Financial Services (Banking Reform) Bill
Baroness Primarolo Excerpts(10 years, 5 months ago)
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Madam Deputy Speaker (Dawn Primarolo)
Obviously, the contents of comments on Twitter are not a matter for the Chair, but if this has occurred, it is an extreme discourtesy to the right hon. Gentleman, and I hope that the Treasury Bench has taken note. Ultimately, Ministers are responsible for what they say, but perhaps in future the Minister could say it in a written answer and be accountable to the House. That way, I could make a ruling; otherwise, I cannot. Nevertheless, the right hon. Gentleman’s point is on the record.
National Insurance (Contributions) Bill
Baroness Primarolo Excerpts(10 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss amendment (a), at end insert—
‘(13) The Treasury shall publish a review of the level of youth unemployment as at December 2013 and the effect on the level of youth unemployment if the amendments made in this section were required to be brought into force on 6 April 2014.’.
Mr Gauke
New clause 3 brings forward an important initiative announced by my right hon. Friend the Chancellor of the Exchequer in his autumn statement of last week. He announced that employers employing workers under the age of 21 would no longer have to pay employers’ class 1 national insurance contributions. Proposed new section 9A of the Social Security Contributions and Benefits Act 1992 and its Northern Ireland equivalent bring this into effect by introducing a zero rate of secondary class 1 NICs for all employers on the earnings of employees under the age of 21. As my right hon. Friend the Chancellor made clear, the Government believe this measure will, alongside other initiatives on apprenticeships and work experience placements, help to address the problem of youth unemployment in the United Kingdom. The measure will apply both to new and existing employees aged under 21 and is not time limited.
National Insurance Contributions Bill
Baroness Primarolo Excerpts(10 years, 6 months ago)
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Richard Fuller
The hon. Lady is digressing significantly from the Bill to talk about 1945, but in any debate I am more than happy— [Interruption.] Labour Front Benchers want to make an argument about how good the Labour party is in office at reducing unemployment. The facts are the facts: Labour comes to office and when it leaves, unemployment is higher.
To return to the impact of the Bill on improving wage rates, let us consider the record of the coalition in government. We are in the process of raising the personal allowance to £10,000. I shall return to that point. We are targeting and simplifying tax credits and other benefits. We have introduced a benefit cap, making work pay. With this Bill, we are introducing an employment allowance, which will provide greater opportunity for us to improve wage rates. The living wage is a crucial issue that Members on both sides of the House should embrace. We should all endeavour to find ways to improve wages for those who are unskilled or on low pay. For many decades, real wages for people who are unskilled have been stagnant, or rising at a very low rate. One benefit of the introduction of higher wages is the potential that many businesses will see for higher productivity. Most importantly, if very small businesses are able to pay higher wages, there is reduced staff turnover. That is particularly important where there is low pay across a profession.
I looked at the Bill with great interest to see how it could provide a solid basis for an answer to the question, “How do we implement the living wage in practice?”. Tomorrow, we will hear from the Leader of the Opposition about his approach. It was interesting that the shadow Minister, the hon. Member for Birmingham, Ladywood (Shabana Mahmood), said that one-off policies were a bad idea when it came to persuading businesses to take up a new Government scheme, but a one-off policy is precisely what the Leader of the Opposition will propose tomorrow as his approach to the living wage. If it does not work for national insurance contributions, how on earth will it work for substantial wage changes by employers? The problem with the Leader of the Opposition is that he just does not understand business.
Madam Deputy Speaker (Dawn Primarolo)
Order. I have allowed the hon. Gentleman to range quite widely, but his comments must relate not to what might happen tomorrow, but to the Bill and its contribution or otherwise to the living wage; I think that was the point that he wanted to develop. I would be grateful if he stuck to that.
Richard Fuller
You read my mind, Madam Deputy Speaker. I shall return directly to the implications of the measure for the living wage and wage rates. Let me give some numbers showing the impact of a change from the minimum wage to the living wage, and say how the Bill can help to achieve that change for the long term.
Let us consider what happens when a married person who works 40 hours a week, has two teenage children, and earns the minimum wage, which is £6.31, moves to the living wage, which today went up to £7.65. I am using the numbers for outside London, because I represent Bedford, which is outside London. The employee’s gross pay would increase from £13,125 to £15,912—an increase of 21%. After the changes to their tax, national insurance and tax credits, their net take-home pay, which is what matters to them, increases from £15,067 to £16,483—a welcome increase, but an increase of only 9%. That is the impact on the family of the change from the minimum wage to the living wage.
Looking at the cost to the employer, there is an increase in salary of £2,787, and an increase in the employer’s national insurance contributions of £385; that is essentially a 23% increase in the cost of employing that person. Then there is the impact on the Exchequer. It benefits from an increase in income tax of £557, and an increase in the employee national insurance contribution of £335. The reduction in the payment of tax credits benefits the Exchequer by £479, and the increase in employer national insurance benefits it by £385. The Exchequer ends up increasing its tax take by 32%. The change from the minimum wage to the living wage means a modest but welcome increase for the employee, has a high cost for the employer, and brings a substantial benefit, on my calculations, for the Exchequer.
In that context, let me say this about the Government’s use of the employment allowance to give something back to our hard-pressed employers and small businesses: £2,000 is a start, but we have found a tool here, if we have the courage to use it, that we can use to encourage—not compel—our private sector employers to accept a living wage. Her Majesty’s Revenue and Customs could act as a compliance officer for those who seek to pay the living wage, as it does for the minimum wage. We could pay back some of the significant gain to the Exchequer that my simple calculation has brought up, though I am sure that there are more complicated numbers out there. There is a useful tool here, and this is a small start. Let us have the courage to see how we can improve living conditions and wages for our low-paid workers, and use the Bill as the start of a better future for all of us.
