Oral Answers to Questions
Caroline Dinenage Excerpts(11 years, 4 months ago)
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Mr George Osborne
The Prime Minister achieved a good deal for the United Kingdom, and got away from the solid and fixed renewables target that the Labour Government signed up to. If the hon. Gentleman wants Britain to leave the European Union, that will be achieved with a Conservative Government offering a referendum, and him having a vote and seeing what the outcome is. [Interruption.] Under the Conservative Government, the British people will get a referendum. We will make the argument for staying in a reformed Europe, and the hon. Gentleman can make the case he wants to make. That will not happen under a Labour Government.
Caroline Dinenage (Gosport) (Con)
May I urge the Chancellor to support the Secretary of State for Business, Innovation and Skills in calls for banks not to shut the last branch in a town? HSBC is about to shut its last branch in Lee-on-Solent, leaving businesses with no banking support at all.
The Economic Secretary to the Treasury (Andrea Leadsom)
My hon. Friend makes an important point. Many people are concerned about bank closures. I recently had a round table with a number of banks and challenger banks to discuss the issue, not least the change towards mobile and telephone banking. We are certainly looking closely at the matter.
Oral Answers to Questions
Caroline Dinenage Excerpts(11 years, 8 months ago)
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Caroline Dinenage (Gosport) (Con)
Will the Minister join me in welcoming two pieces of excellent nautical news for Portsmouth harbour? Not only will it play host to Sir Ben Ainslie’s new America’s cup sailing team hub, but today it welcomes Oceans of Hope—the first yacht to complete a global circumnavigation with a working crew with multiple sclerosis, including my Gosport constituent Phil Gowers.
Debt Advice (FCA Levy)
Caroline Dinenage Excerpts(12 years, 2 months ago)
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Caroline Dinenage (Gosport) (Con)
It is a great pleasure to serve under your stewardship, Mr Hollobone. I would like to add to the praise heaped on to my hon. Friend the Member for Worcester (Mr Walker) for securing this important debate and also for the sterling work that he has carried out with Members from all parties on championing such an important issue.
The hon. Member for Makerfield (Yvonne Fovargue) pointed out and properly articulated the fact that, a few years ago, most of us had not even heard of payday loans. They have grown like a cancer in the past few years and led many thousands of our constituents into a spiral of debt and despair. Addressing this growing, innovating and evolving industry is a matter of urgency. The FCA must take a firm grip on the issue to bring unscrupulous lenders under control.
Of course, in and of themselves, payday loans are not harmful; it is their propensity to turn into defaults and rollovers, as well as the insufficient quality of the advice, that is leading to so much misery. Unscrupulous traders and the devastating impact of continuous payment authorities are concerns for all our constituents who have taken out payday loans. That is why we must do all we can to bring clarity to the dangerous terms and conditions that leave borrowers caught unawares, with no means to pay for their food, utility bills and other household costs.
With a prophesy worthy of Mystic Meg, my hon. Friend the Member for North Swindon (Justin Tomlinson) pointed out that I might allude to some adult literacy and numeracy issues in my speech. He is quite correct. Recent research conducted by the OECD shows that there are 8.5 million people in England and Northern Ireland with the numeracy ability of a 10-year-old child. Payday lenders can seize the opportunity to take advantage of such individuals, who struggle to keep on top of their weekly shopping bills, let alone the complex percentages and interest rates involved in taking out a loan.
In order to strangle the problem at the roots, we need to address the problem of weak numeracy skills and promote the importance of financial education. That is why my hon. Friend has done such sterling work in this field. We cannot leave behind a generation of adults who are unable to comprehend the staggering interest rates that we see. We must improve how we signpost adults through debt advice to the numeracy training that they so desperately need. Independent debt advisers specialise in providing such a service, and their role in mitigating against the devastating impacts of payday loans is crucial. Without such targeted help and support, many of those who fall victim to payday lenders will be unable to break the cycle of financial trauma.
