value for money, and the information is not currently available for us to make that judgment.
Malcolm Bruce (Gordon) (LD)
I shall speak briefly to amendment 51. Since the Government announced the additional corporation tax on oil companies in the Budget, I have been urging and, I hope, taking a constructive part in getting the companies and the Government to talk through how field allowances can be used to ensure that projects reviewed as a result of the tax changes can still go ahead. The purpose of the amendment is to get feedback from the Government on the progress of such negotiations, which I hope will have a positive outcome. Immediately after the Budget, Statoil made the most controversial, and certainly the most high-profile, announcement: that it was putting on hold the Mariner and Bressay fields. I imagine that those fields involve up to £6 billion of investment, with 600,000 barrels of oil recoverable and the possibility of a headquarters building being located in Aberdeen. I hope that the Government will find a way to ensure that the project goes ahead.
Next week, my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) and I are taking a number of oil companies that are members of Oil & Gas UK to meet the Secretary of State for Energy and Climate Change to discuss in detail the implications of the tax. The difficulty is that the tax changes impact differently on every field and on every company and its planned investments. I hope that active negotiations will lead to a recognition that allowances can be adjusted for particular types of field or circumstances, and that as a net result we will not lose too many of the investments that were originally at risk. I also hope that engagement over time will lead to both parties agreeing that a simplification of the tax system might be desirable. When prices are high, the industry might reasonably be expected to make a contribution; equally, we should recognise its need to know with some certainly the return that it is likely to get on significant investments.
The hon. Member for Hayes and Harlington (John McDonnell) made a powerful and persuasive case regarding rewards for work not done or risk not taken, but it is easy to look at the oil companies as rich fat cats, which is how the public and the House often view them. However, developing oil from under the North sea involves huge risks in relation to technology, geology, exchange rates, markets and weather. Many people engaged in the industry use their technical knowledge and expertise to make a substantial return for their companies and for the UK economy, and although they have good, well-paid jobs, the payments and returns they receive are not in the same league as those received by people in financial services.
The Government have acknowledged that they do not want to lose the production from marginal and mature fields, and they are prepared to use field allowances. According to conversations I have had, negotiating in detail over a project for a field is incredibly complicated, requiring an enormous amount of civil service time, expertise and engagement, as well as executive management time, so I hope that the system will be simplified. Perhaps everybody is prepared to devote such time to significant projects, but the Department has a limited capacity to engage in too many of those negotiations, and companies sometimes have a limited capacity and willingness to engage, to the extent they might say that investigating or investing in other projects is more worth while.
I want to be encouraged by the knowledge that constructive engagement is taking place. I get good feedback from the industry about talks that it hopes and believes will lead to agreements that ensure that investments go ahead. In the long run, I hope that we will have a system in which there is trust and understanding and the Government get the revenue from high oil prices to which they are entitled, but the country gets the investment in the expertise, people and resources that will maximise production of oil and gas in the North sea, maximise jobs in the UK, and maximise and sustain the export industry, which is growing substantially. I hope that the Government will give a positive response in due course.
Mr Frank Doran (Aberdeen North) (Lab)
I support amendment 51, tabled by the right hon. Member for Gordon (Malcolm Bruce). As neighbours, we share the same interest in the oil and gas industry and know full well its importance not just to the north-east of Scotland but to the whole United Kingdom. One of our disappointments about the imposition of the tax is that the Government seemed not fully to understand the industry and its importance, which I hope they understand now.
Like the right hon. Gentleman, I am pleased to hear from my contact with the industry that discussions are under way, with the possibility of improvements to field allowances. If the Government had thought the tax through properly, they would have already prepared the ground for field allowances to mitigate the damage done to the industry. It is not possible to overstate that damage. A huge blow was dealt to confidence, not just because the industry had been involved in regular discussions with the previous Labour Government and the current Government about a review of the tax system to deal with a host of areas that had been remained untouched over the years, but because of how that was done. It seems from all the available information that the politicians had no contact or discussions even with tax experts in the Treasury. This was a purely political decision that did not arise from the review, from consultation, or from any wider consideration than the need to raise money.
Steve Baker (Wycombe) (Con)
As I listened to the hon. Member for Hayes and Harlington (John McDonnell) speak to amendment 15, I thought that my ears were deceiving me because I felt so much sympathy for what he was saying. Indeed, he put me in mind of a book by a reformed Trotskyite, James Burnham, who predicted in “The Managerial Revolution” the system of capitalism—the set of structures—that we now recognise in publicly listed companies. My discomfort evaporated, however, when I realised that the hon. Gentleman was defending the interests of the owners of capital.
Steve Baker
In that case, I am delighted that we are on opposite sides of the Chamber.
It is strange that capitalism has come to this: that, nowadays, the owners of capital need to be defended by the House from their own directors. If I have understood the amendment correctly, it would mean that the change in the main rate for 2011 would not come into force until legislation had provided arrangements for shareholders to approve their directors’ remuneration. It is almost incredible that such an arrangement does not already exist.
We must reunite ownership control and the risk taken with capital, and I believe that the amendment goes to the heart of one of the problems of our capitalist system. I am not sure that it would achieve the aim that the hon. Gentleman has set out because it might not affect the rate for 2011, and I therefore cannot support it. Nevertheless, I think it is an extremely good idea, and I urge the Government to consider it.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I support amendment 51, tabled by my right hon. Friend the Member for Gordon (Malcolm Bruce). I remind the House of my entry in the Register of Members’ Financial Interests as a shareholder in Shell and a vice-chair of the British offshore oil and gas industry all-party parliamentary group.
The key aim of the amendment is to introduce damage limitation and to rebuild the confidence and trust among investors that the country needs if we are to maximise the benefits of our own oil and gas. The oil and gas under the ground does not provide us with any jobs, tax or security of supply. Those are produced only when it comes out of the ground, and, although it belongs to the nation, we can get it out of the ground only through the expertise and skill of people from my constituency and throughout the country. They apply their knowledge by way of the investment provided by risk capital, and the investors must know, as far as possible, in what climate they are operating and what returns they will obtain. The kind of risk that we rely on their taking is illustrated by a field in the North sea where the geology suggested that three platforms would be enough to sustain production and provide all the necessary equipment. Only when they started extracting the oil did they discover that there was much more sulphur in some parts of the field than in others and that they needed to build a fourth platform at a cost of £1 billion. Such extra risk taken by investors—not by the Government or the taxpayer—must be recognised as being of great importance to our country’s success in this regard.
Last week, we held a reception in Parliament for Subsea UK to highlight an industry that has developed into a jewel in the crown of this country, yielding £6 billion in production from under the sea through engineering skill, half of which is exported from this country. The United Kingdom is responsible for one third of the world’s subsea engineering; we therefore have something very important to nurture and build on.
The field allowance discussions are an important means of trying to unlock some of the fields that will be negatively affected by what has been proposed. The hon. Member for Aberdeen North (Mr Doran) and my right hon. Friend the Member for Gordon emphasised a longer term risk that needs to be addressed: the risk not to the projects that are unwinding now and in the next two years, which already had the momentum of contracts signed and delivered before the tax was changed, but to those that will be decided in the culture and investment climate prevailing in the aftermath of the tax. That is why these talks are so important in rebuilding trust and a constructive engagement.
I welcome the fact that industry and Government appear to be addressing the need for constructive engagement, and any updates from Ministers as to how we are progressing in rebuilding trust will be very important. We must remember that the reputations of the country managers—the people in this country who work for the multinational companies and the investors abroad—has been damaged by what happened. They have been encouraging their investors to invest in this country in one set of circumstances, only for the goalposts to be shifted. They need trust and confidence in them to be restored if they are going to persuade their investors abroad—in Calgary and elsewhere—to invest again in our country so we can build on the potential that exists.
Stewart Hosie (Dundee East) (SNP)
I agree with everything that has been said by the hon. Gentleman, his party colleague, the right hon. Member for Gordon (Malcolm Bruce) and the hon. Member for Aberdeen North (Mr Doran). We have heard about contracts and work that is in place already unwinding, with the likelihood of a gap after 2013 when one set of investment decisions has already been made but others have not yet been taken. I ask the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) to carry on the good work he is doing with his own Government on speeding up this review, so we can avoid that investment gap and the real dangers we will face in a couple of years’ time.
Sir Robert Smith
The purpose of the amendment is to keep the spotlight on this issue by ensuring we get updates from the Government, and that the Government can give a signal on the investment climate showing that they understand the concerns and are willing to take them on board so we can build a long-term future.
There is another gap apart from the time gap as these contracts unravel. We are a mature province so we must ensure that the infrastructure to get the next investments off the ground is still in place in years to come. That infrastructure must not be decommissioned prematurely, and so the investment must not be withdrawn. The owners of the infrastructure need to know that there is a long-term future for investment as more production will be brought in through those platforms. That is another reason why these constructive talks are so important.
I encourage the Government to do all they can to restore confidence and the positive investor climate that will unlock the full potential that exists in this country, build on the skills we already have, and maximise the benefit to the taxpayer in the long run and to our security of supply.
