Finance Bill

Alison McGovern Excerpts

Tuesday 3rd July 2012 Commons Chamber

[Catherine McKinnell]

It is nice to receive a considered intervention from a Conservative Member. The 100,000 jobs would be created through support from the future jobs fund. They would be guaranteed jobs paid at the national minimum wage for six months to give young people a real chance of getting on to the employment ladder.

This is about not only providing those jobs but creating economic growth and putting money into people’s pockets to create those opportunities. That aspect was absent from the Chancellor’s Budget speech, which is all the more shocking because of the seriousness of the problem. At Christmas, the number of young unemployed people reached 1 million for the first time since comparable records began, and long-term youth unemployment is rocketing too. Across the UK, the number of people aged 24 and under who are claiming out-of-work benefits for more than six months has increased by 60% since May 2010, while the number claiming for more than 12 months has more than doubled by over 125%. In this double-dip recession, young people cannot find work because between five and 10 people are chasing every vacancy. Depending on which part of the country they are in, it could be, and often is, a lot worse. The jobs are simply not there for young people to go into.

Yet the Government recklessly cancelled the very programme that was designed to create youth jobs. We want to use money raised from banks to put that right. In opposition, the Government supported Labour’s future jobs fund, which got young people into real, paid jobs. The Prime Minister called it “a good scheme”, and the Conservatives said that they had

“no plans to change existing Future Jobs Fund commitments”.

I apologise to the hon. Member for Beckenham (Bob Stewart) for my response to his intervention; in fact, it is through the real jobs guarantee that we would look to invest in new job opportunities for 100,000 young people. The future jobs fund was the successful scheme that the Prime Minister heralded as “a good scheme” but it was scrapped as soon as this Government took power.

I see that no Liberal Democrats are here for this debate. That is a crying shame and a shocking indictment of their commitment to young people and to making sure that bankers pay their way. The Liberal Democrats also pledged their support to the future jobs fund but swiftly supported the Government in scrapping it as soon as they got into power. In April 2010, in a letter to the Association of Chief Executives of Voluntary Organisations, their then work and pensions spokesperson —now the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb)—said:

“We have no plans to change or reduce existing government commitments to the Future Jobs Fund. We believe that more help is needed for young people, not less”.

The future jobs fund was scrapped just one month after that letter was sent.

Let us remind ourselves of what that scheme achieved. It offered every young person up to the age of 25 a job if they had been out of work for six months, with penalties for anyone who refused the opportunity. The jobs were real jobs, paid at the minimum wage, that lasted for six months—and that was guaranteed.

[Alison McGovern (Wirral South) (Lab)]

Has my hon. Friend read, as I have, the research from the DWP that tells of the impact on young people not only in terms of numbers but in terms of their confidence, dignity and self-worth?

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[Rushanara Ali]

They do not deserve a cut in taxes. I hope the Government will take serious action, otherwise the public, who already feel this way, will rightly believe that this Government are not for them but for the vested interests and the millionaires who make so much money and are not willing to pay their dues or to make the appropriate contribution. I am sure the Government do not want to be on the side of people who are milking the system and making so much money and not making the appropriate contribution.

I call on the Government to pay attention, to listen not just to my party, but to the millions of young people who want a job and an opportunity to make a contribution to this country. We have a plan that could help get them get into real work and would reward those who work hard—a plan that is costed and paid for by asking some of the wealthiest in our society to contribute just a little more. With the economy back in a double-dip recession and economic confidence so low that investment growth has virtually ground to a halt, job opportunities for these young people desperate to find work will not appear without help. I hope the Government will see sense and give young people in Britain the much-needed support that they deserve, by supporting the new clause.

[Alison McGovern]

I would like to begin my remarks on new clause 13 by agreeing with much of what has been said today by Opposition colleagues. I want briefly to take the House back a couple of years to 2010, when I was lucky enough to secure an Adjournment debate on young people and unemployment, the first such debate I led in the House. For me, it could not have been on a more important subject than the position of young people in the labour market in my constituency. I do not wish to put myself forward as some kind of Cassandra or some awful foreseer of what has come about, but I warned the Minister then that the swift withdrawal of some of the more successful things the Labour Government had been doing to tackle young people’s unemployment would lead to more young people being on the dole. Sadly, that is what has happened. In fact, two years later the ONS tells us that an extra 65,000 16 to 24-year-olds are now without work. That is not just a waste of talent and funds, but a moral shame.

I want to say a few words on that subject and why new clause 13 is so important to young people facing that difficult situation. The Government have had two years to tackle the problem, yet all of us here have to admit that the problem is getting worse, not better, and that action is needed more today than it was in 2010. The Government would not listen then; I beg them to listen now.

[Bill Esterson]

My hon. Friend has a proud record, before and since reaching this place, of advocating for young people and employment. She is quite right to draw attention to the Government’s record. We should remember that we saw the same thing happen in the ’90s. The Government are going back to exactly the same failed policies of the ’90s. The difference between Government and Opposition Members is that when we were in government we looked after unemployment. We kept unemployment, repossessions and business failures low. Under this lot they have gone up and we are seeing the problems for young people, which is why we need the action we are debating right now.

[Alison McGovern]

I thank my hon. Friend and neighbour in Merseyside for his intervention. He is quite right. The return to things such as the youth training scheme has been one of the most unfortunate aspects of the Government’s work in this area.

[Mel Stride]

The hon. Lady makes the important point that youth unemployment is deeply regrettable and has been rising recently, but she skips over the fact that youth unemployment has been rising since 2004, so most of the period of that rise actually occurred on her watch when the kinds of policies she is advocating were clearly not working.

[Alison McGovern]

The hon. Gentleman needs to be careful about apportioning blame, because although we have seen an extreme rise in youth unemployment over the past couple of years because of the recession—I will move on to the problem of demand in the economy later—under the Labour Government there was successful action to prevent levels of youth unemployment from rising to those we saw in the ’90s. If he wishes to, we can talk at length in the Chamber on another occasion about some of the structural reasons for young people’s unemployment, such as how skills are transferred in different ways, how small businesses recruit differently, which hits younger people more than it does those with experience in the economy, and why those patterns were starting to emerge from 2005. However, in new clause 13 we are trying to establish the urgency of getting money from a particular source and prioritising the needs of young people in my constituency and in his.

The Association of Chief Executives of Voluntary Organisations has done an important piece of work to calculate the cost to the Exchequer of young people being out of work, and, although I hope that Treasury Ministers will have already heard the figures that my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) cited, I want to alight on this one. If youth unemployment continues at current rates, by 2022 the cost to the Exchequer and to the economy in lost output is estimated to be £28 billion—on top of the human and social costs. That is a huge figure, and we as a country cannot afford to see this crisis continue.

I shall take a few moments, however, to consider not only the financial cost, huge and important though that is, but the impact of the crisis on individuals, on their pride and on their self-worth. I mentioned earlier the Government’s own research, carried out by the Department for Work and Pensions, into the future jobs fund, and if Ministers have not read it they would do well to do so. The research, first, considered the impact on young people who took part in the future jobs fund programme, and it is a shame that the hon. Member for Dover (Charlie Elphicke) has left his place, because I wanted to ask him—I tried to intervene on him to do so—whether he had met, spoken to or asked the opinion of any young person who took part in the future jobs fund.

Just in case hon. Members have not had the opportunity to read the research, however, I shall quote a young person and how they were feeling prior to the introduction of the future jobs fund. They said that they were

“feeling a bit low. I was about four and half, five months, unemployed and I thought ‘oh no, this isn’t good’. Most employers I spoke to, it was like if you’ve been unemployed for more than 2 months, it really puts people off. I knew how to do a job; it’s just the fact that I’d been unemployed for nearly 5 months. Almost half a year, which was quite embarrassing really. I know there was nothing out there, but it was still kind of embarrassing.”

Despite this person realising that aggregate demand and low job vacancy numbers had caused their problem, they blamed themselves, so I ask hon. Members to consider the impact of low self-esteem and poor mental health on the extra 65,000 young people who have become unemployed since 2010.

The research, secondly, asked young people how they felt about their work once they had taken part in a future jobs fund employment placement, and to me the following quotation says it all. On the question of what the most important gain was, one person said:

“Trust in my determination. Self belief, the belief from my employer that I am able to succeed”.

What more important thing could anybody have for success in life than self-belief? When people are left to languish on the dole, such self-esteem is undermined every single day.

