The Economy

Andrew Gwynne Excerpts

Tuesday 11th December 2012 Commons Chamber

[Danny Alexander]

No, I do not agree with the hon. Lady’s analysis.

There are still savings to be made in day-to-day administration costs. I am confident that the civil service can continue to produce more for less and provide excellent value for money to the public.

The welfare system makes up more than £200 billion of public spending and cannot be immune from the effort to deal with the deficit. As a result of the financial pressures that we are facing, we have had to take the difficult decision that we can uprate working-age benefits by only 1% in the coming three years. That figure represents a rise each year, but it will be below the rate of inflation. It is not as high as some may have expected, but it is what the country can afford. That is a tough choice, but an even-handed one, and it avoids some of the more punitive proposals that have been floated in recent months.

Most benefit claimants would love to work and are trying their best to find a job. However, we need to recognise that in-work incomes have risen at half the rate of benefits since the financial crisis. Those who are in work will be better off thanks to our income tax cuts. When we are increasing public sector pay by only 1%, it would simply not be fair to increase the benefits of those who are out of work at a higher rate than those we employ to work for us.

Even while making those cuts, we have taken steps to protect those who are most in need. That is why disability living allowance and other benefits specifically for the most disabled and their carers will continue to increase in line with inflation. It is also why the basic state pension will increase by 2.5% next April, which is higher than either earnings or prices, honouring our commitment to the triple lock. The application of the triple lock means that there will be a better rise in the basic state pension than pensioners have seen before. Pensioners will see a cash increase of £2.70 a week in the basic state pension in 2013-14.

While we are protecting those in need, it is only right that we ask the most from those who earn the most. That is why the higher rate threshold for personal income tax will also be uprated by only 1% in 2014-15 and 2015-16. It is also why the annual allowance for pensions tax relief will be reduced from £50,000 to £40,000, and the lifetime allowance from £1.5 million to £1.25 million. That will raise more than £1 billion a year by the end of the period and is something for which I, for one, have argued for quite some time. The savings from Whitehall, welfare and the wealthy, and the targeted tax rises, are helping to cut the deficit in the medium term and to boost growth now.

Our capital spending plan will see £5 billion switched from current spending to investment in infrastructure, providing a better connected UK on roads, on rails and online. We will provide £350 million for the regional growth fund, enabling it to continue its success in creating jobs throughout the country. We are rolling out rural broadband across the country and have announced £50 million for the second wave of super-connected cities across the UK from Portsmouth to Perth, via Newport and Northern Ireland.

We have announced funding for a number of road building and maintenance projects. We will be dualling the A30 in Cornwall—an improvement that has long been campaigned for, not least by my hon. Friend the Member for North Cornwall (Dan Rogerson), who is in his place. I congratulate him on his efforts. We will also bring the A1 up to motorway standard all the way to Newcastle. I have been made aware of the need to improve that road north of Newcastle, not least by my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith), and have asked my right hon. Friend the Secretary of State for Transport to work up plans for potential improvements north of Newcastle.

The capital projects will not only create jobs in the short term, but crucially will raise the quality of the country’s infrastructure and our growth potential in the medium term. Labour Members may be interested to know that during the previous Government’s time in office, we fell from eighth to 33rd in the global league table for the quality of infrastructure. That is not good enough and is why John Cridland of the CBI said last week that it is

“absolutely right to shift the focus from current to capital spending to boost jobs today and the UK’s competitiveness tomorrow.”

As colleagues will know, our plans will mean that as a share of the economy, the investment that the Government are putting forward in this Parliament is greater than the average over Labour’s period in office. These investments, not just in roads, but in schools, colleges and flood defences, can only serve to help our businesses in the future.

[Andrew Gwynne (Denton and Reddish) (Lab)]

I am pleased by the Chief Secretary’s recent conversion to investing in capital projects, such as building new schools. Now is perhaps an opportune time for him to apologise to the schools in my constituency that had their Building Schools for the Future funding taken away. Can they expect it back?

[Danny Alexander]

I have not had a recent conversion to capital expenditure. The hon. Gentleman will remember that in the spending review in 2010, we committed over £2 billion a year more to capital expenditure than had been set out in the previous Government’s plans. In the autumn statement last year we added £5 billion and in this year’s autumn statement we added another £5 billion for a range of projects. I hope that he will recognise that the Building Schools for the Future programme was expensive and bureaucratic. The proposals that have been brought forward by the Department for Education are a better and more cost-effective way to meet at least some of the needs in the school system in this country.

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[Rachel Reeves]

Like other countries around the world, our GDP contracted during the global financial crisis. Germany and the United States have managed to recover that growth; we have not, because our Chancellor chose a different course—austerity—when jobs and growth are needed to get the economy moving and the deficit down. Unlike this Government, we recognise that we need to take action to stimulate jobs and growth. That is why we have said there should be a national insurance holiday for small businesses taking on new workers and a bank bonus tax to fund a programme of youth jobs, and that we should genuinely bring forward infrastructure investment and temporarily cut VAT to 17.5%. Those are the policies that would get the economy moving, get jobs back in our economy and help to bring the deficit down in a sustainable way.

[Andrew Gwynne]

The Government have placed great emphasis on the views of the Office for Budget Responsibility. My hon. Friend will be aware from reports in today’s media that Robert Chote of the OBR has suggested that the UK need not fear losing its triple A rating. Does she see us losing our triple A rating as a ringing endorsement of this Government’s economic policies?

