Oral Answers to Questions
Debate between Debbie Abrahams and David Gauke(5 years, 5 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The Lord Chancellor and Secretary of State for Justice (Mr David Gauke)
The Government remain fully committed to the convention, and we assess the UK’s implementation of article 13 of the convention as part of the reporting process to the UN. The latest report to the UN was this year. To improve access to justice for people with disabilities, we are investing £1 billion in reforming the Courts and Tribunals Service, to continue to ensure that we have a modern justice system that is accessible to all. We are also increasing the use of technology to benefit the mobility impaired, who may have greater opportunity to participate in court and tribunal services without needing to travel to a hearing centre.
Debbie Abrahams
Article 13 of the UN convention on the rights of persons with disabilities, to which we are a signatory, goes well beyond access to and the right to a fair trial and includes all aspects of democracy, rule of law and the effective administration of justice for all people. Given that disabled people have been disproportionately affected by cuts to legal aid for social security cases, and that hate crimes against disabled people are on the rise and employment discrimination is increasing, when will the Justice Secretary ensure that we fulfil our commitments under article 13?
Mr Gauke
We do fulfil our commitments, and I have to point out what we do as a country. We are proud of our record in supporting disabled people, including through the landmark Disability Discrimination Act 1995, and we have some of the strongest equalities legislation in the world, including the Equality Act 2010.
Oral Answers to Questions
Debate between Debbie Abrahams and David Gauke(5 years, 6 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Given the very lucrative public contracts given to Atos and Capita, and the fact that they are clearly failing—71% of assessments for personal independence payments are overturned in the upper courts—what discussions has the Justice Secretary had with his counterpart in the Department for Work and Pensions about the imposition of a fining system? Atos and Capita are not only blocking up the courts, but treating disabled people appallingly.
Civil Liability Bill [Lords]
Debate between Debbie Abrahams and David GaukeTuesday 4th September 2018
(5 years, 7 months ago)
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Mr Gauke
In combination with the other measures that we are taking, I think that we are really able to address the problem that my hon. Friend has so eloquently highlighted and that she has personal experience of. What she has highlighted is that we do have a problem and that we do need to take action, and that is exactly what this Bill does.
Debbie Abrahams
I am very grateful to the Secretary of State. I have real concerns about the reduction again in access to justice. The group Access to Justice has highlighted that, each year, people injured in road traffic accidents will be denied access to legal advice if they want to go to court to claim for their injuries. How can he guarantee that that will not happen?
Mr Gauke
We have a system of small claims—by and large, these are very straightforward claims. We want to ensure that support is there so that people are able to bring the claims in person. As I have said, these are simple claims and it is right that we also take action to address some of the concerns that we have. I shall set out more detail in my remarks, but I believe that we have the balance right in terms of the increase to £5,000.
The Bill provides that the tariff will be set in regulations to be debated via the affirmative procedure by Parliament following Royal Assent. We are committed to tabling an amendment in Committee that will require the Lord Chancellor to consult with the Lord Chief Justice before making those regulations. The judiciary will have discretion to increase the compensation payable in exceptional circumstances and, after listening to the views in the other place, we have amended the Bill to ensure that overall compensation levels in the tariff are reviewed at least every three years. We listened carefully to the comments made by the Delegated Powers and Regulatory Reform Committee in the Lords. We accepted its recommendation and tabled an amendment to include a full definition of whiplash injury in the Bill in order to remove any ambiguity about what that constitutes in law.
The Government’s reform programme also includes measures—not included in the scope of this Bill—to increase the small claims track limit for road traffic accident personal injury claims to £5,000, and for all other personal injury claims to £2,000. As these claims are generally not complicated, they are suitable to be managed in the simpler, lower cost small claims track. This route is designed to be accessible to litigants in person without the need for a lawyer, although claimants may still seek legal representation if they wish. To support this, the Government are working with a wide stakeholder group including the insurance industry, claimant solicitor representative groups and consumer groups in order to design and deliver a simple-to-use online service to enable the vast majority of those claiming for low-value road traffic accidents who may well choose not to be represented by legal advisers to receive help and guidance to manage their cases through to conclusion.
The service will be designed for those with no legal advice or training, and will be as simple to use as possible to ensure that the claimant journey is as smooth as it can be. Raising the small claims limit for these RTA cases to £5,000 will work to control their costs, acting as an incentive for insurers to challenge, rather than settle, those cases that they believe to be without merit. This is vital to changing the unhealthy culture that sees whiplash claims as a way to make easy cash. The reality is that, as insurers are forced to offset the cost of the abuse by raising premiums, fraudsters are simply taking money out of the pockets of honest motorists.
Universal Credit
Debate between Debbie Abrahams and David Gauke(6 years, 5 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I thank the Secretary of State for giving me early sight of his statement. There was little surprise when the Government announced reforms to their embattled universal credit programme in the Budget yesterday following months of Labour campaigning, a unanimous defeat on the Opposition-day motion and discontent across the whole House about the rising debt, arrears and even evictions that the social security reforms are causing to so many constituents. We of course welcome any steps to improve the programme, not least the small reduction in the so-called long hello, meaning that those on the lowest incomes will now only be expected to wait five weeks for support to arrive, compared with six under the current design.