[Mr James Gray (North Wiltshire) (Con)]

I strongly admire the sincerity of the hon. Lady’s compassion for those people, but I am not sure that reading out two or three vox pops necessarily adds to the intellectual coherence and probity of the argument. She admitted a moment ago that youth unemployment was dangerously high during the Labour years. It remains very high, and we are very worried about that, but what does she actually propose we should do about it?

[Alison McGovern]

I am not sure I know where to start. I am reading out the testimony of young people who have been unemployed. That is not some kind of media vox pop; it is an example of real people who have been affected by the phenomena that we have been talking about, and we should listen to them. If the hon. Gentleman does not want to listen to what I have to say, let him listen to young people in my constituency and in his own, and to how they feel about being thrown on the scrapheap.

I shall briefly discuss bankers’ bonuses, and why the measure before us is an entirely appropriate one to take in order to fund for young people employment that will stand them in good stead for the rest of their careers. Profit-making banks have had a reduction in corporation tax, but I shall not go over the reasons why the tax in question is an appropriate one to levy on their payroll. We have to face the fact that in the City of London we have seen behaviour that cannot be tolerated. For the sake of the future of our young people, what is needed now is some sort of restorative justice to rebalance people’s ability to make a good life for themselves. Young people in this country are facing a more difficult labour market than they have for many years. I beg the Government to listen and take some action now.

Oral Answers to Questions

Alison McGovern Excerpts

Tuesday 26th June 2012 Commons Chamber

[Danny Alexander]

I am not sure that the hon. Gentleman’s suggested idea would be an appropriate task for the Office for Budget Responsibility to undertake, but he is right that strike action is costly to the economy. He would also be right to observe that it has not stopped this Government proceeding with the reform of public service pensions, and with pay restraint in the public sector, too, to help deal with the enormous mess left to us by the Labour party.

[Alison McGovern (Wirral South) (Lab)]

With regard to the problems at RBS this week, my constituent David Robinson has been unable to access his funds, including disability allowance, from his account with thinkbanking. It is an internet-based bank that uses the RBS platform, so he could not go into an RBS branch to resolve his problems. Will the Minister please make contact with RBS about internet banking users and make sure that my constituents—and everyone else—are not unduly affected?

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The hon. Lady makes an important point, and I spoke to Stephen Hester this afternoon to find out what progress RBS has made in resolving its issues. It introduced measures to help people who can access branches, but she makes a very important point about internet banking, and RBS is very keen to learn the lessons from those problems and to put in place contingency arrangements for the future. I encourage her to get her constituent to write to RBS, and, if he has suffered additional costs as a consequence of the situation, to make that claim to it.

Jobs and Growth

Alison McGovern Excerpts

Thursday 17th May 2012 Commons Chamber

[Alison McGovern (Wirral South) (Lab)]

I shall start my remarks by talking about the announcement by General Motors about Vauxhall at Ellesmere Port. I represent many, many people who work there and I pay tribute to that excellent work force and the community around them who support them. Whilst I recognise the commitment of all politicians who have helped back Ellesmere Port, in Wirral all of us know somebody—a family member or a friend—who has worked incredibly hard for this, and it is those people I am thinking of most and congratulating today.

I would like to make a few remarks about unemployment. Our commentary on employment, I am afraid, often shows the limits of the way we do our politics. The news, and we ourselves, often obsesses about the figures—the monthly movement up and down—and whilst those are important indicators, of course, it is the trend that really matters. We often worry about the weather when we should be thinking about the climate that we are in, and sadly, the unemployment figures are worse than those for this time last year. According to the Library, the number of people claiming jobseeker’s allowance is now 106,000 higher than in April 2011. That is incredibly worrying. The Chancellor mentioned the figures for two years ago. Unemployment plateaued in 2010. It is growing again now and we need to worry about why.

To add to the problem that we have, our understanding of the impact of unemployment and the lack of the necessary jobs in our economy is limited. I recently tabled a parliamentary question, asking the Treasury what assessment the Department had made of the medium and long-term cost to the Exchequer of the current level of unemployment. That matters because unemployment has a wide range of impacts. The Treasury did not give me as full an answer as I would have liked. I would have liked to know how unemployment impacts on the health budget in the form of increased costs; how much funding is being made available for the regeneration that is needed; and the impact of unemployment on crime levels.

[Andrew Bridgen]

In the shadow Chancellor’s speech, he made much of the apparent increase in long-term youth unemployment. Is the hon. Lady aware of the cynical way in which the last Labour Government manipulated the figures for long-term youth unemployment by cynically bringing people in for a one-week training course and then restarting the clock immediately after, to keep the figures down? That was a cynical measure, which this Government have stopped.

[Alison McGovern]

I thank the hon. Gentleman for his intervention. I have thought a lot about youth unemployment over the past years. The former Government oversaw radical improvements, such as our intervention in the labour market with things like the new deal. I find it hard to characterise any of that work, which has been recognised around the globe, as cynical. I find that very difficult to believe.

[Bill Esterson (Sefton Central) (Lab)]

I wanted to agree with my hon. Friend about the important and welcome news about Ellesmere Port, because like her, I have constituents who rely on the work that comes from Ellesmere Port. In her excellent speech, might she comment on the tax cut for millionaires that is paid for by pensioners? Does she agree that if that tax cut were reversed, the money would be better invested in jobs and growth of exactly the kind that she is calling for?

[Alison McGovern]

I thank my hon. Friend and Merseyside neighbour for his question. Like my constituents, I cannot understand this Government’s decision to give tax breaks to millionaires.

[Sheila Gilmore (Edinburgh East) (Lab)]

In light of the earlier intervention, I thought my hon. Friend might be interested to hear figures, provided to the Work and Pensions Committee yesterday by the Department for Work and Pensions, on the issue of people who had apparently been off benefit. In March 2010, there were 18,000 young people who could have been put in that category, and there are now 4,000 in terms of training allowances. That is a difference of 14,000. As I think my hon. Friend would agree, that hardly explains the rise in youth unemployment.

[Alison McGovern]

I thank my hon. Friend for that helpful and informative intervention.

When the Chancellor talked about a growing economy, one of my hon. Friends shouted, from a sedentary position, “Not in the north-east.” We need to recognise that worklessness does not impact equally on all communities. That is why when we think about the growth we need, policy needs to be tailored properly to the economy in each and every part of the country, so that the GDP growth we all hope for represents the whole of the UK. I suppose it is entirely possible that the UK will recover, but leave behind heavily blighted areas of our country.

A study of unemployment reveals a key flaw in the Government’s thinking. They have talked about “expansionary fiscal contraction”—in other words, to achieve growth, the Government need to slash their budgets and investment will flow in from foreign shores. I do not believe that that is consistent with the Government’s other stated aim: to rebalance the economy. Finance for those parts of our economy that have strengths in manufacturing but need regeneration is necessarily long term. Government industrial strategy should shelter our industry from global headwinds, not leave us vulnerable.

Fiscal contraction at the pace we have seen has harmed blighted areas that had only recently started to recover from the impact of previous Conservative Governments’ attitude to industry. In my area, I see the impact of the withdrawal of central Government from regeneration and the stopping of regional growth via regional development agencies. The responses built into local government that were designed to target deprivation, which clusters in particular parts of our country, were stripped away in the financial settlement.

In the Budget, the Chancellor introduced measures that took money out of the pockets of people on low and middle incomes in those parts of the country where we want to rebalance. That will not help. Someone in the Treasury has to take responsibility for looking at the macro impact of all the measures that are affecting those places that stand to be the worst affected by this Government. We have had a botched Budget and then a next-to-nothing Queen’s Speech, I am sorry to say. The Government will be judged by the people in Wirral and Merseyside not merely on the GDP figures, but on the actual development we see in our city. We must take account of the differential impacts of Government measures on different parts of the country with different economies; we must not focus only on the national picture.

My question for the Government is: will they meet the test of real economic development? Only that will promote the widespread employment that people want. People will judge this Government on the basis of whether or not they see their friends and family in employment.

Finance (No. 4) Bill

Alison McGovern Excerpts

Thursday 19th April 2012 Commons Chamber

[Margot James]

My hon. Friend has, in part, responded to the point made by the hon. Member for Stoke-on-Trent South (Robert Flello), and I was going to say that some 5 million older people will not be affected by this measure. We can split hairs on this issue, but I accept that the measure does amount to an additional payment. However, although the allowance freeze results in an increase in tax payable, it does so only by an average of £84 a year. I accept that that is not nothing, but it is a relatively small sum. The measure is raising so much money for the Exchequer by dint of the fact that so many people are in receipt of state pensions. The pain, as it were, can therefore be shared by many, and the resulting amount per person is very small. I apologise for the fact that I shall not take any more interventions, but so many other Members still want to speak.