Interest Rate Swap Derivatives
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Bill Wiggin (North Herefordshire) (Con)
I draw the attention of the House to my declaration in the Register of Members’ Financial Interests.
We have a problem at the moment with the Financial Conduct Authority. It has been given the remit to act and the banks have set aside the money, but not enough has been done, or is being done, to ease the burden on British business. I have been contacted by many of my constituents about the FCA, the banks and the progress being made. Last night, that progress was slammed by none other than the chief executive of the FCA. Giving a speech at the Mansion House, Martin Wheatley said that
“the industry is deceiving itself if it imagines that a total of 32 offers accepted, totalling £2 million, is adequate progress.”
That is an admission, by the head of the FCA, that progress has been pathetic. With that quote, Mr Wheatley appears to be passing the burden squarely on to the shoulders of the banks. It is as if the FCA, and its predecessor the Financial Services Authority, had not been involved in the delays that have led to such inadequate progress. The FCA has the remit and the authority to speed up that progress. It is inextricably linked to that progress and the entire situation. As one of my constituents put it to me, it appears from the outside as if the
“FCA is unwilling to discuss anything with a bank customer, the British Bankers Association represents only the bankers, and the Financial Ombudsman Service remains buried in PPI cases.”
One mis-selling case in my constituency concerns a residential home. Thankfully, the business is still operating, but two of its owner’s other businesses have not been so lucky. The owner was mis-sold an interest rate swap agreement—in this case a “vanilla swap”—but the FCA scheme has been too slow in offering redress. Another constituent came to me today because he felt he was targeted by HSBC and sold an interest rate product that was wholly wrong for him and his business, but very profitable for HSBC.
The campaign group Bully-Banks, which I am sure has contacted many Members here today, highlights the precarious financial situation of the many businesses affected. People are up at night worrying about their bank and whether they will receive redress. As Mr Wheatley admitted, only 32 businesses have agreed redress out of the many thousands of businesses affected. That is not good enough. The country and the Government are focused on business for our economic recovery. We all know that more businesses mean more people in work, but with the FCA redress scheme operating at a snail’s pace, there are many thousands of businesses that will not be making those investments that we want them to; they will not be expanding or hiring more staff, until they receive redress and these matters are finally concluded.
The FCA’s chief executive contends that the banks are to blame for the speed at which redress is being offered to affected companies. According to several ongoing cases in my constituency, the banks are also to blame for a lot more. One business run by a constituent has already ended up in administration. It changed banks from HSBC to Lloyds TSB and was then badly advised. It seems that these two banks feature in practically all of my casework. My constituent was advised to set up a factoring account, which then disrupted his business, drove away his customers and caused problems with his cash flow. This was a high street bank once again showing a serious error of judgment. It poorly advised a business owner in my constituency, which led to that business being driven into administration. In this case, the Financial Ombudsman Service protected the bank after an investigation owing to a lack of documentation.
In yet another case of a bank not operating as it should, constituents of mine, attempting to grow their free-range egg and cider business, in the face of weak product prices and rising expenditure, received a support loan from their bank, Lloyds. Despite my constituents’ winning several high-profile contracts, however, Lloyds started to put what has been labelled as “unrelenting pressure” on the business. The bank gave my constituents a deadline to repay their loan and advised them to find an alternative bank. It then refused to release the ownership documents that would have allowed my constituents to sell a parcel of land, which would have repaid their debt to Lloyds and allowed them to move banks.
The Connaught Income Fund might be familiar to the House. I know that a number of parliamentary colleagues are involved in this matter. It is yet another case where the FCA and its predecessor, the FSA, have failed to take appropriate action. The fund was originally promoted, based on an information memorandum, as being of low risk. That memorandum now appears fraudulent, but was the FSA negligent to allow the fund to continue to operate, particularly when it became apparent that the memorandum was fraudulent? Several investors in the fund have gone even further, claiming that the FSA deliberately withheld information from the police and downplayed the serious nature of the fraud.
I am sure that the Minister will want to send a clear message from the Government to the FCA. We need the FCA actively to work to sort out these messes and to speed up its efforts. We need it to listen to the complaints and take serious action backed by meaningful compensation or fines. If this is not possible, perhaps he will confirm what changes in the law are needed to make it so. Finance is complicated, but the FCA is supposed to be sufficiently expert to appreciate what is going on and then have the teeth and nerve to act. Any bank must prefer to follow the FCA instructions—
Madam Deputy Speaker (Dawn Primarolo)
Order. I apologise to the hon. Gentleman. I am listening so intently to every Member’s contribution that I forgot to look at the clock.
Madam Deputy Speaker (Dawn Primarolo)
Order. Lots of hon. Gentlemen keep referring to the Gallery, and they need to be reminded that doing so is a procedural motion that causes a Division. Perhaps I could help them by suggesting that they say that their constituents are following the debate “closely”, “intently” or “not far from the House”, so that we can avoid any confusion about any unfortunate procedural vote that might be triggered.
Andrew Jones
Thank you, Madam Deputy Speaker. We do not want any procedural confusions—I am always lost by the procedures here anyway—but I am quite sure that this debate is being followed closely from somewhere very near to where we are.