Before I address the detail of today’s announcement, let us step back and look at the big picture. The Government introduced universal credit with three promises: to reduce child poverty by 350,000; to simplify the social security system; and to ensure that work always pays. As the mounting evidence has shown, universal credit is not living up to those ambitions. Now it is our task see whether the Chancellor’s announcements meet the Government’s own tests. First, the most immediate matter: the reforms announced today will not be introduced until next year and will do nothing for the tens of thousands who are stuck in the six-week waiting period over Christmas. Anyone who has tried to claim universal credit since Tuesday 14 November will not get their first payment until after Christmas day. That will mean tens of thousands of families going without over the festive period.
Secondly, we are concerned that the Government have decided to remove only a single week from the waiting period, taking it down to five weeks. Under existing Department for Work and Pensions guidance on alternative payment arrangements, claimants should be offered the option of being paid every two weeks, reflecting their previous employment patterns. A report published by the Resolution Foundation has found that 58% of those moving on to UC from work were paid more regularly than monthly. Can the Secretary of State tell us whether there is capacity in the system to offer claimants more regular payments if the Government do not change the payment period to fortnightly as opposed to monthly?
There is no change to the monthly assessment period that is particularly affecting the self-employed, and I want to press the Secretary of State on why that is the case when the current arrangements are clearly so punitive. In relation to the advance payment, we have concerns over the details of the extended repayment period. What additional debt does the Secretary of State expect the average claimant to incur? What does his Department predict will be the average monthly repayment amount deducted from a claimant’s income? Our position remains the same: the social security system should prevent people from getting into debt, rather than making matters worse. It is contrary to the ambitions of universal credit that instead of alleviating poverty, it is going to cause it. It is also an insult to ask people who are unable to make ends meet under the Government’s punitive reforms to bear even more risk, stress and concern.
The Government’s housing benefit proposals are not due to be introduced until April next year, nearly six months after the Budget. Support for rent will be available for the first two weeks of the five-week period before claimants receive their first payment. That will leave a three-week gap, which is still too long for many people to cope with. It will lead to arrears and even evictions, as we have said already seen from the programme.
Finally, this announcement did nothing to restore the key ambition that work will always pay. The swingeing cuts to UC have not been addressed, condemning more disabled people, children and their families to poverty. Taken together, these announcements equate to putting in £1 for every £10 that the former Chancellor cut. In a further nonsensical approach, he has downgraded planned increases to the national living wage, leaving a full-time worker on the minimum wage £900 a year worse off by 2020. Why have the Government failed to give our workers the pay rise they deserve? The Government seem content to leave us with 17 years of pay stagnation.
In summary, these measures for UC are not enough. They must be brought forward, amended and added to. We stand ready to work with the Government to make the necessary changes. Failing that, they should stand aside and let a Labour Government get on with the job.
Mr Gauke
Where to start? Let me begin with the point about people having to wait five weeks. People do not have to wait five weeks; they can get a payment within five days. As for the dismissal of an interest-free advance as immaterial, that is just completely unreasonable and wrong. An advance enables people to have control over when they receive their payments. We are making it more generous and giving people a longer period over which to repay it, but we are also making it more flexible by enabling people to get a larger advance if that is what they want and need.
The hon. Lady suggests that we should move towards paying fortnightly, saying that the system should reflect how people’s previous employment packages worked, but only 3% of people in employment are paid fortnightly. If we are to have a system that has the flexibility to cope with people who are out of work moving into work, a monthly approach is absolutely sensible, but we need flexibility in the first assessment period, so that people can get access to money earlier. That is exactly what we are delivering.
The approach of the Opposition Front-Bench team is not one of constructive engagement. They are a roadblock to welfare reform. They have sought to stand in the way of delivering universal credit—[Interruption.] They have just asked for a pause. I am unsure whether we heard a request for a pause from the hon. Lady today, but I would be fascinated to know what they mean by a pause. Do they mean not rolling universal credit out to any new jobcentres, or do they mean stopping any new claimants going on to universal credit at all? I am not quite sure which it is.
Oral Answers to Questions
Debate between Debbie Abrahams and David Gauke(6 years, 5 months ago)
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Mr Gauke
My hon. Friend is absolutely right. This is why we are recruiting work coaches up and down the United Kingdom to provide the personalised support that people need to help them get into work. I come back to my experience of meeting work coaches in jobcentres up and down the country. They believe that they have a system in place that is helping them to do more to transform lives, and that is hugely important.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
One of the original objectives of universal credit was to reduce child poverty. In 2010, the Government said that UC would reduce child poverty by 350,000. That figure was revised to 150,000 in 2013, but last year, Ministers failed to produce a figure in answer to a question from my hon. Friend the Member for West Ham (Lyn Brown). What is the Government’s current estimate of how many children will be lifted out of poverty as a result of universal credit?
Mr Gauke
Universal credit gives people a better opportunity to work, and it gives parents, including single parents, greater support with childcare. I come back to the example I gave the House a moment ago. Someone who had previously been on income support and unable to get help with childcare can now get that help and get on to the employment ladder, thanks to universal credit. That is what universal credit is delivering.