To address the other point made by the hon. Member for Stoke-on-Trent South, the Government have a good record in protecting people on pensions. We have restored the earnings link. The Labour party had 13 years in which to restore the link, and Barbara Castle called for that every year until her death. We have done it. We have also secured it with the triple lock.

The hon. Member for Leeds West (Rachel Reeves) was ungenerous in arguing that we appeared to be proud of the inflation rate. If she had remained in the Chamber, I would have told her that that inflation has largely been driven by increased oil and commodity prices, which Governments have no control over. It is to the credit of this Government that they were brave enough to say, “We will increase the state pension by either 2.5%, the rate of inflation or the rate of earnings, whichever is the greater.”

[Alison McGovern (Wirral South) (Lab)]

rose—

[Margot James]

I am sorry, but I will not take any more interventions.

As a result of that Government pledge, there will be no cash losers from this allowance freeze. We have protected universal benefits, with the single exception of not renewing the temporary increase of £100 in the winter fuel payments. We have protected all the other universal benefits, however, as we promised to do. Some 600,000 of the poorest pensioners have received a warm home discount of £120 extra to help with their fuel bills. We have also frozen council tax for two years running. Council tax has been a bone of contention among older people, many of whom have been hit hard by increases in it over the past decade. We have also protected, and increased slightly, the budget for the NHS. As we all know, older people account for more of that expenditure than any other group and they will benefit disproportionately from the NHS budget increase.

I have already made the point that freezing this allowance will entail a cost of, on average, £84 a year. I accept that that is not a derisory amount for someone living on an income of just over £10,000 a year. However, 5 million pensioners will not be affected by this measure. In fact, the Joseph Rowntree Foundation, an organisation that Labour Members sometimes cite, has said that the media coverage has lost all perspective on this matter, stating that

“you would think it’s doomsday for older people…I’m not sure. I think we’re losing perspective on phasing out the Age-Related Allowances”.

It makes a number of good arguments as to why it takes that view.

In conclusion, I must say that I have received very few critical letters on this subject from pensioners. The vast majority of older people in my constituency are more concerned with the prospects for their grandchildren; the average age of a new home buyer is now 38. They might not have read “The Pinch” by my right hon. Friend the Minister for Universities and Science, which was published two years ago, but he pointed out, among many other things, that those in the generation born after 1970 are the first not to be able to look forward to a better standard of living than their parents. That point is felt keenly by many older people in my constituency. Although they cannot easily increase their income, they accept that their grandchildren are facing a different future from the one they faced. Unlike the Labour party, they know that the alternative to facing down this deficit, with everyone making a contribution to that strategy, is the further impoverishment of their grandchildren, and that is not a price that they are willing to pay.

--- Later in debate ---

[Brandon Lewis]

The hon. Lady has just made a very good argument for cutting taxes and increasing the personal allowance, which is exactly what this Government are doing. The reason why I have chosen to talk about particular issues is that I agree with something my hon. Friend the Member for Stourbridge (Margot James) said a moment ago. Pensioners in my constituency are often concerned about the future for their family—their children and their grandchildren. The work this Government have done has put in place changes, enterprise zones and opportunities for people to increase jobs, as we have seen this month, so there is a real opportunity for people in future.

We must also take into account something else. In Great Yarmouth, a prediction listed by our local health teams in the past few years is that our pensioner group will increase by 35% in the next 15 years. That is a huge increase. I fully agree with my hon. Friend the Member for Ipswich (Ben Gummer) that we have to ensure that this country can provide for people in their pensionable years in future. As we face such an increase in the number of such people, the Government must take the decisions that mean we can provide a good and fair opportunity for the future of all pensioners. That is why I also appreciate the Government’s work to move towards a fair and straight flat-rate pension for pensioners in future, on which I congratulate them. The work done in the last two Budgets will make that possible. It will mean that our economy can move forward and that we can make fair and proper provision for people in various age groups.

As the personal allowance for all people, including under-65s who work hard, increases, there will be an impact on pensioners in future. The changes announced in the Budget that simplify the tax system make it clear that there will eventually be a flat, fair and generous rate of allowance for all people. As Opposition Members have admitted, that means that nobody has a cash loss at all. In fact, pensioners under this Government had the biggest increase in their basic state pension ever seen. More than 5 million of the poorest pensioners are unaffected thanks to the triple lock. All pensioners are therefore better off and will receive the biggest ever increase of £5.30 a week. In 2013, they will receive £130 more than they would have received under the previous Government’s plans. Pensioners will respect this Government for that and appreciate the Government’s credibility for putting together a solid economic base to allow it to happen.

That is why the measure should be looked at as a whole, particularly for an area such as Great Yarmouth, where we have a high proportion of pensioners. We must make sure that we can provide for them properly and fairly in the future, and also that the economy can create jobs for their families and increase our economic growth. Being in government is about making tough decisions. Those must be the right decisions, and that is what being in government is about. As we heard today from those on the Opposition Front Bench, opposition is often about opportunism, not about making right or proper decisions.

[Alison McGovern]

I shall make a few remarks about an important impact of the changes, which is at risk of going unrecognised. I think of that as the cluster impact of the changes. Our country does not have the same kind of people distributed uniformly across the United Kingdom. People of different ages cluster in different areas.

I am deeply proud to represent the Wirral, not least because the area has a higher proportion of older people. It is a great strength of our area. They bring a large amount of expertise and stability, and we should not talk about people living longer as though it was a negative thing. I benefited from having grandparents who lived longer than they might have expected, and I cherished each of those relationships.

With that clustering of older people comes a responsibility to pay attention to the issues that affect them. Even if that was not the right thing to do in and of itself, our local economy in Wirral is highly dependent on the income of pensioners. We have many small independent businesses whose relationship with their customers is important. They have regulars of many years’ standing, and many of those people are retired and on a fixed income, so even if it was not the case that we should care about the needs of older people, the employment of the rest of us in the Wirral and the vitality of some of the local shops is related to the income of older people.

Before I deal with the clustering of the local economy and the attention that Ministers must pay to how our economy works in practice, I want to make a few points about longevity and the increase in life expectancy that we are seeing. We must recognise that this is not a uniform phenomenon. Not everybody in our country is living longer in the same way. There is a social justice element. Poverty is still a pretty strong determinant of the length of people’s life. People such as those in my constituency who have worked in manufacturing might not expect to live as long as those in relatively more affluent parts of the country. My constituency is very mixed, and there are people there who may not be able to expect to live longer as the average increases. That average masks different expectations.

When Treasury Ministers make decisions about, for example, age-related allowances, I ask them to find out how those will impact on different parts of the country and different groups of people. The impact will not be uniform. We are not all uniformly living longer in exactly the same way. The NHS is a wonderful thing, but we still have a heck of a long way to go on public health to make sure that poverty does not limit people’s life expectancy, as it has done in the past and still does.

[Ben Gummer]

The hon. Lady makes a sensible point. One of the big challenges that faces us in increasing the state pension age and the point at which people retire is trying to understand the different requirements of people who have done heavy manual labour throughout their life or for any part of their life and have had different physical pressures put upon them, and those who have not. But that does not remove the point that most people who are affected by the tax allowance freeze are relatively wealthy pensioners—most of them. Therefore, although this is not a precise instrument, I am not sure that her point addresses exactly what the Minister seeks to do.

[Alison McGovern]

I shall return to my constituents and tell them that a moment of cross-party agreement broke out over the problem that the hon. Gentleman and I agree exists, where we must rightly consider the state pension age, but that that decision will affect certain people in a completely different way from that suggested by any average figure. I hope that the hon. Gentleman will allow me to respond to his second point by saying that I will remark later on whom the proposals affect and their relative position.

Before making my substantive point about how the economy clusters and how these proposals will affect us, I want to answer the point about inflation made by the hon. Member for Stourbridge (Margot James), who has unfortunately just left the Chamber. She sought to make a case against my hon. Friend the Member for Leeds West (Rachel Reeves), saying that the Government were doing pensioners a great service by increasing their pension on inflation, which has come about because of events beyond our shores, and the Government are just trying to respond to the oil price, and so on. I have no doubt that world events have had an impact on inflation in this country. Thankfully, I do not have to work out which events have an impact on inflation and report that to the Chancellor. That is the job of the Governor of the Bank of England. I have read the Governor’s letters on inflation and he remarks on the impact of the Government’s VAT rise on inflation. If the hon. Lady were here, I would tell her that it is not entirely true to say that the inflation that we face that has caused the Government to be so proud of their cost of living rise for pensioners is entirely beyond our control. It is in part at least down to the Government’s action.

