Oral Answers to Questions
Chris Leslie Excerpts(11 years, 6 months ago)
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Greg Clark
My hon. Friend is absolutely right. It is crucial that the right skills are there, but we have taken a role internationally in leading this. In fact, in Mexico, the Chancellor is leading the way across the world in making sure that we have a co-ordinated regime.
Chris Leslie (Nottingham East) (Lab/Co-op)
I do not quite understand why the Minister is reluctant to be straight with the House on the facts, particularly given the question asked by my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop).
Mr Speaker
Order. I am sure that the hon. Gentleman is not suggesting that any Minister would be anything other than straight. He may want to deploy another word with reference to dealings with the House.
Chris Leslie
Absolutely. Perhaps it was inadvertent—I would not in any way wish to imply that the Minister was deliberately obfuscating on the facts. I wanted to pick up on a specific question. As I understand it, public sector borrowing in the first six-month period of the last financial year was £62.4 billion. It was £65.1 billion in the first six months of this financial year, so will he confirm that that is £2.6 billion higher, that borrowing has risen, and that the deficit has gone up?
Greg Clark
No, the numbers vary from month to month. The hon. Gentleman needs to wait until the end of the financial year. January is the key month for these things, as he knows, but if he is interested in getting matters straight on the facts, will he clarify the shadow Chancellor’s suggestion that there was no structural deficit before the recession, because according to the IMF not only was there a structural deficit but it was the worst in the G7?
Chris Leslie
As I understand it, Mr Speaker, we ask the questions—the Minister is supposed to answer them. Why will he not confirm that borrowing figures are higher and that the deficit has risen? Will he stop being so complacent, get a grip of our economy and public expenditure, and confirm that the Government will keep their promise? The Chancellor said that the coalition Government will take responsibility for balancing Britain’s books within five years, so will they keep that promise?
Greg Clark
The facts are as I set out, but if the hon. Gentleman is implying that in some way he is against a deficit, that he wants to pay down the deficit, can he explain why he can hold that position and simultaneously be in favour of increasing borrowing? The shadow Chancellor is on the record as saying that his plans mean a short-term increase in borrowing. Let him say by how much and when.
Banking Union and Economic and Monetary Union
Chris Leslie Excerpts(11 years, 6 months ago)
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Chris Leslie (Nottingham East) (Lab/Co-op)
No pressure there, then, Mr Deputy Speaker.
I have a lot of sympathy with the Minister today. Let us hope that he is a little luckier than he was last Wednesday, although of course the curse of Tunbridge Wells will have its way. In a way, as he explained, banking union is a natural downstream consequence of monetary union. It would be wrong to resist it for the eurozone, as the eurozone crisis has exposed a series of risks to economic stability, not least of which is the relationship between sovereign debt and banking debt and the need to find credible ways to prevent private banking losses from dragging down sovereign fiscal positions. The UK has its own banking union and our monetary policy sovereignty has given us a measure of protection during the sovereign and bank debt crises that have engulfed the eurozone.
I thought the Minister was perhaps labouring under the impression that his plucky Members of Parliament kept us out of the euro between 1997 and 2010—that is too funny, as of course that was the decision of the previous Labour Administration. It was the right decision.
Chris Leslie
I will not give way yet, as I am conscious of the time.
We were right, too, to bail out the banks in 2008, but that came at a high cost for the taxpayer and for the country’s economic prospects. UK public debt was adversely affected by the purchase of banking assets and the subsequent loss of revenues from financial services. These issues are now affecting countries around the world, especially in the EU. Monetary policy sovereignty has allowed the UK to adopt an active interest rate policy to counteract those economic headwinds—something less available to those in the eurozone.
To save the euro, the eurozone has looked at new rules to grip the fiscal policies of its member states. Fiscal union in the EU is now widely recognised as dependent on banking union. Germany initially insisted on that, and it has asked that the single supervisory mechanism—the eurozone nation state regulators and Governments—be completed before banks can access the European stability mechanism and the European Central Bank’s outright monetary transactions programme, hence the imperative to agree these matters. In recent weeks, however, Germany is rumoured to have lost some enthusiasm for that tougher banking union and its consequences, especially as some of its smaller banks face major regulatory upheaval.
It is right that the ECB’s role in supervisory policy should be triggered, by unanimity if necessary, as required in the Maastricht treaty. Central banks are increasingly in the driving seat in financial regulation, as is the case in the UK, and it is necessary for the ECB to have a clear capability in its role overseeing the operation of the eurozone. The ECB is a full treaty institution, and it must be governed by treaty rules and member state unanimity, as we heard from the Minister. In that process, the rights of non-eurozone members, particularly the UK, must be safeguarded in several ways. We should not be party to any deposit guarantee mechanisms or pre-fund recovery or resolution mechanisms. The UK has undertaken its own measures in that respect, and there are no proposals on the table that would affect our taxpayers directly.
The rules for the single market, including a single rule book for the financial services sector in the EU, should involve all 27 member states. The European Banking Authority—as well as other European supervisory authorities—is the vehicle for preserving the integrity of the single market. The Commission says in its documentation that
“it is proposed that voting arrangements within the EBA should be adapted to ensure EBA decision-making structures continue to be balanced and effective and preserve fully the integrity of the Single Market”.
That is absolutely crucial, but we need far more details about how that will work. The 17 eurozone countries will act en bloc through the ECB in their seats on the EBA, which could represent a permanent majority on all issues, as the Minister explained. The EBA has rule-making powers under qualified majority voting decisions, it mediates between supervisory institutions, and it shares supervisory best practice. There is a real risk of the ECB bloc acting as a permanent caucus to overrule the 10 non-eurozone nation states.
Chris Leslie
As I shall come to, we should seek such key guarantees. I do not think that there is a sufficiency under the proposals on the table. As I said, I am sympathetic to the Government’s situation. However, there is a crucial difference between the Opposition and the Government. We believe that it is really important that we stay in the room somehow so that our voice continues to be heard and we can shape and mould supervisory rules, given the importance of financial services to our economy. How can we continue to be involved while not being at risk of being overridden by the 17 eurozone members? That is the conundrum with which we are trying to grapple, and it is shaping up to be a test case in the two-speed Europe debate.
Mr Clappison
The phrase, “Staying in the room” is one we often hear. However, is it not the reality of the voting arrangements that the hon. Gentleman would be staying in one room and the important decisions would be made in another?