Debbie Abrahams
That was a really disappointing answer. As we have already heard, the Child Poverty Action Group published data last week predicting that 1 million more children will be pushed into poverty as a result of universal credit cuts, 300,000 of whom will be under the age of five. Another objective of universal credit was always to make work pay. Given that four out of 10 people on UC are in work and will be on average £2,600 a year worse off, when will the Government admit that UC is not fit for purpose or fit to meet the challenges of a new labour market and stop its roll-out?
Oral Answers to Questions
Debate between Debbie Abrahams and David Gauke(6 years, 6 months ago)
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Mr Gauke
My hon. Friend makes a very good point. There is an obligation on social landlords, given the source of income through universal credit, to work constructively with tenants. If a tenant has a reasonable expectation of receiving housing costs as part of their universal credit payment but has not yet received them, the landlord should not take action and the tenant should not face risk of eviction.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
As we have heard, universal credit is causing debt, rent arrears, and even homelessness up and down the country, with many claimants already in work. Given that housing associations are saying that over 80% of rent arrears are down to UC, and that the Mayor of Greater Manchester is predicting that rough sleeping will double as a result of UC roll-out, how many more families does the Minister estimate will be made homeless this winter as a result of the Government’s refusal to pause UC roll-out?
Mr Gauke
Let us be clear: no one needs to go six weeks without financial support when there is a system of advances in place. I make the point to all right hon. and hon. Members that if they are aware of constituents who have not received an advance, they can make it clear to them. Let us be realistic: the fact is that we are now moving towards a welfare system that does not put in place barriers to work and does enable people to make progress. It is no good Labour Members saying they are in favour of the principles, but then trying to obstruct the delivery of a reform that will give 250,000 more people a job.
Pensions
Debate between Debbie Abrahams and David Gauke(6 years, 9 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I thank the Secretary of State for his statement, and for arranging to let me have sight of it 30 minutes ago.
Yesterday, the renowned expert on life expectancy, Professor Sir Michael Marmot, described how a century-long rise in life expectancy was
“pretty close to having ground to a halt”
since 2010, when this Government began their failing austerity programme. Last week, evidence from Public Health England showed how deep inequalities in healthy life expectancy remain, both regionally and between different groups in our society, including women, disabled people and black and minority ethnic groups. It is therefore astonishing that today this Government choose to implement their plans to speed up the state pension age increase to 68.
Most pensioners will now spend their retirement battling a toxic cocktail of ill health, with men expecting to drift into ill health at 63, five years earlier than this proposed quickened state pension age of 68, and women expecting to see signs of ill health at 64. This national picture masks even worse regional inequalities. Men who live in Nottingham are likely to suffer ill health from the age of 57, a full 11 years earlier, under this Government’s shortened plans, than a state pension age of 68. The Government talk about making Britain fairer, but their pensions policy, whether on the injustice that 1950s-born women are facing or on today’s proposal to increase the state pension age to 68, is anything but fair.
The Government claim that it is young people who will have to bear the burden of the state pension, but in fact it is the young who have to bear the burden of the cuts that they are facing already—cuts to education, housing and working age social security—as well as the Government’s endless extensions of the state pension age. Sadly, like much of the Conservatives’ policy platform, their approach to this matter appears to have changed little since their election manifesto. At that time, they promised to
“ensure that the state pension age reflects increases in life expectancy, while protecting each generation fairly.”
How does today’s statement meet the promise made in the manifesto, given the evidence on life expectancy that we have seen in the past week? What conversations has the Minister had with his new friends in the Democratic Unionist party, whose manifesto promised advocating
“for the interests of our older people”?
Perhaps, as the Pensions Minister astonishingly suggested in a debate earlier this month, the Government will force people in their mid-60s to seek out an apprenticeship. A constituent of mine, hearing that suggestion, visited our local jobcentre in Oldham, only to find that the adviser had no idea of any apprenticeship support or Government employment support available to a woman of her age. The Pensions Minister’s position was not one shared by Mr Cridland, who suggested that the social security system must be able to support those who find themselves unable to work. Perhaps Mr Cridland was unaware of the seven years of slash-and-burn policy on our social security system; the so-called “safety net” is increasingly inadequate, driving up pensioner poverty by 300,000.
Labour wants a different approach. In our manifesto, we committed to leaving the state pension age at 66 while we undertake a review into healthy life expectancy, arduous work and the potential of a flexible state pension age. We want an evidence-based approach to build a state pensions system that brings security for the many, not just the privileged few, so that we can all enjoy a healthy retirement.
Mr Gauke
Even by the standards of the Labour party, its approach to the state pension age is reckless, short-sighted and irresponsible. When the evidence in front of us shows that life expectancy will continue to increase by a little over one year every eight years that pass, fixing the state pension age at 66, as advocated by the Labour party, demonstrates a complete failure to appreciate the situation in front of us. Compared with the timetable set out by this Government, Labour’s approach will add £250 billion to national debt. Let us put that in context: it is almost twice as much as was disbursed into the financial sector following the financial crisis. Let us put it another way: spending in 2040 on the state pension would be £20 billion a year higher under Labour’s plans than under the plans we are setting out—that is almost twice the Home Office budget. Where on earth is this money coming from? Even the—[Interruption.]