I want now to think about the cumulative impact of this policy and a couple of others on the part of the world that I represent, but also on similar local economies. Some of the Government’s decisions have resulted in a kind of conflagration that means that particular localities face a really difficult economic future.

[Charlie Elphicke (Dover) (Con)]

The hon. Lady makes much of the fact that age and longevity vary quite a lot throughout the country. She has also made a connection between shorter life span and deprivation. How many of her constituents with a short or shorter than average life span will be affected adversely by the age-related allowance, because it is over £10,000?

[Alison McGovern]

The hon. Gentleman seems to be saying that if you are poor enough to have a short life span, you are not rich enough to be affected by the change, which is an interesting hypothesis. It is a testable proposition, but it seems entirely wide of the mark.

[Lyn Brown (West Ham) (Lab)]

You are too generous.

[Alison McGovern]

I always try to be generous. In fact, I thought that we were agreeing across the House that the argument about increasing life expectancy cannot be made in such a broad-brush way, but perhaps the situation was not as happy as I had thought it was.

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[David Mowat]

The hon. Lady is making a powerful point about the cumulative impact of policies on particular regions of the country. Her constituency is close to mine. Will she concede that in the last year of the previous Government the north-south divide, measured in terms of gross value added per head, reached its maximum level in the past 20 years? That is something we have to fix in this Parliament, not continue.

[Alison McGovern]

I am so pleased that the hon. Gentleman chose to mention the north-south divide, because it gives me the opportunity to discuss a concept that trips off the tongue so easily but is actually extremely unhelpful in tackling the kind of local economic development that I am asking Treasury Ministers to consider when making decisions. He will know as well as I do that although the north-west, which we both represent, has significant deprivation, it also has some pretty wealthy areas—the Chancellor himself has the honour of representing one such area. The north-south divide, as a concept, masks a whole lot of other inequalities. Again, I mention the inequalities in London. It cannot be said that there is a simple, straightforward north-south divide in this country affecting every locality in the same way; we should have a much more fine-grained analysis. There are places in the north that are extremely successful and places in the south that really need help.

Before I try the patience of the Chair any further, I will return to the importance of age-related allowances.

[Charlie Elphicke]

Will the hon. Lady give way?

[Alison McGovern]

I will give way, and I feel sure that the hon. Gentleman will say what he thinks the Government ought to do to ensure that the cumulative impact of their policies, and their policy on age-related allowances specifically, does not hold back local economic development in parts of Wirral.

[Charlie Elphicke]

I thank the hon. Lady for giving way again; she is being extraordinarily generous in taking interventions. She is making a characteristically extraordinarily thoughtful speech. It is a matter of great concern that over the past decade and a half, the gap between the least well-off and the richest has grown. There is now more inequality. Will it not help to reduce the inequality between pensioners to increase the basic state pension by the biggest amount ever—£5.30, which is a big jump—and to ensure that the richest pensioners do not get such a high benefit, but do not lose out either, by capping the allowance?

[Alison McGovern]

That was a long intervention. The hon. Gentleman said that inequality grew under the previous Government. I point him to analysis done, if I recall correctly, by the Institute for Fiscal Studies at the time of the 2010 general election, which showed that the incomes of the lowest on the income scale increased significantly under the previous Government. We can have a discussion about how one deals with the inequality that is created when the incomes of people who earn a great deal of money rise, but I fear that it would not be within the scope of this debate. I am sure that we will discuss that on another occasion.

I will conclude my remarks by talking about the squeezed middle, because it is people on what one would think of as middle incomes who are affected by age-related allowances. In its frequently asked questions section on this policy, the BBC states that

“it is a ‘middle-income’ range of 40% of pensioners who will not get what they might have expected from the tax system.”

[Lyn Brown]

Is my hon. Friend not astonished by the figure of 40%? If one listens to the Conservative party trying to explain away this awful attack on our pensioners, it does not seem like it is talking about 40% of the pensioners in this country. A very high number of pensioners will be affected by this change.

[Alison McGovern]

That point was very well made. I am never surprised by the ability of people to brush over things. We have heard this afternoon that this is a minor technical change. As I said, I am quoting the BBC itself—[Laughter.] I know that Conservative Members are not always the greatest fans of the BBC, but it states that

“it is a ‘middle-income’ range of 40% of pensioners who will not get what they might have expected from the tax system.”

[Harriett Baldwin]

Much as we all love and admire the BBC, not everything that it puts on its website to do with benefit changes is accurate. I am sure that the hon. Lady would want to find a more reliable source.

[Alison McGovern]

Would the hon. Lady like to intervene on me again, then, and say what proportion of pensioners will be affected, if she thinks the BBC is unreliable?

[Harriett Baldwin]

A BBC website had a wholly inaccurate story yesterday about the changes to employment and support allowance, so it is not an accurate source. That is the point I am trying to make.

[Alison McGovern]

Is the hon. Lady therefore saying that the proportion is not 40%? She indicates that she does not know—that is fine.

[Ben Gummer]

Whatever the proportion of pensioners affected, whether it is 10%, 20%, 30% or 40%, does the hon. Lady think it is right that they currently get a different tax rate from low-earning families who are struggling hard but for some reason seem to be discriminated against just because they are not over 65?

[Alison McGovern]

The hon. Gentleman, too, is welcome to intervene on me again and say what he thinks the proportion is if he thinks the BBC is wrong. He said it might be 10% or 20%. No? Okay.

[Rachel Reeves]

Does my hon. Friend agree that it is disappointing that hon. Members will vote on the matter today without having any idea what proportion of older people it will affect? She is correct to say that 40% of pensioners will be affected, and I am pleased that Opposition Members know their facts, unlike Government Members.

--- Later in debate ---

[Alison McGovern]

The great Bill Shankly once said that he was always surprised that people were surprised at surprises. In one sense it is surprising that Government Members seem to question the BBC and yet cannot intervene to tell me that it is wrong. As the BBC states, those affected will be

“a ‘middle-income’ range of…pensioners who will not get what they might have expected from the tax system.”

That is a very important point. Of course we are all concerned about the impact of the recession on the poorest, but there is another factor to consider. People on middle incomes, who might have had certain expectations about how they could live their life, are now being disappointed and do not know what is coming in the future.

People feel that one of the big problems with the Budget is that certain matters that were brushed over and not explained fully have subsequently come out as being pretty serious. The insecurity facing people at the moment, especially those in the middle of the income distribution, is really quite serious, not least because it is not very good for people’s quality of life if they are constantly worrying about what next year might bring financially. How they interact in the economy and their actions as consumers are also deeply affected by that insecurity.

One of the biggest challenges for Treasury Ministers to address is how communities such as I have mentioned in the Wirral and other parts of the country, where time after time Government announcements have chipped away at the money in the local economy, can deal with the insecurity facing people. The Budget will have a significant impact on people’s quality of life.

[Fiona O'Donnell]

My hon. Friend is making an excellent contribution. Does she agree that when we meet older people in our constituencies, it is inspiring to hear how concerned they are about young people’s future? However, what they see in the Government’s taking money from 40% of pensioners is not an effort to invest in creating jobs for young people. What really hurts is the fact that that money is being used to give a tax break to millionaires.

[Alison McGovern]

My hon. Friend is right. Of course, older people are worried about the next generation’s future, and they do not believe that the Government are making the right move, not least for the reasons that she gave.

I hope that Treasury Ministers will reconsider the proposal and their approach to local economic development. Economies are geographically centred, and businesses currently face, as I have said time and again, a chipping away of resources in their area. That makes growth extremely hard and I hope that Ministers will consider that.

Finance (No. 4) Bill

Alison McGovern Excerpts

Wednesday 18th April 2012 Commons Chamber

[Owen Smith]

I have absolutely no confidence whatever. My hon. Friend’s point goes to the heart of the dodgy economics in the dodgy dossier. The figure of £100 million is entirely predicated on the assumption that there will almost be a net offset of the £3 billion static loss as a result of the change to the 50p rate, through people deciding to work harder, save less, take their income in the current year, and hide their income less. Those are the behavioural changes that the Government are assuming will take place, but there is no real evidence base for the change. It is fundamentally dodgy.