[Rachel Reeves]

Let us see what the rating agencies have to say in the new year. Of course we are on negative watch, but it was not we who said the rating agencies should be the be-all and end-all. Indeed, they were giving Lehman Brothers a triple A rating until that company crashed and almost took the global economy with it. It was the Chancellor who said that a triple A rating would be the watchword of his chancellorship, so if it were to go, it would be a damning indictment of what this Government have presided over.

What was the Government’s response to all the bad economic news last Wednesday? Let us give credit where it is due. The Chancellor now agrees with us that we should not go ahead with the fuel duty increase in January; he agrees with us that introducing regional pay in our public services would be costly and impractical; he agreed with us that we should reverse the relaxation of restrictions on pension tax relief for the very rich; he agreed with us that it was a mistake to implement deep cuts to capital programmes such as Building Schools for the Future; and he agreed with us that cutting investment allowances risked damaging incentives for long-term wealth creation. We propose the creation of a British investment bank to support small businesses, and the Chancellor has produced a pale imitation of that, but I am afraid that all these measures are too little, too late—robbing Peter to pay Paul. Smoke and mirrors will not hide the lack of a real, purposeful growth strategy.

The chief executive of British Airways summed it up yesterday when he said:

“I don’t see an agenda for growth.”

I agree, and so does the Office for Budget Responsibility. Taking into account all the Government’s measures from the autumn statement, the OBR has concluded that they will add just 0.1% to UK GDP over the next five years. The economy is shrinking this year. Growth next year—forecast at 2.9% just two years ago—is now forecast at just 1.2%. Indeed, we have seen downgrades not just this year and next, but the year after.

Public Service Pensions Bill

Andrew Gwynne Excerpts

Monday 29th October 2012 Commons Chamber

[Danny Alexander]

I agree with that, and I would add that, frankly, these reforms could have been made in the 1980s or 1990s, as well as the 2000s. In fact, we have to go back quite a few decades to find the root of the problems we are having to tackle in this Bill, which I think we are doing very effectively.

The remainder of the £430 billion of savings are generated by the Government’s decisions to change their policy on the indexation of pensions and payments from the retail prices index to the consumer prices index, and, as has been mentioned, to increase the contributions that public servants pay towards their pensions, rebalancing the costs more fairly between them and other taxpayers. The combined effect of those changes will help to restore the health of the British economy, reduce the size of our deficit and correct the unsustainable 40% increase in costs there has been over the last 50 years.

[Andrew Gwynne (Denton and Reddish) (Lab)]

I am grateful to the Chief Secretary for giving way. Does he recognise that the Government have to be careful and approach this issue in a much more balanced manner? There is a danger that if more people opt out of occupational pensions because they find them unaffordable, that could end up costing the Treasury more in the long run through means-tested benefits.

[Danny Alexander]

I would say that we have handled this process in a balanced and sensitive way throughout, in recognition of the fact that the changes affect millions of public service workers. In response to the hon. Gentleman’s concern, which was raised a number of times in the talks, I would say that none of us wants to see increased opt-outs from pensions, for the reasons that have been mentioned on both sides of the House. We have put in place a process for reviewing the next stage of the contribution increase in the light of opt-out data from the first year. I am sure he will be pleased to hear that there is no evidence of increased opting out in response to this year’s increase in contributions. However, we will review the matter again next year before proceeding with the third phase of the increases, so he makes a serious and important point.

The reforms treat not only the symptoms of delayed reform but the underlying problem. Therefore, they are forecast to reduce the cost of providing public service pensions by around 40% over the next 50 years, returning costs to their historic long-term average. Clause 9 deals with the principal risk that needs to be managed if pensions are to be affordable and sustainable: longevity. Longevity has improved significantly over recent decades, which is a very good thing. As a result, the state pension age has increased. The Government are therefore asking public service workers in due course also to retire later. In a society where we are all living longer and where fellow citizens in the private sector are expected to retire later, it is both fair and right that the public sector retirement age should rise with the state pension age. As Lord Hutton says, improvements have continuously been underestimated in the past, which has led to the cost of providing pensions rising significantly over recent decades. As such, clause 9 provides that in future the normal retirement age in the public schemes will be set at the state pension age. As Lord Hutton identified, this change will move the proportion of adult life in retirement for public service pension scheme members back to where it was in the 1980s. More important, by linking the scheme retirement age to the state retirement age, we will ensure that further improvements in longevity are tracked. That is the main way in which the Bill will ensure that the cost of public service pensions cannot again spiral out of control, but will remain affordable and sustainable long into the future.

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[Rachel Reeves]

We have said that we support the shift from the retail prices index to the consumer prices index for the period of this Parliament to reduce the deficit, but we do not support a permanent shift from RPI to CPI that will continue long after the deficit has been eliminated. I will discuss shortly some evidence from the Pensions Policy Institute and the Royal Statistical Society on the appropriate measure of inflation for uprating pensions.

[Andrew Gwynne]

My hon. Friend realises that the vast majority of public sector workers do not have massive gold-plated pensions. Instead they have very modest pensions, and they are concerned about their employment prospects as well as their contributions. Does my hon. Friend agree that those are the kinds of concerns that people out in the real world we speak to are talking about?

[Rachel Reeves]

My hon. Friend is entirely right. The average public sector pension in payment is under £6,000 a year, and it is considerably less for women who work in the public sector, so we are not talking about huge pensions in the vast majority of cases. Instead, we are talking about modest pensions to which people have contributed throughout their working lives.

We support in principle the main measures in the Bill, however, so we will not oppose it on Second Reading, but we will work in Committee to improve it, in order to ensure that it underpins, rather than undermines, the progress made in negotiations. We will seek to ensure it facilitates a smooth and stable transition to new scheme designs, entrenching good standards of governance, transparency, administration and consultation, thereby allowing those who give their working lives to serving the public to save for their retirement with confidence, while establishing a workable system for managing change and controlling costs to the taxpayer.