Mr David Hanson (Delyn) (Lab)
I am grateful to the hon. Member for Amber Valley (Nigel Mills) for kicking off this wide-ranging discussion on a number of important tax issues. He certainly enlightened me when he revealed that the Minister is tax personality of the year. I missed that; despite all my “Gauke” Google alerts, I missed the fact that he was tax personality of the year. May I offer the official Opposition’s wholehearted congratulations to him on that?
The hon. Member for Amber Valley gave a number of Ronald Reagan quotes and he said today was the 100th anniversary of Ronald Reagan’s birth. That was on 6 February, in fact, but this is the 100th year since Ronald Reagan’s birth. As you will know, Mr Deputy Speaker, today is the day on which we shrank the UK tax base by giving away America 200-odd years ago, and I hope that, as part of his plans for simplification, the hon. Gentleman will recall that.
New clauses 12 and 14 were proposed by the hon. Gentleman and he may be surprised to learn that I am not averse to his suggestion in new clause 14, because there are grounds for discussing the simplification of UK corporation tax returns for multinationals. It is worth while considering the review that he suggests, provided that it examines whether such a simplification will decrease, rather than increase, tax evasion—an increase is always the worry with such a simplification. New clause 14 potentially has merit and although I do not expect the hon. Gentleman to push it to a vote, I hope that the Minister will consider the issue.
New clause 12 proposes to review, or possibly even remove, capital allowances and asks the Office of Tax Simplification to report on replacing them with a different form of relief. The hon. Member for Amber Valley will know that Labour Members had substantial concerns about reducing capital allowances for firms, which explains why I cannot support the new clause. My hon. Friends and I tabled a number of amendments in Committee to oppose the reduction in the capital allowances. I realise that the reduction was tied up strongly with the decision to cut corporation tax to 24% by 2014-15—shortly thereafter it was decided to cut it to 23%— which was one of the flagship growth measures in the June Budget. However, that was paid for by slashing investment and capital allowances, which encourage businesses to take a long-term view by providing tax relief on the purchase of equipment and machinery. The view that I expressed in Committee has not changed, although I know that it will cause disagreement: companies that invest, particularly in manufacturing—car industries in my own area of north Wales, advanced manufacturing, wind turbine manufacturing, plane makers and so on—will benefit from capital allowances, whereas the tax cuts are, unfortunately, aimed at financial services.
At the time of the June 2010 Budget, manufacturers expressed concern at what this approach will mean for industry. More recently, the engineering manufacturers association warned that the Government risk moving to a tax system that contains “a bias” against big manufacturers. Members on both sides of the House are trying to encourage manufacturing growth, and I believe that the review that the hon. Gentleman seeks in the new clause could be damaging to the growth of capital investment and, therefore, to the growth of manufacturing industry.
Nigel Mills
I wish to clarify something. My aim in new clause 12 was not to do what the right hon. Gentleman fears will happen, but to do the opposite. I was aiming to ask the OTS to consider simplifying or replacing the capital allowances regime with one that would match the tax relief more closely to the life of the assets being invested in. My concern was that an 18% reducing balance was giving tax relief over a far longer period than the actual useful life of those assets. I felt that having a simpler system, where a shorter “life” meant that the tax relief would be obtained much faster, would incentivise investment, not discourage it.
Mr Hanson
That is an interesting argument, and I bow to the hon. Gentleman’s detailed knowledge of these matters, which goes back to his professional experience before entering the House. My worry has been placed on the record on Second Reading, in Committee and on several other occasions. For the moment, it is best that we keep our arguments to the effectiveness of capital allowances, and I will, thus, still be unable to support the new clause.
My hon. Friend the Member for Hayes and Harlington (John McDonnell) tabled amendments 15, 20 and 17. I suspect that he was even more surprised than me to hear the hon. Member for Wycombe (Steve Baker) offer his unflinching support for my hon. Friend’s suggestions on this matter. I thank him for tabling his amendments because they make an extremely important contribution to the debate. We face a real issue in how we collectively address what is now a cross-party concern and shed light on the remuneration of executives, who are ultimately paid by the companies for which they work and by us as consumers of those goods in our society at large.
John McDonnell
I had better correct the record. As someone who still sees the relevance of Trotsky’s transitional programme, I am attempting not to salvage capitalism but to expose its weaknesses.
Mr Hanson
Far be it from me to engage with my hon. Friend on the benefits or otherwise of Trotsky’s theory, because I am sure that he would win that discussion hands down.
The key point is that we all seek transparency in remuneration. My hon. Friend the Member for Hayes and Harlington will be aware that there is already legislation on the statute book that means that banks must have transparency in their remuneration. The Government should enact that legislation and should also push for a wider European agreement on transparency, an act of faith that they have so far failed to push for.
The previous Government, in our Financial Services Act 2010, allowed the Treasury to issue regulations that forced banks to disclose in bands the number of staff earning more than £1 million a year. That legislation has so far not been pursued with any vigour by the Government. The Act, which gained Royal Assent in April 2010—just before the general election—gave the Treasury the power to regulate on this issue. It is an issue that my hon. Friend the Member for Hayes and Harlington has raised and for which the Government must account today. The Opposition will continue to consider it in the future. Indeed, my right hon. Friend the Leader of the Opposition made a clear speech to the Coin street neighbourhood centre on Monday 13 June in which he committed the Opposition to ensuring that we had such transparency and that chief executives were accountable not just to their shareholders but to the wider community.
Kate Green (Stretford and Urmston) (Lab)
Does my right hon. Friend agree that an important feature of exposing those very high bonuses to public scrutiny was to make it clear that other lower paid workers in the banking sector receive some bonus payments? It is very important that we distinguish between the excessive bonuses at the top and the bonuses that top up relatively modest wages for the bank clerks, who are feeling quite attacked personally when the banking crisis was none of their making.
Mr Hanson
My hon. Friend makes a valuable point. She will know that the legislation passed by my right hon. Friend the Member for Edinburgh South West (Mr Darling) in the last Parliament allowed salaries of more than £1 million to be open to scrutiny, which would address the issue she mentions.
There is some merit in bringing this issue to the attention of the House, and I am grateful to my hon. Friend the Member for Hayes and Harlington for doing so. He will know that there are some issues to do with his amendment delaying corporation tax cuts, but I am grateful that he has addressed the issue and I hope the Minister will respond in due course.
Amendment 17 is about the enterprise investment scheme, which we support. In Committee, we asked the Minister whether he had state aid approval for the EIS and I would welcome an update on whether he has since made progress on that.
I have some sympathy with amendment 51, tabled by the right hon. Member for Gordon (Malcolm Bruce). On Second Reading and in the Committee of the whole House, we tabled amendments that mirrored his amendment in many ways, asking the Chancellor to produce before the end of September an assessment of the impact of taxation on ring-fenced profits, business investment and growth, including an assessment of the long-term sustainability of oil and gas exploration in the North sea. For the reasons mentioned by my hon. Friend the Member for Aberdeen North (Mr Doran), the way that the proposal was brought forward contained elements of surprise for the industry. There was a lack of consultation and there have been consequences. The right hon. Member for Gordon and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) both mentioned Statoil and the great impact that the decision has had on that company’s potential $10 billion—or £6.1 billion—investment in the North sea.
It is important that the Economic Secretary has had discussions—some potentially very exciting and energetic—with oil companies on these matters as part of her initiation into her role in government. I hope that she will ensure that she reports back. I also hope that the Minister will accept amendment 51, or at least accept an amendment in principle for the future.
Finally, although my hon. Friend the Member for West Bromwich East (Mr Watson) is not present today because of other matters, I very much welcome his amendment 9, which is part of this group. We raised the issue of video games tax relief in debates on the Finance (No. 2) Bill. However, we need to look at the issue again in detail, if only because the hon. Member for Wantage (Mr Vaizey) said when in opposition:
“We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years.”
He said that during the general election, on 13 April 2010. He is now the Under-Secretary of State for Culture, Olympics, Media and Sport, yet he has been sat on by the Chancellor of the Exchequer, who said in his Budget statement last June:
“In the current climate, with the deficit the size…all those reductions in tax must be more than paid for by other changes to business taxation, so we will not go ahead with the poorly targeted tax relief for the video games industry.”—[Official Report, 22 June 2010; Vol. 512, c. 175.]
My hon. Friend’s amendment 9 asks the Government to look again at the issue. I simply put on record the fact that, yet again, those in government said one thing during the election and something else afterwards. We need to encourage the video games industry so that we can compete on a global scale.
In summary, there are some useful amendments in this group. I cannot accept everything that the hon. Member for Amber Valley said, but the other amendments before us have some merit. I look forward to hearing what the Minister has to say.
The Exchequer Secretary to the Treasury (Mr David Gauke)
We have had an interesting and wide-ranging debate on this group of amendments, which propose a number of changes to the taxation of business. Let me start by reiterating our position on business tax. The first step in the Government’s plan for growth is a competitive UK tax system. In fact, the Government’s aim is to create the most competitive corporate tax regime in the G20, and we have been clear about how we intend to achieve that. Last November we published our corporate tax road map, setting out our plans for reform over the next five years and the principles underpinning those reforms. I am quite clear that if we are to provide business with the certainty that it needs to invest in the UK, tax reforms need to maintain stability, avoid complexity and ensure a level playing field for taxpayers.