The companies in my constituency have provided me with much detail. They have been frank in explaining some of their personal commercial circumstances and providing me with access to some of the supporting papers, so that I could see the whole thing—the background and implications for their companies. I have heard of the challenges that companies have faced with cash-flow problems; of companies having to sell assets simply to generate enough cash to pay their banks; of companies having to delay investment; of companies having to make people redundant simply to take cost out of the business and raise cash to pay their banks; and of company managers enduring sleepless nights and desperate worries. I have even had a case where a company was put into administration. In that case, the business owner believes it was done by the bank purely to avoid its mis-selling liabilities.
Overall, this issue has had a detrimental impact on many businesses. However, as we have heard from colleagues from across the country, it is not a local issue; rather, it affects people up and down the country. The collective effect is a detrimental impact on the entire economy.
I know that the problem has been recognised and that the redress scheme has been created, but I do not think that that is good enough. More needs to happen. The speed with which the scheme is proceeding needs to get a lot faster, because we need a swift resolution to this issue. Businesses are haemorrhaging cash, and they are still facing the problems that I have outlined. In the vast majority of cases, resolution will result in a judgment of mis-selling. It will also bring clarity and, consequently, an ability to plan for the future. Businesses are in a state of near-suspended animation until they get that clarity.
The one way to deliver that speed is to bring an end to all payments during the resolution process. That would help companies with cash flow, and provide an incentive for the financial institutions to get on with it. Progress has simply been too slow. The FCA is at least now publishing some data, which is a help. As of 27 September, the review population stood at 27,989 companies, some classed as sophisticated, some not. Of that number, 16,236 have been classed as non-sophisticated, of which 438 have gone all the way through the process and had an additional redress outcome communicated to them. That represents a hopeless rate of 2.7%, after months and months of work, and it involves only a communication, not a conclusion.
I have been told by the FCA and by the banks of the number of people recruited to deal with the issue and of the importance that they attach to it. I am sure that people have been recruited, but that is simply a measure of input. A process is designed to achieve an outcome, and the outcome is not having a process. The process is not working. I want us to send a message from this place that the impact on UK business is being recognised, that the pace of the process is unacceptable, that the financial institutions and the regulators will work to improve that, that we in this place will be watching their progress and that the Government will apply appropriate pressure. This issue needs to be resolved very quickly.
Air Passenger Duty
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Mr Gauke
Is the implication of the hon. Gentleman’s question that he managed to identify the position of Labour Front Benchers, because I could not particularly?
My hon. Friend the Member for Brigg and Goole (Andrew Percy) delivered a thoughtful speech in which he set out the evolution of his own thinking and made the case for regional airports. The hon. Member for Mitcham and Morden (Siobhain McDonagh) raised a point on behalf of her constituents who originally come from the Caribbean. Such a point was also made in interventions, so let me reiterate that APD must adhere to international rules on aviation tax—a point that she acknowledged—specifically the Chicago convention. The capital city convention in APD ensures that the duty complies with the rules. She asked why we could not reform the bands. We could move to having two bands, and we did examine that as part of the 2011 consultation, but no banding structure can be entirely free of anomalies, and a revenue-neutral move to two bands would require an increase in APD for about 90% of passengers, including those flying to Europe and the United States. We were not attracted to that approach.
The hon. Member for Paisley and Renfrewshire North (Jim Sheridan) raised a point about Scotland, following on from the contribution by the hon. Member for Na h-Eileanan an Iar. He rightly said that there would be an implication if the tax were devolved to Scotland and then abolished, because the cost of that would have to be found from the block grant. We have not estimated what that would be, but such a decision would have consequences to comply with EU state aid rules. It is also worth pointing out that we would need to take into account any market distortions that would be created and that the cost would have to take into account any lost revenue for neighbouring English airports, for example. That is not an insignificant point.
The hon. Member for South Down (Ms Ritchie) spoke about domestic flights. It is worth pointing out that several European countries put VAT on domestic flights, whereas the UK does not—the rate is 19% in Germany, 21% in the Netherlands and 27% in Hungary. My hon. Friend the Member for Mid Norfolk (George Freeman) made the point that we would like to get rid of most taxes, but we are not in a position to do so. He also highlighted the fact that rates have increased with inflation. The hon. Member for Strangford (Jim Shannon) argued that there would be a net gain for the Exchequer if APD were abolished, but we do not agree—I shall set out the reasons why in a moment.
The hon. Member for North Antrim (Ian Paisley) spoke against the tax and also hoped that we could all unite behind the motion. I am terribly sorry to say that I have to disappoint him on both fronts. The hon. Member for South Antrim (Dr McCrea) summed up the debate, arguing that we should perhaps follow the example of the Republic of Ireland, which is not always an argument that I hear from him.
As I have made clear, APD makes a crucial contribution to tackling our fiscal challenges. The tax raises nearly £3 billion in annual revenue. Contrary to the claims of the PricewaterhouseCoopers report, which has been cited frequently, scrapping APD would not be costless; it would result in a significant loss to the Exchequer. Unless we were to give up on our fiscal goals—my hon. Friends have been absolutely right to highlight the need for us to maintain discipline on reducing the deficit—the lost revenue would therefore need to be found elsewhere, either by increasing other taxes or by further reducing our public spending. In the course of the debate, I have heard few realistic proposals as to how that could be done. Not only would scrapping APD create substantial costs to the Exchequer, but the benefits of such a step would be small compared with those of the policies that the Government have already put in place.