[Alison McGovern (Wirral South) (Lab)]

Does my hon. Friend agree that we are debating the difference between those of us who do our economics using evidence and those on the Government Benches who do it using spurious theory? We should all be responsible; we should look at the evidence and report that evidence. That is why it is important that the Prime Minister should return to the House to correct the record.

--- Later in debate ---

[Nadhim Zahawi]

rose—

[Alison McGovern]

rose—

[Andrea Leadsom]

rose—

--- Later in debate ---

[Alison McGovern]

May I draw my hon. Friend back to his remark about the ethics of this issue? The ethics of whether people feel as though we are all making a contribution turn very much on what is happening around this rate of tax. Paul Johnson from the Institute for Fiscal Studies has said:

“The truth is we still do not know the true effect of the 50p rate on revenues.”

Does not this make it extremely difficult to make the right political and ethical choice at this time?

[Chris Bryant]

My hon. Friend is absolutely right. In fact, I think she must have been reading my notes, which were very close to her face, because they say that it is completely uncertain how much this will cost. That is, as my hon. Friend the Member for Pontypridd said, at the nub of this. The Government have no idea how much this is going to cost them or how much would have been raised had we continued with the 50p rate of tax for another five years. That rate has not been in place long enough for us genuinely to see how it has affected people’s behaviour. Sometimes, when a new rate of tax is brought in it has a sudden impact that then evaporates two or three years later. There is absolutely no certainty and I say to Government Members, who I am sure are going to march loyally through the Lobby with the Exchequer Secretary this afternoon not because he is persuasive but because they believe in this—[Interruption.] He may be persuasive, but I do not think he is going to persuade me. I say to them that I think this will end up being a divisive measure.

--- Later in debate ---

[Karl MᶜCartney]

In a minute.

One hopes that the Labour party knows and realises that the 50p tax rate it introduced for spurious reasons made our country economically uncompetitive, but it has never let the truth get in the way of a good soundbite, has it? It is not fair to say that the reduction in the 50p tax rate and other measures announced in the Budget are a tax break for the wealthiest because, in total, the measures announced will see the wealthiest paying many times more.

[Alison McGovern]

Will the hon. Gentleman give way?

[Karl MᶜCartney]

No, I certainly will not at this stage.

--- Later in debate ---

[Alun Cairns]

The hon. Gentleman has repeated that by “temporary”, the Opposition mean eight years and that it could be even longer. On the one hand, he is not prepared to make a commitment for three years’ time, but on the other, he is prepared to make a commitment for the next three years. That is another inconsistency in his argument.

The Opposition’s strongest argument is about the uncertainty over the change in income when the rate changes from 50% to 45%. To be kind, one would say that the hon. Member for Pontypridd has been selective; some might say that he has not been wholly honest. Everything is uncertain. There is no guarantee about how the economy will grow, nor about how the European or the global economy will grow. There was exactly the same uncertainty when the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), introduced the 50% rate. He predicted that it would bring in three times more than it has brought in.

[Alison McGovern]

On a point of order, Mr Hood. I believe that the hon. Gentleman referred to my hon. Friend the Member for Pontypridd (Owen Smith) as not being wholly honest. Will you clarify whether that is in order?

[The Temporary Chair (Mr Jim Hood)]

I thank the hon. Lady for her point of order. It is not a point of order for the Chair if an opinion is expressed by an hon. Member. It is certainly not against the Standing Orders of the House.

--- Later in debate ---

[Stewart Hosie]

We back amendment 1. As the hon. Member for Pontypridd (Owen Smith) said, it is the only way in which we can score out the cutting of the 50p rate of tax. Government Members have made some obscurantist points, as he described them, about why the amendment may not do precisely what is intended, but we would expect the table showing the 2013-14 rates to appear in the 2013 Finance Bill, as the equivalent table does in the Finance Bill every year, whether the amendment succeeds or not.

We believe it is wrong to remove at this point the temporary 50p rate for those earning more than £150,000 a year. I want to say a little about the context in which that extraordinary tax giveaway is happening. The Government say that we are all in it together and point in their various documents to the fact that every decile in society will be worse off and take some share of the burden. However, they then tell us that, almost uniquely, the personal tax-raising measure of the 50p rate is now deemed ineffective in bringing in much-needed revenue to tackle the deficit and debt, which is their primary objective, and in bringing down their borrowing requirements, which they see as an essential part of their plan.

The Revenue has produced an assessment of the impact of the change, which I am certain the Exchequer Secretary will pray in aid to justify the Government’s case. I will come back to that assessment, but first I shall explain why the removal of the temporary 50p tax rate proves that we are not all in it together, and why that single tax cut amplifies the unfairness of the Government’s plans. I hope to expand on the points that the hon. Member for East Antrim (Sammy Wilson) made in his very good speech.

For those on low and fixed incomes, pay cuts, wage freezes and now a shock rise in inflation have meant the erosion of their living standards over some time. They will see no benefit from a tax cut for millionaires. For families in receipt of working tax credit, the new rules mean that their household income will fall by up to £3,800-odd a year if they are unable to find an extra eight hours of work a week. We know from our constituencies that such work often simply does not exist. They will see no benefit or fairness in cutting the 50p tax rate.

Of course, the families who face a fall in working tax credits are those who tend to earn only about £17,000 a year in total. They will see no benefit from a tax cut for millionaires. Indeed, real middle-class families earning £40,000, £50,000 or £60,000 a year—not somewhere over £250,000 a year, as I suspect the Government assume middle-class families earn—are about to have their child benefit removed, even with the taper changes to be proposed.

Before a Liberal gets up to tell me that there have been moves to increase the basic personal allowance from £6,475 in 2010 to £9,205 by 2013, an increase of £3,000 leading to a saving of some £600, I point out that the threshold above which one pays the 40p rate will go down from £37,400 to £32,245 in the same time frame. That is a fall of £5,000, so the fall in the threshold at the top end is larger than the increase in the allowance at the bottom. The net impact is that by 2013, the percentage of people paying the 40p rate will go up to 15% of all taxpayers, or some 5 million people earning more than £41,500. We have never had such a percentage of our taxpayers paying that rate before, and they will see no benefit from a tax cut for millionaires.

That is before we even consider the tax changes for older people. The changes to age-related allowances—the so-called granny tax—will have an impact on some 40% of pensioners. Those above the basic tax and pension credit threshold but below the £30,000 level at which they would not benefit anyway, or some 4.41 million older people, will be worse off. They will be singing in the streets of Raith, as they say, at the millionaires getting a tax cut that they are paying for.

The Government are providing a tax cut for millionaires that is being paid for by those on fixed incomes hit by inflation, poor working families whose tax credits are being cut or removed and middle-class families earning just over the ever-reducing 40p tax threshold. It is hardly fair, it is not right, and we are definitely not all in it together.

How precisely do the Government justify that? It is an inevitable consequence of a financial plan that is seeing the Government fetishise debt and deficit levels to the extent that they plan to take £155 billion a year out of the economy by 2016-17 for fiscal consolidation, through cuts and tax rises. To understand the Tory priorities, we need to understand how the proportion of spending cuts to tax rises is changing, which is very instructive. I hope some Tories will find it instructive, because their constituents will soon be knocking on their doors asking why it is happening.

In 2011-12, spending cuts were planned to be 56% of the total consolidation, the rest of which would be tax rises, which is a pretty reasonable balance. However, the Government are increasing the proportion of the consolidation that is cuts through the next few years to 62%, 69%, 74% and 79%, and up to a whopping 81%—only 19% of the consolidation will be tax increases by 2016-17.

[Alison McGovern]

In addition to those comments, does the hon. Gentleman agree that there is a geographical dimension? Those likely to benefit from the tax cut are clustered in certain locations in our country, and those who lose money, as he has described—they will also suffer from public spending cuts—cluster in other areas.

[Stewart Hosie]

That is absolutely right, but I want to be careful in answering. It is not good enough to say that people in the north or Wales or Northern Ireland or Scotland will lose, because unemployment and poverty in London is enormous. The geographical areas are not the ones traditionally described in lazy journalism—it is not that the north is poor and the south is rich—because pockets of poverty and of wealth exist in every single constituency in the country. The hon. Lady is right, however, that there are such pockets.

Even with all the pain and austerity, and the social and economic problems that the Government’s plans will cause, the Chancellor has been able to find a tax cut for millionaires. How does he justify it? Whatever his justification, the measure does not make sense economically, to answer the points made by the hon. Member for Vale of Glamorgan (Alun Cairns), who seemed to think that the measure is economically robust.