The Government and public service employees do need to find ways of adjusting to the welcome fact that people are living longer. In government, Labour had agreed and established a framework for negotiating reform and the “cap and share” mechanism to manage long-term costs, and it was always clear that this would mean increases in contributions and, as the population lives longer, a rise in retirement ages.

We have always said that the Hutton report provided a useful starting point for negotiations. Lord Hutton was right to suggest that career average schemes could be fairer than final salary schemes, and we think his proposal that public service pension ages should rise with the state pension age is right in principle. Lord Hutton also stressed the need to approach these issues in a careful and balanced way, however, with particular care for the affordability of any additional contributions for lower paid public service workers, and for avoiding fuelling a race to the bottom on pension provision. Reform needs to be fair to taxpayers and public service employees, as well as being genuinely sustainable for the long term, and that would be endangered by a search for quick cash savings or the playing of political games.

The vast majority of public service workers retire on very modest pensions. The average public service pension in payment is less than £6,000 a year, and even less for women. Tearing up decent public service pension schemes, or imposing punitive and unaffordable contribution increases, would be entirely counter-productive if that resulted in lower saving and inadequate retirement incomes.

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[Rachel Reeves]

I thank my hon. Friend for his intervention. We argued exactly the same point when the Government arbitrarily increased the state pension age for women in their late 50s with just six years’ notice given. When Lord Turner carried out the review of state pensions for the previous Government, he recommended a 15-year notice period be given, and the Pensions Policy Institute recommends a 10-year notice period. Such notice needs to be given and it is not enshrined in this Bill.

[Andrew Gwynne]

Does my hon. Friend recognise that one of the reasons why that notice period is required is that as the retirement age rises careers may also have to change to ensure that employees are not forced into ill health and are not forced to do work that is unsuitable for their age?

[Rachel Reeves]

I thank my hon. Friend for that intervention. We also believe that this Bill should not pre-empt or cut across ongoing discussions—this builds on the point that he raised, as did my right hon. Friend the Member for Rother Valley (Mr Barron)—between the Department of Health, NHS employers and NHS workers about the implications of working longer for some staff groups, especially those, such as paramedics, in physically demanding roles.

We think that the Bill should reflect Lord Hutton’s recommendations that the link between public service pension ages and the state pension age should be kept under review and that this should be conducted by a properly independent body, with public service employees and employers represented and consulted. The Chief Secretary to the Treasury said in his speech that that will happen, but it is not guaranteed in the Bill—indeed, it is unclear whether it is even compatible with the Bill. These are all issues that we will be raising in Committee to get the commitments that public service workers deserve and thought they had been given during the negotiations behind the Bill. These are also issues that we will have in mind as we look to any future increases in the state pension age itself.

For our finances to be sustainable, and for decent pensions to be affordable, it is right that retirement ages rise with longevity. However, as Malcolm Wicks, the late Member for Croydon North reminded us in some of his most recent work, many people doing manual jobs started work at 16 or 18, with some doing so even earlier, and find it harder to continue work into their late 60s. We should be mindful of people’s capacity to work later and later, especially if support is not in place for them in the workplace.

Secondly, there are real worries that the Bill fails to take due account of the special characteristics of the local government pension scheme. Members will know that it is a fully funded scheme administered by local authorities and we should welcome the hard work of local councils and trade unions, who have made very valuable progress in negotiations on a mutually agreeable agenda for reform. The Bill threatens to unravel the agreements that have been reached and destabilise financially the local government pension funds by forcing a disruptive and potentially disastrous closure of existing schemes instead of facilitating a smooth transition to the new scheme design. That extension of Treasury interference into aspects of scheme valuation and design could prevent local authorities from delivering on the deal they have agreed with their work force. Indeed, the view of the pensions manager at the Chartered Institute of Public Finance and Accountancy is that the relevant provisions in the Bill represent

“a major shift in the governance of local authority pensions and”

raise

“questions about future local democratic accountability for those pension funds.”

Again, we expect those concerns to be addressed in Committee.

Thirdly, on the question of good governance, the Bill must underpin and not undermine high standards of scheme governance. As Lord Hutton stated in his final report,

“there is a powerful case for…much stronger governance of all the public service pension schemes. This should keep government, taxpayers and scheme members better informed about the financial health of these schemes. There should be minimum standards set for scheme administration. There is also a proper and legitimate role for representatives of the workforce to be formally involved in these new governance arrangements.”

The Bill fails to include key recommendations from Lord Hutton’s report, such as the inclusion of member-nominated and independent members on pension boards; the establishment of pension policy groups to consider major changes to scheme rules; the need to ensure that pension boards are responsible for the oversight of financial management and, in the case of funded schemes such as the local government pension scheme, for investment management; and the commissioning of a review into how standards of administration in public service pension schemes can be improved. Those measures would improve the efficiency and cost-effectiveness of scheme administration and would ensure that public service pension schemes matched best practice in the private sector.

Finally, we must ensure that the Bill adequately reflects and reinforces the progress made in negotiations. We should give public service workers a system they can trust and pensions that they can save towards with confidence, ensuring protection against retrospective or arbitrary detrimental changes. We also have concerns in this regard, which some hon. Members have already mentioned, and we will seek to address them in Committee. For one thing, the Bill subjects many aspects of public service pension provision to unilateral Treasury control. Although it is right that mechanisms should be in place to ensure that costs to taxpayers are contained, public service employees also have a right to know that critical changes will be consulted on and that their pension savings will not be vulnerable to arbitrary interference and opportunistic cash raids.