We are not persuaded by the case that has been put before us. We cannot take risks with the public finances, so we will not be supporting the motion.
Question put.
The House proceeded to a Division.
Madam Deputy Speaker (Dawn Primarolo)
I ask the Serjeant at Arms to investigate the delay in the No Lobby.
The House having divided: Ayes 13, Noes 284.
Mrs Anne Main (St Albans) (Con)
On a point of order, Madam Deputy Speaker. May I ask through the Chair whether any application has been made for a statement on the recent developments concerning the Arctic 30? I am sure that many of us will be pleased to hear tonight that the charges against them have been downgraded from piracy to hooliganism. Some are related to, or friends of, Members, and one is a constituent of the Prime Minister, as my right hon. Friend has said. Is there any chance of them now being granted bail, and what does the development mean in terms of the possibility of their being repatriated home to this country?
Madam Deputy Speaker (Dawn Primarolo)
As the hon. Lady will know, that is not strictly a point of order. The matter of statements is something the Government themselves determine and I have no knowledge of that, but she has had the opportunity to raise her point in the Chamber and, importantly, to get her views on record. I am sure that those on the Treasury Bench have taken note of what she said.
Jim Shannon (Strangford) (DUP)
Further to that point of order, Madam Deputy Speaker—
Madam Deputy Speaker
Order. There is not a point of order, Mr Shannon. Having just ruled that what we heard was not a point of order, I can hardly allow you to speak further to what is a non-point of order.
Business without Debate
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Diana Johnson (Kingston upon Hull North) (Lab)
On a point of order, Madam Deputy Speaker. Very sadly, on Wednesday of this week an 11-year-old girl was knocked down in Bransholme in my constituency by an MOD training vehicle, which are used in large swathes of my constituency to train drivers for the armed forces. My office has attempted to arrange a meeting with the senior officer at the Leconfield base, where the training school is based, and I have been told that we cannot have the name of that senior officer. I do not think that that information is a matter of national security, and I would hope that you agree with me, Madam Deputy Speaker, that giving such information would allow me to perform my duties as a constituency MP.
Madam Deputy Speaker (Dawn Primarolo)
May I say to the hon. Lady that I am sure the House would share her concern and anxiety about the accident involving a child in her constituency? We entirely understand that she would be angry at being thwarted in pursuing her responsibilities as a Member of Parliament on behalf of the family, but I have to say to her that it is not a point of order for the Chair. However, those on the Treasury Bench will have heard her point, and I am sure that they will ensure that she is provided with that information in order to pursue her responsibilities as a Member of Parliament.
Living Standards
Baroness Primarolo Excerpts(10 years, 8 months ago)
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Madam Deputy Speaker (Dawn Primarolo)
Order. A large number of Members wish to participate in the debate, so there will be a time limit of six minutes on all Back-Bench contributions, starting with the next speaker.
Trident Alternatives Review
Baroness Primarolo Excerpts(10 years, 10 months ago)
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Mr Baron
Many of us who believe that a continuous-at-sea nuclear deterrent is absolutely essential, and that anything else involves living in cloud cuckoo land, also believe that we should honour those who were in at the very beginning of our nuclear arms age—the British nuclear test veterans. The British Nuclear Test Veterans Association and many parliamentarians from both sides of the House have come together to campaign for recognition for the veterans. We have written to the Prime Minister and had meetings with Ministers. Will the Government look again at the campaign, because we rank very lowly on the international table of decency on this issue—
Madam Deputy Speaker (Dawn Primarolo)
Order. The hon. Gentleman’s intervention has gone on for too long.
Danny Alexander
I certainly hear the point my hon. Friend is making. The veterans clearly played an important role in the development of the deterrent, and I am sure that the Under-Secretary of State for Defence, my hon. Friend the Member for Ludlow (Mr Dunne), who is going to reply to the debate, will be able to add something more on that in his comments.
The review was tasked to answer three questions. First, are there credible alternatives to submarine-based deterrence; secondly, are there credible submarine-based alternatives to the current proposal; and, thirdly, are there alternative nuclear postures that could maintain credibility? The review has been thorough, detailed, extensive and objective. The analysis looks in detail at specific combinations of platform, delivery vehicle and warhead design, but excludes technologies that could not be ready by 2035. Variants of the current successor programme are included.
As for alternative platforms, the review considered large aircraft, combat jets, surface ships and multiple types of submarine, including those with a dual role. As for alternative delivery systems, the final analysis was focused on two types of potential future cruise missile—a subsonic stealthy cruise missile and a supersonic cruise missile, each carrying one warhead. Warhead design issues were considered and were important in the review.
An assessment of our ability to deliver alternative options showed that producing the warhead and its integration into a cruise missile or bomb would be the critical challenge. The reality is that the UK nuclear warhead programme is highly optimised around producing and maintaining warheads for the Trident missile. The review found that moving towards an alternative would add technical, financial and schedule risk to the programme. Delivering a warhead for an alternative system would therefore take at least 24 years—deliverable with some risk by about 2040. The crucial point is that the review judged this warhead time scale to be longer than the Vanguard submarines can safely be operated for. There are, of course, options to bridge the gap, but when we look at the cost of alternative systems, it becomes clear that each cruise missile-based option includes an extra £10 billion on its price tag because of the need to bridge the gap.
The bottom line is this, and I quote from the review:
“The analysis has shown that there are alternatives to Trident that would enable the UK to be capable of inflicting significant damage such that most potential adversaries around the world would be deterred.”