Let me deal first with the amendments tabled by the hon. Member for Hayes and Harlington (John McDonnell), and in particular amendment 15, which deals with directors’ pay, and on which we saw an unlikely alliance between him and my hon. Friend the Member for Wycombe (Steve Baker) in defence of the interests of capital versus workers—if I can phrase it in a way that will please my hon. Friend but not the hon. Gentleman—albeit the highest paid workers. It is worth noting that both hon. Members have made many declarations of independence, and today was no exception. As I have said, a competitive tax regime is the foundation of our plan for growth, and the consequence of amendment 15 would be to delay the reduction in corporation tax.
The Government take the essence of the hon. Gentleman’s concern—directors’ remuneration—seriously; indeed, my right hon. Friend the Secretary of State for Business, Innovation and Skills raised it on 22 June in a speech to the Association of British Insurers, asking how we can ensure that directors’ remuneration is effectively linked to company performance. To help answer that question, the Government already have plans to consult in two relevant areas. In July, the Department for Business, Innovation and Skills will look at the narrative aspects of reporting directors’ remuneration, examining the provisions dealing with the disclosure of directors’ remuneration and making the link to company performance much clearer. In the autumn, the Department will explore other policy options related to the role of remuneration committees and company accountability to shareholders.
Turning directly to the proposals made by the hon. Member for Hayes and Harlington, let me first remind him that UK-quoted companies are already required to publish a directors’ remuneration report. That includes full individual details of each director’s pay, including salary and bonuses, share schemes and all other forms of remuneration. His proposal to make the remuneration vote binding in nature would raise difficulties, as such a vote would inevitably cut across contractual arrangements already entered into between the company and the director. That is why the vote is currently advisory in nature.
John McDonnell
Is this issue to be part of the consultation in the autumn? Will it be addressed at all?
Mr Gauke
As I have said, the consultations I have announced will focus on the narrative provisions, the role of remuneration committees and company accountability to shareholders. I am sure that representations could be made to the latter consultation. However, there remains a difficulty with cutting across contractual arrangements and I dare say that there might be issues with the Human Rights Act 1998 were that to happen.
John McDonnell
First, I think it would be greatly reassuring to the House overall if the issue of the binding vote was within the scope of those consultations. Secondly, the issue of contractual commitments has always been the red herring brought up on any future reform. The way around it is simply to make future contracts subject to that binding vote of shareholders.
Mr Gauke
I know that my ministerial colleagues in the Department for Business, Innovation and Skills are watching this debate very closely and will have listened to the hon. Gentleman’s representations. I noticed that when he referred to the House as a whole, he gestured to my hon. Friend the Member for Wycombe. Whether the hon. Gentleman and my hon. Friend necessarily represent the views of the House as a whole on all issues I am not sure, but the hon. Gentleman raises a fair point.
Steve Baker
May I say that I think the reason for this unlikely alliance is that the workers now are the capitalists through their pension funds and other investments? I remember a trade unionist explaining to me with some care the new movement for workers’ capital and I think we will be missing a trick as a free-market Government, if indeed we are a free-market Government, if we do not recognise that the workers now are the owners and that we need to help them take control of what they own.
Mr Gauke
I do not know whether my hon. Friend is trying to lose the support of the hon. Member for Hayes and Harlington on this, but I fully take his point on board and I shall ensure that BIS is aware of this debate. My right hon. Friend the Business Secretary has said that shareholder accountability is an area that his Department will be looking into in the autumn.
John McDonnell
This is a serious point, and I say to the Minister that this will come back time and again, because every Government structure put in place by successive Governments on this issue has been unsuccessful in controlling remuneration. There is outrage among the general public about what has been happening, not just in recent years but today with £6 billion bonuses in the City and elsewhere. I say to him in all seriousness that any Government need to address this issue, which concerns the democratic control of what are now public companies in terms of ownership.
Mr Gauke
The hon. Gentleman makes his point forcefully. It is worth pointing out that the UK leads the way internationally on the reporting of executive pay and accountability to shareholders. I hope that he will acknowledge that, just as I acknowledge the legitimate concerns he raises. It is our intention to make sure that the framework remains fit for purpose and in line with our approach to delivering long-term returns as our economy grows out of the recession.
The hon. Gentleman’s second amendment, amendment 17, would delay the introduction of clause 42 until a report on the impacts of the enterprise investment scheme had been published. In contrast with corporation tax as a whole, EIS is a focused relief with a particular purpose and is a vital component of the Government’s plan for growth. The scheme encourages investment into smaller, riskier companies by offering a tax incentive to investors. For example, it benefits new start-ups in high-tech sectors such as IT bioscience. Since 1994, about £7 billion from private investors has been contributed to qualifying companies. The Government are building on the success of the scheme with changes in this Finance Bill and in the Bill next year that will increase the incentive for people to invest in smaller companies, helping them to establish and grow.
John McDonnell
How do the Government assess value for money with regard to those schemes, if not in job creation?
Mr Gauke
There have been assessments of the enterprise investment scheme, which has been in place since 1994. We want to encourage greater investment, particularly in smaller companies. We recognise that sometimes there is market failure in that area, which is why tax incentives are justifiable. We have set out as much information as we can, but it is not something on which we can provide precise numbers. That is not the nature of the economy, but the scheme will encourage greater investment and that should be welcomed.
I thank my hon. Friend the Member for Amber Valley (Nigel Mills) for his remarks on my award as tax personality of the year. Some may think it a somewhat oxymoronic award, but I can tell the House that it has changed my life considerably.
My hon. Friend brings much greater expertise to these matters than I do. I welcome the fact that he seeks simplicity, which is not always the case with new clauses and amendments to Finance Bills. I want to make a couple of points that relate to both his new clauses.
First, we do not see it as our role to direct the Office of Tax Simplification. The office has done a lot of good work, but it is important that its independence is respected. Secondly, in its broad work the OTS has looked at the various allowances and reliefs in the tax system and has concluded that they are not areas where it wants to devote its efforts. None the less, I know that the OTS will closely read my hon. Friend’s speech. We are always keen to look at areas where we can improve the administration of the tax system, including his proposals in new clause 14 on consolidated filing.
On new clause 12, the OTS has given initial consideration to capital allowances as part of its review of tax reliefs and its ongoing review of small business taxation. The Government have set out their approach to capital allowances in the corporate tax road map. Allowing each business asset to be written off for tax purposes in line with its own depreciation rates would not necessarily bring the benefits to businesses that the new clause anticipates. Some business assets would depreciate more slowly than they currently do under the capital allowances regime, and it should be noted that the annual investment allowance gives immediate write-off for the plant and machinery expenditure of 95% of UK businesses. There is thus a danger that the new clause could increase business tax complexity.
I know that my hon. Friend tabled his new clauses as probing provisions. I may not have entirely satisfied him, but he has put his case on record and the OTS will of course look carefully at what he says.
I turn finally to amendment 51, tabled by my right hon. Friend the Member for Gordon (Malcolm Bruce), who has played a constructive role on the issue in the three months since the Budget announcement on oil and gas. He made an important contribution when the House debated clause 7 in the Committee of the whole House. He has stressed the importance of working closely with the industry in the months ahead, which the Government committed to do at the time of the Budget. We announced then that we would work with the industry in three key areas: setting the right trigger price for the fair fuel stabiliser; looking at whether we can find a way to provide long-term certainty on decommissioning relief; and looking at the case for new categories of field qualifying for the field allowance. I am pleased to tell the House that we are making good progress in these discussions. My hon. Friend the Economic Secretary, who is here this evening, will update the House on progress on those discussions as soon as is appropriate. I hope and expect that she will be able to do so in the very near future. I thank my right hon. Friend for tabling his amendment. Although I have been unable to respond in full detail, I hope that the Government will be in a position to do so shortly.
In conclusion, I remind the House that it is the Government’s aim to create the most competitive corporate tax regime in the G20. We have set out our plans for reform over the next five years in the corporate tax road map, which was published last November. In order to provide businesses with the certainty they need to invest in the UK, tax reforms need to maintain stability, avoid complexity and ensure a level playing field for taxpayers. Therefore, although we have had a good debate, I invite my hon. Friend the Member for Amber Valley to withdraw the motion.
Nigel Mills
My purpose in moving the new clause was to encourage the Government down the route of tax simplification, which I hope I have achieved tonight. Therefore, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Clause 1
Charge and main rates for 2011-12
Mr Deputy Speaker (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
Amendment 14, page 1, line 9, at end insert—
‘(3) A report on the impact of the current rates of income tax on inequality in the United Kingdom, also taking into consideration all other direct and indirect taxes including duties and excises, council taxes and mandatory charges for the use of cars and televisions and making specific reference to the overall tax rate of taxpayers grouped by decile in the United Kingdom and by each individual constituent country shall be prepared by HM Treasury and laid before the House of Commons not later than 1 December 2011.’.
Amendment 30, page 1, line 9, at end insert—
‘(3) All public sector employees whose earned income does not exceed £21,000 shall be entitled to a £250 reduction in tax liability for the tax year 2011-12.’.