Furthermore, Lord Hutton has stated that

“there must…be full protection of accrued rights”,

but the Bill does not rule out retrospective changes that reduce benefits already accrued, going against the fundamental principle that pension benefits accrued are pay deferred and must therefore be honoured. The Government have reiterated their commitment to maintaining defined benefits in the public sector, and the Chief Secretary reaffirmed that to the House last year. He said, as he has on a number of other occasions, that his commitment was that

“public sector schemes will remain as defined benefit schemes, with a guaranteed amount provided in retirement”.—[Official Report, 2 November 2011; Vol. 534, c. 927.]

Clause 7, however, provides for the creation of new schemes that are

“defined benefits…defined contributions…or…a scheme of any other description.”

That should not be a means to drive a coach and horses through the commitments the Government have given and allow another round in the race to the bottom on pension provision.

In addition, the Government have made much of their promise of

“no more reform for 25 years”.

In his foreword to the Treasury’s document on new scheme designs, published last December, the Chief Secretary wrote that

“we need a long term solution that will last a generation”.

Clause 20 specifies “protected elements” of scheme design that cannot be altered for the next 25 years without clearing a “high hurdle” of comprehensive consultation and a report to parliament.

We think it is right that public service workers should be given an assurance that their pension savings will not be vulnerable to further arbitrary and unfair changes without adequate scrutiny and debate, but the Bill seems to be riddled with loopholes, excluding a number of important scheme features from the list of “protected elements” and stating that the “high hurdle” can be bypassed in order to meet a cost cap that is in turn set by the Treasury with no such requirement for consultation and report. Furthermore, it was a critical part of the agreements reached with employee representatives that protection should be provided to staff transferred to alternative providers as a result of public service outsourcing —the so-called fair deal policy. The Chief Secretary told the House last year that

“we have agreed to retain the fair deal provision and extend access for transferring staff. The new pensions will be substantially more affordable to alternative providers, and it is right that we offer workers continued access to them.”—[Official Report, 20 December 2011; Vol. 537, c. 1203.]

Yet there is no guarantee in the Bill that public service workers transferred to new employers will be able to keep their public service pensions. We will seek to address all those issues in Committee to improve the Bill and the protections granted to public service workers.

In conclusion, we think public service workers with understandable fears for their financial futures deserve better than being treated as pawns in this Government’s political games, with the consequence that it has been harder to reach agreement on reasonable reforms that control costs to the taxpayer. Indeed, perhaps the best case for the Bill is that it should ensure that never again can an opportunistic Government create unnecessary conflict and disruption by imposing unfair and arbitrary changes without adequate consultation, scrutiny and accountability. Let us ensure that it fulfils that objective.

Finally, let us remember that the real pensions crisis is not in the public sector but in the private sector. It is right that we should ensure public service pensions are sustainable and affordable for the taxpayer, but we should not allow that to distract us from the unacceptable inadequacy of pension provision in the private sector. Too often, it has sounded as though the Government’s answer to disparities in pension provision across the public and private sectors is to level down, not level up. Indeed, we have seen more than a million lower paid workers excluded from automatic enrolment when we should be ensuring that the National Employment Savings Trust can deliver low-cost, high-quality pensions to all who could benefit.

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[Katy Clark]

My understanding is that there will be a review of the scheme. Having spoken to some of those who are directly involved in the negotiations on the scheme, I am firmly of the view that we need to look carefully at those figures. On the basis of the financial information that we have, which is, of course, dated, because there has not been an up-to-date review, the reality is that the scheme is viable and there is no reason to believe that that will change.

[Andrew Gwynne]

May I advise my hon. Friend of a successful local government pension scheme, namely the Greater Manchester pension scheme, which is administered by my own local authority—Tameside metropolitan borough council—and is fully funded? Is it not the case that best practice therefore exists, and should not other local government pension schemes utilise it?

[Katy Clark]

I am interested in the scheme to which my hon. Friend refers, and I might get more information about it from him later.

Finance Bill

Andrew Gwynne Excerpts

Monday 2nd July 2012 Commons Chamber

[Cathy Jamieson]

I thank my right hon. Friend for that intervention, which explains the history extremely well. That is why I have focused so much on reminding us that this is supposed to be about children and doing the right thing by people who have the responsibility for caring for them, whether parents, or grandparents or other family members who may be entitled to claim the benefits. I hope to have enough time to be able to say a few words about that towards the end of my contribution.

The Government did revise the original proposal, but that revision has not gone far enough to deal with the inherent unfairness. The revised proposal will affect about 1.2 million families, of whom it is estimated that some 70%—790,000 couples and 30,000 lone parents in 2013-14—will lose the full amount of their child benefit. A further 330,000 couples and 20,000 lone parents affected by the charge in 2013-14 will lose a proportion of their child benefit. The average loss for those who are going to lose out is estimated at about £1,300 a year. In a previous debate, I highlighted the difficulty for families who are going to lose about £500 a year because of other changes that have been made. That £1,300 is a very significant amount for anyone caring for children in today’s economic climate.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Of course my hon. Friend is absolutely right about the unfairness of this proposal. We hear statements from the Government about the complexity of the tax system, so does she not find it surprising that they have come up with a proposal that increases complexity in the taxation system, as well as unfairness?

[Cathy Jamieson]

Again, my hon. Friend makes a valid point, and I shall deal with it in detail in a moment or two. Strangely, given everything else that the Government have supposedly wrapped up to try to make anomalies disappear, we know that sometimes even more anomalies have been created as well as unfairness. In trying to simplify things, they have actually made them more complicated.