The analysis shows that cruise missile-based options are militarily credible, but, because of the gap, my conclusion is that a replacement nuclear deterrent based on the current Trident system is the most cost-effective for the period we are considering.
Mr Jones
It is a serious subject. I just wish that Liberal Democrats would treat it seriously, rather than coming up with the nonsense that they keep peddling.
The alternatives review reinforces my point. On page 5, it states:
“The highest level of assurance the UK can attain with a single deterrent system is provided by SSBN submarines operating a continuous at sea deterrence posture.”
On page 10, it states:
“None of these alternative systems and postures offers the same degree of resilience as the current posture of Continuous at Sea Deterrence, nor could they guarantee a prompt response in all circumstances.”
I could not put it better myself. Breaking CASD would involve an unacceptable downgrading of our capabilities.
To return to the issue of cost, we have been told by the Liberal Democrats that the alternatives to Trident would be cheaper, but their review shows that to be complete nonsense. We were told by the Chief Secretary yesterday that the review was not about savings, but about the nuclear deterrent.
In conclusion, the Liberal Democrats’ review has not only unmasked their political posturing, but reinforced the case for the policy voted for by this House in 2006. [Interruption.] I am sorry that the right hon. and learned Member for North East Fife (Sir Menzies Campbell) is muttering. When he is put under detailed examination, he will have to explain the nonsense that he peddled in the run-up to the last general election, which his party’s review has completely discredited. Perhaps he has not read the report. The Liberal Democrats must want to have some credibility. I know that it is not unusual for them to look both ways and ignore the truth, but the report clearly discredits most of the things that he has said over the past few years.
The alternatives review has looked at the alternatives and come forward with the conclusion that we all thought it would reach: the minimum credible nuclear deterrent for the UK is submarine-based continuous-at-sea deterrent. [Interruption.] Well, that is what it is saying—
Madam Deputy Speaker (Dawn Primarolo)
Order. That really is enough. It is impossible for Hansard to keep a proper record of this debate when senior Members keep shouting across the Chamber and the Member on their feet then replies. Either we have interventions or we do not. We are up against the clock and I would appreciate it if we could get on to the Back-Bench speeches.
Mr Jones
Thank you, Madam Deputy Speaker. I await the examination of the report by the right hon. and learned Member for North East Fife and his justification of his comments over the past few years on this subject.
The standards that we set in this area are important not just in terms of cost. I know that the Opposition and the Government are conscious of the need to ensure that we not only get value for money, but we have a—
Madam Deputy Speaker
Order. At the beginning of the debate, Mr Speaker indicated that he was minded to set a time limit of six minutes depending on how much time was taken up by the opening remarks from the two Front-Bench spokesmen. We have made up some time with speeches that were commendably short, so I will start the time limit at seven minutes for Back Benchers. However, that might need to be reviewed if others are not disciplined and do not stick to the seven minutes or less limit.
Corporate Structures and Financial Crime
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Tessa Munt
I thank the hon. Gentleman for giving way again. I wanted to draw it to his attention that the power has been used several times by the UK already to make the dependencies comply with other parts of regulation, so we could just require them to do what they should do. I would give as examples the banning of the death penalty, the rules on acceptance of homosexuality, and, on a slightly minor level, an acceptance that they should ban pirate radio.
Madam Deputy Speaker (Dawn Primarolo)
Order. The hon. Lady knows, because it is repeatedly pointed out to her by occupants of the Chair, that interventions must be brief. That was another very long intervention. I think she has made her point. While I am on my feet, may I also say to the hon. Gentleman that he has been speaking for quite a long time? This is a short debate and a lot of people want to get in, including, funnily enough, the hon. Member for Wells (Tessa Munt).
John Mann
Madam Deputy Speaker, my speech was already at an end, save for the final sentence. I did not wish to hog the debate with illustrations and proposals. I wanted to set some of the terms of the debate and implore those on both Front Benches to come forward with effective proposals, because this is a major issue for the UK economy and for our democracy.
Madam Deputy Speaker (Dawn Primarolo)
Order. Before the hon. Lady returns to her point, I am sure she is going to tell us how what she is talking about connects with financial crime. We are discussing corporate structures, tax evasion, money laundering and financial crime. The crime she was describing was serious, but she said there was a link between it and financial crime, and I would quite like to hear what it is.
Helen Goodman
Thank you, Madam Deputy Speaker.
Let me respond to the hon. Member for Dover (Charlie Elphicke). The companies that I listed have been inadvertently caught up in financing in this particular way, but the question for them is whether they have made it clear, publicly, that they do not wish to be financing the distribution.
In response to your point, Madam Deputy Speaker, the problem is that we have a system through which money is hoovered up in one way and can then be used to finance any other kind of crime—the crimes that I have described, but also those mentioned by my hon. Friend the Member for Bassetlaw. What we do not have from these organisations is any proper accountability that would allow us to get to the bottom of the issues and tackle them properly. It is extremely problematic that we do not have international agreements about how to deal with these internet companies when it comes to their taxes and their other behaviour. Although it is true that tax avoidance is a scourge and tax evasion is a crime, the industry’s use of these sites helps to promote other kinds of crime. I believe that there is a serious cultural issue about these companies that must be addressed.
Madam Deputy Speaker (Dawn Primarolo)
Order. I remind the two remaining Members who wish to speak that we are running out of time. So that we can hear the Front-Bench speakers, may I ask them each to take a maximum of six minutes? I will not put a limit on the clock, as they are both experienced Members who can judge it for themselves to enable us to hear the wind-ups.