Mr Hanson
I do not intend to detain the House for long on these amendments, although they are important. I particularly welcome amendment 30, which stands in the name of my hon. Friend the Member for Hayes and Harlington (John McDonnell) and my right hon. Friend the Member for Birkenhead (Mr Field), and which I will touch on briefly. Clause 1 deals with rates of taxation and, if approved, will set the rates for the next financial year at 20%, 40% and a special rate of 50%. Amendment 10, which is simple and straightforward, has been tabled by the shadow Treasury team because we want to shed a little light on how the Government will report on their future plans for the 50% rate of tax.
We already know certain key facts. We know that the Chancellor has asked HMRC to collect tax receipts for this financial year and that he has assessed the revenue levels of the 50% rate for this year. In Committee, the Exchequer Secretary said:
“The Chancellor’s Budget statement to the House on 23 March simply highlighted the fact that he has asked Her Majesty’s Revenue and Customs, as part of that ongoing work, to see how much the additional rate actually raises. HMRC will look at all the available evidence about the impact of the 50% rate, including data from the 2010-11 self-assessment returns, which will become available next year.”––[Official Report, Finance (No. 3) Public Bill Committee, 10 May 2011; c. 22.]
My concern, which I will put directly on the table, is that the Government have already prejudiced any decision on the 50p rate of tax by stating clearly that they believe it will do lasting damage to the economy. We want further explanation of the methodology that they will use to consider the 50p tax rate for future Budgets, and I think that the best organisation to do that is the Office for Budget Responsibility. The Government set up the OBR and gave it a number of key roles, one of which I have helpfully drawn from its own website. Under the heading “What we do”, it states:
“We scrutinise the Treasury’s costing of Budget measures: During the run-up to Budgets and other policy statements, we subject the Government’s draft costings of tax and spending measures to detailed challenge and scrutiny.”
All the amendment would do is formally recognise that role in relation to the Government’s forthcoming review of the 50p additional rate.
The Chancellor has said to the House of Commons, the public and anyone who will listen that he sees this as a “temporary measure” and that it will do “lasting damage” to the economy. He has signalled that he will abolish the 50p rate as soon as he can, in line with Conservative thinking before the election. However, the timing remains uncertain. I believe that the Chancellor has pre-empted the review. When HMRC undertakes the review, it will do so on the assumption that at some time around 2013 the Chancellor of the Exchequer will abolish the rate on incomes above £150,000.
Charlie Elphicke (Dover) (Con)
May I congratulate the Opposition on submitting the amendment on time and on its being selected? In relation to this report, I ask the right hon. Gentleman whether it is fair, right and proper that in 1978 the top 1% of earners paid 11% of all tax and that they now pay 25%.
Mr Hanson
I am grateful to the hon. Gentleman. I presume that he does not support the 50p tax rate, whether it raises revenue for the Treasury or not. We do not want HMRC to do a private report for Ministers, and for Ministers then to make political judgments about the 50p additional rate. Through the OBR’s involvement, we want there to be a public report on the impact of the rate which is open to scrutiny.
The hon. Member for Dover (Charlie Elphicke) will know that about 308,000 people are affected by the 50p rate. I am not surprised that he supports its abolition and a lower rate, because he knows that it is paid less in my region in Wales, in the north-west region of my right hon. Friend the Member for Birkenhead and my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) and in the north-east region of my other hon. Friends. The benefit of this tax cut, if it happens, will predominantly affect south-east and east England and the wealthier parts of London, although it will not particularly affect the constituency of my hon. Friend the Member for Vauxhall (Kate Hoey). I understand why the hon. Member for Dover wants to get rid of the rate. If he does, there will be a tax benefit for the richest people in our society and for certain parts of the United Kingdom.
All I am saying to the Minister is that we want to see the evidence on whether the additional rate raises money. If it does not raise money, we want to see it openly scrutinised. If it does raise money, we want to expose that, so that if the Minister and his hon. Friends cut the rate, it will be clear that they are doing so for political reasons and not because it is ineffective.
Charlie Elphicke
The right hon. Gentleman should know that in Dover there is a lot of deprivation. My case is not that we should get rid of the 50p tax rate tomorrow, but that we should do so at the right time. My question was simply whether it is safe and sensible for so much of the tax base to depend on so few people in this country?
Mr Hanson
I just say to the hon. Gentleman that in south-east England, which I recollect covers Dover, some 67,000 people pay the additional rate, whereas in north-east England, which is represented by some of my hon. Friends who are present, only 5,000 people pay it. Clearly, there will be a regional imbalance if this tax cut goes ahead. We will consider those issues in due course. I know that there are areas of great poverty and deprivation in Dover, where people do not pay the additional rate, but the hon. Gentleman has imposed value added tax on those people through votes in the House of Commons, and that is an unfair tax.
The simple point I make to the Minister is that we want open scrutiny of the decisions he takes on the ending or otherwise of the 50p additional rate. The leader of the Labour party has said that we would maintain that rate for the duration of this Parliament. The Minister and his colleagues have indicated that they want to do away with it. They are now trying to produce the information to show why that should be done. I believe that the Office for Budget Responsibility would provide greater scrutiny of that decision than—dare I say it?—the Minister in an in-house decision. We will test the matter tonight, and I hope that the Exchequer Secretary will accept the amendment. It relates to a core role and duty of the OBR, which is on its website, and I cannot see why he would not wish it to review the Government’s decision formally.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Is it not important that the matter is subject to scrutiny, because the Government continue to tell us that they are looking after everyone in the community, including the less well-off? A review would show whether they have plans to reduce the burden on the highest paid.
Mr Hanson
That is true. My hon. Friend will know that “We’re all in this together” is one of the Government’s refrains, and a review would show whether that is true. I want to know that preferably from the OBR, as suggested in the amendment, but otherwise from the Exchequer Secretary. The Government need to set out why they have decided to reduce the 50p rate in 2013, if that is their decision; what it will cost; what the forgone income will be; and who will benefit. There should not just be internal discussions—the decision should be open to public scrutiny through the OBR.
I am grateful to my right hon. Friend the Member for Birkenhead for tabling amendment 30, which highlights an extremely important issue. Again, I wish to hear the Exchequer Secretary’s response today. I do not wish to steal my right hon. Friend’s thunder, but he will know that the Conservatives pledged in their manifesto to freeze public sector pay, but to exclude from that 1 million of the lowest-paid workers. It stated that they would
“freeze public sector pay for one year in 2011, excluding the one million lowest paid workers.”
Through great effort, he has used parliamentary questions to uncover the fact that that is not the case, and that the Conservative Government have yet again broken a promise in their election manifesto. I believe that he will make a strong case that we need some explanation from the Government of what they are doing about the impact on low pay of the public sector pay freeze that has been put in place.
My right hon. Friend will know that there are issues to consider about the applicability of his amendment to clause 1 and its workability, and indeed its fairness. However, he has highlighted an extremely important issue, and I want the Exchequer Secretary to explain why the Conservatives’ words about ensuring that low-paid workers were not disadvantaged have proved to be weasel words.
Charlie Elphicke
Is the right hon. Gentleman’s position and that of the official Opposition that they support amendment 30?
Mr Hanson
I have not yet heard what my right hon. Friend the Member for Birkenhead has to say about it, but the hon. Gentleman might be interested to know that we have discussions not just in the Chamber but outside it as party colleagues. My right hon. Friend will make his case in a moment, and I will listen to it and respond in due course. There are some issues that we need to consider, but it is not for me to respond to amendment 30; it is for the Exchequer Secretary to say why he has let down low-paid workers across the United Kingdom through his promises before the elections and his actions in the Budget. I look forward to hearing my right hon. Friend in short order.
My hon. Friend the Member for Hayes and Harlington has yet again tabled an amendment that has a great deal of merit. Although I do not expect it to be pushed to a vote, I want to hear what he says about it, because he has important points to make. The key point on all the amendments is that the Government need to provide clarity. We need clarity about what they are doing on the 50p tax rate and on low-paid workers, and on the points raised by my hon. Friend’s amendment. I look forward to hearing my hon. Friend, my right hon. Friend the Member for Birkenhead and the Exchequer Secretary in due course.
Mr Frank Field (Birkenhead) (Lab)
I shall not press amendment 30 to a Division tonight, because we will return to the subject in greater detail later in the Parliament. However, I want to address some questions to those on the Treasury Bench. I accept that there are problems with the amendment, but it was the only way that I could find to debate the matter in the House.
I wish to remind the Minister that in the Budget debate of 2010, the Chancellor said that
“the Government are asking the public sector to accept a two-year pay freeze, but we will protect the lowest paid…They will each receive a flat pay rise worth £250”—[Official Report, 22 June 2006; Vol. 512, c. 171.]
He said that the cut-off point would be not £18,000 but £21,000 a year, and he, not the Opposition, estimated that 1.7 million people would receive that pay increase.
A number of Opposition Members, including those who put their names to amendment 30, and many hon. Members, have constituents who believed what the Government said. They believed that they would be protected. The Chancellor’s announcement was a crucial part of protecting those workers, but it was also a crucial part of selling to the wider public the pay freeze that the Government announced. However, those people have so far received no £250 pay increase.