Over the past four years, Citizens Advice estimates that it has seen a tenfold growth in the demand for debt advice, as many colleagues have already said. That significant rise has undoubtedly been stimulated by an increasing dependence on payday loans, which take advantage of some of the most vulnerable people in our society. One aspect of payday loans about which I am particularly concerned is refinancing. The recent review by the Office of Fair Trading revealed that individuals seeking debt advice had, on average, refinanced their loans at least four times and were repaying six separate payday loans. Such shocking figures show the extent of the difficulty that borrowers can get into before seeking help, as the hon. Member for Makerfield said.
What we see is not responsible trading. The absence of ready access to helpful information prevents people from gaining the necessary autonomy that they need to put a stop to successive borrowing. Although the FCA’s proposal to force payday lenders to signpost borrowers to debt advice will promote greater responsibility and hopefully discourage the selling of unaffordable loans, it will also place even greater pressure on organisations that have limited resources. Therefore, like many colleagues, I strongly advocate the new powers that the FCA will have to levy all consumer credit firms to help to fund MAS. We must ensure, however, that the level of payment is commensurate with the problem.
Consumer choice is a paramount factor in the issue of payday loans. Individuals must be well informed and aware of the risks before and during their engagement with payday lenders. That is why debt advisers are so important and must be provided with the financial resources needed to continue their good work. It is also important to emphasise that we are not seeking to eliminate the access to credit streams that provide a safety net to many of the lowest paid. However, such borrowing opportunities must be subject to rigorous regulation and injected with the responsibility needed to bring about greater consumer advice and confidence.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I have listened intently to the debate; Members may wish to intervene during the course of my remarks. I congratulate the hon. Member for Worcester (Mr Walker) on securing this debate and the Backbench Business Committee on seeing the wisdom of holding it. I am sure that it is due to the Committee’s good judgment rather than simple coincidence that we had a Backbench Business debate on payday loan companies last night in the main Chamber, followed by this one. The two debates are linked, and it adds value to be able to follow last night’s discussion with this one. There were 17 Back-Bench speakers last night, not counting interventions, and Members had the opportunity to lay out a range of reasons why tougher action is needed on payday loan companies generally and ways that regulation could be improved.
When I first saw that this debate was going to be about the levy, I feared slightly that people would think the issue was only a technical one and not quite as important, but it has been useful to hear a number of speeches linking the principles of what needs to be done on payday lending and regulation and how it can be put into practice for the greater good. It has been heartening to hear that from Members from all parties; we have not got bogged down in the technicalities of the levy, as we might easily have done.
Anyone who has gone through the Library briefing—I am sure that everyone here has, although perhaps people outside this room have not—knows that it explains in great detail how the levy is calculated and the various different sections and categories. The Minister may want to say something about that and whether, in the longer term, he has any plans to review the levy further. I know that the Government always say that they keep everything under review—he and I often exchange comments on that particular approach—but it might be useful to hear from him whether he has any further work to do on that.
We have heard that although better regulation is of course important, it is also important that we continue to ensure that proper debt advice is available. In his opening speech, the hon. Gentleman made the key point that there is a danger that the Financial Conduct Authority might simply be seen as a collection agency. Several speakers made the point that the Money Advice Service has a flatline budget—I hesitate to use that word—but the Government are not seeking to increase the budget, at a time when we have all heard about and know the pressures on various organisations that provide support. That is a potential problem, and I hope that the Minister will address it in his reply.
We want to ensure that the cost of regulation does not take up all the available resources. That is why I highlight the point about the complexity of the levy as it currently operates. We do not want the FCA and MAS to spend all their time trying to administer it, so that resources do not get to the front line. Another key point made is that we do not want the amount of advice available to be reduced.
On the nature of advice, we want the opportunity to widen the scope for funding. I will return to that, but I want to mention a couple of the points made by my hon. Friend the Member for Sheffield Central (Paul Blomfield), who has a long track record of campaigning on payday loan issues, as do the majority—in fact, all—of the hon. Members here. He made the point early on that we have a unique opportunity to tackle the problem without additional cost to the public purse, a point reiterated by my hon. Friend the Member for West Bromwich West (Mr Bailey). I am sure that it will always be attractive to the Treasury, when we have a problem, if we can identify a potential solution that will not cause additional cost to the public purse, especially at a time when we are trying, as I am sure the Minister will mention, to reduce the deficit and look to the future. That ought to be considered.