Mr Jim Cunningham
The hon. Member for Daventry (Chris Heaton-Harris) has raised the issue of Coventry football club. I do not want to go too far down that road, except to say that the parent company should be investigated. It set up two sub-companies, one of which went into administration and was then given by the administrator to the other company. It is a ludicrous situation for the people of Coventry to find themselves in: the fans are up in arms, they do not know where they are going to play next season and all sorts of threats are being made.
Madam Deputy Speaker (Dawn Primarolo)
Order. Before the right hon. Member for Leicester East (Keith Vaz) responds to that point, I remind Mr Cunningham that the courtesies of the House indicate that he should not enter a debate at the end and immediately intervene, because he has not been present at any stage during the debate.
Madam Deputy Speaker
We will not discuss this now, but I am sure Mr Cunningham will remember it for the future.
Keith Vaz
I thought that my hon. Friend the Member for Coventry South (Mr Cunningham) was going to tell me that the directors of Coventry City were chewing khat. I did not realise that he wanted to make another point.
In conclusion, I say to the Minister: let us look at the proceeds of crime and the way in which financial structures protect them, and let us use effective action through the structures of Government and the financial agencies to try to make sure that the Mr Bigs pay back the money they have stolen.
Sir Edward Garnier
It is always so lovely to hear the hon. Lady, but I am actually addressing the shadow Attorney-General.
Madam Deputy Speaker (Dawn Primarolo)
Order. Before the hon. Member for Islington South and Finsbury (Emily Thornberry) responds, I point out again that interventions made by people who have only just arrived in the Chamber, not having been present at any point during the debate, do not show the best courtesy to the House. I hope that all Members will bear that in mind.
Sir Edward Garnier
On a point of order, Madam Deputy Speaker. If I have caused any offence, I apologise. The reason I addressed the hon. Member for Islington South and Finsbury (Emily Thornberry) was that she and I have a joint interest in the matter. I am sure she did not take offence.
Madam Deputy Speaker
Thank you, Sir Edward, but you are continuing the debate. Your point is on the record, but we are now eating into the Minister’s time. I understand that he does not mind, so I call Emily Thornberry to conclude her speech.
Emily Thornberry
I am grateful to the hon. and learned Member for Harborough (Sir Edward Garnier) and appreciate his expertise in the matter, but I actually did say that immediately before he came into the Chamber. I am glad that there is now cross-party agreement, and I urge him to ensure that his party’s Front Benchers adopt my ideas. Now is the time to move on in relation to fraud, and I believe that companies should be held liable for the fraudulent activity of individuals, building on the Bribery Act. That is a way forward, and if we can agree on it, then great—let’s do it.
If the Government are committed to a crackdown on crime, why have they left it to Labour to amend the Financial Services (Banking Reform) Bill, which will come before the House again on Monday? Why have they not tabled amendments? We understood that the Prime Minister was committed to introducing a crime of reckless management of a financial institution, so why have the Government not tabled such an amendment? Why do we need to do it? It seems odd. We are concerned that, although the Prime Minister is happy to make pledges when everyone is watching, he hopes that when nobody is noticing he can carry on and do nothing.
It seems to us that an offence of reckless banking needs to do more than deliver symbolic sacrifices after the event. We need managers to be held liable if they turn a blind eye to those who are committing crime. They should have a responsibility to monitor what happens. No single person brings a bank to its knees and no single person should be responsible for UBS, Société Générale or Barings, whatever some may want us to believe. There are further people who are also responsible, and we need to ensure that the law allows for other people to be prosecuted. Nowhere is that more apparent than in the Government’s record on basic economic crime such as the failure to ensure that people are paid the minimum wage. In the past three years, only two bosses have been prosecuted for that, and workplace inspections have halved in the past 12 months. It seems to us that it is about time the Government started taking seriously economic crime of all types, including people not being paid a basic wage.
Finance Bill
Baroness Primarolo Excerpts(10 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Debbie Abrahams
The fact is that the employment rate is lower now than it was in 2008. Absolute numbers mean nothing. The rate is lower now than it was before the recession.
Madam Deputy Speaker (Dawn Primarolo)
Order. The debate is, to put it politely, starting to go a little wide of the new clause. Perhaps we could focus—in a laser fashion!—on new clause 10.
Catherine McKinnell
Thank you, Madam Deputy Speaker, but I think that my hon. Friend has made an important point. What we needed to hear from the Chancellor last week was a plan for economic growth that would boost tax receipts and increase the number of jobs. Ultimately, that is how we can balance the books and reduce the deficit: by getting people into work and reducing their dependence on welfare.
My hon. Friend made a powerful point: the Government should not be so complacent about the unemployment situation in this country, and in particular the long-term unemployment situation.
Mel Stride
Given the hon. Lady’s response to my previous intervention, I wanted to clarify the issue of John Mills and his donation to the Labour party. Does she accept that his donation is a case of tax avoidance—yes or no? [Interruption.]
Madam Deputy Speaker (Dawn Primarolo)
Order. Mr Sawford, I do not need your help in chairing the debate in the Chamber today. I have done enough Finance Bills to know what is in order and what is not in order. The question that has been put is about tax receipts, excluding the reference to individuals, and that is in order.
Catherine McKinnell
It is open to the Government to support our proposed review of spending round 2013 and the impact that that may have on tax receipts. If the hon. Member for Central Devon (Mel Stride) wants to support our motion today and the Government in undertaking such a review, it is open to him to do so. We have not specified exactly what should be included in that review and it is open to the Government to look at whatever avoidance opportunities they consider relevant to ensuring that we protect future tax receipts.