Tax Avoidance and Evasion
Debate between Debbie Abrahams and David Gauke(8 years ago)
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Mr Gauke
I want to make a few more points. Even before last week, HMRC had already received a great deal of information on offshore companies, including those in Panama and including Mossack Fonseca. This information comes from a wide range of sources and is currently the subject of intensive investigation. HMRC has asked the International Consortium of Investigative Journalists, the BBC and The Guardian to share the data they have received from last week’s leaks. Clearly, it is important to examine the data very closely, which is why we are providing new funding of up to £10 million for an operationally independent cross-agency taskforce to analyse the Panama papers and take action on any wrongdoing and regulatory breaches. The taskforce will include analysts, compliance specialists and investigators from across HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority. Between them, those agencies will have some of the most sophisticated technology, experts and resources to tackle money laundering and tax evasion anywhere in the world. The taskforce will report to my right hon. Friends the Chancellor of the Exchequer and the Home Secretary on the strategy for taking action, and we will update Parliament later this year. I stress that the taskforce will have total operational independence. If it finds people to prosecute, it will prosecute them. If it finds information about illegality, it can act on it. In addition, the independent FCA has written to financial firms asking them to declare their links to Mossack Fonseca. If the FCA were to find any evidence that firms have been breaking the rules, it, too, has strong powers to take punitive action.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The Minister mentioned last year’s Budget and the £800 million for non-compliance issues. However, I understand from his answer to a written question that only £266 million of that has been allocated specifically to address tax fraud. How much of that will be spent on dealing with tax evasion?
Budget Changes
Debate between Debbie Abrahams and David Gauke(8 years, 1 month ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Gauke
This was an excellent Budget for education; it was an excellent Budget for the next generation. If we are going to have the prosperity and economic security the country wants, we have to have a world class education system. That is exactly what the Government are in the process of delivering.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Is it fair to make £4.4 billion of cuts to disabled people through the personal independence payment when they are twice as likely to live in poverty, and at the same time give tax breaks in corporation and capital gains tax?
Mr Gauke
As I say, there will be a statement on personal independence payments later this afternoon. In the past six years, we have seen a significant increase in real-terms spending on the disability living allowance and PIP. We also need to ensure we have a productive economy that creates wealth in the first place. I make no apologies for our wanting to have a competitive tax system.
Oral Answers to Questions
Debate between Debbie Abrahams and David Gauke(8 years, 9 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
1. What discussions he has had with the Chancellor of the Exchequer on the effect on claimants in Scotland of changes in entitlement to working tax credits and child tax credits.
The Financial Secretary to the Treasury (Mr David Gauke)
The Chancellor has regular discussions with Treasury colleagues, as well as with the rest of the Cabinet, on a wide range of topics. The changes to tax credits are at the centre of the Government’s intention to move to a higher wage, lower tax and lower welfare society.
Debbie Abrahams
The independent Institute for Fiscal Studies has shown that the poorest 20% of the population will lose proportionately more than any other income group as a result of the benefit and tax changes. Given that International Monetary Fund analysis has shown that an increase in income to the poorest 20% stimulates growth, what is the Minister’s assessment not just of the increase in poverty in Scotland but of the stifling of growth?
Tax Credits (Working Families)
Debate between Debbie Abrahams and David Gauke(8 years, 9 months ago)
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The Financial Secretary to the Treasury (Mr David Gauke)
A fundamental part of this Government’s long-term economic plan is to support working people at every stage of their lives. We have a record we can be proud of: we are providing our children with the best start in life; we are helping millions of people to secure their first job; we are allowing people to keep more of the money they earn; we are helping families get on the property ladder; and we are providing our pensioners security in their old age. We can do that only on the back of a strong, stable and growing economy. This is the Government who have delivered sustained growth—the fastest in the G7 last year. This is the Government who drove income inequality down, reduced pensioner poverty to record low levels and, according to data released earlier this week by the Office for National Statistics, have seen living standards rise by 3.9% on the year. We now need to finish the job. We need to keep our economy secure; to run a surplus; to start paying down our debts; and to put in place the stable future that this country’s citizens voted for.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
How does what the Minister has just said marry up with the International Monetary Fund research showing that taking money from the poorest 20% in society actually stifles growth? IMF figures show that if we invest in the bottom 20%, there would be growth of 0.38%.
Mr Gauke
The hon. Lady quotes the IMF, but this is the same IMF that has praised this Government’s record in turning round the economy. The head of the IMF said that she shuddered to think what would have happened had we not got to grips with the deficit. The reality is that if we want to help every part of society, which is what this Government want to do, we need to make sure that we have a strong economy, and that is what this Government are delivering.
Mr Gauke
My hon. Friend is right on both points. It was only because of the difficult decisions that we took that we were able to restore credibility to the UK as an economy and that we were able to make the progress that we made. Labour said that it is committed to closing the deficit. It voted for the Charter for Budget Responsibility, and the shadow Chancellor told us at the weekend that the Government should run a surplus in normal years. It is therefore disappointing that the Opposition have not yet set out how they will do so, because if they continue to oppose finding savings in the welfare budget they will have to explain whether they would borrow more, tax more or cut departmental spending more.