Chris Leslie
It is right for the hon. Gentleman to voice that anxiety. I do not want us to be on the margins, unable to promote the best interests for our nation and our economy. Given that our financial services sector represents approximately 40% of the total of the European Union’s financial services sector, that is absolutely at the core of our vital national interests. It is therefore imperative for us to remain an active driving force in the EU single market in financial services.
Mr Jenkin
It seems to me that the hon. Gentleman is trying to have his cake and eat it. Either he is going to be in the room—in the banking union—or not. If he is not going to be in the banking union, the question that he is failing to grapple with is this: what safeguards and protections do we need given that we will not be in the room because we will not be in the banking union? Perhaps he could provide an answer to that question instead of just waffle.
Chris Leslie
The hon. Gentleman is too kind, as uncharacteristic of him as that may be.
I am afraid that this is a tall order for the Government to negotiate. It is a conundrum. I do not in any way shrink from the mountain that needs to be climbed in squaring this circle, if I may mix my metaphors in that way. I am just concerned that the Government’s approach—perhaps an echo of their approach to the EU budget—is not ambitious enough. I urge hon. Members to talk to institutions across the City of London and to financial services practitioners across the country. They are very worried about their position if they are not able to be part of a single market. They know very well that there are forums in which the rules will be made and shaped, and yet of course they want to reserve our rights from a UK position. Somehow, we have to try to forge a negotiating strategy that manages to do better.
Chris Leslie
I will in a moment, but I am conscious of time.
The motion expresses, in only the most general terms, the Government’s policy to
“remain outside the new supervisory arrangements while protecting the single market in financial services.”
That is necessary, but it is not sufficient. Perhaps it would be better if Ministers found ways to stay outside the scope of the eurozone’s rules—the point made by the hon. Member for Harwich and North Essex (Mr Jenkin)—but somehow still be in the room on EU-wide supervision matters as they develop, and to secure protections in any future settlement on EBA rule-making and mediation.
Mr Cash
Surely the hon. Gentleman is missing one major point, which is that the transfer of the jurisdiction under the single market arrangements that took the City of London away from the United Kingdom and gave it to the European Union was a decision taken by his Government. That is why the problem he is now having to deal with—the anxieties he referred to—has arisen. That the coalition has acquiesced in that is another story. The fact is, however, that the real responsibility lies with those who transferred the jurisdiction, as I pointed out in the Financial Times three years ago.
Chris Leslie
I do not want to get too much into the history of these things. We could go back to the Maastricht treaty, the formation of the eurozone and the inexorable logic of how we have got to where we are today. All I know is that it is important that we try our best and redouble our efforts to ensure that we have a negotiating strategy that secures the best deal possible for the UK.
Chris Leslie
I should like to make a little progress if I may.
I know that hon. Members will say, “How can we manage to secure these particular arrangements? What should our stratagem be?” Government Members will recall Lady Thatcher’s invocation of the Luxembourg compromise—a quiz question for hon. Members who recall that device. It has not been in use in recent times, but it was a way, in certain circumstances for qualified majority voting arrangements, to ensure that there was a capability of promoting vital national interest. There was at one point a recognised device for ensuring that one could stay in the room. If vital national interests were affected, then certain levels of protection were possible. I do not in any way deny that that is a difficult position, but that is the sort of scale of proposition that the Government should be more actively asserting. The Government need to negotiate a clearer and more distinct set of rules that protect our status outside the eurozone while ensuring that we have an ongoing role in how new rules develop across the whole EU. In our view, that must be the Prime Minister’s negotiating objective.
We have other concerns and questions about the SSM. How can it connect with the wider public and be subject to democratic accountability? That is an important point, because the bodies at the heart of the SSM will need to be more transparent. I am not clear whether they will publish their minutes in the same way as the Bank of England or the Federal Reserve, but we need to start addressing some of those transparency questions. Furthermore, what will be the relationship between the ECB’s monetary policy stance and its approach to decisions on financial supervision?
The composition of the SSM is complex and lines of accountability are extremely confused. For example, the European Central Bank is a superior treaty institution, yet the EBA will in theory sit on a junior institution. It is extremely difficult to see lines of accountability and how the legal issues raised in the amendment will be resolved. What will happen in the intervening months and potentially years before this complex constitutional wiring is settled? What if new market pressures force banking crises that require the stability mechanism or outright monetary transactions to be triggered, and what if there is no SSM in place?
How do we prevent City of London institutions and firms, which contribute about one sixth of Britain’s GDP, from changing their opinion about London in the long run as the right place to locate, when there is a risk that we will be marginalised in the decision-making forum for EU banking rules? They will worry about the prospects of operating under a different set of rules from those on the continent. Our vital national and economic interests are at stake, so we need to ensure that we keep involved, do not get pushed out and avoid being marginalised, while of course reserving our rights.
Wayne David
My hon. Friend has set out a precise and appropriate agenda for the country to pursue, but does he agree that for that agenda to be pursued effectively we need the ability to put across arguments and to persuade? What we do not want is rhetoric and empty gestures, which is what we are getting from the Government.
Chris Leslie
I worry that that is the problem with the Government’s approach to the negotiations. I do not deny for a moment that this is a tall order as a negotiating strategy, but it is necessary to protect our national interests. Of all the 10 non-eurozone countries, we have the most at stake. As I said, 40% of the EU financial services sector comes from Britain. We cannot allow ourselves to be treated as an afterthought in these negotiations. Why are the Government letting others shape the thinking and make all the running on EU banking union reform? Our vital national interests are on the line. We need a clearer negotiation strategy from the Government from the one we have seen to date.
Multiannual Financial Framework
Chris Leslie Excerpts(11 years, 6 months ago)
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Greg Clark
That is exactly what we are doing in this multiannual financial framework, and the opportunity we have to veto a settlement that we are not in favour of gives us leverage in that.
Chris Leslie (Nottingham East) (Lab/Co-op)
The amendment to the motion
“calls on the Government to strengthen its stance so that the next MFF is reduced in real terms.”
Does the Financial Secretary disagree with the amendment?
Greg Clark
The hon. Gentleman, characteristically, is playing games with the issue. Of course we want to see a reduction. His position is wholly incredible, because this week he has been calling for a cut in the EU budget, which we all want to see, but when asked whether he is prepared to veto the budget, as we have said clearly we are prepared to do, he refuses. How can he take that position if he does not will the means to enforce it?