I would certainly be concerned by any suggestion that the changes to get more companies paying the levy by bringing them into the scope of the regulation would mean a levelling down in terms of what they pay. The point about the payday loan companies, which has been emphasised in a number of debates, is their potential detriment to individuals, because of the way they operate. They should certainly not get off the hook, particularly as we are hearing that more problems are being identified.
It was also correct to suggest that the FCA should not simply exist to signpost people at particular stages, for example rollover, however important that role is. Nevertheless, we need advice to be available and easily accessible.
I am also concerned about an issue that was raised in the briefings that I have been provided with, for example by Citizens Advice and the StepChange charity. We must not have a perverse incentive whereby the system would mean, for example, that on the issue of write-offs companies were somehow moving to operate in a way that would be detrimental to the individual debtor, so that those companies could somehow avoid paying what would be seen as their fair share of the levy. Lenders should pick up the bill for some of that levy. Again, I hope the Minister will say something about that issue.
My hon. Friend the Member for Makerfield (Yvonne Fovargue) talked about the “behind the clock” syndrome and I think it was the hon. Member for North Swindon (Justin Tomlinson) who referred to carrier bags. I do not want to make this debate sound like a competition, but I spent many years as a front-line social worker providing a lot of welfare benefits advice, among other things. I recall occasions when people had large black bin bags full of information. What never ceased to amaze me at the time was the fact that people had kept all of the paperwork, including every letter that had come in. Quite often, those papers were stacked in fairly neat order, with elastic bands around them, but they were not then dealt with; they had simply been put away because the problem they related to was too difficult to deal with.
One thing that I learned from those experiences was that we do people no favours whatsoever if we do not have a face-to-face discussion and work with them to get them out of the mess they are in. Simply telling someone to go and read a website, or to get information online or even a pamphlet, is not enough; it ought to be an introduction to them, so that they can sit down face to face, assess the scale of the problem and work it out. Again, the importance of that process was raised by a number of hon. Members.
Caroline Dinenage
I do not want to bang on about the same subject, but does the hon. Lady agree that sometimes adults lack the necessary literacy and numeracy skills to address the issue of debt and so, even if they wanted to address it, debt is a massive puzzle for them? We also need to look at the ways that we signpost people to address that skills issue.
Cathy Jamieson
The hon. Lady makes an important point, and the issue of financial education was raised in the debate in the main Chamber last night. Financial education is important because there are people who have literacy and numeracy problems, which are often picked up at the point that they come for advice. They may not have felt able to tell people before then, but the problem becomes very apparent in a face-to-face meeting with advice workers, who can perhaps assist them to get help and support.
More broadly, financial education in schools is, of course, valuable; I have said that many times. It is the right thing to provide, but if it is only seen as something to be provided in schools that is not enough. There are key points in people’s lives when there is the opportunity to introduce them to different forms of financial education.
Payday Loan Companies
Caroline Dinenage Excerpts(12 years, 2 months ago)
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Ann McKechin (Glasgow North) (Lab)
The fact that this is the second time in two years that the Business, Innovation and Skills Committee has reported on this issue reflects the enormous public interest in the matter and the concern about the impact of the sector on our communities as well as on individual borrowers. To date, the regulatory authorities have being running behind the curve, and it is important that the Financial Conduct Authority should start ahead of the game. The regulators initially gave little priority to protecting the poorest borrowers on the basis that the total lending represented just a small percentage of the total in the financial services sector. They failed to take proper account of the problems that had already beset other international jurisdictions, to which the hon. Member for Dover (Charlie Elphicke) has referred. The Government’s response to our first report was simply to try to shift the problem further down the time line, with an instruction for further reviews and reports. The transition to regulation by the FCA was used as the main reason for not taking immediate action.
In my own city of Glasgow, the council reported last year that its citizens borrowed £57 million annually through high-cost credit, including payday lending. Given that 49% of our residents are within the bottom 20% of the income quartile, it is not surprising that the council estimates that a staggering 100,000 residents are using non-standard credit and that a high percentage of that number are finding it difficult, if not impossible, to repay their loans.