The Government’s fiscal rules—that the structural current deficit should be in balance and that debt is falling as a share of GDP in the final year of the forecast—are under enormous pressure. The problem—this is the evidence we ought to look at—is that the deficit in this Budget was forecast in the 2011 Red Book for 2011-12 to be £90 billion, but it is now forecast to be £98 billion. That is £8 billion worse than planned. The net borrowing requirement in the 2011 Red Book was forecast for 2011-12 to be £122 billion; it is now £126 billion. That is £4 billion worse than planned. The national debt or the treaty ratio that was due to peak at 87.2% of GDP—£1.25 trillion—in 2013-14 is now expected to rise, on the same count, to 92.7% of GDP in 2014-15. That is up again; it is worse than the Government’s forecasts. Everything is going in the wrong direction, so this is the wrong time to forgo revenue yield.

--- Later in debate ---

[Charlie Elphicke]

The hon. Gentleman makes that assertion. Let us consider the detail of what the OBR says, leaving aside forestalling. Page 108 of its report, which considers this matter in great detail, states:

“These steps might include labour supply responses (e.g. working less”—

working less hard, basically—

“taking a lower paid job, retiring early, or leaving the country)”.

As we know, many people have given up, upped sticks and gone—driven away by the anti-business, anti-aspiration policies of the Labour party.

[Alison McGovern]

Will the hon. Gentleman tell us exactly how many people have left the country? If so, what is his source for that statistic?

[Charlie Elphicke]

I am simply reporting what the OBR has said. I will not pretend that I am an expert on immigration to and emigration from this country. I might represent Dover but that does not mean I count everyone in and out. I have to trust the OBR. Having said that, in the past decade my constituents have complained that an awful lot of people seem to have come in. They are very upset about that and think there could have been more border security. But that is not the key point of this debate.

Oral Answers to Questions

Alison McGovern Excerpts

Tuesday 1st November 2011 Commons Chamber

[Miss Smith]

My understanding is that, compared with the plans of the previous Government, businesses will pay £3 billion less in employer national insurance contributions and more than £1 billion less in corporation tax, as a result of changes announced in Budget 2010.

[Alison McGovern (Wirral South) (Lab)]

Small businesses have been frequent attenders at my regular Friday surgeries, and they tell me that business is hard. Now that the hon. Lady’s party’s Chancellor has presided over the slowest economic recovery since the first world war, will she explain to small businesses in Wirral how they are supposed to get out of this mess?

Jobs and Growth

Alison McGovern Excerpts

Wednesday 12th October 2011 Commons Chamber

[Mr Osborne]

Okay. The motion tears up the Darling plan—it is £27 billion off the plan set out in the March 2010 Budget. That is the truth.

[Alison McGovern (Wirral South) (Lab)]

rose—

[Mr Osborne]

I shall give way to the parliamentary private secretary to the former Prime Minister to defend his record.

--- Later in debate ---

[Alison McGovern]

I will defend the record of our former Prime Minister any day of the week, but will the Chancellor defend his own record, and tell the House how far away he is from his deficit payback plan?

[Mr Osborne]

The hon. Lady has to defend the record of the former Prime Minister because he never turns up in this House to defend it himself.

The one thing that we want to avoid in a debt crisis is a sharp rise in interest rates, but that is what the motion would bring about. Let me give the House some new information.

--- Later in debate ---

[Jake Berry (Rossendale and Darwen) (Con)]

I am delighted to see that the reshuffle of the shadow Cabinet has had a real effect on its sense of humour. Government Members are of course used to the fake outrage all the time, but the terms of the motion suggest that the Opposition seem to have discovered irony.

I will not support the motion, because it demonstrates the Opposition’s fundamental failure to have any credible economic policy whatever. This five-point plan is a nationalised Ponzi scheme on steroids. Even in itself it would add £3.1 billion to our deficit. The Opposition probably do not understand what a Ponzi scheme is, but they should look at their own manifesto. People in my constituency do not believe that the way out of debt is to take on more debt. They do not believe that the way to reduce their personal liability is to spend more money.

[Alison McGovern]

The hon. Gentleman is incorrect, because if there were investment it would not be a fake Ponzi scheme—the assets would be real, unlike in an actual Ponzi scheme.

[Jake Berry]

I never said it was a fake Ponzi scheme, I said it was a real Ponzi scheme. That is the basis of the Opposition’s entire policy.

The markets believe in our plan and want us to stick to plan A: actually, so does every hard-working family in my constituency. They are struggling with personal loans and do not want interest rates to go up. Like so many of us, they are struggling with mortgages and cannot afford that to happen. The Prime Minister has offered real leadership throughout this, and the Chancellor of the Exchequer has been honest. That is in stark contrast to the Labour party’s constant line of “too far, too fast”.

What is the Opposition’s alternative? This five-point plan is simply too little, too late. They believe, “Why repay borrowing today when we can have business as usual and bankrupt Britain tomorrow?”

Eurozone

Alison McGovern Excerpts

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

I am sure the hon. Gentleman can put in his bid for things he would like to see repatriated. Perhaps there would be some trade union powers, so that a Government led by the union man, the leader of the Labour party, could get their way more easily. But we will have that debate in due course; it is not active at the moment in European circles. I suggest that we focus on the immediate issue at hand, which is resolving the eurozone crisis.

[Alison McGovern (Wirral South) (Lab)]

In response to the right hon. Member for Wokingham (Mr Redwood), who is no longer in his place, the Chancellor described the Bank of England’s analysis of the impact on inflation of the last round of quantitative easing. At a time when British people have less and less cash in their pockets, few issues could be more important. [Interruption.] [Hon. Members: “It’s Gordon Brown ringing for you!”] Will the Chancellor tell the House, perhaps by telephone, or by e-mail, whether he has requested any analysis from his civil servants in the Treasury of the forecast for the impact on inflation of the current round of QE?

[Mr Osborne]

I think the phone would have been flying through the air rather than ringing, if it had been the last Prime Minister. Of course we have made our own examination of the impact of QE. When I became Chancellor, I set out the procedures I would follow if there were a request from the Monetary Policy Committee. I set it out within weeks of coming into office and I said I would follow exactly the procedures set out by my predecessor—that if there were a request, we would accede to it. I also believe that the MPC has come to the right judgment; its judgment was independent, but I believe it was right.

Global Economy

Alison McGovern Excerpts

Thursday 11th August 2011 Commons Chamber

[Mr Osborne]

My hon. Friend is absolutely right. In January last year the largest bond investor in the world said that UK gilts

“are resting on a bed of nitroglycerine.”

Today I could read out a whole string of comments from market participants saying that the UK has been a safe haven in this sovereign debt crisis because of the decisions that we took.

Standard & Poor’s, the rating agency that has just downgraded the United States, took the United Kingdom off “negative outlook” and reaffirmed our triple A credit rating. The practical consequence of that is much lower interest rates. If we pursued the policy proposed by the Opposition of more spending and more debt, the immediate response would be higher interest rates which would kill off any recovery. That is why such a policy is economic madness.

[Alison McGovern (Wirral South) (Lab)]

Given poor and worsening United Kingdom growth, at what point will the Chancellor advocate further quantitative easing? If he will not answer that question, will he tell us whether he believes that there is no chance that rapidly rising sterling will hurt our exports?

[Mr Osborne]

Both those matters are properly for the Bank of England. It is for the Governor to comment on the value of sterling, if he chooses to do so. As for quantitative easing, the arrangements agreed by the last Government, which I have retained, remain in place. If the Monetary Policy Committee makes a serious request, of course we will consider it seriously, but we have received no such request.

Finance (No. 3) Bill

Alison McGovern Excerpts

Tuesday 5th July 2011 Commons Chamber

[Chris Leslie]

I agree with my right hon. Friend—they definitely will benefit from the reduction. I am not sure that the counteracting change—the tweak to the bank levy—goes far enough to counteract that corporation tax change. There are ways in which the bank levy could be amended further, but in general we support the principle; it is the design and the level at which it is set that we object to.

Amendment 31, tabled by my hon. Friend the Member for Hayes and Harlington (John McDonnell), relates to a financial transaction tax, for which a strong and impressive case can be made. Many of us, on both sides of the House, will have received letters and e-mails from constituents through the Robin Hood Tax campaign, which many charities have advocated. I pay tribute to the technical work that they have done on that issue. What may well be very minor changes to transaction levies could, according to many of these designs, generate significant and useful resources. Clearly, though, we need a design that does not jeopardise the rejuvenation of a stable and well-balanced financial services sector, so we would need an honest assessment of the impact of such a tax.