Greg Clark
I will not give way, because I want to make progress.
We have touched on a number of themes in the debate already—shamelessness, wastefulness, hypocrisy and betrayal—which leads us neatly to the position of the Labour party. Those sitting on the Opposition Front Bench are the same men who gave away so much of our rebate and who would surely surrender the rest on demand to curry favour with Europe. It is the party that, the last time it was in power and had the opportunity to negotiate an MFF, agreed not to a cut or a freeze, but to an 8% real-terms increase. It is a party whose socialist comrades in the European Parliament declared that the Commission’s proposed 10% increase was
“not sufficient to finance all the EU’s objectives”.
It is a party that nearly bankrupted our country but now claims conversion to the rigours of fiscal rectitude. It is a party whose last act in office was to sign Britain up to the EU stabilisation mechanism when it did not ever have a mandate to govern. It is a party that is so caught up in its cynical political games that it calls for a cut in the budget but at the same time says we should not deploy our veto to secure Britain’s interests. It is not a party that deserves to be taken seriously, as its opportunistic posturing this week shows.
Chris Leslie (Nottingham East) (Lab/Co-op)
That was a rather partisan speech from the Minister—[Interruption.] Well, it is the truth—it was rather partisan. May I first place on the record my appreciation to the Leader of the House, who is not in his place, and to the new Chief Whip, for scheduling this debate? Without the Government helpfully timetabling the motion on the report from the European Scrutiny Committee, we would not have had the opportunity to express the view of the House of Commons today.
Our economy has struggled in the past two years. We have stood still while our international competitors have accelerated away, and the flatlining economy has been bad for public finances, with borrowing higher so far this year than in the same six-month period last year. It is therefore clear that all demands on the public purse need to be considered with care, and our contribution to the EU budget can be no exception.
Mr MacShane
My hon. Friend might be a bit young to recall that in 1984 Britain’s contribution to the then European Community was £654 million. Six years later it had risen fourfold to £2.54 billion. Does he remember which Prime Minister sprayed British taxpayers’ money all over Europe, or are we all now post-Thatcherite, because the Conservative party certainly is?
Chris Leslie
The two Government parties have a lot of history to confront, but I do not want to be as partisan as the Financial Secretary, except to say that in a week when 1 million letters are being sent clawing back child benefit, when police budgets are being cut by 20%, when pensioners are having their tax allowances frozen, and when some of the poorest in society are being asked to pay more in tax—[Interruption.] It is a fact. Given all that, would it not be perverse if the European Union were exempt from those cuts?
When times are tough, not only in Britain, but in countries throughout Europe, it is all the more important that the negotiations on the next seven-year EU spending review—the multiannual financial framework—spurn the inflationary tendencies which simply repeat previous settlements plus a nominal price adjustment. Heads of Government need to champion reform, get a grip on the fundamentals of the EU budget and reverse that upward trend. There is a very simple test for the summit on 22 November: will member states just keep rolling forward the EU budget, plus inflation, or can they achieve a real-terms reduction?
Alun Cairns (Vale of Glamorgan) (Con)
I accept the difficulties with public finances and the sincerity with which the hon. Gentleman makes his comments, but does he regret the actions of the previous Labour Government, who gave up the rebate?
Chris Leslie
The rebate has not been given up; it is still there to be defended. This is a task for the Prime Minister and the Chancellor to achieve, and we will see how they do. The last time we discussed these issues was seven years ago and we are now discussing them at a critical moment ahead of the next seven-year period, so this is when they matter most of all.
Chris Leslie
I want to address the motion and the amendment, if I may. The Government’s motion, for all its rhetoric, has such meagre ambitions. [Interruption.] It is true. The motion implies that the House should be content with business as usual, but that just will not do. A real-terms reduction is possible, but it requires persuasive diplomacy, careful alliance building and, above all, leadership.
Nadhim Zahawi (Stratford-on-Avon) (Con)
The hon. Gentleman mentions careful alliance building. As we have heard, two years ago the Prime Minister did exactly that, with Germany, France and the Netherlands backing him to deliver a no real-terms increase. If the Prime Minister has to exercise the veto at the November meeting, will the hon. Gentleman support it? On 29 October, the hon. Gentleman said the opposite by saying that he thought we could avoid a veto, so will he now back it?
Chris Leslie
If the hon. Gentleman calms down, I will explain. No one should be fooled into thinking that a veto is cost-free. The hon. Gentleman and all other hon. Members should know that the way in which European Union rules work means that last year’s budget will be cut and pasted and become the new budget for 2014, plus the inflationary increase. In other words, if the Prime Minister flounces off again, an extra £310 million will go from the Exchequer to the 2014 budget. That is a fact and we need a negotiation strategy that is going to work.
Greg Clark
Will the hon. Gentleman answer a simple question? Would he back the use of the veto—yes or no?
Chris Leslie
We have three weeks of negotiations. There is a summit on 22 November. [Interruption.] If the Minister has decided today to use the veto, why even bother going to the summit on 22 November? What is the point of the Prime Minister even travelling there? Will he still attend the summit? Surely the path to be pursued is the one that is the best for the taxpayer. I have explained what will happen if the Prime Minister walks away from the talks—it will cost the taxpayer more. Members can look at the Library research paper, which makes it clear for all to see that it will cost £310 million in 2014.
Chris Bryant
Is not the truth of the matter that literally the only way in which we can ensure that we end up with a less than inflationary increase is by not announcing that we will use the veto and by ensuring that we negotiate all the way through to the end? It is a child who announces on the first day of negotiations that they are going to use the veto, because then the Commission gets its way.
Chris Leslie
My hon. Friend is entirely right, and that is why the Government do not get it. They need a negotiating strategy to get the best deal for the taxpayer. [Interruption.] The Minister laughs, and the Chancellor is next to him puppeting him along in his hilarity, but I say to the Chancellor that this is an incredibly serious issue. It is about taxpayers’ money, and incredibly large sums of it at that. [Interruption.]
Mr Speaker
Order. Mr Zahawi, I am sure that in your own way you mean well, but you are far too excitable. It is no good looking up and around, and at places outside the Chamber, and waving your hands in a bizarre manner. What you need to do is calm down. It will be good for you, good for the House and good for Stratford-on-Avon.