I should therefore like to ask the Minister two questions. First, of the 1.7 million whom not I, but the Chancellor, said would be eligible, how many have received the £250 across-the-board pay increase? Next year’s earnings figures show that the numbers eligible will rise to 2.2 million. Therefore, my second question for those on the Treasury Bench is this: how many of that 2.2 million will receive their £250 pay increase?
I conclude by merely trying to express, perhaps inadequately, a sense of how low-paid workers in my constituency feel. They feel that they have again been let down. The previous Labour Government did not do too well by that group, with the 10p tax rate abolition, and this Government have done not too well by them. Many are women coming up to retirement age who now learn that they must work two years more. They thought they would get £250 as a lump sum to protect them against rising prices and a general wage freeze, but many now find that no such increase is forthcoming. I would therefore be grateful if the Minister could give us answers to those two questions.
John McDonnell
May I associate myself with amendment 30, which I also signed? For my constituents, £250 means a lot. It is a lot of money in terms of paying daily bills, but it is also the difference between some children having a summer break this year and not. I hope the Minister responds positively and examines that matter, but I will give him this assurance: if we do not have positive assurances from the Government, we will be back time and again until that money is paid.
I wish to speak to amendment 14, which is in my name. The amendment simply proposes that, as we determine personal income tax rates for the coming year, we look carefully at their impact on inequality. The proposal is from various lobbies in recent months, from religious groups, churches, welfare rights groups, trade unions and other civil society organisations, which have expressed their anxiety about inequality in our society. Like them, I believe that our country is disfigured by inequality and the extremes of wealth and poverty. Consequently, I believe that we should use every legislative weapon possible to address it.
I mentioned some of the extremes of wealth and poverty in the earlier debate on executive pay—some top executives earn a salary that is 145 times the average salary of their workers. The Government’s assessment of wealth distribution last year showed that the total wealth of the top 10% of the population is now 100 times that of the bottom 10%. The simple reason is that the poorest have so little wealth.
In 1986 in the UK, the richest 1% held 25% of marketable wealth. Twenty years later, that had risen to 34% of total national wealth. The poorest 50% had gone from holding 11% of the nation’s wealth to holding just 1% today. That is not solely the result of economic trends or globalisation—it has been Government policy, largely in the 1980s and 1990s, to pursue the systematic redistribution of wealth from the poor to the rich, and the last Government at least held back the tide for a period.
Taxation policy has a key role to play in addressing inequality and I note that the Treasury Committee quoted Wendell Holmes’ popular dictum that tax is the price we pay for a civilised society. I agree, but civilisation has a range of definitions, one of which is that we should not live in a society that is so starkly unequal—
Kate Green
I very much support the sentiments my hon. Friend is expressing. Does he agree that it is not only the income and consumption taxes that need to be encompassed in his amendment, but the wealth taxes, especially in light of the examples that he has just given us?
John McDonnell
My amendment proposes examination of the whole range of taxes, indirect and direct. It is interesting that the direct taxation system can be progressive in redistribution, but that the indirect system is so regressive in this country. It has a considerable impact on ensuring that we see these vast extremes of poverty and wealth.
It is not only the lobbyists from various organisations who have expressed their concerns about this inequality, because the general public are averse to high levels of inequality too. In recent surveys, 80% to 90% have been in favour of a more equal distribution of wealth in our society. We have had various discussions in this House about the impact of inequality, and none better than the debates around the work by Richard Wilkinson and Kate Pickett, “The Spirit Level”, which was ground-breaking.
Richard Wilkinson was an adviser to my party in the early 1990s, when he did the earliest work on the impact of inequality on health. That was revisited in 2005, when he came to the House and briefed several MPs. “The Spirit Level” confirmed what he had suspected in the 1990s and started the debate. The Prime Minister and the Leader of the Opposition have both accepted that inequality is an issue that must be addressed. In 2009, the Prime Minister quoted from Richard Wilkinson’s book in a major speech, demonstrating that the Conservative party at that time was keen to address some of the issues of inequality. He said that
“among the richest countries it’s the more unequal ones that do worse according to almost every quality of life indicator.”
In his first major speech as leader, the Leader of the Opposition said:
“I do believe that this country is too unequal and the gap between rich and poor doesn’t just harm the poor, it harms us all.”
That is based on the work in “The Spirit Level”.
The argument in “The Spirit Level” is straightforward—that when people in the same social class, at the same level of income and education, are compared across countries, those in more equal societies do better on every measurement, be it health, mortality, obesity, teenage birth rates or mental illness. Their quality of social relations is better too. Inequality is socially divisive, increasing the rate of homicide, hostility and racism. The level of trust in unequal societies is lower than in societies that are more equal, and social capital is less —the engagement in civil society and even in political processes. That is why we need to address the issue of inequality when we consider taxes and our financial strategy.
I realise that this has been a contentious debate, and I have read the arguments made by the TaxPayers Alliance, which has tried to rebut Wilkinson and Pickett’s work, but I have also read the more recent independent research studies that have simply reinforced the inequality argument. Whichever side of the argument Members fall, it is clearly an issue to be considered, and that is why I suggest that we look at taxation as a whole—
Stephen Williams
I agree with virtually everything that the hon. Gentleman has said. I have “The Spirit Level” at home and it will be part of my summer reading as I have not had time to read it yet. Does he at least acknowledge that one of the good things that the coalition Government have done is reduce the exposure to income tax of the lowest paid in society, while at the same time increasing capital gains tax? His Government did the reverse.
John McDonnell
I believe that the hon. Gentleman joined the House at the last election.
John McDonnell
The hon. Gentleman clearly has not been reading my alternative Budgets that I table year after year and which address some of those issues, although he is not alone in not having read them—but there you are!
The purpose of amendment 14 is to examine the issue again and regularly. The equality assessments that we receive from the Government in the budgetary papers consist of one sentence telling us who will gain and who will lose. They do not address the issue of inequality. A wider debate is needed, however, and my amendment would ensure that that debate is revisited and kept in close focus as we determine our financial policies. There have been previous attempts at this, and various reports by various governmental bodies have partly addressed the issue, but they have not been related to specific policy decisions or policy development.
This is more of a plea. The previous Government, of which I had occasional criticisms, set up an excellent initiative in founding the national equality panel under its chair, Professor John Hills. The panel still exists within the Home Office, and it produced a major report in January 2010 entitled, “An Anatomy of Economic Inequality in the UK”. It was extremely detailed and brought together the evidence on economic inequality in our society. It was enlightening and depressing but at the same time motivating. It was enlightening because it exposed not only the scale of inequality but the trend growth over time, which, as I said, was only arrested in the previous decade, not reversed. It was depressing because, as the report stated, the sheer scale of inequalities in outcome—for instance, the sheer scale of differences in wealth—was shocking. The report even implied that it might be impossible to create a cohesive society given the scale of inequality.
The report identified a backdrop of widespread ignorance of the scale of inequality and the lack of awareness in society as a whole among the rich and the poor. It was not just the poor who did not realise how unequal society was; it was also the richest. The report was motivating because it demonstrated that public policy interventions can reduce inequality, particularly interventions around tax and welfare benefits. They can narrow gaps between the rich and the poor and create a more cohesive and successful society. My plea, through this amendment, is that before we agree tax levels, we address the issue of inequality and that we bring forward a further report. I suggest that the national equality panel continues its work, assesses the taxation policies set out in the Budget and brings a report back to the House so that we can be sure that the policies we are pursuing are addressing inequality in our society.
I am obviously aware that through the Child Poverty Act 2010 the previous Government set up the Child Poverty Commission, the remit of which has now been extended to include the issue of social mobility. I am sure that the commission could play a valuable role in assessing the tax decisions in the Finance Bill and their impact on inequality.
Kate Green
Does my hon. Friend agree that it would be an important opportunity to look again at the assertion that the countries with the highest levels of inequality are also those with the least social fluidity and therefore at the role that tax could play in achieving the Government’s social mobility objectives?
John McDonnell
That is particularly important given that we are in if not a recession, a period of economic inactivity in which the economy has been scraping along the bottom. We have 2.5 million unemployed, of whom nearly 1 million are young people and 1.7 million people are in enforced short or part-time working. As Richard Wilkinson demonstrated, during the ’80s, the social psychological response was either fight or fright: fright meant depression, alcohol and drugs, and fight often meant violence on our streets and, unfortunately, an increase in violent crime.
We should be addressing those issues now, as we pass through this economic recession, which might last some time. It behoves us, as we discuss taxation and if taxation can play a role in addressing inequality, to examine the matter in detail. The amendment simply tries to emphasise that inequality is an important issue that has to be addressed and that all legislation needs to be reviewed and assessed in the light of its impact and effectiveness in addressing inequality. The amendment therefore calls for a report to be brought back to the House addressing that matter. In that way, we might at least acquire an understanding of the impact of taxation policies on inequality, even if we might disagree on specific taxation policies.
Mr Love
I associate myself with the speech made by my hon. Friend the Member for Hayes and Harlington (John McDonnell) and its focus on inequality. I want to pick up on that focus, and on the discussion we had a few moments ago about the Government’s claim that we are all in this together. I shall subject that to scrutiny through amendment 13, which was tabled by my right hon. Friend the Member for Birkenhead (Mr Field). As my right hon. Friend said, and as has been said by those on our Front Bench, the Conservative manifesto at the 2010 general election included a commitment to
“freeze public sector pay for one year in 2011, excluding the one million lowest paid workers”.