In the Committee of the whole House, I raised issues about the principle and about the costs. It is important to have those firmly stated on the record, because the Government have estimated that the additional cost to Her Majesty’s Revenue and Customs over the first five years will between £8 million and £13 million for the computer system—the development and running costs—about £100 million for staff resources and £5 million for customer information. I asked the Minister in that debate for some further information on that. Some further parliamentary questions since then elicited more information, particularly on how much would be spent on marketing the new system. However, having looked at all this again in great detail, I must say that in my opinion and in that of Labour Members, it is not marketing that is needed at this point in time to make a bad policy and an incoherent change to the taxation system palatable to people, but a change of policy to make sure that whatever is done is fair and workable, and will not cause any further problems.

Despite exhortations from Government Members for further changes, those with incomes above £50,000 will have their child benefit withdrawn at 1% for each £100 of income from January 2013. That means that there will be no child benefit entitlement for families where any earner has an income of more than £60,000. As I said in Committee, although the changes that the Government have made are a small step forward, they do not deal with that inherent and fundamental unfairness. That is because they still leave the scenario where a couple with children where one earner is on £60,000 and the other is on £10,000 lose all their benefit, whereas a dual-earner couple on £49,000 each keeps it all. We still do not see how that is fair.

It is not just Labour Members who are saying that there is a problem. Irrespective of someone’s views on whether this is a fair system or whether they support the principle of what the Government are trying to do, which I do not, there remain a number of issues that others have raised. These points will not be new to the Minister, but I am outlining them once again because they have not been adequately addressed during the consideration of the Bill. The most recent information that has come from the Institute of Chartered Accountants in England and Wales makes things clear. It states:

“While this Bill makes some steps in the direction of tax simplification, many of the measures introduce yet more complexity and taken overall the Bill does little to simplify the UK’s complicated tax system. The child benefit reforms…create considerable cost, confusion and complexity.”

It is also concerned about the Bill in general and states that

“the valuable lessons in drafting style produced by the Tax Law Rewrite project have been lost.”

I mentioned that earlier in our consideration of the Bill. As so much of the Bill is made up of complicated schedules and guidance and as it is the longest finance Bill ever, we must question whether we have had the opportunity to carry out all of the scrutiny, even though we did our best in Committee.

People who have to operate the provisions are concerned that they might need to be amended in the light of experience to ensure that they all work properly together and do not end up having further unintended consequences. Essentially, we are using the amendments to ask for clause 8 and schedule 1 to be withdrawn because we believe that the changes are flawed and unfair. That has also been pointed out by the ICAEW, which was straightforward and blunt in its language, stating that there could be a “reputational and operational disaster” for the Government and for HMRC. Those criticisms were largely reported and we have had the opportunity to listen to them in our debates.

We share the ICAEW’s disappointment that the Government have not tabled more workable proposals in time for our final consideration of the Bill. I would hope that even at this stage the Government will at least be able to give us some answers to the criticisms that have been raised or to accept that their plan is not only unfair but risks being unworkable.

The criticisms highlight the fact that

“the phased withdrawal for those earning between £50-60,0000 will be difficult to implement, open to error and potentially costly for HMRC to administer and for taxpayers to comply with.”

As those critics have said:

“The trouble is that an income tax system based on taxation of individuals, does not work properly if it has to cope with benefits that apply to a household”

such as tax credits

“or potentially to another person”

such as child benefit. The real concern is that:

“The phased withdrawal will not work well with the PAYE system.”

A considerable amount of concern has been expressed that the

“‘sliding scale’ approach to tapering down the benefit makes the system much more complicated.”

It has been described as “perverse” that such an approach is being removed for higher personal tax allowances for those aged over 65 on the grounds that this will help to simplify the system at the same time as a form of it is being re-introduced for the withdrawal of child benefit. That does not seem to be a consistent policy approach.

A further criticism is that the implementation timing is odd, with a start date of January 2013 that does not align with the start of the income tax year on 6 April. Concern has been raised that that

“could trigger many unexpected tax bills at the end of the tax year, as many more taxpayers will be brought into self-assessment.”

I do not think that the public have yet caught up with what they will be required to do.

The system is also

“unlikely to cope efficiently if families change or break up”

and we had a considerable amount of discussion on that question during the previous debate. As we all know, family formations change over time. Couples form, the people involved might have children from previous relationships and so on. There is real concern that

“The confusion caused by the new system could hit tax compliance, and undermine confidence in the tax system at a time when the employers are also having to implement the Real Time Information scheme for PAYE.”

On top of the criticisms set out by the ICAEW, the Chartered Institute of Taxation has raised a number of concerns. I hope that the Minister will be able to give an answer to some of these points about the complexity of the scheme. The institute’s concern is that

“ a high degree of complexity—for both HMRC and taxpayers—into what has hitherto been a straightforward benefit with practically universal take-up”

is now being introduced. It also believes:

“If the legislation is to be implemented, there are many issues that need to be resolved”

and that that should happen well before the new charges go live. Given the timing of the implementation of these provisions, there is not a huge amount of time to sort out any of the anomalies. I hope that the Minister can say something on that point. [Interruption.] I heard someone say “six months”. If it is believed that all this can be sorted out in that time, I would like to hear it from the Minister, because many of us have experienced cases where, with the best of intentions, and with support on all sides, fairly complicated systems—new computer programmes and so on—let alone systems of this complexity, have not worked.