Chris Leslie
I am sure there is some Shakespearian reference about being calm in negotiations, and calm, persuasive diplomacy is the strategy that we need today.
Dan Byles (North Warwickshire) (Con)
I understand the hon. Gentleman’s point, but I do not think any Government Members are saying that we should go into the negotiations saying that we will use the veto. [Interruption.] No, what the Minister said was that he was not ruling it out, and that he was prepared to use it. That is a very different thing. Would the shadow Minister be prepared to use it if necessary?
Chris Leslie
Of course it is a fact that a veto is part of the suite of what is available at the negotiations, but we should try to negotiate a better settlement first. My point is simple: if we go along with the proposals—[Interruption.] Will hon. Members bear with me for a moment? If we go along with the proposals of the Commission and the European Parliament, the Chancellor will be providing significant extra money. Hon. Members need to be aware of what the implications for the taxpayer will be if we walk away, which I am sure the Chancellor will confirm. I am happy to give way to him on the subject. If we walk away and there is no agreement, the budget will roll forward along with an inflationary element, costing the Exchequer an extra £300 million.
Mr Dennis Skinner (Bolsover) (Lab)
Does my hon. Friend realise that this discussion is almost a replay of John Smith finding a way to oppose the Maastricht treaty? The result was rebellions lasting several years and a majority of about 190 for Labour. My hon. Friend’s measured response of joining those of us who have voted against most of the treaties is a wonderful idea, and the prospect could be him sitting on the Treasury Bench.
Chris Leslie
I respect my hon. Friend’s view, but our goal today is to stand up for the taxpayer. That is not just the preserve of Opposition Members, because I know that some Government Members also want to rise above the partisan discussions and ensure that a decision is made that will mean the best thing for the taxpayer.
Chris Leslie
What an array of Members to choose from. I give way to the right hon. Member for Mid Sussex (Nicholas Soames).
Nicholas Soames (Mid Sussex) (Con)
I am grateful. Would not the hon. Gentleman agree that the proposal that the Government have put forward in the face of extraordinary, irrational provocation from the Commission is extremely sensible and deserves the support of the whole House?
Chris Leslie
I respect the right hon. Gentleman’s position, but with the greatest respect, I do not think the Government’s proposal goes far enough. They need to set in train a negotiating stance for the UK that will lead to a real-terms reduction. For all the fine words that we heard from the Minister, if he believes that as well, he should quite simply accept the amendment.
Chris Leslie
I would like to make progress as we have a limited amount of time.
The next seven years of the EU budget should prioritise jobs, growth, infrastructure and practical programmes that rejuvenate fragile economies. Building up those elements, however, means reducing EU spending elsewhere. Savings can be made on the common agricultural policy, which currently costs European nations £45 billion with the UK contributing about £1 billion a year. The common agricultural policy is a distorting barrier to trade liberalisation, a wasteful programme that is in need of further reform, and it is astonishing that the Government motion does not refer to it.
Savings can be made on aspects of EU structural funds that represent 35% of the budget and are too often committed in a haphazard manner and depend on outdated commitments rather than future priorities. Unless structural funds contribute to positive economic development, they cannot be justified. Savings can also be made on subsidies for tobacco growers, which will be discontinued, on outdated practices such as relocating the European Parliament to Strasbourg for a week each month—that costs €200 million each year—on non-essential projects such as the House of European History museum, which cost a reported £137 million, and on export refunds, which cost millions and disfigure fair trade.
Savings can and must be made, and delivering a real-terms reduction in the EU budget requires a relentless focus on the justification behind detailed expenditure. That is why we need a more effective and independent EU auditor who is able to examine the impact of programmes on the EU economy. The auditor must also improve the accountability of spending on pro-growth activities, which will require the bringing together of disparate Commission priorities under the auspices of a single commissioner for growth, persistently and single-handedly concentrating on that overarching concern.
How capable is our Prime Minister of delivering real reform in the EU budget? Can he come back with a deal that sees the contribution from the UK Exchequer reduced in real terms? Those are the tests he must now face. We know that his phantom veto last December placed the UK in the margins of influence, just when it mattered most, but today’s debate must be about more than the frailties of the Prime Minister. It boils down to how much we care about taxpayers’ money—money that is hard-earned and needs to be safeguarded.
For every 1% that the Government concede in additional spending on the multiannual financial framework, nearly £1 billion will transfer from UK taxpayers to the EU budget over the seven years of the spending review period. If negotiations fail because a member state walks away from the talks, we will simply see last year’s settlement rolled forward and supplemented by an automatic 2% inflation upgrade which, as I said, will cost our taxpayers at home an extra £310 million in 2014.
Andrea Leadsom (South Northamptonshire) (Con)
Perhaps the hon. Gentleman has not realised that trying to negotiate in a calm way on a deal that was agreed two years ago by our Prime Minister is the most sensible way to proceed. If he looks into it, he will find that new member states also have a lot of skin in the game, and they will not want us to use our veto because they will also lose out. This is not just about Britain and Britain’s veto, but about dynamics across the whole EU membership. Using our stated policy over two years in a consistent and calm fashion gives us the best chance of achieving real reductions in cost for the British taxpayer.
Chris Leslie
I have a lot of respect for the hon. Lady and she made a calm and persuasive point. The difficulty is that the Prime Minister has not been calm in these negotiations; indeed, he has deployed the veto almost three weeks before negotiations have even started. It is important to have a consistent and calm strategy, and the window of opportunity must surely be to persuade nations across the EU that their taxpayers also want a spending reduction in real terms. If the Prime Minister ends up at the November summit writing a cheque for hundreds of millions of pounds more, he will surely send an unpalatable message to millions of hard-pressed taxpayers across the country.
Gavin Shuker (Luton South) (Lab/Co-op)
Despite his youthful appearance, my hon. Friend has been in this House for many years longer I have. Perhaps he will explain to me why, although the Minister said that the stated ambition of his Government is to reduce the EU budget, Government Members who vote for that lose their positions.
Chris Leslie
The new Chief Whip will have his own strategy for twisting arms and using his powers of persuasion. The amendment is straightforward and similar to the position the Opposition took in July—[Interruption.] I hear what the junior Whip, the hon. Member for Chelsea and Fulham (Greg Hands), says about our position. It would be perverse for Government Members to walk through the Lobby to vote against the position the Minister proclaims he holds—but strange things happen in the House.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the shadow Minister confirm that, if the aims of the amendment are implemented, there will be a reduction in payments for Welsh farmers, and a reduction in convergence funding for some of the poorest communities in the EU, such as the one I represent?