I am appalled that the Government have for now ruled out a financial transaction tax. It should not only stay on the table, but be actively examined and reviewed. Government Members might say that they are pursuing a financial activities tax—a slight variant in this policy area—instead, but the Chancellor, having talked about that last June, has made absolutely no progress with international jurisdictions in advocating or gaining support for it. We see no action by Ministers on what were ultimately G20 discussions about a financial transaction tax. We have not seen them explore either that possibility or a financial activities tax. The only qualm I have with my hon. Friend’s amendment is whether it stresses sufficiently the need for international agreement and discussion. Nevertheless, it is certainly something that, in broad terms, we think needs to stay on the table to be examined further.

[Alison McGovern (Wirral South) (Lab)]

That is a crucial point, because moving ahead on this suggestion will take leadership from the very top of all Governments around the world, yet that is the very thing that seems to be lacking in Britain at the moment.

[Chris Leslie]

It is a shame that the leadership we need—not just at the G20, but at the European level and elsewhere—on the financial transaction tax and in a number of other areas is lacking. The Chancellor of the Exchequer has not reported any progress on the financial activities tax, for example. Perhaps the Minister would care to tell us today what progress he has made with other Heads of Government and Finance Ministers on the financial activities tax.

--- Later in debate ---

[Chris Leslie]

It is very easy to find oneself tied into the lexicon used by the financial services sector. My right hon. Friend calls a spade a spade, and it is sometimes important to do just that.

The bonuses that I have described are really excessive. For example, we know from the limited disclosures that we have seen that John Varley, the former chief executive of Barclays, received a £2.2 million bonus in 2010 and that, between them, the top five earners at Barclays, excluding executive directors, received more than £38 million in salary and bonuses in 2010 alone. That amount was shared between five individuals. Bob Diamond, the chief executive of Barclays, has received £6.5 million in bonuses for 2010 since January. As many will know, Mr Diamond lost out in the bonanza compared to his two senior managers at Barclays, with Tom Kalaris receiving a cool £10.9 million in salary and bonuses, and the other top manager, Rich Ricci—my hon. Friends might remember his name—receiving a cool £10.6 million. Those two individuals earned enough money—£17 million—in 2010 to pay the wages of more than 500 qualified nurses.

[Alison McGovern]

My hon. Friend is pointing out some of the excesses at the top of the financial services sector, but does he agree that it is also a matter of concern to those at the bottom end of the pay scales in the financial services sector to see such inequality in the organisations they work in, just as it is to workers in other sectors?

[Chris Leslie]

Indeed. That is precisely why the bonus payroll levy arrangements that we advocated excluded bonuses of up to £25,000 going to those working on the front line in the banks. We thought that those working at that level should not be affected by that particular payroll tax. What we are talking about now are senior executives. Stuart Gulliver, chief executive of HSBC, gained a £5.2 million bonus while Eric Daniels, the former chief executive of Lloyds, secured £1.45 million.

--- Later in debate ---

[John McDonnell]

No. If that was the case, we would not have introduced a stamp tax on transactions. It brings in £5 billion and has been an incredibly successful tax. The concern has been expressed that this country would be disadvantaged if it acted unilaterally, but the International Monetary Fund’s study does not say that. It cites the stamp duty as an example of a transaction tax that has not affected UK business and states that financial transaction taxes

“do not automatically drive out financial activity to an unacceptable extent”.

Banks do not leave, because they know that they are secure in this country—in fact, they know that if they get into trouble we bail them out.

The argument that London’s advantages would evaporate overnight as a result of this sort of tax are just not accurate. The reason this country has these advantages, apart from the experience in dealing with financial transactions that we have built up over generations and centuries, is that it is time zone-critical—it is located between the Asian and New York markets—so it is ideally placed to ensure that financial operations are carried out in London. If companies were to move elsewhere in Europe, where would they go? Germany, our main competitor in the European time zone, is already committed, under Chancellor Merkel, to implementing a financial transaction tax.

The argument that is made now about needing some form of global international agreement is exactly the same one that was used to say that we should not introduce any form of taxation on bank bonuses. When we introduced the one-off tax on bonuses in 2010 we were told of fears that there would be a mass exodus of bankers leaving the country. In fact, the recruitment of bankers has increased—perhaps that is a debate for another day.

[Alison McGovern]

On the argument that my hon. Friend has just made about whether or not people would leave as a result of such a tax, does he agree that we should support what J. K. Rowling said in 2010 about people who might leave this country because of taxation? She said:

“I cannot help feeling…that it would have been contemptible to scarper…at the first sniff of a seven-figure…cheque.”

Ought we not to support her on this?

[John McDonnell]

There is a spell, is there not—[Interruption.] The new sequel film is coming out soon, so we will see what spell there is to retain bankers in this country, if we need them.

I do not take this issue about international agreement lightly. That is why I am calling for a report, as any report would examine that issue. We are going back to the point that my hon. Friend the Member for Wirral South (Alison McGovern) made earlier, because this country is best placed to take the lead in trying to secure some of these agreements and such a report could address how we could do that. However, it certainly should not hold us back from taking unilateral action.

The other matter that has been raised in this debate previously is the concern about avoidance, but we can design out any avoidance measures. We can design this tax to make it difficult to avoid, just as we did with stamp duty.

--- Later in debate ---

[Mr Robinson]

They are hoping to collect them, I imagine, when they lose the next election.

What I do not understand about this whole debate is how the banks can make so much money. The retail sector is usually profitable. It is like a utility: there is a regular amount of income, those involved have a fairly nice oligopoly between them, and it works quite well. I do not think anybody is complaining about that, apart from the fact that every time the investment sector does badly, the poor retail customer gets it in the neck—the small companies and others—when the banks immediately try to recoup their losses by increasing fees and charges. While all is going well, we have one rule for the investment banks and one rule for the rest of the world. The investment banks continue to coin it in and take every penny they can in bonuses, and the rest are left with the remaining share of profitability, which is diminished by the excess amounts that the investment side is taking.

The first thing that I would recommend the Government to do is look at the spread of profitability throughout the economy. If we are serious about rebalancing the economy, the first thing that has to be rebalanced is the power differential between the banking sector and manufacturing—and, equally, the share of profitability as between the banking sector and the rest of the economy. It cannot be possible for those in the banking sector—RBS, Barclays and others—to go from a position of massive losses one year to huge profits on their investment trade in the next. In six months RBS made £5 billion profit. We are pleased to receive our share of that, but how can it be making such disproportionate profits compared with the rest of the economy? That does not quite stand up. Either they are real profits, in which case there is clearly a dysfunction in the economy as regards competitiveness that needs to be investigated and addressed, or the bank is creating fictitious profits, taking the bonuses while it can, and leaving the taxpayer to bail it out later. I do not know the answer to that question, but I put it to the Financial Secretary that it needs to be looked into. The profits are unreasonably high. He should forget about whether they are offensive or poisonous and address this as a purely economic phenomenon. How can the banking sector make those profits without sucking profitability out of the rest of the economy, particularly the manufacturing sector?

That brings me to the Government’s policy on rebalancing the economy. We all agree with that, but why do they not address the problem by taxing bonuses through the levy—and, for that matter, through the bonus tax that we propose? Unless we do something about that, the banking sector’s preponderance in being the master and not the servant of industry will continue, and for as long as it does, any talk about rebalancing the economy and the rebirth of manufacturing is make-believe. Nowhere can we see that better than in Derby, with yet another death of one of the few remaining conventional manufacturing industries in the UK. We are all in favour of advanced manufacturing and high-tech industries, but the German success has been based on superb engineering in the traditional conventional industries, which we—particularly those on the Treasury Bench, under both the Conservative and Labour parties—have tended to look down on.

If the Government are serious about rebalancing the economy in favour of manufacturing—we must all be serious about that—they will have to do better than saying that the market and the banks are the master. I am pleased that the Transport Secretary announced an investigation this morning—on the “Today” programme, as usual. The next instalment of the growth plan must consider how the Government can use their purchasing power to the benefit of this country, as is done superbly well in Germany and France.