I know from written answers that I have received from HMRC recently that staff numbers were projected to fall from 88,875 in March 2009 to 58,464 by March 2014. Will the Minister provide an update on those figures, and in particular what HMRC’s headcount is expected to be by March 2016, following last week’s spending review and the additional resource reduction flowing from it? It is concerning that despite much-publicised announcements about increased investment in tax avoidance and evasion activity, the number of HMRC staff working in enforcement and compliance was expected to fall from 34,762 in March 2009 to 26,905 in March 2014.
I assume that given the Government’s much-stated commitment to getting tough in this area, the predicted fall in staff numbers is no longer going to happen and that we will see a rise in the number of HMRC staff dedicated to enforcement and compliance work. It would be helpful if the Minister could confirm that for the House and tell us how many HMRC staff will be working in this area between this year and 2015-16.
In conclusion, the Government had the opportunity last week to boost tax receipts by announcing measures that would provide the short and medium-term boost our economy needs while providing a long-term return for the country, yet despite the catastrophic failure of their economic plan to date, the Chancellor came to the House and announced that he would continue ploughing the same infertile furrow he has been on since 2010. He just cannot bring himself to admit that it has gone badly wrong. We believe that conducting the review set out in new clause 10 might just help the Government to take stock and note the error of their ways to date. I therefore urge all Members to support the new clause, not only for the sake of their constituents, but for that of our country’s finances.
Mr Newmark
There is a thing called “chutzpah”. Is the hon. Lady saying that her party bears no responsibility whatsoever for the enormous debt legacy and deficit the country was left with? The Government are making progress. More men and women are in work than ever before and the deficit is down by a third. Yes, the debt is not going down as fast as possible—
Madam Deputy Speaker (Dawn Primarolo)
Order. Mr Newmark, this is not an opportunity for you to make a speech; it was an intervention on new clause 10, and we would like it to be relevant.
Debbie Abrahams
On the hon. Gentleman’s final point, there is more to come in my speech: “And there’s more”, I promise—I never did a good impersonation of Frank Carson. On employment, however, the hon. Gentleman is wrong. Employment is lower than in 2008 and I will come on to that—those are official statistics, so he cannot refute them. At the end of 2010, our economy was growing, yet we have been bumbling along the bottom for three years. We had a double-dip recession and barely escaped a triple-dip recession. Growth has been downgraded at every turn.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I beg to move amendment 57, page 15, line 16, at end insert—
‘(2) Notwithstanding the provisions of paragraph 13 of Schedule 18, that Schedule shall come into force after the Chancellor has conducted, and placed in the House of Commons Library, a review of the operation of the interaction of REITs with the Housing Market. The Review shall consider—
(a) tax measures in place to support house building; and
(b) what steps HM Government have taken to support house building.’.
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss Government amendments 30 to 34.
Cathy Jamieson
I am tempted to start by saying that I am sure this is the part of this afternoon’s proceedings that everyone has been waiting for, and that there is much excitement about the prospect of talking about real estate investment trusts, and that many Members will want to contribute on this very important issue.
Amendment 57 is another amendment that I have regularly described as very mild-mannered. It proposes that the Government must ensure that the impact of their policy is examined and reported on, and that all Members are subsequently able to access information on its impact from the House of Commons Library. In this amendment, we are asking for that information to be examined and made available before schedule 18 is implemented.
The amendment also asks that the Government conduct a review of the interaction of real estate investment trusts with the housing market and that the Government consider in particular measures that are in place to support house building and what measures they have taken to support house building. I suspect that the Minister may well say this is not necessary because everything is always kept under review so far as the Government are concerned, but he will be aware—because he has heard me say this before both in Committee and on the Floor of the House—that I think Governments always tend to say things are under review, but there is a great difference between something that sits on a shelf that may be dusted down and had a look at if someone asks a parliamentary question or writes to a Minister, and something that is a proactive review, whereby policy is examined and modelling work is done and different facts and figures are placed in the House of Commons Library so that we can all benefit from that information. That is really why we have tabled this amendment now. I keep making this plea to the Minister to take up, at least once, the opportunity to look more favourably on such reviews.
In last year’s Finance Bill Committee and once again this year, we have had important discussions about real estate investment trusts, or REITS. For hon. Members who have not followed the Committee musings over the two years or had the opportunity to read in Hansard the record of the excellent contribution from my hon. Friend the Member for Nottingham East (Chris Leslie), who said just a few words about REITs during those deliberations, I shall outline briefly what this is about and why our amendment is so important.
REITs are securities that sell like a share on stock exchanges and invest in real estate directly, either through properties or mortgages. As of September 2012, 34 nations had REIT-like regimes in place. REITs are tax-advantaged vehicles set up to encourage investment in the property sector. I will, of course, be developing that theme, and people may wish to consider my comments in the light of the need for the review. REITs are exempt from corporation tax on profits and gains arising from their property rental business as long as profits are distributed. In that way, taxation of income from property is moved from the corporate level to the investor level. REITs have been given tax advantages to encourage diverse investment in the property sector, where fellow investors can have a different tax status.