Chris Leslie
No, that is not necessarily the case. I do not know what the hon. Gentleman has heard from Government Members or whether they have been trying to persuade him not to vote for the amendment, but my point, which other hon. Members will no doubt make during the debate, is that there is plenty of scope for savings within the EU budget. We need to prioritise jobs, growth and support for economies, but there are plenty of other ways in which we could make savings.
Chris Leslie
I want to make progress, if I may, because a lot of hon. Members want to speak.
I saw in The Guardian today that the Deputy Prime Minister has made a comment on Labour’s position. Liberal Democrats—there are none on the Treasury Bench, but some are in the Chamber—believe that Labour Members are dishonest and hypocritical simply because we want a real-terms reduction in the EU budget. Let us put to one side the fact that the Deputy Prime Minister, of all people, ought to avoid throwing those epithets. We have been clear on our position for a long period: because of the stagnating economy and the pressures on public finances, a real-terms rise in the EU budget is wrong. We have been saying that for months. The Deputy Prime Minister should figure out his own position before criticising those of us who want to stand up for the taxpayer.
I urge hon. Members to look at the amendment we tabled in the debate on 12 January, which states that the
“UK’s ability to negotiate a satisfactory European Union budget deal has been weakened by the Prime Minister’s failure to secure allies for a more prudent settlement in this qualified majority decision; and so calls on the Government to strengthen its stance so that the 2013 Budget and the forthcoming Multi-Annual Financial Framework are reduced in real terms”.
If the Government had paid attention back then, they might not be in such a weak position today.
George Eustice (Camborne and Redruth) (Con)
I understand the hon. Gentleman’s point on the importance of building alliances. Will he update the House on how many leaders of Labour’s EU sister parties he has spoken to in the three days since Labour announced this new policy? Do any of those socialist leaders support his position?
Chris Leslie
If the Minister wants to resign his seat in the negotiations, we would be more than happy to take over—we would be a great deal more successful. We are the Opposition and are not in a position to negotiate, but we are quite ready to take that role to get a better deal for the taxpayer. I only hope Ministers do so.
Chris Leslie
I will not give way for a moment.
Some people seem to think that querying the size of the EU budget is anti-European, but it is not. For those of us who believe strongly in the benefits of coming together as a community of nations and working jointly in the EU, it is our duty to prove that pooled budgets can be spent wisely and effectively, and retain the confidence of taxpayers everywhere. Good relationships with other EU states require a level of diplomatic acumen to persuade our partners that there is an alternative way forward.
The Conservative party in opposition believed in a real-terms cut. We have heard what the Minister has said and the Prime Minister was quoted at Question Time. However, we now hear that sources in No. 10 are backtracking and implying that the proposals are impossible to deliver. It is all very difficult, but what has changed? Frankly, the Prime Minister needs to have his hand strengthened in the negotiations, and it is our duty as a Parliament to fortify him at this critical stage and help him on his way.
The amendment makes it crystal clear that a real-terms reduction should be the goal. It is a position identical to that laid out in our amendment when we last debated this question in the middle of July, and it is a position that we still support today. It is time for the House of Commons to speak with one voice on behalf of the whole nation and say to the Prime Minister, “This is what we expect of you. This is your task. Let’s do the right thing for the taxpayer and have a real-terms reduction in the EU budget.” We support the amendment.
Stephen Williams (Bristol West) (LD)
The hon. Member for Vauxhall (Kate Hoey), who I assume has gone to light her bonfire—I am not sure whether Mr Barroso or anyone else will be on top of it, but I hope that she enjoys the heat south of the river—said that the House was at its best when it is united. I entirely agree that the House is at its best when united on an important point of principle in which we all genuinely believe, and some Members are genuinely standing up for what they believe in—the hon. Members for Rochester and Strood (Mark Reckless) and for Wellingborough (Mr Bone), for example, who are genuinely Eurosceptic—but when the public see nakedly opportunistic Opposition motions, that is when the House is at its worst in their eyes, and that is what undermines public confidence in the work of Parliament.
Chris Leslie
Will the hon. Gentleman remind the House what he said about tuition fees before the general election?
Stephen Williams
This is about a debate we are having now on a budget from 2014 to 2020, not about a position we took in 2009 before any of us knew we were going to be in a coalition Government. This is a position we can decide for ourselves, knowing the circumstances we are currently in. They are entirely different situations.
We are essentially discussing a comprehensive spending review of the European Union from 2014 to 2020, for which the European Commission has asked for a budget of €972 billion. That is roughly €100 billion above what would be a real-terms freeze. That is completely unrealistic at a time when EU member states are under real budgetary pressure, and some more so than others. It would be unacceptable for the United Kingdom to agree an increase of that magnitude, because it would represent roughly £10 billion in extra contributions. Therefore, it is absolutely right that the UK Government are going into the negotiations, in concert with many other member states, asking for a real-terms freeze. That is what is important: the position our Government are taking is in agreement with that of many other member states. It is a position that has a realistic prospect of achieving the success that most of us actually want. Undermining the United Kingdom’s position today will blow a hole in that negotiating position and make it much less likely that we will get the outcome many of us wish to achieve.
Public Service Pensions Bill
Chris Leslie Excerpts(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Robert Neill
I certainly never took any pension contribution holidays. Indeed, I only became a member of the local government pension scheme in 2000, when I was a member of the Greater London authority, so I do not think that the hon. Gentleman’s point is realistic. The performance of the scheme is down to the investment climate in which it operates, and the investment climate is determined by the macro-economic policies of the Government. The hon. Gentleman does not accept the failure of his Government in this context. One of the by-blows of that failure was that the investment returns for the scheme were less than expected and that has added to the pressures on the scheme. It is not the sole pressure, but it has added to them.
The Audit Commission also noted that the cost of pensions affects the amount of money available for local authorities to fund services and it influences council tax decisions, so there were questions about whether the LGPS benefits were affordable in the long term. Although some of those matters have been picked up by prior reforms—I do not pretend otherwise—they were not adequate to deal with the pressures. The Audit Commission concluded that, despite the fact that the scheme had funding, unlike others, reform was needed none the less. It is not just the Audit Commission that has recognised that—so too have the professionals in the local government pensions world. In October 2009 Mike Taylor, the chief executive of the London Pensions Fund Authority—I declare an interest, having been a member of that body for a short period—said that the LGPS needed to respond to increasing longevity because it
“is not designed to pay benefits for ever increasing periods of retirement and, without change, will face extinction…Employer or taxpayer contribution rates currently take all the strain of increasing liabilities in the LGPS. This situation cannot continue and either those costs must be reduced, or employees bear a fairer share of the increasing costs.”