In 2013, the regulatory authorities and the Government realised that a policy of laissez-faire was not going to work. The findings of the Office of Fair Trading’s damning report showed the scale of contraventions in the sector, and the growing amount of strong evidence from agencies like Citizens Advice, StepChange and Which? could not be ignored. The sector itself had rapidly increased from £900 million in 2008-09 to £2.2 billion in 2011-12. Wonga had become a household name and, even more worryingly, the level of personal debt in this country was beginning to rise again, potentially threatening any increase in growth.
The sector now has a shop in every high street, it dominates the advertising schedules and it has been allowed the freedom of a wild west market to achieve rapid growth and massive profits. Many of its victims now populate the ever-growing food banks and our debt courts. It should be abundantly clear that this issue cannot exist in a vacuum, devoid of political direction. The statutory independence of a regulatory authority to act should not be a barrier to setting a framework and priorities that it needs to address; nor should it be a way to sidestep the will of Parliament, which on numerous occasions over the past three years has expressed exactly the concerns that are being raised today. The level of cross-party agreement and civic support for tougher regulation is overwhelming.
Wider issues have intensified the interest in this sector. The hon. Member for Dover referred to the lack of provision in the mainstream credit sector, but other issues include the squeeze on real incomes, and the above-inflation rises in essential costs—energy, transport, housing and food. The demand for unsecured lending continues to expand, but we also have a rapidly changing financial services sector that often lacks adequate transparency not just in short-term lending, which adds to consumers’ confusion in making the best decisions to suit their needs.
I believe the major players in this sector well know that the current era of weak regulation ripe for exploitation will one day come to an end, but if they can extend that period or find a new avenue for profit, they will happily go for the bottom line. They have achieved their aim of being a ubiquitous presence. The Chair of the Select Committee on Business, Innovation and Skills, my hon. Friend the Member for West Bromwich West (Mr Bailey), has referred to the evidence from the money expert Martin Lewis, who brutally exposed the scale of this insidious influence. He said:
“14% of parents of under-10s, when they have said, ‘No, you cannot have your toy,’…have had a payday loan company quoted to borrow the money from.”
We have also heard about scale and the Ofcom research on advertising, which found that there were 17,000 payday lending adverts in 2008 whereas there were 397,000 in 2012. That equates to each adult in the UK seeing an average of 152 payday loan adverts a year. Given that level of market penetration, some of the biggest firms barely need ever to advertise again. That is why our Committee believes that our modest recommendation on curbing TV advertising is important, but we should not believe that it will cure the cultural influence.
Caroline Dinenage (Gosport) (Con)
Does the hon. Lady agree that it is not just the volume of TV advertising, but the nature of it that is concerning? These companies are often advertised via cuddly, humorous characters, such as knitted grannies and granddads. That is worrying it lulls people into a false sense of security about the nature of the product in which they are investing.
Ann McKechin
I absolutely concur with what the hon. Lady, a Committee colleague, says. The advertising is very clear and insidious, and it is targeted at younger people and children in particular. There is no debate about that; it has happened and continues to occur.
I want to deal now with the real-time recording of credit information. If credit information is to work, it needs to be both accurate and comprehensive; otherwise, there is little point to it. Unsurprisingly, the industry was quick to downplay the significance of this potential regulatory step, and again it is regrettable that the authorities have not been faster to respond, preferring instead an approach of wait and see. I commend the sustained pressure from agencies like as Citizens Advice and StepChange, but the cloud lifted when BBC’s “Newsnight” programme and others reported at the end of last year on the potential impact on mortgage lending. If there is no real-time recording in the payday lending sector, the existing credit recording systems become increasingly unreliable and inaccurate, particularly in respect of younger borrowers, who form the bulk of this sector’s customers. Lenders in the mainstream sector have now decided, in their world of lower risk, to dismiss payday borrowers entirely from their eligibility test—and hey presto, this month we have the announcement from Wonga and some others that a real-time recording system is going to be put in place later this year. Call me a cynic, but I suspect that the potential hit on their client base, who were increasingly worried about future access to mainstream lending and to mortgages, acted as a greater incentive than the dialogue with the FCA.