Oral Answers to Questions

Andrew Gwynne Excerpts

Tuesday 26th June 2012 Commons Chamber

[Andrew Gwynne (Denton and Reddish) (Lab)]

6. What assessment he has made of the performance of the economy in the last 18 months.

[The Chief Secretary to the Treasury (Danny Alexander)]

As the Office for Budget Responsibility made clear last autumn, Britain’s recovery has faced strong headwinds from the euro area, high oil prices and the impact of the financial crisis being deeper than previously thought. Our actions to reduce the deficit and rebuild the economy have secured stability and kept interest rates near record lows, benefiting families, businesses and taxpayers, although, of course, considerable external risks remain.

[Andrew Gwynne]

That just does not wash, because by May 2010 the British economy was growing, whereas since the Government’s emergency Budget of June 2010 the economy has at best flatlined and at worst dropped back into recession. Why does the right hon. Gentleman think that is?

[Danny Alexander]

By May 2010, the hon. Gentleman’s Labour Government had put in place plans to increase fuel duty by above the rate of inflation each and every year of this Parliament. He should be welcoming the fact that we are taking steps to support hard-pressed families and hard-pressed consumers across the country in the very difficult economic circumstances that we face.

Changes to the Budget

Andrew Gwynne Excerpts

Monday 11th June 2012 Commons Chamber

[Mr Gauke]

I can assure my hon. Friend that we will not be listening to those who think that the best solution to debt is to borrow more.

[Andrew Gwynne (Denton and Reddish) (Lab)]

So much has been changed in this disastrous Budget that one wonders what will be next. Will the Minister now start to rethink his tax cut of £40,000 a year for 14,000 millionaires, which is, quite frankly, outrageous?

[Mr Gauke]

Let me point out to the hon. Gentleman that three changes have been made in the 282 measures announced in the Budget. As for the 50p rate, the problem was that it did not raise any money. The measures that we have announced will raise five times more money from the rich than the policy pursued by the Labour party.

Finance (No. 4) Bill

Andrew Gwynne Excerpts

Thursday 19th April 2012 Commons Chamber

[Mr Chope]

There is a whole host of ideas going round. There was a time when no child benefit or allowance was payable for the first child, on the basis that parents should take responsibility for that child and bear the costs themselves, but, if they had any more, they could expect the state to help them. My hon. Friend’s point illustrates further the fact that this measure should have been the subject of proper consultation and draft clauses, so that we could have had a debate on it in the wider context of universal benefits. Instead, it was announced at the party conference and implemented in this way.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Is not one of the benefits of a universal system of child benefit the fact that everyone in society who has children feels part of that society and that welfare state? The proposal will breed resentment not only between the haves and the have-nots but between the haves and those whose family situation fits the new system.

[Mr Chope]

The hon. Gentleman makes a good point against these provisions. On the issue he raises, it would be worth reminding ourselves that the Christian organisation CARE has produced a useful document, “The Taxation of Families 2010/11”, which considers whether current tax burdens are fair. It looks at the relative position of households up and down the income distribution scale in the United Kingdom. For a family on £51,543 a year, who represent 150% of the reference wage, a single person with no children is better off than 94% of the population, a one-earner couple with no children are better off than 81% and a lone parent with two children are better off than 80%. Yet a one-earner couple with two children are better off than only 63% of the population and a two-earner couple with two children are better off only than 69%. That shows that targeting families with children for this tax exacerbates the unfairness rather than ameliorating it—running directly against the principles of fairness, equity and justice.

Finance (No. 4) Bill

Andrew Gwynne Excerpts

Wednesday 18th April 2012 Commons Chamber

[Owen Smith]

I knew it would be worth while giving way to the Treasury spokesman for the Democratic Unionist party. His intervention offers a contrast to some of the more pedantic contributions that we have heard from Conservative Members. He is right to say that it was far too early to make a decision, ostensibly based on evidence, just one year after the implementation of the new tax rate. That is what the Institute for Fiscal Studies has concluded, and it is what the Office for Budget Responsibility has effectively concluded in suggesting how uncertain the conclusions are. It is also, unfortunately, what the country is concluding.

[Andrew Gwynne (Denton and Reddish) (Lab)]

The information in the report shows that the cost to the Treasury of the tax cut will be £3 billion. That is rather conveniently predicated on behavioural change bringing in an extra £2.9 billion. Given that scorn has been poured on that figure of £2.9 billion, what confidence does my hon. Friend have that this tax change will not end up costing the Treasury far more than its report suggests?

[Owen Smith]

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

--- Later in debate ---

[Owen Smith]

That would be entirely consistent. The Minister knows that our amendment merely asks the Chancellor of the Exchequer to review the possibility of incorporating a bank payroll tax in the bank levy, and to publish a report within six months on how the additional revenue might be spent. We have suggested that we would spend it on creating 100,000 jobs for the unemployed youth of our country, 1 million of whom are still out of work today despite the recent small but welcome fall in unemployment. We would also spend the money on building 25,000 affordable homes, which are equally vital at a time when homelessness is rising at a rate that has not been seen for 25 years.

[Andrew Gwynne]

My hon. Friend is making a compelling case. May I share with him the figures that I have obtained from the House of Commons Library for the 16 to 24-year-olds in the borough of Tameside who are not in employment, education or training or on an apprenticeship? The figure for 2010 stood at an appalling 20%, or one in five. The most recent figure is 33%, or one in three. Does not that show how urgently we need to tackle the underlying structural employment issues in constituencies such as Denton and Reddish?