Debbie Abrahams
Does the Minister consider it a success that the debt to GDP ratio, according to House of Commons Library figures, is running at more than 80% whereas after recapitalising the banks and the biggest global crash in history it was running at only 60%? Is that a success or not?
Mr Gauke
Let me put this as simply as possible. The debt is essentially the accumulation of deficit and for the past five years every measure that the Government took to reduce the deficit was opposed by Labour. Indeed, Labour’s economic argument—its whole case—was that we were going too far, too fast in reducing the deficit and that we should have a looser fiscal policy. A looser fiscal policy means borrowing more. If we borrow more, the debt will rise more quickly. The hon. Lady cannot have it both ways. She can argue that we should have been prepared to borrow more and to allow the debt to rise because that was a price worth paying, but she cannot then turn around and say, “We want the debt to be lower, even though our policies called for higher debt.”
Taxation of Pensions Bill
Debate between Debbie Abrahams and David Gauke(9 years, 5 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Minister explain why there has been a change in terminology from “advice”—which the Chancellor mentioned in his introduction of the proposed measures—to “guidance”, which, unlike advice, legal protections are not associated with?
Mr Gauke
We made it clear, in the documentation that was published at the time of the March Budget, that the legal status of the support we have provided is “guidance”. That means that there is not a recommendation of a specific product; none the less, that support will be hugely helpful for those who will face choices. It is right that the role that we play—or facilitate—is about providing support in the form of guidance, rather than making recommendations of particular products.
I would like to provide Members with an overview of the different parts of the Bill. At Budget 2014, the Chancellor announced that everyone with a defined contribution pension could take it as they wished from age 55, and would no longer be subject to drawdown limits or income tests before being able to take their money flexibly. The current system denies people flexibility at the point of taking their pension. For those with the smallest and largest pension savings, there is the option to take their pension as cash, but for everyone else there are considerable restrictions. They have two main options: purchase an annuity or enter capped drawdown. Capped drawdown limits how much someone can take out each year to an amount calculated by reference to the amount they might have received from an annuity purchased with their fund.
Flexible drawdown already lets those with very high levels of savings to take their money however they want, taxed at their marginal rate, if they can prove that they have a guaranteed pension income for the rest of their life of at least £12,000. The Government have already reduced that from £20,000 to give many more people flexibility, but the first main change provided for in the Bill goes much further, making unlimited drawdown available to anyone with a defined-contribution pension and removing the limits on what can be withdrawn from those funds.
The Bill also ensures that existing drawdown funds can, if the individual wants, be converted to flexi-access drawdown, so that those currently in capped drawdown will be able to benefit too. The aim of the changes is to give all the 320,000 people who retire every year with defined contribution savings greater choice about how to access those savings, regardless of how big their pension pot is. The changes will take effect from 6 April 2015.
Some people think that this change—allowing everyone access to their own hard-earned money—will cause people to spend recklessly what they made sacrifices to save. The Government do not agree. Those who have saved the money over a lifetime should be trusted to make their own decisions about how best to use it to provide themselves with an income in retirement. Through the guidance guarantee, we are making sure that customers have access to impartial guidance on how to make the most of their money.
Mr Gauke
I would like to make a little progress. That brings me to the second main change in the Bill, which is to make annuities more flexible. Current tax legislation caters for two broad categories of retirement income: lifetime annuities and drawdown. As I have set out, we are making drawdown much more flexible. Let me explain how we are doing the same for annuities.
We think annuities will still be the right product for many people, as they provide the valuable security of a guaranteed income for life. The current requirements for a lifetime annuity, however, lead to an inflexible and restrictive product, and there is a clear demand for more flexible ways of getting income from one’s pension pot. We want these reforms to stimulate competition and innovation in the retirement income market. We want providers to innovate and create new products that will more closely reflect the changing needs of their customers. We have consulted extensively with industry on the changes that it would like us to make to enable this kind of innovation. The Bill will deliver those changes by allowing annuities to decrease, and by removing the 10-year guarantee period for guaranteed annuities. That gives significantly more flexibility to providers to offer products that meet individuals’ needs more closely. Those changes will apply to annuities sold after 6 April 2015.
The third major change in the Bill is a new method by which people can access their pension. Currently, people who want to take their pension as cash have to take their whole tax-free lump sum—25% of their fund—and place the other 75% in a drawdown fund. Any money they then draw down is taxed at their marginal rate. The Bill will introduce a new option by giving individuals the flexibility to take one or more lump sums from their pension fund—with 25% of each payment tax-free and 75% taxed at their marginal rate—without having to enter into drawdown. This lump sum is known as an uncrystallised funds pension lump sum, or an UFPLS. [Interruption.] It is perhaps not the most elegant of names, but try doing better with “uncrystallised funds pension lump sum”. These payments can be taken from funds that are uncrystallised—that is, have not yet been accessed. It will be open to schemes to provide this option from 6 April 2015 onwards. This does not change the amount of tax people pay on their pension, but it does provide them with extra flexibility and further choice about when and how to access their savings in a way that suits them.