Justin Tomlinson
I thank the hon. Gentleman for that intervention. I will be moving on to the failings of mainstream banking shortly.
It is also a recognition of how consumer habits have changed. With 24/7 internet shopping becoming increasingly popular, if consumers see something online at 3 o’clock in the morning and want to purchase it, they would like to be able to access the funding right away. Society is geared up for consumers wanting something, and wanting it right away. That market adapted to consumer demand and stepped in where the mainstream banks were not looking. Clearly, value for money for the consumer is not paramount, and that needs to be addressed.
I welcome the positive steps that the Government have started to take, working with the FCA. I will comment briefly on the various things that I would like to see. The first one, and it is often the simplest, but the one on which I am not sure we are there yet, is that the total cost of a loan should always be displayed in cash terms. I suspect that not even Treasury Ministers can calculate an APR rate, which involves a hugely complex formula. Therefore, a customer should be able to say, “I want to borrow £100, and it will cost me £20.” Even those without a particularly good grasp of mathematics would then be able to make a reasonably informed decision on whether that represents good value for money.
To encourage competition, we need a standardised unit for comparison. In the energy market and in mobile phone contracts there are standard units, so consumers can visit price comparison websites to find the best product. That is very difficult with payday loan companies.
Caroline Dinenage
My hon. Friend is making an excellent speech. I know that he has worked hard to bring financial education into the school curriculum. Does he agree that to be able to fathom even the cost of these loans in numerical terms people need a certain level of literacy, so we really need to tackle the poor levels of adult numeracy and literacy, which are a big barrier in this case?
Justin Tomlinson
I thank my hon. Friend for that contribution. If she can just be patient, I will be heaping huge amounts of praise on her shortly.
The second thing I would like to see is real-time credit checking. The industry wants that because, despite a lot of the rumours, it relies on people being able to pay back the money they have borrowed. It would help to avoid somebody going into one shop and 15 minutes later going into another one. The credit checking agencies follow the traditional monthly banking system, so in theory somebody can wreak damage on themselves in the course of a month before the banks catch up. The industry says that it wants real-time credit checking; the credit agencies say they would like to offer it but that it is very complicated. One of the smaller operators, Call Credit, has got 10 operators signed up, but it will not be 100% participation. The Government will therefore have to empower the FCA to demand this. We are getting close to it, and it exists in some forms in America. It will make a huge difference because it will protect people from taking out multi-loans and allow the FCA to enforce affordability checks so that lenders who are lending to people who cannot afford it can be dealt with.
I would like to go one step further in ensuring that people can rebuild their credit rating. When someone has been turned down for a loan by one of the mainstream banks, the payday lending industry is often the only one that is prepared to take the risk with them. If they pay back the loan properly and on time, they should then have their credit rating repaired, allowing them to re-enter mainstream traditional lending.
There is a perception that the products, prices and requirements placed on people pushed them away from mainstream banking into a more modern, innovative industry that was responding to the situation. Mainstream banking has to take a long look at itself to see how it can adapt to a changing world. I fully support the fantastic work that my hon. Friend the Member for East Hampshire (Damian Hinds) has done on credit unions as an alternative for people. It might not be the total solution but it is certainly a very important part of the process.
On debt advice, which will be debated tomorrow in Westminster Hall, I fully support the levy, and I think the industry does as well. The Nationwide building society carried out a survey showing that 91% of people who get into financial difficulty say, “If only I had known better.” We see this in our casework. People who have got into difficulty come to see us with their carrier bags of unopened envelopes, and they need face-to-face, patient help. At the point where they go to get one of these loans, it would be helpful to have well-advertised information about how they can access free, independent debt advice, with a freephone telephone number.
Under the licence to operate, it costs lenders about £2,000 to get set up. A particularly bad, unscrupulous lender can wreak all sorts of damage before the FCA, or formerly the OFT, will have had time to do something about them. Unfortunately, some of these operators on the very fringes of the market will take advantage of the potential two-year window to do whatever they want before being taken down, and will then spend more money to get themselves back up the Google search engine listings.