We should look back. I have not made a study in advance of this speech and it would take us too long to go through everything. The death of the telecoms industry was down to a Government purchasing decision that ditched GPT. Ericsson came in with a great fanfare, then closed the whole of its works in Coventry and pulled its horns back to Sweden. We also pulled our support from the motor car industry. Years ago, people thought it was great because we would move into high-tech manufacturing. What happened? One industry after another closed in the wake of the car industry, including the machine tools industry and the capital goods industry in general. Throughout the history of post-war British manufacturing there has been a progressive loss of self-confidence and self-belief in British manufacturing throughout the country. That has to be addressed, and I put it to the Financial Secretary that it needs to be done now.

[Alison McGovern]

Does my hon. Friend agree that one moment in history when the British Government did not act in that way, which I raise because it was important to my constituents, was when the Labour Government stood behind General Motors at Ellesmere Port to maintain that industry in my area at a time of deep economic troubles in this country?

[Mr Robinson]

That is right, and I supported that entirely. I support any large manufacturing company with a base in the UK that we are seeking not to protect, but to develop and expand. I have stressed the progressive loss of self-confidence in British manufacturing across the nation. That example involves a large American company. Although it had got into a much worse mess than the old British motor industry ever got into, because it was American it had a naive faith that it would be able to pull itself, and us, out of that situation.

There has been a loss of confidence in our industries. I will not delay the House by giving example after example, but the view of the Treasury, the old Board of Trade and the old Department for Industry—unbelievably misnamed—has always prevailed: that the Government can do nothing, and market forces must prevail. That is despite the fact that every country that was a real competitor of ours took exactly the opposite view, and ensured that their industries thrived and prospered. They were not protected, but they were supported. We have so many latent advantages that we simply ignored, to the advantage of others and to our own continuing and cumulative disadvantage. That is the point that I am trying to make.

This is by no means a digression from the debate, Mr Deputy Speaker. This is why the tax on the banks should be increased. The banking sector’s preponderance in the economy has to be reduced if we are to survive as a manufacturing and balanced economy in the future. In one way or another, that has to be done. What we have seen from the Government is a pathetic capitulation to the banks. It was difficult enough for us when we were trying to save the banking industry in the crisis, when it was in a bad state. When the banking industry is clearly on the way to recovery, there is absolutely no reason not to proceed with the bonus tax.

The only reason—with which I disagree—is that if we dare tax the banks, they will go abroad because they are being taxed too highly in the UK. This is another area where I would like a study to be done. To what extent is that really a risk? If it were a risk that major bankers would leave the UK in droves and we would have a denuded financial sector over night, it would have some benefits and a lot of disadvantages, but to what extent is it a risk? That could be studied. There are some hard-headed people in the Treasury who would certainly not agree with the banking point of view.

What is so special about the bankers that they can generate these huge profits and bonuses? I do not think that anybody knows. Anybody who thinks about it objectively thinks, “How can that be done?” The manufacturing industries in Germany and France, such as the telecoms sector and the car and lorry manufacturers, are sweating it out in their export markets. They are rebuilding the east of Germany and eastern Europe, and are now helping to industrialise China with massive exports of huge engineering resources. How can it be that they struggle to make 10% on turnover, but bankers can come in and generate huge profits—unrelated, as far as one can see, to any meaningful or socially useful activity, as Lord Turner said in another place?

--- Later in debate ---

[Alison McGovern]

I want to say a few words in addition to those made so far about amendment 13. The amendment is crucial, and it matters because at its heart it concerns inequality. I want to say something that I take to be uncontroversial across the House: inequality is a problem for us all, no matter what our place in society—it is even a problem for the bankers receiving the bonuses that we have heard about so far. We know that more equal societies do better. I take that statement to be uncontroversial, because we have had many recent discussions both inside and outside this House about why equality matters and why it is important to deal with wide income gaps between the top and bottom in our society.

On that basis, amendment 13 is highly relevant to one of the biggest problems that we have been trying to grapple with. As I said in an earlier intervention, this is not merely about inequality across society, from the very top earners to those receiving the minimum wage; it is about an imbalance in the financial services sector. Many people in my constituency, across Merseyside and in the rest of the UK work in the financial services sector, and not all of them are well paid. Inequality matters not just within those companies, but for those working for companies that service banks—I am thinking about those in occupations such as cleaning or looking after the children of those working in the financial services sector. They face steep income inequality; therefore, it matters that we address this issue. Income inequality has a huge impact on our society—I take that fact to be uncontroversial—and therefore the amendment is important.

The hon. Member for Bristol West (Stephen Williams) described himself as a free-market liberal; I would not go that far, but I would describe myself as somebody who has tried to think about how the economy works.

[Stephen Williams]

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

[Alison McGovern]

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

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

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

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

--- Later in debate ---

[David Mowat]

Indeed. Does she think that higher salaries in all those professions should be taxed more? If that is the case, the most logical option would be to have higher income tax.

[Alison McGovern]

As I said earlier, I think we all agree that inequality is a problem. We have tabled an amendment that deals with a specific problem. Do not we all agree that inequality in this country is a problem that needs to be tackled? I thought that that was politically pretty uncontroversial these days.

[David Mowat]

Will the hon. Lady give way again?

[Alison McGovern]

Many people wish to speak, so perhaps it would be better if I did not take any more interventions. I am assuming that the hon. Gentleman was not about to tell me that inequality is not a problem.

I want to outline what we could do with the extra income that could be generated if our amendment were accepted. I also want to build on the remarks made by my right hon. Friend the Member for East Ham (Stephen Timms). His analysis of the future jobs fund was thorough and it accords with my research on that subject. I pay tribute to him as one of the House’s experts on youth unemployment. His constituency is in the London borough of Newham, which has done extensive research into that issue and probably knows more than many places in this country about what can best be done to tackle it.

I want to make a further point. In January, I asked the Minister for Employment whether he could provide business planning projections of how much the Department for Work and Pensions expected to have to pay for 16 to 24-year-olds on jobseeker’s allowance for each year of this Parliament’s life. I was told that by the end of this Parliament the Department expected to pay jobseeker’s allowance to 279,000 16 to 24-year-olds. It thought that just under 280,000 young people would be on the dole. To check what had happened as a result of the Government’s economic policies coming into force, I asked that self same question in June, when the Minister for Employment was forced to tell me that his Department projected having to pay 303,000 such young people on the dole. The DWP has had to up by 24,000 its own forecast of the number of young people on the dole by the end of this Parliament. Nobody can say that this problem does not need to be dealt with. The Government know from their own DWP projections that this problem has to be dealt with—and it has got worse, not better, over the last six months.

I applaud the Government’s approach to apprenticeships and many other things, but the fact is that we had a programme and a set of policies that were working well for young people. The future jobs fund will be much debated and there is more research to come on the subject, yet the DWP’s own research provides evidence of how that particular scheme worked. The best way to get a job is to have a job; we demonstrated that basic fact through the future jobs fund.

[Kate Green (Stretford and Urmston) (Lab)]

I agree with every word that my hon. Friend says. Does she agree that one crucial value of the future jobs fund intervention was that it broke the trend into long-term youth unemployment—a trend about which we should be particularly concerned? The lesson of the 1980s recession was that if young people did not get a start in the labour market at the very beginning of their working lives, they never really got themselves established. That is what the future jobs fund successfully intervened to disrupt.

[Alison McGovern]

I thank my hon. Friend for her intervention. Having grown up on Merseyside in the 1980s, I know it was only when I studied economics later in my life that I found out that there was a word for the thing I always knew happened—that people got punished throughout their lives for being unemployed when they were young. The economic word for that is hysteresis. The labour market has memory: if someone fails to get a job early in life, it stays with them, scarring not only the person’s career prospects, but the economic prospects of the locality. We know all about that and the previous Government worked to stop it happening when the economic crisis hit. I would like to see this Government take that problem seriously, introduce measures that will bring real work to young people and deal with some of the problems we face, which are getting worse.

[Bill Esterson]

Let me draw Members’ attention to the proposals of the Opposition Front-Bench team. Amendment 13 states:

“The Chancellor…shall review the possibility of incorporating a bank payroll tax within the bank levy and publish a report”—

not an unreasonable request, but a very sensible and measured one. Yet we have heard from Conservative Members and from the Minister in an intervention that they are reluctant to take that action. I guess that the Minister will take the same attitude towards the amendment proposed by my hon. Friend the Member for Hayes and Harlington (John McDonnell), which similarly calls for a review. Neither of these measures calls for the City of London to be disbanded or for bankers to be put in the stocks and pilloried by the public—much as many members of the public might wish to do just that! However, given that many members of the public may have recently wished to do the same to Members of Parliament, perhaps we should not pursue that line too far.