Chris Leslie (Nottingham East) (Lab/Co-op)
Will the hon. Gentleman discuss with the chief executive of the LPFA his opinion of clause 16, which will close the existing local government pension scheme and start a new one? As I understand it, closing it might trigger what are known as section 75 crystallisation of debt arrangements, and the burden could fall heavily on local authorities. Does he agree that the Economic Secretary needs to ensure that the crystallisation of costs does not fall disproportionately on local taxpayers?
Robert Neill
I certainly agree that the impacts of crystallisation have to be considered carefully. It is worth saying, however—I was going to come to this point later, but I will deal with it now—that the reason why we are dealing with the matter in this way is in no small measure the result of an agreement between the unions and local government employers. They agreed that it was desirable to have a single reform of the system to deal with both short and long-term pressures, which was referred to as a “single event”, and that it should take place in 2014. There is a technical debate to be had about how best to achieve that while avoiding the risk of crystallisation, and I hope that my hon. Friend the Economic Secretary and his ministerial colleagues will have that debate. However, that is certainly not a reason for opposing the Bill, and I do not think for one moment that it undermines the major thrust of the Government’s reforms. The structural issues that require reform in all the public sector funds, including the LGPS, need more radical work than that.
It seems to me that there is scope to reflect the particular circumstances of the LGPS within the parameters of the Bill, and I hope that Ministers will recognise that. It is still significantly funded, and at its best it has very high standards of governance. Many of us in local government have wanted to examine the capacity of some of the smaller schemes, and I believe that there is scope for the Government to encourage greater collaboration between some of them, or perhaps even mergers. The large and well run ones such as those in Greater Manchester, London and elsewhere have good governance arrangements, and I concede the point that was made about the Greater Manchester scheme. There is no reason why we cannot ensure that those arrangements are reflected in the secondary legislation that flows from the Bill. That will be a desirable outcome.
I hope that there will be democratic local accountability through elected members serving on the boards of schemes. I do not think it is necessary to impose a one-size-fits-all approach on the governance of schemes in order to achieve the important financial and structural reforms that are needed, which I support the Government in taking forward. We can reflect the particular circumstances of the local government scheme within the parameters that the Government have rightly set. That also applies to certain aspects of the scheme’s design, because there were constructive negotiations on the LGPS on the basis that the key point was to achieve the required cost envelope, which, as I recall, was 19.5% of salaries. Particular parts of the scheme enable us to do that while reflecting the particular nature of the local government work force and the scheme’s governance arrangements. I hope Ministers will ensure that the commitment to do so is maintained, and I have no doubt that they will.
I referred earlier to the investment potential of the local government scheme. It is already a significant player in many investment markets, but it could do more. I support the Government proposal to lift the cap on the amount that local government schemes can invest in local infrastructure schemes, which is currently an arbitrary 15%. When I was a Minister, I believed passionately in ensuring not only that local authorities had more resources of their own to put towards local investment but that they made the best use of their current assets, so it does not seem unreasonable that we should remove that cap. The professionals in the field have suggested that something like 30% would be a more realistic cap, and I am open-minded about the exact amount.
I recognise that Brian Strutton, from one of the public sector unions, has some concerns about that idea. If I may say so, I regarded him as a responsible interlocutor in my dealings with the trade unions. He rightly recognises that it might be possible to achieve our objectives either through changing the cap, which I think the unions are wary of, or through the creation of a new asset class for infrastructure. I hope that my hon. Friend the Economic Secretary will consider how we can achieve the important objective of giving local schemes a greater ability to invest in local infrastructure. We should not miss that important opportunity.
I turn now to the firefighters scheme. Again, I accept that it has differences from other schemes. A particularly important issue in all my negotiations with the Fire Brigades Union was the retirement age. The final agreement that was achieved, on which I reported to the House shortly before the summer recess, provided us with adequate and proper flexibility to take on board the concerns of our firefighters, whom I greatly respect. Two matters were put forward in that agreement. The first was that there would be a review of contribution levels from 2013-14 onwards, taking into account the impact of opt-outs, to which the hon. Member for North Ayrshire and Arran referred. I am sure the Economic Secretary will confirm that that remains the position.
Secondly, it will be recalled that I commissioned Dr Tony Williams to examine the evidence base for the case that was made about the physical impact of a firefighter’s job and its relation to the retirement age. The new firefighters scheme has had a normal pension age of 60 for new entrants since 2006, so the situation will not change for many firefighters. In addition, the retirement age of 55, or 50 after 25 years’ service, has been protected for entrants from before 2006. There are significant protections built in for long-serving firefighters. Dr Williams is extremely reputable in this field. He is the medical director of Working Fit and has 15 years’ experience as an occupational physician in the NHS as well as experience of firefighting. I hope that my hon. Friend the Economic Secretary will be able to confirm that the Government will look very closely at the outcome of his review.
Chris Leslie
The hon. Lady will know that in the past—I believe this was in the Pensions Act 2011—people were given short notice about changes to the pension age. Does she agree that, ideally, a good 10-year notice period should be given so that people can plan ahead? If this is pegged to the state pension age, people should have sufficient opportunity to plan with enough forethought.
Andrea Leadsom
The hon. Gentleman will recall that the Government made great efforts to ensure that the cliff edge affecting certain women born in a certain couple of years disappeared. He will also be pleased to note that the pensions of those with less than 10 years until retirement will not be affected by this measure, which provides the ring-fencing for those with not long to go until retirement age. I would have thought that he would welcome that—again, on the basis of fairness between those workers and the taxpayer.
Of course, two thirds of private sector workers are not members of a pension scheme. We have heard hon. Members from all parts of the House say that we do not want a race to the bottom. We are proud of our public sector pension provision, and nobody would wish to see it brought down to the abysmal level of private sector pensions. However, it would be pleasing if Opposition Front Benchers were to concede their part in the destruction of private sector pensions, which has made a significant contribution to putting us into this pitiful position; private sector pensions have been decimated by the actions of the previous Prime Minister.