The FCA needs to be extremely proactive in terms of mystery shoppers. Often the consumers who get themselves into the most difficulty are vulnerable people who are least equipped to raise it with us so that we can chase things up. This particularly applies to doorstep lending, as I have said in previous debates. With that lending model, the lender befriends someone, gains their trust, goes into their house every month, and could encourage them to borrow more. They might say over a cup of tea, “Have you sorted out your Christmas presents? If not, don’t worry, because we could provide the money for that, and why don’t you get your carpet sorted out if you’ve got your family coming round—that’s only another £3 a week.” We need to have mystery shoppers to check that the operators are sticking to the rules.
I championed the desire to get financial education on to the statute book, and I am delighted that the Government are implementing that in 2014. As my hon. Friend the Member for East Hampshire said, things will now change. This is about equipping the next generation of consumers with the skills to be able to make informed decisions—not moralising on those decisions but enabling them to make the mathematical calculations.
National Minimum Wage
Caroline Dinenage Excerpts(12 years, 2 months ago)
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Rachel Reeves
It is not just the Tories who should apologise; the Government’s junior coalition partners should apologise, too, because they were worried back then as well about the impact of the minimum wage. In 1994, their then leader attacked Labour’s
“umbilical attachment to a national, high-rate minimum wage”
and said that
“a national minimum would…force many on to the dole”.
The Liberal Democrats went into the 1997 general election with a manifesto commitment not to a national minimum wage but to a
“regionally variable, minimum hourly rate.”
Let us be grateful that they did not get their way. Despite the then Opposition fighting the legislation tooth and nail, line by line, clause by clause, using every trick in the book to slow, frustrate and obstruct its progress, the national minimum wage became law.
Caroline Dinenage (Gosport) (Con)
I am grateful to the hon. Lady for her fascinating history lesson. I wonder whether her bit of paper also says that 500,000 people lost their jobs under the previous Labour Government and whether she agrees that the announcement made this morning demonstrates the Government’s absolute commitment to ensuring that no employer will be able to exploit their employees by paying unfair wages.
Rachel Reeves
Two million jobs were created under the last Labour Government and employment reached a record high, so I am not sure where the hon. Lady gets her statistics from.
I have quoted the former leader of the Liberal Democrats but, back then, where was the Secretary of State for Business, Innovation and Skills, the right hon. Member for Twickenham (Vince Cable)? He was nowhere to be seen in the debates. He was nowhere to be seen on the voting record. On Second Reading and Third Reading, he failed to vote. Apparently, he abstained because he had reservations about a minimum wage. Perhaps he will stand up today to profess his concern for the plight of the low-paid. I am happy to take an intervention from the right hon. Gentleman if he wants to make one.
National Insurance Contributions Bill
Caroline Dinenage Excerpts(12 years, 4 months ago)
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Sheila Gilmore (Edinburgh East) (Lab)
It is a pleasure to follow the hon. Member for Redcar (Ian Swales). As so often when members of his party speak in these debates, they talk about what was happening to the economy in the period before the general election and after it as if they were two completely different things. Many of the views the hon. Gentleman has just expressed were certainly not those on which he and his party leader stood, so far as the manifesto is concerned, in the period leading up to the election.
Anyone walking into this debate would think that it was yet another general debate on the economy—and, indeed, on the record of the last Government. Now that we are three and a half years into this Government, that seems somewhat strange. To me, it looks like diversionary tactics. Government Members are saying, “Let’s not talk about what we’ve done; let’s hark back yet again not just to the previous Government, but to proposals that never even came into effect”, suggesting that those proposals were somehow the cause of our economic difficulties. That clearly could not be the case.
Caroline Dinenage (Gosport) (Con)
I am grateful to the hon. Lady for giving way. I can understand why she would not want anybody to hark back to the 13 years of the Labour Government, when anyone who ran a business saw it become more and more uncompetitive, when our country slipped down the league for international and global competitiveness and when our businesses were shackled by endless amounts of red tape and bureaucracy. Has she had the chance to speak to any businesses at all about that record and how things have significantly improved over the last three years?