[Owen Smith]

It absolutely does. On Monday night, I put it to the Chancellor that he and those on his Front Bench were entirely out of touch with the reality in constituencies such as mine and that of my hon. Friend. Pontypridd is fortunate, right now, to have the prospect of a new supermarket opening, which will create 200 jobs, but 2,500 people queued 600 yards down the main street to try to secure one of those jobs. They came not only from my constituency but from right across south Wales. That is the desperate reality that many people in this country are facing. I saw the queue myself, and I know that many of those people were young and eager to work. They also felt that the opportunities for them were diminishing under this Government, rather than increasing. They are looking to the Government, and the Opposition, for action. They want us to put on the table solutions that will deliver growth and jobs and that will stop the economy flatlining.

Unfortunately, the net effect of all the measures in the Budget, including those in clause 209, will be an increase of only 0.1% growth in GDP—[Interruption.] The hon. Member for Vale of Glamorgan (Alun Cairns) shakes his head, but those are the numbers in his Government’s documentation that have been agreed and validated by the OBR: growth of 0.1% in GDP and growth of 0.7% in business investment, which is down almost seven points from where we thought we were going to be just 18 months ago. That is a desperate state of affairs. How on earth can he defend it?

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[Mr Stuart]

My hon. Friend is right. We have heard examples of managing directors of companies being called in by their banks to talk about lending provision because of the threat and uncertainty that this measure brings. It will be extremely disruptive to a fantastic British manufacturing success story. Let me go through the process. The supply chain is in the UK. It is very much concentrated in east Yorkshire but hundreds of people are employed by suppliers elsewhere in Yorkshire and across the country.

[Andrew Gwynne]

The hon. Gentleman is making an eloquent case regarding the supply chain, which is indeed spread right across the United Kingdom. Let me draw to his attention the correspondence I have had from a company called Phantom Ltd, based in Reddish in my constituency, which supplies security and safety systems to the leisure market, including the caravan market. It says that the VAT increase could be “devastating” for its business and that its

“plans for expansion will be severely curtailed and new employment opportunities will be lost.”

Is that not the reality of these measures for the wider supply chain?

Amendment of the Law

Andrew Gwynne Excerpts

Wednesday 21st March 2012 Commons Chamber

[Diana Johnson]

My right hon. Friend makes a very good point and indicates, again, that this is not a Budget for growth—the very opposite, it seems.

The latest official statistics show that there are 5,447 jobseeker’s allowance claimants in Hull chasing 177 vacancies. That is 30.8 people after each job, which is the 10th worst rate in the country. The overall claimant count across Hull was up by 12.4% in the latest period. Kingston upon Hull North’s long-term youth unemployment among 18 to 24-year-olds has gone up by 155% in the year to February, which is shocking. Hull needs a determined focus on specialist vocational education and training, to equip our youngsters to get the jobs in green industry that could be important to the economy of Hull and the region.

Engineering qualifications are very important, and I was disappointed that the Secretary of State scrapped the diplomas scheme, particularly for engineering diplomas. As I asked the hon. Member for City of Chester (Stephen Mosley), why is information and communications technology not part of the English baccalaureate to show how important ICT skills are for our future?

The Government have talked a lot about rebalancing the economy, but people in the north who are seeking work—the north’s jobless—are being told to move to the south for work, and those in the south who are looking for affordable homes are being told to move to the north. Is that rebalancing the economy? The Government have to think again. They should ensure that there are enough jobs and homes in each region to make the whole country work together effectively.

I wish to focus on some of the key announcements in today’s Budget, starting with the raising of the personal allowance to £9,000 next April. Citizens Advice has already put out a quote on the matter, stating:

“Raising the personal tax allowance is an empty gesture to struggling families on low wages.”

That blows a hole in the argument that the Liberal Democrats try to put forward about the Budget promoting fairness.

Like cuts to income tax rates, raising the personal allowance could be part of a plan to boost demand and growth, provided that it was part of a group of measures such as those outlined in Labour’s five-point plan. In a time of scarcity, the Government’s plan, costing about £3.3 billion, is an inefficient way of helping the poorest in our society. It is clear that middle and upper earners will benefit most from the change. I understand that they will get about an additional £175 each year.

We must consider that against the losses that individuals and families will experience. For instance, the average family is due to lose £530 from 1 April because of the changes to VAT and benefits, including child benefit freezes. This April’s changes to the working tax credit requiring couples working part time to do a 24-hour week rather than a 16-hour week, at a time when a lot of people’s hours are being cut and jobs are disappearing, will affect 212,000 families across the country, including nearly 450 in my constituency. They will lose nearly £4,000 a year, and they are families that are struggling just to get by. What help was announced for those families? There was nothing. If the Government were serious about fairness, they could have done something about that.

Research by the Child Poverty Action Group shows that two thirds of the families who are about to lose tax credits are already in poverty, so I dread to think what will happen to them now. They are punished for doing the right thing and for trying to hold down a job at a time when it is so difficult to get a job or to get further hours of work.

To make matters worse, the coalition is now moving ahead with regional pay in the public sector, with the Liberal Democrats’ support. That is not surprising, because the Liberal Democrats have often advocated a regional minimum wage. Regional pay is more evidence-free policy making by this Government, based on free market dogma. There is no real evidence that national public sector pay crowds out the local private sector. Indeed, public sector workers, living and spending locally, are a vital part of supporting the private sector in Hull’s local economy. We already have London weighting to help workers with the extra costs of living in the south, so there is no reason for different pay rates between the regions.

Local or regional public sector pay could drive down wages in some of the poorest areas, taking billions more out of local economies and accelerating the growing north-south divide. So much for rebalancing the economy.

[Andrew Gwynne (Denton and Reddish) (Lab)]

My hon. Friend is making a pertinent point, but in some parts of the public sector will not the opposite be the case, so that, for example, hospitals, desperate to recruit the best clinicians, will end up paying more to compete with hospitals in London and the south?