I want highlight changes that we are making through the Bill to ensure that these reforms, which are intended to give individuals more choices about their income in retirement, are not exploited for tax purposes. If the Government were to take no action, an individual over the age of 55 could divert their salary each year into their pension, take it out immediately and receive 25% of it tax-free, thus avoiding income tax and national insurance contributions on their employment income. That is not the intention of the reforms.
The Government spend a considerable amount a year on pensions tax relief and have a responsibility to ensure that the money is used for genuine pension saving. Under the current system, individuals in flexible drawdown have no annual allowance. They are not entitled to tax relief on anything that they contribute to their pension after they have accessed it flexibly. Extending this rule under the new system would be disproportionate and would disadvantage average savers. We are in an era of much more flexible retirement. An individual might access their pension flexibly and then decide to return to work, or access it while working. They might still want to save into a pension. They might be automatically enrolled into a pension and be subject to a tax charge on the amount contributed. If we kept the current system, there would be a strong incentive to opt out of auto-enrolment.
Instead of having no annual allowance, individuals who access their pensions flexibly will, under the new system, have a lower annual allowance of £10,000, which will apply to their defined contribution savings. This approach allows people the flexibility to contribute to their pension even when they have flexibly accessed their pension rights. At the same time, it ensures that individuals do not use the new flexibilities to avoid paying tax on their current earnings. It will prevent those with the means to divert large sums into pensions from doing so, while allowing the vast majority of individuals to continue to save. The Government have worked very closely with industry to develop this measure, and will continue to do so to ensure that it remains fair and proportionate.
Mr Gauke
The Office for Budget Responsibility will return to the issue of the forecast at the time of the autumn statement. Mr Greenwood’s evidence featured some eye-watering numbers, but they were based on extraordinary assumptions about behaviour. All the changes resulting from the reforms that we have announced since the Budget will be announced in the autumn statement in the usual way. We certainly do not recognise some of the numbers that have been floated in relation to cost, but the numbers have not yet been certified by the OBR, so I cannot give the hon. Gentleman the answer that he seeks at this stage. Of course we have been mindful of the impact on the Exchequer, but we believe that our proposals will not put it at risk of losing substantial sums. As I have said, we are not preventing people over 55 from drawing down part of their pensions while continuing to make contributions, or retaining the flexibility to do so. We might have closed off that option, but we decided not to.
Debbie Abrahams
The Minister is indeed being generous with his time. May I ask when the Treasury is likely to publish its assessment of the risks associated with the delivery of this project? It has obviously identified a number of such risks, and it would be helpful for everyone to see the assessment.
Mr Gauke
A number of elements are involved. We have already estimated the costs resulting from the Budget announcement, and, as is customary, we will update the House about the cost of further changes that we have made in the autumn statement. We need to take account of a number of policy announcements that have been made since the Budget. The information will be available once the numbers have been certified by the Office for Budget Responsibility—that is, at the time of the autumn statement.
The last change that I want to explain is the change that the Government are making to the tax charges on pensions when someone dies. We will table amendments in due course to enact those changes in detail, but the Bill currently provides for certain lump sums to be paid from pension schemes when someone dies under the age of 75. It ensures that when someone dies with money in a drawdown account before reaching the age of 75 and a lump sum is paid from it, that sum can be paid tax-free. It also ensures that if someone dies with a pension after reaching the age of 75, the tax charge on a lump sum paid from it is reduced from 55% to 45%, and it reduces the tax charge when someone over 75 receives a serious ill-health lump sum to 45%.
The Bill makes a number of other changes, which I will summarise briefly. They include the introduction of a permissive statutory override, which will allow schemes to make the types of payments set out in this Bill without the need to change their scheme rules; provisions to ensure that the new system is reflected in the rules governing overseas schemes involving UK tax-relieved funds; allowing payments from guaranteed annuities to be paid to beneficiaries as a lump sum if they are under £30,000; and measures to ensure that people cannot gain an unintended tax advantage by becoming temporarily non-resident.
Our pension reforms have been extensive and fundamental. We have taken steps to provide a solid foundation for private saving by reforming the state support that is on offer and introducing automatic enrolment. However, it is also vital to give people an informed choice, and the Bill introduces welcome changes to ensure that that happens. It makes the tax system fairer by ensuring that people have more choice in regard to how they access their savings, while also preventing people from exploiting the new flexibility in order to gain unintended tax advantages. At the heart of it are three key principles: responsibility, fairness, and individual choice. I commend it to the House.
Finance Bill
Debate between Debbie Abrahams and David Gauke(9 years, 9 months ago)
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Mr Gauke
Again, I am delighted to hear that. My hon. Friend lobbied us and made representations on behalf of his constituents for the inclusion of circuses. As a consequence of the consultation process and listening to the points raised by my hon. Friend and others, I am delighted that circuses will benefit from this tax relief.
Debbie Abrahams
It is important to support this area, but would the Exchequer Secretary like to comment on the National Audit Office and Public Accounts Committee’s recent reports criticising the Government and Her Majesty’s Revenue and Customs for not properly monitoring the tax reliefs in this area?