Sheila Gilmore
I thank the hon. Lady for her intervention, but I am certainly not going to say that many of my constituents did not benefit from the record of the last Government, and I am not going to accept her characterisation of that Government as not having helped the majority of people in this country. Yes, I have spoken to local businesses, and many of them have been struggling, particularly over the last three and a half years, to get loan finance to get their businesses functioning. Many have found it extremely difficult to operate in an economy that has been sent into decline by many of the measures that the incoming Government imposed. The picture presented by the hon. Lady is wrong.
As I was saying, the concentration on what happened during the last Labour Government is a reflection of the fact that this Government know that their previous proposals on national insurance contributions simply did not work. We have heard a lot about predictions, and some people have suggested that the Opposition’s predictions about the economy were wrong, so the Government’s predictions, presumably by extension, must be right.
However, what the Government told us in 2010 and 2011 was that they were going to eliminate, not just reduce, the deficit over the course of one Parliament. What we now hear over and over again is that the deficit has been reduced by one third, but it seems to have reached a plateau. That figure of one third has been invoked for a very long time now, which suggests that the Government’s original intentions and purposes have not been achieved. They have clearly accepted not only that they will not eliminate the deficit by 2015, but that everything has stalled and that deficit reduction has, as I say, reached a plateau. In 2010-11, it was predicted that we would see economic growth in 2010-12, not that we would be still waiting for it in 2013. Even now, the amount of growth we are seeing is very limited.
Caroline Dinenage (Gosport) (Con)
I am grateful for the opportunity to speak in this important debate, and to follow such an array of wide-ranging, informative, quality contributions from my hon. Friends and colleagues. The Bill is a key part of a wider programme that the Government have undertaken to support aspiration, encourage job creation, and boost growth. As a small business owner, I am proud to speak in support of a policy that will help firms around the country to expand, innovate and, crucially, create jobs. To put it simply, the Bill is great for small businesses, great for charities, and great for Britain.
As we have heard, the key part of the Bill will save all businesses in the country up to £2,000 in class 1 national insurance contributions. Taking a tax off jobs will make it much easier for millions of people who have set up firms to take on new employees. Do not take my word for it; Anne Redston, professor of law at King’s College London, says:
“At a stroke, this new relief…removes the ‘jobs tax’ on millions of small businesses, and is likely to encourage one-man businesses to take on their first employee.”
What is more, 98% of the benefits of the change will go to small and medium-sized enterprises. As we have heard, 450,000 small businesses—one third of all the employers in the country—will pay no jobs tax at all.
Julian Smith
Does my hon. Friend agree that not only is this an exciting proposal overall, but the fact that social enterprises and charities—many of which, in her constituency and mine, are highly innovative and create jobs—are included is a really good thing?
Caroline Dinenage
My hon. Friend makes a key point. The fact that the measure is open to charities and social enterprises, as well as businesses, is really important. That is another step in the right direction by the Government to make it easier for small firms and charities to take on new employees. This is not just about business; the head of policy and research at the National Council for Voluntary Organisations, Karl Wilding, says that the idea is
“a very positive thing…To a small organisation, £2,000 is a lot of money.”
He is absolutely right. When I set up my business at the age of 19, £2,000 would have been a massive incentive to take the big step of hiring my first member of staff.
My hon. Friend the Member for Stourbridge (Margot James) spoke powerfully about her experiences of starting up a business. As she said, taking on that first member of staff is a really big moment—a huge decision. It is a massive responsibility; the person hiring becomes responsible for someone’s income, livelihood and wages.
Caroline Dinenage
And their family. I am pleased that the Bill makes that moment so much more likely. There are many statistics that show how great an impact the change will have. We have heard some amazingly powerful statistics this afternoon; for example, over a year, employers with fewer than 10 employees will have their national insurance contribution bill cut by 80%. However, it is easy to get bogged down in figures. What does the Bill mean for charities and small businesses up and down the country? It means that the small-time cupcake seller who works out of their kitchen and wants to expand, but is not sure that they can afford to, is now £2,000 more likely to give a young person their first foot on the jobs ladder. It means that the mechanic who needs another pair of hands to deal with a recent increase in demand can take someone on and pay them up to £22,000 without having to pay any jobs tax. It means that the Government are continuing to deliver exactly the kind of policies that have, so far, created 1.4 million private sector jobs and put the country on the path to prosperity.