We seek to amend a simple, one-line clause introducing schedule 18, which of course contains considerable detail. I am sure the Minister will speak to the Government amendments in some detail in due course, but these provisions would allow UK REIT income derived from investing in other UK REITs to be treated as income of its tax-exempt property rental business. Until now, REITs have predominantly invested in commercial properties—for example, office and retail properties. We had lengthy discussions about that when debating a previous financial Bill. According to Treasury consultation documents published in April 2012, there are more than 20 UK REITs, with a market capitalisation of more than £20 billion, so this is obviously an important issue.
As I said, the Committee discussed in detail why it is important to reform the REIT regime. We did not oppose clause 38 in Committee and we are not seeking to do so now; we are simply seeking this review and reporting back. My hon. Friend the Member for Nottingham East recognised that REITs are important investment vehicles that have changed the investment scene relating to property and those financial instruments. He spoke about that in Committee, also acknowledging that the Government appeared to be proposing relatively sensible pieces of housekeeping on the cash flow and investment profiles of the REITs. He further acknowledged the argument that REITs could make better returns on such cash if they were allowed to invest short term in other REITs. That was seen as promoting greater liquidity in the property market and potentially attracting additional investment income, particularly into the built environment. However, at that time my hon. Friend also raised a number of specific points with the Minister. For example, he asked what the policy’s effect would be on revenues to the Exchequer. He probed further the broader impact on tax treatments and also sought to discover whether HMRC had done any modelling on how the arrangement might affect yields.
My hon. Friend was interested in what the REIT vehicles are investing in and in how they are linked to commercial property arrangements and the circumstances in which residential property REITs exist. In Committee, he also sought further information from the Minister on the impact of REIT arrangements on the residential property market and its prices, given that there has been some concern in various quarters about the Government perhaps looking more at the demand side of the housing market equation than at the supply side.
I shall say a little more about the housing market later, but in Committee my hon. Friend specifically pressed the Minister on whether the Treasury had analysed the general impact of REITs on property prices in the residential sector and whether there was any overlap between the Help to Buy arrangements and investment in REITs.
The Committee also heard during that debate that although the Government originally consulted on the idea of using REITs as a vehicle to support social housing investment, they decided not to take that forward. There was no REIT vehicle arrangement to help with what the Opposition believe to be the priority—that is, of course, dealing with the need for social housing and affordable housing. I shall say something further about that in due course.
To be fair to the Minister, he advised the Committee that only 15 written responses to the Government’s consultation were received and that there was consensus that amending the tax treatment of REITs would generate positive benefits for the industry and his Government’s wider objectives, as he saw them.
In response to the questions from my hon. Friend, the Minister referred to the tax information and impact note that, as he pointed out, states that
“the provision will have a negligible impact on the Exchequer”.
He went on to explain:
“It removes a barrier that has prevented REITs from investing in REITs, which has generally not happened because it has been an inefficient structure. As a result, the cost of the change to the Exchequer will be negligible.”
That is all fair and proper, but his response to the question on the impact on house prices was perhaps less definitive. At that stage, the Minister suggested that the Government could not
“yet assess the impact on house prices as there are not yet any substantial residential REITs on the market, so the answer is that they have not had an impact on house prices.” ––[Official Report, Finance Public Bill Committee, 4 June 2013; c. 318-19.]
Although I can see the logic in that argument—it comes from a factual perspective—my hon. Friend was probing a question on which I invite the Minister to say more today. Has the Minister considered whether he would use some of the extensive resources at his disposal to do some further modelling work, not just to consider what is happening now but to make projections for the future? That would give us some idea of the advantages and disadvantages of the proposal, particularly as regards the impact on house prices, and would allow us to identify the concerns and, if any were identified, to see how they could be mitigated. That was what my hon. Friend was seeking and is part of the reason why we have tabled the amendment once again.
Madam Deputy Speaker (Dawn Primarolo)
Order. Mr Leslie, please ensure that you leave time in the debate, which will end at 8.19 pm, for the Minister and perhaps some Back Benchers as well.
Chris Leslie
I will be very brief. I want first to pay tribute to the hon. Member for East Worthing and Shoreham (Tim Loughton). I have to hand it to him: he has got the Government jumping around and on the run on this issue. However, I am afraid that the Opposition are not convinced that the millions of people who are separated, divorced, or indeed widowed, would benefit from this policy, let alone those married couples where both partners work. I am all in favour of marriage, and Mrs Leslie might at first glance like the idea of the £150 give-away, but because she works and earns above the personal allowance, it would not be of benefit in our circumstances.
Chris Leslie
I am sorry that we did not have the opportunity to consider this matter on Report. I think it was given some consideration in Committee. I think we are still waiting for the Government’s review to come to fruition—I am happy to give way to the Minister if he wants to confirm that—and we need to see the evidence. If we feel that any changes in tax and in spending are necessary, we want to spell out clearly where we would get the resources to pay for them. The fact that the Government have ignored not just our advice—[Interruption.]
Madam Deputy Speaker (Dawn Primarolo)
Order. Can we stop the chuntering from Front Bench to Front Bench while someone is trying to speak? Minister, you were listened to in silence and with proper courtesy, so it would be good if you showed that same courtesy to the shadow Minister. Perhaps Ministers and shadow Ministers could pay attention rather than shout at each other.
Chris Leslie
Madam Deputy Speaker, I am grateful for your protection from the sedentary chuntering of Government Members. They ignore anything they hear, not just from the Opposition but from the International Monetary Fund, which has pointed out that this has been the slowest recovery for a century. There has been barely 1% growth since the 2010 spending review, and the Chancellor predicted there would be 6% growth by now. Living standards have fallen and many families are finding it difficult to make ends meet. Life is much harder.