[Diana Johnson]

Absolutely. My hon. Friend makes an important point. We know that the NHS is in for a torrid time in the months and years ahead, and he has identified another problem that it has to tackle.

The combination of regional pay and the unfairness in the Budget contradicts the coalition’s rhetoric about making work pay and rebalancing the economy, sucking even more money out of areas such as Hull and the north in favour of the wealthier areas, mostly in London and the south-east.

I am also worried that regional pay could mean that some of the brightest and best, for example, teachers—we need the brightest and best teachers in areas such as Hull—will not come to Hull if the pay is not the same as in some other parts of the country.

Let me comment on the Liberal Democrats’ spin to the effect that this is a Robin Hood Budget. It joins the long list of broken Liberal Democrat promises. We had the abolition of tuition fees, which were then tripled, and education maintenance allowance was axed. The Liberal Democrats promised 3,000 more police but we are getting 16,000 fewer. They promised opposition to VAT, but we how have higher VAT. They seem to have dropped the armed forces pay increase and many more of the opportunist promises they made before 2010, when they had full knowledge of the deficit that would face them. The tycoon tax is just the latest Lib Dem slogan. Increased stamp duty is all very well, but it hits only the minority who sell the property in any year. It needs to be matched by a clampdown on general stamp duty avoidance.

The other major announcement is to cut the top rate of tax. [Interruption.] The Liberal Democrats have no defence on that.

Oral Answers to Questions

Andrew Gwynne Excerpts

Tuesday 1st November 2011 Commons Chamber

[The Chief Secretary to the Treasury (Danny Alexander)]

I do agree with my hon. Friend. We will set out more details of our credit easing plan in the autumn statement later this month, but it is a mark of the Government that we are prepared to think differently and intelligently about how we can use such mechanisms precisely to get small businesses going in this country.

[Andrew Gwynne (Denton and Reddish) (Lab)]

T9. Youth unemployment now stands at a shocking 34% in Tameside and 23% in Stockport. Is not the right thing to do to listen to Labour’s five-point jobs plan, get the bank bonus tax reinstated and invest in 100,000 jobs for young people?

[Mr Osborne]

In his pitch for a job, the hon. Gentleman failed to mention that youth unemployment rose by more than 40% under the Labour Government. There is complete amnesia about the fact that 16 months ago they left this country with high unemployment, a high budget deficit, the deepest recession this country has seen in the last 100 years, and the biggest banking crisis in our history.

Finance (No. 3) Bill

Andrew Gwynne Excerpts

Tuesday 5th July 2011 Commons Chamber

[Andrew Gwynne (Denton and Reddish) (Lab)]

My hon. Friend is setting out his case very well. In recent years, there has been an ever-speedier move towards the globalisation of our economies, and he is absolutely right that this assessment and review is needed in respect of our obligations to global society. My hon. Friend has set out that case perfectly. Does he agree that it is crucial that we do not overlook some of the global challenges in tackling poverty and climate change?

[John McDonnell]

Yes, and when the various groups lobbied us last month it was interesting to note how the debate had progressed since the original discussions about the Tobin tax. The debate had become much more refined and concretely related to the global needs that my hon. Friend mentioned. There has been a debate about how we allocate these resources and what the greatest priorities are, and so far it has been about poverty in this country so that we do not in any way undermine support for such taxation among people in the UK, but we must balance that with support for efforts in the developing world. The climate change issue has also come on to the agenda since the Tobin tax was first proposed.

One question that arose in the discussions in Central Hall was what the effect would be if we did raise, for example, £20 billion in this country. It was said that if we spent £4 billion, we could halve child poverty in this country overnight, and if we spent £5 billion, we could insulate every home and therefore take people out of fuel poverty. Such examples bring home the reality of what could be done through such a tax.

It is not a tax on normal retail banking or on savings or mortgages. It does not hit the ordinary saver. It is a micro-tax, and in some ways a tax on short-term speculation banking. It does not fall on UK banks alone either, as foreign banks operate in the City. I would take particular delight in taxing Goldman Sachs in this way—that is a personal grudge—but there are also other hedge funds operating in the City of London. A strong argument, which we have heard today, has been made for seeking international agreement. Negotiations are taking place and there is consensus, even within the European Parliament, on introducing a European-wide financial transaction tax. My concern about that is that the European discussions were about using that tax to fund the European Commission—I might have more than reservations about that proposal.

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[John McDonnell]

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

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

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

[Andrew Gwynne]

My hon. Friend rightly talks about taking the lead. Are we not hearing exactly the same arguments as the ones used against my private Member’s Bill to tackle vulture funds in the previous Parliament? Thankfully, the Bill was pushed through by the previous Government using the wash-up procedure and it has been made permanent by this Government. Were not exactly the same arguments employed during the debate on that Bill? Is it not sometimes right that we do take the lead?

[John McDonnell]

Yes, I had forgotten that example. It is a good example of how unilateral action can raise the standard overall across Europe and globally.

Another issue raised in our debate on the Tobin tax a number of years ago concerned whether it would be practical. Things have moved on since then and the system for undertaking financial transactions is highly automated and centralised. New systems have been put in place, and I refer Members to the study by the Institute of Development Studies that identified how the system now operates:

“The Continuous Linked Settlement Bank, launched in 2002, now settles more than half of all foreign exchange transactions, with the remainder processed through national real-time gross settlements systems.”

Now we have the systems in place, through advances in new technology, to monitor the process and thereby ensure that tax is collected easily and that avoidance can be prevented.