It was announced in the 2010 Budget that there would be a two-year pay freeze, except for those earning £21,000 or less, who would receive an increase of at least £250 a year. In his statement, the Chancellor went on to say that 1.7 million public servants would benefit from that and receive the £250 for two years.
In the Budget statement this year, the Chancellor had changed his tune somewhat. He said:
“I can confirm today that in the coming year all workers in the armed forces, the prison service and the NHS, and teachers and civil servants, earning £21,000 a year or less will receive a pay uplift of £250.”—[Official Report, 23 March 2011; Vol. 508, c. 963.]
That is considerably less than the commitment given in the 2010 Budget, and it is different from—and, in a sense, considerably less than—the commitment given in the Conservative manifesto. Some work has been done that shows that if the measures include only public sector workers who are under ministerial control and subject to pay review bodies—that is in essence what the Chancellor is saying—that commitment is very considerably less. As I understand it, it equates to less than half the original number affected.
In supporting amendment 30, I want to ask the Minister directly whether he accepts that the Conservative manifesto misled the people of this country. Does he accept that, in his Budget statement in 2010, the Chancellor misled the House and the people of this country? Does he also accept that the present number of people who will benefit from the £250 uplift is considerably lower than the number originally envisaged? In those circumstances, and given the difficulties that we face in a debate of this nature on taxation, will he accept the thrust of the amendment? Will the Government recommit to doing something to address low pay for those earning less than £21,000 a year? Will the Minister also ensure that everyone earning under that amount will receive the £250, given that only some are doing so at present?
Mr Gauke
It is a pleasure to respond to the debate. Amendment 10 would require the Office for Budget Responsibility to report on the revenue raised by the additional rate of income tax. Amendment 14, meanwhile, seeks a report on the impact on inequality of all taxes, and amendment 30 seeks to provide a £250 reduction in the tax liability of all public sector workers earning less than £21,000.
I deal first with amendment 10. At the Budget, my right hon. Friend the Chancellor asked HMRC to assess the revenue raised by the additional rate. As I explained during the extensive debate on this clause in Committee, which the right hon. Member for Delyn (Mr Hanson) will well recall, HMRC will consider all the available evidence on the impact of the additional rate, including data from the 2010-11 self-assessment returns, which will become available next year. Data from tax returns are clearly essential in any assessment of the revenue raised, but of course they contain confidential taxpayer information and are best reviewed by HMRC. It already has the expertise in monitoring and evaluating tax measures and is resourced to do so in future. The Office for Budget Responsibility has a different remit in producing independent economic and fiscal forecasts, judging policy against the fiscal mandate and analysing the sustainability of the public finances.
Kate Green
I understand what the Minister says, but does that not suggest that one useful role that the Office for Budget Responsibility could fulfil would be to take a dynamic look at the effect of the 50% tax rates on, for example, the propensity of people to remain in the country and pay that tax and the longer-term impact on the economy?
Mr Gauke
I would not necessarily have put the hon. Lady down as an advocate of a more dynamic assessment of the tax measures, but perhaps I was mistaken in my understanding of her views. The purpose of the review that my right hon. Friend the Chancellor has announced will be to enable HMRC to see what has happened in the first year. It is right to say that there are long-term effects that will not necessarily be incorporated in that first year’s data, and I think anyone with an understanding of these matters would acknowledge that.
It is perfectly reasonable to make the point that if the 50p rate were to become a permanent feature of our tax system, it could damage the UK’s competitiveness. That is a point that the noble Lord Mandelson appears to support and I believe that the right hon. Member for Edinburgh South West (Mr Darling), who introduced the 50p rate as Chancellor, saw it as a temporary measure, while Tony Blair has made it clear that he thinks the 50p rate is a mistaken policy—full stop. Our view, however, is that at this time, because of the sacrifices we are asking people to make, the 50p rate does play a role, but we want to analyse what revenue it brings in the short term and to gain an understanding of its long-term effects.
As the additional rate was introduced by the previous Government, I can perfectly understand why the right hon. Member for Delyn is so interested in establishing whether it was a successful policy, but when he talks about public scrutiny of Budget measures I must ask him what public scrutiny was there when the 50p rate was introduced? To what extent was the analysis published then, and to what extent was it published when the 10p rate of income tax was doubled? What information was put into the public domain at that point? As a Government, we have done much more on putting information into the public domain by publishing our analysis. Announcements in this area will be made by the Chancellor at the appropriate time. It is peculiar, however, to hear the Opposition proposing more evidence-based policy making only to reject the notion, it seems to me, that this Government should consider the evidence before making any further commitments.
I turn now to amendment 14, which deals with the impact of tax on inequality. I realise that the hon. Member for Hayes and Harlington (John McDonnell) has his own views on inequality, some of which may not necessarily be shared by his Front-Bench team. I thank him for tabling this amendment, however, as it provides me with an opportunity to highlight the significant steps that the Government have taken in 13 months to address inequality through the tax system.
First and foremost, the Government are committed to ensuring that the income tax system gives more support to those on low to middle incomes, and rewards the efforts of those who choose to work. That is why the June 2010 Budget announced a £1,000 increase in the income tax personal allowance for those aged under 65. A further £630 increase was announced in Budget 2011. That will make the personal allowance £8,105 from next year. Together, those increases will benefit 25 million individuals, and take 1.1 million low-income individuals out of income tax—an important point that my hon. Friend the Member for Bristol West (Stephen Williams) highlighted. Basic rate taxpayers will gain by £210 per year on average. That is part of our stated objective to increase the personal allowance to £10,000, with real terms steps in that direction every year.
Income tax is not the only area in which the Government are tackling inequality. All local authorities in England have voluntarily frozen or reduced their council tax in 2011-12 and as a result have qualified to receive additional Government grant equivalent to a 2.5% increase in their band D council tax. We have committed £1.9 billion to ease the burden on motorists, including the 1p cut in fuel duty as opposed to the 6p increase under the plans of the previous Government. We are supporting pensioners through the triple guarantee of state pensions being uprated by earnings, prices or 2.5%, whichever is highest. The television licence will be frozen for the next six years.
Clearly, the Government have taken great strides to tackle inequality in this country.
Kate Green
What steps have the Government taken to reduce inequality by concentrating on taxation not at the bottom of the income spectrum but at the top?
Mr Gauke
As was mentioned earlier, we have increased capital gains tax rates from those that we inherited, and our income tax decreases have been focused on the low paid. That is an example of what we are trying to do. The point is how to ensure that we have a competitive tax system so that we have the growth that the economy needs and that benefits all our constituents.
Let me turn to the report requested by the hon. Member for Hayes and Harlington.
I draw his attention to the detailed analysis that the Government have published on the impact of direct tax, indirect tax, tax credits and benefit reforms, which can be found in annexe A to “Budget 2011”. The Government have gone further than any previous Government in presenting distributional analysis of how changes to taxes, tax credits and benefits affect households. We have published detailed analysis at Budget 2011, the spending review and the June Budget 2010. That analysis shows that the top decile sees the largest losses from the cumulative impact of tax, tax credit and benefit reforms introduced at Budget 2011 and previous fiscal events. In cash terms, the top decile loses more than twice as much as the ninth decile, and 10 times as much as the bottom decile. That is the case if one looks at the overall impact or in cash terms, as a percentage of net income, or across income or expenditure deciles.
John McDonnell
Will the Government publish anything with regard to the distribution of wealth—for example, the impact of such policies on the Gini co-efficient?
Mr Gauke
We will make further announcements as and when necessary, but we are publishing much more information on distributional analysis than any previous Government have. It is right to do so, and to take steps to ensure that the House and the whole country can debate such matters with as much information presented in future. A striking contrast can be drawn with regard to one policy—the doubling of the 10p rate—about which the hon. Gentleman and the right hon. Member for Birkenhead (Mr Field) had concerns. It was difficult to obtain any information on that policy’s impact, although we have learned in recent weeks that much of the information about that was available to Ministers at the time.
Amendment 30 seeks to provide a one-off £250 reduction in the tax liability of all public sector employees earning less than £21,000. In the June 2010 Budget, we announced a two-year pay freeze for public sector workers earning a full-time equivalent of £21,000. That is one of the many difficult choices that we have had to make to help put the UK’s public finances back on track, and it does not mean that we do not value the work done throughout the public sector. All Members know that those in the public sector work hard for the benefit of society. However, pay freezes of this sort save jobs. Given that we are having to constrain public spending and given that the fiscal deficit requires cuts, a pay freeze will help to mitigate the effect of those cuts. Because we recognise that the freeze will be hardest on the lowest-paid public sector workers, it was announced in the June Budget that those earning a full-time equivalent of £21,000 or less would receive an uplift of at least £250 in both years of the freeze.
Both the Labour party’s manifesto at the time of the last general election and the 2009 pre-Budget report announced a 1% increase for public sector workers across the board, apart from the armed services. No distinction was made between the low paid and the high paid. Under a Labour Government, none of those earning less than £21,000 a year—including nurses, teaching assistants, police community support officers and hospital porters—would be receiving a £250 increase.