An important point of fairness is involved in the fact that the taxpayer contributes three times more to a civil service employee’s pension than the average private sector employer pays in. The employer contribution rate to the civil service pension scheme is 19%, whereas the average private sector employer contribution rate for a defined contribution pension scheme is only 6.4%. To get the same pension in the private sector, someone would have to contribute about a third of their salary.
Richard Graham (Gloucester) (Con)
Thank you, Mr Deputy Speaker, for calling me to speak in this long and important debate on pensions. This is a subject on which we would surely all agree that the object is to get cross-party agreement on issues that affect so many of our constituents, and that should be achievable. Indeed, the coalition Government have already achieved it across the two parties, and by seeking and taking Lord Hutton’s advice they hoped to secure agreement from Labour. In that sense, it is good news that this Second Reading will be unopposed, but it is none the less sad that we have heard so many speeches in which Labour Members were unable to rise to the challenge of reaching agreement and seeking harmony and instead sought to make a series of party political, aggressive and disagreeable contributions to the pensions debate.
Let me start with the hon. Member for Leeds West (Rachel Reeves), who led the debate for the Opposition. She said, for example, that the Opposition had accepted the need for a move from RPI to CPI as an index for pensions only as a temporary deficit reduction measure for the life of this Parliament, and she criticised its timing. However, she completely failed to mention that the Labour party itself had already changed the index for its own pension scheme for its party workers from RPI to CPI before the Government did likewise for all public sector workers. Unfortunately the hon. Lady is not in her seat, but the right hon. Member for Wentworth and Dearne (John Healey), who is here, said that the change had been imposed without warning and called it the moment at which the Government had lost their moral authority. I am sure that he will be able to explain to his own party workers quite what moral authority his party has on this issue, having made precisely the same change. The reality is that both the Labour party and this Government have had to face uncomfortable facts— above all, the consequences of the fact that so many of us are living for so much longer—and have had to tailor pensions accordingly.
The hon. Member for Leeds West rightly expressed concern for public sector workers. She may be a deferred public sector scheme worker herself, as am I and many other Government Members, and it is important for Labour Members to understand that we do not all represent purely the private sector. This is about seeking agreement for public sector and private sector workers from Members of Parliament who have themselves worked in both sectors. She rightly stood up for public sector workers but was unable to give any credit to this Bill, which has completely protected workers earning less than the full-time equivalent of £15,000 a year—some 15% of the work force—and provides considerable protection for people, many of whom live in my constituency, who earn less than the full-time equivalent of £21,000 a year.
The Bill also protects everybody who is within 10 years of retirement, which is very important for so many of our constituents who are in their 40s and early 50s. Crucially, it increases accrual rates, which is a technical point that will be appreciated by those who have worked in the sector, such as the right hon. Member for Wentworth and Dearne. Above all, and most importantly, the Bill protects the risk-free investment nature of a defined benefit scheme.
On that point, I must refer to the speech by the hon. Member for Hayes and Harlington (John McDonnell), who is in his place and whose integrity I respect. He quoted, as he would in his role as the Public and Commercial Services Union representative, the PCS briefing for this Second Reading debate and came to the same conclusion that
“members will work longer, pay more and get less pension.”
The reality, however, is that all of us will live longer, work longer and, if we are lucky enough to have one, get a pension for longer, and those who are public sector workers will have a much better pension than anyone else in the land.
My point to the hon. Gentleman and the hon. Member for Blaydon (Mr Anderson), who is not in his place, is that it is no good simply championing the status quo for today’s workers and betray tomorrow’s. In many ways, that is what happened—I am afraid that the trade unions are partly culpable for this—to private sector DB schemes, which the right hon. Member for Birkenhead (Mr Field) has often referred to as the jewel in the crown. Many of them have closed precisely because the unions could not and would not see the future and adapt before companies decided that they could no longer afford the schemes and closed them.
The point of this Bill—this should be something on which every Member of this House can unite—is that this Government are trying to work with unions and Opposition Members to keep defined-benefit schemes for the public sector, despite the fact that we will all live for so much longer than our fathers and mothers, and that, therefore, the cost of those pensions will be so much greater. To use the analogy of the hon. Member for Blaydon, it may be raining, but this Bill will make sure that the umbrella is kept for public sector workers.
Chris Leslie
The hon. Gentleman says that we should all stand together to defend ongoing defined-benefit schemes, so could he explain why the Bill does not honour that commitment? Clause 7 states that schemes created under the Bill can be defined-benefit schemes, but they can also be defined-contribution schemes or
“a scheme of any other description”.
Where is the guarantee that these will be defined-benefit schemes?
Richard Graham
I have no idea whether the word “guarantee” is in the Bill. In life, only two things are guaranteed as far as I know: taxation and death. We are talking about not guarantees as such, but a defined-benefit scheme in which the entire risk is taken by the taxpayer and the certainty that gives people the chance to budget in their retirement is with the scheme’s beneficiary. In fact, it is even better than that. As the hon. Gentleman will know, because he has studied these things carefully, the advantage of a career average defined-benefit scheme is that it benefits precisely those workers whom I would have imagined he would be most in favour of protecting.
The Pensions Policy Institute, which the hon. Member for Hayes and Harlington referred to, says:
“The Coalition’s proposed reforms will remove the different outcomes for high-flyers and low-flyers which exist in final salary schemes.”
It goes on to estimate that, under the current scheme, a high flyer
“would have had a pension benefit of 29% of salary, compared to 11% of salary for the low-flyer.”
Under the reforms proposed by this Government, both high and low flyers will have
“the average value of the pension offered being worth 15% of salary”.
That is a significant improvement for the low flyers. I would be astonished if all Members of the House were not in favour of that reform.
The hon. Member for Leeds West recognised that something had to be done, but tellingly, she made no reference at all to three of Lord Hutton’s four tests—affordability, fairness to the taxpayer and governance and transparency. Did she not think they mattered? Should they not be at the heart of what any Government do? That was a disappointing series of omissions.
Chris Leslie (Nottingham East) (Lab/Co-op)
This has been a thorough debate, and I welcome the contributions made by Members from both sides of the Chamber.