Mr Gauke
The Government will respond formally to that, but I believe that well-designed, well-focused and targeted tax relief, which is what we have, can help the economy grow and help particular sectors. Indeed, I am delighted that two examples have just been provided to us. This Government have successfully lowered rates, including corporation tax, which we have debated this afternoon, and, if particular sectors can be supported by a well-targeted tax relief, we should do that. We believe that, overall, our tax system is working to enhance the UK’s competitiveness. This Government have a good record in the creative sector in particular, and I am delighted that, through new clause 5 and new schedule 4, that will continue.
New clause 6 amends the list of excluded activities in the tax-advantaged venture capital schemes—the seed enterprise investment scheme, the enterprise investment scheme and venture capital trust schemes—so that a company whose trade consists substantially of the generation of electricity or heat that attracts renewable obligation certificates or payments under the renewable heat incentive will no longer qualify for investment under those schemes, with limited exceptions.
As in the case with the feed-in-tariff exclusion, community interest companies, community benefit societies, co-operative societies and Northern Irish industrial and provident societies will not be affected by the restrictions. The exceptions for co-ops will also apply to European co-operative societies, in line with the changes being introduced as part of the “taxation of co-operative societies” amendment, which aims to align and update all references to industrial and provident societies across the Taxes Acts. The restriction will also not apply where the electricity is generated by anaerobic digestion or by hydropower, nor where heat is generated, or gas or fuel produced, by anaerobic digestion. The measure will apply in respect of both UK ROC and RHI schemes and overseas equivalents. It will make the tax-advantaged venture capital scheme better targeted and effective in supporting small and growing, higher-risk businesses.
Amendments 5 and 6 make technical changes to clause 73, which will restore sense and fairness to air passenger duty by reforming the destination banding and introducing a simple to understand two-band system. As the House will know, we have devolved the power to set rates on direct long-haul flights from Northern Ireland to the Northern Ireland Assembly, which set the rates at £0 in the Air Passenger Duty (Setting of Rate) Act (Northern Ireland) 2012. As the structure of the tax, including the number and composition of the destination bands, remains a matter for the UK—the Northern Ireland legislation refers to the UK legislation—the Northern Ireland Executive have asked us to make the consequential amendments needed to their legislation so that it aligns with the UK legislation.
Finance Bill
Debate between Debbie Abrahams and David Gauke(10 years, 9 months ago)
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Debbie Abrahams
No, I will not give way now, as I want to carry on with my argument. There may be an opportunity later.
Amazingly, just a few months after the Chancellor delivered his autumn statement, he had to halve his estimates for growth this year. We will be borrowing £245 billion more than planned since 2010, and as we have heard, the deficit will not be eradicated as the Government promised in 2010. In spite of being told how important austerity was for economic confidence and low interest rates, the triple A rating has been downgraded by not one but two credit rating agencies. The Government tried to blame everybody except themselves and said that austerity was the only way, only to receive an embarrassing rebuke from the chairman of the Office for Budget Responsibility who said that public spending cuts wiped 1.4% off growth last year. The International Monetary Fund followed suit shortly afterwards.
Should anyone wish to know how we relate to the rest of the world, we come 18th in the G20, due to our appalling economic performance. Even after the IMF revised its multiplier, the Chancellor remains steadfast. I could go on—[Interruption.] I am tempted. Our rate of inflation is way above the Bank of England’s 2% target. Employment is lower now than in 2008 and one in 10 people are underemployed. Whatever economic indicator we use, the Government are failing. By all accounts, the public are now starting to see that. Earnings are falling in real terms by 2%, and a recent poll showed that four out of five people feel that austerity is not working. As we have heard, the Chancellor is resolute and sticking fast. The Chancellor and the Prime Minister have also tried to pass this off as everybody else’s fault, but we need to examine the arguments put forward to explain why we are in this mess.
The previous Labour Government have been blamed, but that ignores the fact that this was a global financial crisis. We should remember that at the time the Chancellor and the Prime Minister failed to suggest that our financial institutions required more regulation. The Chancellor has tried to suggest that it is a public spending issue, but public spending as a percentage of GDP was 36.5% in 2007, compared to 42.5% in 1997. In other words, the Labour Government did repair the roof when the sun was shining. We brought down the deficit when we were in power, and it is outrageous to suggest anything else. After injecting funds into our banks, public spending rose to 60% of GDP, but the City’s debt was 245% of GDP. For this Government to pass the crisis off as a sovereign debt problem is absolutely outrageous. This was a problem in our financial institutions that they said nothing about when they were in opposition. They are still failing to grapple with this major issue. They have not managed to improve it.
The Government are trying to distract attention away from our financial institutions and blame what they refer to as shirkers and scroungers. Their attack on the social security budget is outrageous. We must not forget that 43% of social security is paid to older people through old age pensions. This attack is on our pensioners, and that is disgraceful. Growth of just 1% a year since 2010 would have generated £335 billion more. If growth had been 2% a year, that figure would have been £551 billion. Many economists have said that the lack of growth as a result of the failure of economic policy may not be recoverable.