Mr Frank Field
What we said at the last general election is not very relevant, because we lost. The other side won, and made a commitment in the Budget. The Chancellor stood at the Dispatch Box where the Minister is standing tonight, and said that 1.7 million low-paid workers in the public sector would receive an increase of £250. What we now want to know is how many are being paid the £250, and, if 1.7 million are not being paid that sum, what steps the Government will take to ensure that they are paid it.
Mr Gauke
The policy advocated by the Labour party when they were in government would have resulted in none of these public sector workers receiving £250.
We will ensure that the policy on pay increases for low-paid local government workers is applied across the civil service and to work forces with pay review bodies. That will include civil servants, NHS staff, teachers, members of the armed forces and those working in prisons. Many civil servants, nurses and prison officers, and the armed forces, have already received the £250 increase this year and can expect a further £250 increase next year, but other work forces have responsibility for negotiating their own pay deals. Decisions on the pay of local government work forces are for local government employers, rather than central Government, to negotiate. Provision was made in the local government settlement for local authorities to pay the £250 increase, but the fact remains that the decisions are made by local authorities. We gave them the opportunity to pursue the policy that we are pursuing at national level, but it is ultimately for them to decide how to pay their employees.
Mr Field
At the Dispatch Box, the Chancellor said that 1.7 million low-paid workers in the public sector would receive increases of £250 this year and next year. Will the Minister please tell the House how many of those 1.7 million have received the promised sum—promised by the Chancellor, not by me?
Mr Gauke
Where it is within the Chancellor’s control because the money is paid through central Government, those low-paid public sector workers will receive the £250. For those who work in local government, which is not within the control of central Government, we have provided local authorities with the funding to be able to meet that policy objective.
Mrs Mary Glindon (North Tyneside) (Lab)
My own Tory council totally ignored the Chancellor’s directive to give that money, and in the debate on the budget refused to give the £250 to our low-paid workers and said it had put in place a balanced budget that was in line with the Chancellor’s requests. What does the Minister think of that?
Mr Gauke
It is for local authorities to determine what they pay their employees, but we have given them the extra money to fund this, and we would like local authorities to fulfil the objective that we are achieving at national level. We do not control local authorities, but we can provide them with the funding, and we did that. Our intention was that all low-paid workers would receive the £250, but we do not—and should not—have the ability to mandate local authorities to pay their workers, and that is currently up to them.
John McDonnell
When the Chancellor made his statement, there were no caveats; it was a straightforward commitment to pay 1.7 million workers the £250. The Chancellor gave a moral commitment; it therefore behoves the Government to intervene to ensure the Chancellor’s pledge is fulfilled to all 1.7 million workers, without any caveats.
Kate Hoey (Vauxhall) (Lab)
The Minister said earlier that the Government had specifically given this money to local authorities. If we are now hearing that authorities—of all political persuasions, perhaps—such as that of my hon. Friend the Member for North Tyneside (Mrs Glindon) have not been paying it as they should, will the Government take that money back?
Mr Gauke
No. The funding settlement with local authorities was made on the basis that the money would be available for them to pay to low-paid public sector workers, but it is ultimately their decision.
Returning to the amendment of the right hon. Member for Birkenhead, I understand that it is intended to help enforce the Government’s policies, and I am sure he intends to be helpful. However, we do not believe that using the tax system is the right way to address this; we do not think that will be practical. It would add complexity to the tax system, and I therefore urge him to withdraw the amendment, especially as I know he will return to this subject at a later date.
Mr Gauke
I have given way to the right hon. Gentleman on a number of occasions, and I think it is time to conclude.
I have explained why the assessment of the additional rate of income tax requested by my right hon. Friend the Chancellor must be prepared by Her Majesty’s Revenue and Customs. I have explained that the analysis the hon. Member for Hayes and Harlington seeks already exists, and I have explained why the Government’s approach to assisting the lowest-paid public workers is the right one. There is no need for these amendments, so I ask for them to be withdrawn.
Mr Hanson
What is clear is that my right hon. Friend the Member for Birkenhead (Mr Field) has exposed completely the fact that the Chancellor of the Exchequer promised one thing at the election and one thing in his Budget, and has not delivered on that promise completely. I know that we will return to that issue during the next few weeks and months.
On the issue of the Office for Budget Responsibility, I wish to press amendment 10 to a Division and I urge my right hon. and hon. Friends to support me in the Lobby.
Question put, That the amendment be made.
Business without Debate
Musculoskeletal Diseases
(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Graham Stringer (Blackley and Broughton) (Lab)
The genesis of this debate was four reports into musculoskeletal disorders from about two years ago. The first was from the National Audit Office, one was the King’s college report, there was another from the umbrella organisation, the Arthritis and Musculoskeletal Alliance, and the final one was the clinical advice from the National Institute for Health and Clinical Excellence. Those four reports led to an excellent debate in Westminster Hall on 19 January 2010 at column 1WH of the Official Report. I advise the Minister to take a look at that hour and a half debate in which many more points were made than—[Interruption.]
Mr Speaker
Order. I apologise for interrupting. There are Members behind the Chair making a frightful racket and it should not happen. They should leave the Chamber and show some courtesy to the Member who is developing his speech. I apologise to the hon. Gentleman who should now resume.
Graham Stringer
Thank you, Mr Speaker.
Many more points were made in that debate than it is possible to make in a half hour debate in this Chamber. What the then Government were essentially being asked was to take action to ensure better clinical outcomes for the money being spent on musculoskeletal disorders. The real ask from the community was for a clinical director or so-called tsar. In a sense, however, the most important ask is not that, but that there is an outcome strategy that improves the outcome for people suffering from musculoskeletal disorders. In many ways, in spite of those four reports and the debates that have taken place since, the situation nationally remains much the same. The statistics are worth going through in some detail. The amount of money spent on musculoskeletal disorders is large—£4.76 billion, which is the fourth-largest category spend within the NHS. That money is spent on 25% of the population as one in four people have a musculoskeletal disorder. That is 9.6 million adults and 12,000 children. Many people think that arthritis and rheumatism affect only older people, but that is not true. They can affect people of any age, as is perfectly illustrated by the fact that 12,000 children suffer from it. In terms of costs, the magnitude of the issue is that one visit in every four to a general practitioner concerns musculoskeletal disorders and 10.8 million working days are lost because of such disorders.
Those are the statistics. The problem is that there is no equality of outcome and no sense that when money is put into the system outcomes improve. About two years ago, partly in response to the reports, the previous Government put £600 million more into the system, but there was no noticeable improvement in outcomes. The NHS atlas of variation shows a threefold difference in spending in different parts of the country, but it does not relate to differences in incidence, prevalence or severity of the problem; nor does it necessarily relate to better outcomes. Although there is a threefold difference generally, the difference for rheumatoid arthritis is five times, for hip replacements 14 times, cemented hips 16 times and for uncemented hips it is 30 times. Clearly something unusual is happening in that area of the service and it requires examination.
Quite simply, current services do not ensure swift treatment of arthritis, which in many cases is vital. I shall give an example from one category of disorder: rheumatoid arthritis. People think it is the same as any other arthritis but it is not; it is an auto-immune disease and few people suffer from it. Many GPs see only one new case every year or so, which is surprising but true. Because GPs do not see such cases regularly, patients often have to visit their GP about three times before they receive treatment, but early treatment is vital. The time before treatment means not only pain but also that the rheumatoid arthritis is not cured. Since a third generation of drugs—the biologics—has been developed, the disease is curable in a large number of cases if treatment is given quickly enough. Even if the disease is not curable, what matters is getting the patient to a multidisciplinary team of physiotherapists, consultant surgeons, doctors and community nurses as quickly as possible.
Nic Dakin (Scunthorpe) (Lab)
My hon. Friend is setting out his stall powerfully. It is a difficult subject. Does he agree that early intervention is good not only for the patient, because they can recover faster or get to grips with the condition, but also for the economy, because the person is more likely to be able to continue active employment, and for the health service because early intervention is likely to cost less in the longer term?
Graham Stringer
Precisely. I mentioned the total number of lost days. In the vast majority of cases of rheumatoid arthritis, people stop working two years after diagnosis, but if diagnosis and treatment are earlier it is most likely that even if the person is not cured they could continue working for longer.
The Arthritis and Musculoskeletal Alliance—ARMA—is calling for a number of things, but before I put its case I note the following points. The fact that there are unsatisfactory differences in inputs and outcomes is not completely an accident. By and large, the services have not had the attention they deserve. I am not making a party political point; the situation has been going on for a number of years and unfortunately it continues. The quality and outcomes framework contains no indicator for musculoskeletal conditions. Why not? The musculoskeletal services framework of 2006 lacked leadership and was largely ignored by the centre in the NHS, GP training in musculoskeletal conditions remains poor, despite the evidence I have just given about the importance of GPs recognising precisely what form of musculoskeletal disorder a patient has, and only two of the NICE policy standards announced so far relate to musculoskeletal conditions—for hip fractures and osteoarthritis—out of the vast range of some 200 conditions covered by this generic term.