There are so many ways in which the Government have helped small businesses to flourish. Locally, I have been involved in a really successful regional growth fund bid—a partnership between The News, which is our local newspaper, and the Solent local enterprise partnership. The Bridging the Gap scheme is a pot of money that new start-ups and small firms can bid for to help grow their business and create jobs. I recently visited three of the Bridging the Gap success stories in my constituency, including Kev Jones and Son, an independent convenience store at the heart of the community, which is, you will be interested to hear, Madam Deputy Speaker, the go-to shop for your Christmas meat hamper. The people there had very ambitious plans to expand. With a little bit of extra money, they were able to bring those plans forward, and they have now doubled their floor space and created some of the new jobs the area so desperately needs. These are exactly the kinds of businesses that we will be supporting through this Bill. That is absolutely the right thing to do, because they are not just the backbone of our economy but the lifeblood of our communities. The Bill is a key part of the wider programme to make Britain the most small-business-friendly environment in Europe.
By cutting Labour’s deficit, the Government have secured record low interest rates for hard-working families and small businesses across the country. From April 2015, corporation tax will be cut to 20%—the lowest in the G20. As a result of the Government’s policies, the UK recently topped KPMG’s list of the most competitive countries in which to do business, beating Switzerland, the USA and France for the first time ever. This hard work is getting results. The latest figures from the Office for National Statistics showed strong growth of 0.8% for the third quarter of 2013. That proves that the only way to create real prosperity and to raise living standards is not through quick-fix gimmicks but through straightforward solutions: backing businesses to create growth, cutting taxes to boost growth, and supporting hard-working people.
Labour Members have presented this as being somehow their idea. That appears to show brass neck of almost biblical proportions. Anyone who ran a business under the previous Labour Government, as I did for 13 years, will know that we were shackled by endless amounts of bureaucracy as the country fell deeper into debt and slipped down the international competitive league tables. We cannot escape the fact that they got it very badly wrong on the economy as well. They said we would lose 1 million jobs. Instead, we have seen the creation of 1 million net jobs—three in the private sector for every one lost in the public sector. Because this Government have cut taxes, slashed red tape and unleashed innovation, we have seen record levels of small business creation and employment. I am confident that the Government will continue to deliver the right policies.
Sheila Gilmore
Does the hon. Lady accept that the rate of employment has not yet reached the level it had reached prior to the recession, even if some numbers, many relating to part-time work, have gone up?
Caroline Dinenage
The hon. Lady can throw facts and figures around as much as she likes, but unemployment was so high when we came into government purely as a result of the Labour party’s economic policies over 13 years. Everything we have done until now has been to try to put the brakes on and reverse that, bringing employment back to households that may not have had it for over a decade.
I am confident that the Government will continue to deliver jobs and deliver the right policies, such as this Bill, backing small businesses to create the jobs we need and keeping us on the path to prosperity.
Oral Answers to Questions
Caroline Dinenage Excerpts(13 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr George Osborne)
This coalition Government have dramatically increased the pressure against those who avoid and evade taxes. As a result of our efforts, tax revenues from our compliance and enforcement are £3 billion higher than when we came to office. We have tackled disguised remuneration, we are dealing with stamp duty enveloping and we are introducing a general anti-abuse rule. None of those things, of course, happened over the previous 13 years.
Caroline Dinenage
My constituents do not mind paying taxes, so long as everyone pays their fair share. Given that the tax gap widened under the previous Government, will the Chancellor confirm that this Government are committed to tackling all forms of aggressive tax avoidance as well as tax evasion?
Mr Osborne
We are committed to doing that. My hon. Friend is right that the tax gap—the amount of money that should be collected but is not collected—rose from £35 billion to £39 billion under the previous Government. As I have said, our compliance and enforcement efforts have already increased the amount raised by £3 billion, and later this week we will confirm that we have raised £500 million more in extra tax from high net worth individuals as a result of our efforts through Her Majesty’s Revenue and Customs. We are taking action, but need it to be supported, yet the Labour party recently voted against the changes to disguised remuneration, which were an attempt to clamp down on a particularly egregious form of tax avoidance.