On the areas taking the biggest hits in the spending review—I have just alluded to the Department for Work and Pensions—we must not forget local government. What will the cuts hit? They will hit our social care budget—the budget for the most vulnerable in our society. That is outrageous. Although the NHS budget has been protected, the Institute for Fiscal Studies predicts that job losses are likely to continue. We have already seen 300,000 people lose their jobs in the public sector. It is estimated that another 300,000 will lose their jobs in the next two years. The indirect effect of cuts to work and pensions, local government and the NHS will be to hit our pensioners and increase the number of children growing up in poverty, which will affect the rest of their lives, to more than 1.1 million. We are also seeing, for the first time in decades, life expectancy coming down in certain areas. I could go on, but I will finish there.
Mr Gauke
New clause 10 asks for a review of the impact on tax revenues of the measures set out in the 2013 spending review. I note that the Labour party again seems to be interested in discussing matters that are not in the Bill as such. Rather than discussing the Bill, Labour Members want to discuss the spending review—although given how the spending review went for the Opposition, they might have done better to spend last week debating the Finance Bill.
Let me explain briefly why new clause 10 is unnecessary. The House will be aware that in 2010 this Government created the Office for Budget Responsibility in order to ensure that the impact of Government policies is independently scrutinised. The OBR routinely publishes economic and fiscal outlooks, which provide a transparent and independent assessment of the impact of Government policy on the public finances, including receipts, and the economy. The impact of the policies announced in the 2013 spending round will be reflected in the OBR’s autumn forecast, which will be published alongside the autumn statement, so there is no need for a parallel review, which is what new clause 10 would involve.
We have had an interesting debate about the measures in the spending review. At times I have been somewhat confused about the Opposition’s position. I had understood that they accepted the spending review envelope, although it certainly did not sound like it from what the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) said. She described local government spending cuts as “devastating”, so we assume that she opposes that measure. She was not quite clear about where further cuts would be made to compensate for that, but no doubt she will enlighten us in future.
We also heard the Opposition make the argument that we should take steps to boost growth now, rather than focusing on 2015-16. That was not an endorsement of changes such as planning deregulation, which can help growth, or a more competitive tax system. Indeed, we have tried to work out exactly what Labour believes in this area, but it was not clear. We have consistently heard about a five-point plan from the Opposition, including a cut in VAT, which was the flagship of that plan. On three occasions the hon. Lady was asked whether Labour still favoured a temporary cut in VAT under the current circumstances; on three occasions that question was evaded. I will happily give her the opportunity to intervene now if she wants to provide an answer. Do the Opposition believe in cutting VAT now? [Interruption.] She is not going to answer that question. I think we have seen the abandonment of the five-point plan—
Tax Fairness
Debate between Debbie Abrahams and David Gauke(11 years, 1 month ago)
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Mr Gauke
I will take that as a Budget representation. It is perhaps worth pointing out that there was a measure that the previous Labour Government had to reduce the deficit, which was substantial increases in fuel duty over the course of this Parliament. That is a measure that we have been able to stop, and quite right too.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Minister explain why four out of five people feel that austerity is not working? Is it related to the downgrading of the economy yet again for 2013? Is it the shrinking of the economy in the last quarter of last year by 0.9%? Or is it that the OBR had to call the Prime Minister to task and give him an economics lesson?
Mr Gauke
This is a difficult time for all major economies, and the UK is no exception, but matters would be much worse if we were to abandon our desire to bring some control to the public finances. We must ensure that there is the political will to deal with the public finances, and that is what this Government will continue to demonstrate. The approach of ignoring the deficit, believing that this is all an issue that can be addressed at some future time, is economically irresponsible and unfair on future generations who will face the bill that they will have to pick up because we failed to address those problems now.
Mr Gauke
This is starting to get interesting, because we have now learned that the Labour party has moved a motion trying to persuade Liberal Democrats to vote in support of a mansion tax, yet Labour will not confirm whether it thinks a mansion tax is a sensible policy for the next Parliament. The position of the Liberal Democrats is clear and the position of the Conservatives is clear; what is not clear is whether the Labour party, after all, supports a mansion tax. Will it be in its manifesto? That is a perfectly clear question.
Debbie Abrahams
The Minister is being very generous in giving way, but I want to ask him what his Government are doing. I tabled a written parliamentary question to his Department asking about the average tax rates for different groups of people, and he may be astounded to know—as I am sure many of my constituents in Oldham will be—that 6% of people on incomes over £10 million pay under 10% income tax. What is he doing to address that inequity?
Mr Gauke
That is exactly why in the last Budget this Government brought in a cap on reliefs preventing the wealthy from driving down their tax rate to such levels—something the Labour party never did in 13 years in government. I note, however, that I get no answers to my question.
Let us be clear: we hear lots of complaints about the 50p rate being reduced to 45p, but we get no indication as to whether the Labour party would or would not reverse that if it were to win the next election. I can only assume that that is because deep down it knows that campaigning on 50p might look good on a leaflet but is lousy for the economy; after all, that seemed to be Labour’s approach when it was in government. We have also learned this afternoon that the Labour party is not committed to a mansion tax in the next Parliament, after all. So what do we have? We have opportunism on the 50p rate and opportunism on the mansion tax.