ARMA is calling for an outcomes strategy as a vital first step in addressing the current failures in provision of treatment and care for people with these disorders. What would that strategy look like? It would cover a number of areas, including outcomes, demonstrating how high-quality musculoskeletal services can deliver improvements in the outcomes measured in the NHS outcomes framework, particularly gaining independence and returning to work, as my hon. Friend the Member for Scunthorpe (Nic Dakin) pointed out.
The useful slogan, “no decision about me without me”, should also be a guiding factor, enabling patient involvement and shared decision making at all points in the patient pathway and, in particular, encouraging better self-management and at the same time improving general public awareness of musculoskeletal conditions. The information revolution is also relevant for setting out and making public the key sources of data on the performance of and expenditure on musculoskeletal services and improving our understanding of outcomes beyond hip and knee replacements, which account for only 20% of expenditure. There must be co-ordinated service delivery, joining up delivery across the NHS and social care services. Commissioning should describe the measures of success that will be used to assess clinical commissioning groups and set out the support that will be provided to commissioners. Training for GPs in musculoskeletal medicine is also important. We must enhance the currently small component in training to support GPs in providing effective and timely treatment and care to patients, as well as informing their commissioning decisions.
ARMA’s request of 18 months ago for a direct musculoskeletal service was reasonable. Even if there is to be no service director, ARMA’s requests are quite reasonable, because surely the Minister cannot be satisfied with how services are being delivered across the country, with different inputs and massively different outputs.
I finish by quoting Professor Emery of Leeds university. He was talking about rheumatoid arthritis, but this applies to any of these conditions. He said that it is the “most common treatable disability”. Essentially, it is not treated as well as it should be and the disability could be removed. I look forward to the Minister’s response, and hopefully he will respond positively to what should be a reasonable way forward.
The Minister of State, Department of Health (Paul Burstow)
I congratulate the hon. Member for Blackley and Broughton (Graham Stringer) on securing the debate and bringing to the House’s attention an important issue. He has rehearsed the statistics, but behind them are people with real lives, in some cases suffering in agony and having difficulty getting on with their lives as a consequence of musculoskeletal disease.
Let me make it clear from the outset that the Government fully recognise the impact that musculoskeletal disease has on individuals and society as a whole and that, although there are excellent services in some parts of the country, there is still far too much variation in the availability of services and the outcomes they secure for people. This debate is about how we will respond to that evidence and to the concerns that the hon. Gentleman has brought to the House tonight, and about how we will deliver the change on the ground that we all want to see as constituency Members.
The hon. Gentleman argued for a national outcomes strategy on musculoskeletal conditions. He made some important points and I will try to address directly some of the concerns that sit behind them. The 34 organisations in the Arthritis and Musculoskeletal Alliance, which he has spoken on behalf of this evening, make some important points. They have been in discussions with the Department of Health about their concerns over how we will ensure that the differences between services around the country are addressed so that people get access to the right services at the right time.
On 19 April, officials wrote back to the alliance to confirm that we would
“ask the National Quality Board to look at this area as a potential topic for a national outcomes strategy”.
By that, we mean that it will consider whether there are problems in our approach to these conditions that go wider than the NHS. It is important to understand that an outcomes strategy produced by the Department of Health looks out from the NHS to wider impacts on health and considers how those might be influenced to improve health outcomes for people. It will also look at what needs to be done about efforts that are already in hand, to ensure that the NHS is more responsive to patients’ needs and that there is an uptake of good clinical practice.
I do not believe that the case has been fully made for such an outcomes strategy, and I want to explain to the hon. Gentleman, and through him to members of the alliance, why that is. A number of steps have been taken in the past 12 months that have moved us on significantly from the debate that the hon. Gentleman spoke about at the beginning of his remarks. I understand that the National Quality Board will consider its future work programme at its meeting this month. It will decide whether it is appropriate to commission the necessary work to look at the case for a Department-led outcomes strategy. I assure the hon. Gentleman that I will ensure that not only this debate but the debate that took place in 2010 are cited by the members of that board.
I will spend a little time describing what is happening now. The hon. Gentleman referred to the musculoskeletal framework that the Department published in 2006. He spoke about the impact of that strategy, and I will say more about that in a moment. The document was developed in collaboration with a wide range of patient and professional organisations. It set out a vision for services based on the concept of an integrated care pathway—exactly the sort of pathway that the hon. Gentleman talked about. The clear aim was to help the NHS to organise services so that patients could access a variety of primary and secondary care services according to their need, including physiotherapy, clinical psychology, specialist rheumatology and surgery, and have a seamless transition from one service to another.
The model proposed depended on the idea of a multidisciplinary clinical assessment and treatment service, or CATS, for musculoskeletal services. That would bring together clinicians from primary and secondary care, assess patients’ needs, treat them locally where possible, and where necessary refer them on for specialist hospital care. The document recognised that different health communities would implement the framework in different ways, and that it should be possible in some circumstances to offer patients a choice of pathways.
Three years after the publication of that document, in spring 2009, the British Institute of Musculoskeletal Medicine held a symposium to review progress in implementing the framework. Today’s debate echoes the frustration that was felt there. Although the symposium found that a number of excellent services had been developed, incorporating the vision of services integrated around the needs of patients, which this Government strongly endorse, interestingly it also found that those services were very different from one another. Some were still based in hospitals, some were in the community. Some were a see-and-treat type of service, but others had triage-based systems to refer people on to the most appropriate service. However, as the hon. Gentleman identified, there was still a patchiness to the provision.
The hon. Gentleman touched on the need to integrate services, which the Government are determined to drive forward in order to deliver better results for patients. We need to do that at the same time as acknowledging that people want to be able to exercise the maximum possible control and choice over their treatment. We set out our course clearly last year in the White Paper on the NHS, and just recently in the response to the NHS Future Forum we made it clear that we would be placing explicit duties on clinical commissioning groups to promote integrated services for patients. We will also further strengthen existing duties planned for the NHS commissioning board. We will amend the proposed duty of Monitor to make it clear that its core duty is to promote and protect the interests of patients, rather than to promote competition as an end in itself.
We intend those amendments, taken together, to create a strong incentive for local commissioners to take forward more integrated services, which I think all of us in the House wish to see delivered for people with musculoskeletal disorders and other patients. However, we have to go beyond just health integration and ensure that we achieve integration across health and social care. The hon. Gentleman was right about the concept of “no decision about me, without me”. We need to ensure that it is hard-wired into the way the NHS works.
Paul Burstow
As ever, there is a clear obligation on us to respond to reports and recommendations of the Public Accounts Committee, which we happily fulfil. I am sure that we will do that if we have not already done so, and I am grateful to the hon. Gentleman for asking.
I turn to the specific issue of outcomes. The Government believe that a focus on outcomes is key to how we can drive improvements in the NHS. It is also how we can hold the NHS to account. That was why we published the NHS outcomes framework, to which the hon. Member for Blackley and Broughton referred, in January. It has five key domains that are populated by measures that will be used to judge outcomes. They are preventing people from dying prematurely; enhancing quality of life for people with long-term conditions; helping people to recover from episodes of ill health or following injury; ensuring that people have a positive experience of care; and treating and caring for people in a safe environment and protecting them from avoidable harm.
The second domain, improving the quality of life of people with long-term conditions, is clearly the most relevant to the debate. It includes an instrument known as EQ-5D, which is to measure people’s quality of life in a number of respects including mobility, pain and the ability to carry out the usual activities of daily living. The inclusion of that measure was the result of feedback from the public consultations last year on the outcomes framework. It is clear from the analysis done by the Department’s economists that almost half the total burden of disease, as measured by that instrument, is due to musculoskeletal disease.
In other words, the inclusion of that instrument in the NHS outcomes framework highlights clearly the importance of musculoskeletal conditions to the population, and why commissioners and clinicians need to focus their efforts on designing and delivering care pathways of the type outlined in the framework in 2006. It shows how that can have a significant impact on the aggregate score in the outcomes framework on enhanced quality of life for people with long-term conditions. It will not be possible to achieve success, as set out in the framework, without making progress in that way. There is a powerful new lever in the system as a consequence of the outcomes framework.
The hon. Gentleman talked about the atlas of variation, which is also a powerful tool for identifying outliers and allowing the appropriate challenge of commissioners and others on the decisions they have made. We intend it to be used by commissioners in that way, to drive improvements in the service.
I welcome the fact that the hon. Gentleman sees quality standards as a useful tool. NICE has already developed a quality standard for osteoarthritis, and we are looking at the scope for the development of a quality standard in pain management. We are about to see a further consultation on a range of subjects for the next batch of clinical quality standards. We have the hon. Gentleman’s suggestions on a musculoskeletal condition standard in mind.
This short but timely debate has highlighted an important area of health policy in which we need significant improvements on the ground. The evidence and clinical advice to provide excellent services is there, but we need clinicians to use their leadership role in the NHS to drive change, and we need to take the opportunities of changes in clinical and commissioning leadership to drive forward those reforms. I shall certainly ensure that the debate is referred to those who need to take such decisions, and I thank the hon. Gentleman for bringing the matter to the House tonight.
Question put and agreed to.