We need reforms that enhance the sustainability of pension schemes. In an era of significant demographic change, it is right to reform the pension system to ensure affordability for both employees and employers—which in the case of the public sector is the taxpayer. The sustainability of a decent pension scheme was the focus of several tough decisions made by the previous Labour Administration. The changes made to public service provision when we were in office included raising the pension age from 60 to 65, introducing a “cap and share” approach that would protect Exchequer revenues and share costs between employees and employers, and reforming contribution levels, which rose by 0.4% for teachers and up to 2.5% for NHS staff. The Public Accounts Committee says that those changes would save the taxpayer £67 billion over a 50-year period, so considerable reform took place under the previous Administration.
However, the Government have mishandled subsequent reform. As we have heard from some of my hon. Friends, when the Government were formed in 2012 by the Conservatives with their good friends the Liberal Democrats, instead of building on the changes that we made, they decided to rip them up, thus causing major problems. Their incompetent and shambolic handling of the reform process has also made it much harder to build a consensus on some of the many sensible long-term reforms proposed in my noble Friend Lord Hutton’s report, as my hon. Friend the Member for Blaydon (Mr Anderson) said. We have to find better ways of rebuilding trust and achieving consensus on these vital matters.
The Government are compelling major changes without negotiation in a way that is both crude and unfair. In particular, by unilaterally imposing a steep 3% rise in contributions prior to any negotiations or even the completion of Lord Hutton’s review, and by making a permanent switch in the indexation of future pension income from RPI to CPI, the Government provoked strike action, at a cost to the country and the users of public services. They also provoked deep cynicism among public service workers. These changes were not recommended by Lord Hutton, but were unilaterally introduced, in an unfair and provocative way. The Government’s aggressive approach to this serious and sensitive issue resulted in months of stalemated negotiations. It is a matter of deep regret that the Government have lost the confidence and damaged the morale of hundreds of thousands of public service workers, whose engagement is vital at a time when they are being asked to accept ongoing pay restraint.
Many hon. Members have noted that Lord Hutton produced a thoughtful and comprehensive report on the way forward, using a number of the changes made by the previous Administration as a starting point for negotiations. The document was very useful. He was right to suggest that career average schemes could be fairer than final salary schemes—several hon. Members have made that point—and to say that we should be asking people to work for longer, given the increase in life expectancy. He was also right to stress the need to approach these issues in a careful, balanced way, and to avoid a race to the bottom on pension provision. It is those aspects of Lord Hutton’s report that I wish the Government had looked at more carefully and taken to heart. The Bill is only part of the story, as the unfair increases in contributions and the changes in indexation that have already been imposed do not appear in it.
The Bill contains a series of proposals that we need to consider on their merits. As it consists mainly of enabling legislation that is designed to put new schemes on a clear and equal footing, we will not oppose its Second Reading, but we will hope to address a number of serious concerns in Committee. My hon. Friend the Member for Hayes and Harlington (John McDonnell) has very strong opinions on these matters, which I respect, but I want us to try to find opportunities to improve the Bill in Committee.
All too often when Opposition amendments are tabled in Committee, we see brand new Ministers, with the advice of their officials, opening up their briefing books to find the word “resist” in block capitals, and then simply parroting the notes that have been put into their folders. However, I am sure that that will not be the case with the Economic Secretary to the Treasury, for whom I have great hopes. Let us pray that the Bill’s Committee stage will involve a genuine exchange of views, and give us the opportunity to look into the detail and dig into some of the Bill’s anomalies and, indeed, failures.
Several hon. Members referred to key aspects of the Bill that contain glaring deficiencies. For example, my hon. Friend the Member for Dumfries and Galloway (Mr Brown) and my right hon. Friend the Member for Wentworth and Dearne (John Healey) referred to the retrospectivity involved in the changes to scheme regulations. By allowing scheme regulations to make retrospective changes, the Bill gives the Government the power to reduce benefits that have already been accrued. Many hon. Members will be surprised by that, because most assume that such things are sacrosanct.
My right hon. Friend the Member for Wentworth and Dearne was right to point out that the proposal comes into conflict with the European convention on human rights. It also goes against the central tenet of pension provision, which is that what has been accrued cannot be reduced, because it has already been earned. That is an important principle, because how can public service workers have any security about their future retirement if they know that the Government can retrospectively reduce the benefits that they have already earned at any point? This should not be a partisan matter, but the contract between the employer and employee is important, so I urge the Minister to listen to the genuine concerns that have been raised in the debate.
Mark Durkan
Earlier, in response to an intervention that I made, the Chief Secretary to the Treasury tried to say that the retrospective provisions in clause 3 would be used only for technical and incidental purposes. Will my hon. Friend test the Government by tabling an amendment in Committee that would stitch that commitment into the Bill?
Chris Leslie
What a splendid idea. If that were the Minister’s purpose, I agree that there would be no reason not to specify it in the Bill. That would normally happen in the case of incidental, supplementary or consequential issues but, of course, many people suspect that that is not what is involved.
I also want to talk about the employer cost cap, which can unilaterally result in staff benefits decreasing or their contributions increasing. What is particularly pernicious is the fact that the Bill exempts such changes from even the meagre protections for consultation with staff under clause 20. That clause deals with the consultations and discussions that should be held with staff, but it explicitly excludes the arrangements for the employer cost cap. Clause 11 provides for the cost cap to be determined entirely by the Treasury with no requirement for parliamentary scrutiny, which means that the Treasury can set the cap at an unreasonable level, or use it to reduce pension benefits unchecked, thereby further undermining the security of schemes for retirement provision.
Other hon. Members raised issues under the assumption that the Government’s commitment to a new defined benefit scheme was enshrined in the Bill. It turns out that the Bill does not, in fact, honour such provision. In fact, clause 7 says that a scheme that may be created is “a defined benefits scheme”, “a defined contributions scheme” or a scheme “of any other description.” The only restriction is that a scheme cannot be a final salary scheme. In other words, the Government are enshrining in the Bill the side of the agreement that benefits the Treasury, but they have left out the corresponding promises that they made to public sector workers.
My right hon. Friend the Member for Wentworth and Dearne talked about the fair deal, as it was known, for public service workers who might be outsourced to a private provider. Following the transfer of employment, they should be entitled to accrue pension benefits that are broadly comparable to those that they would have accrued if they had remained in the public sector scheme. The Government’s promise does not extend beyond the civil service, however. We shall press for a commitment for the benefit of other public sector workers, as there is an anomaly in the Bill that such a commitment is provided only to employees of central Government and not to other public service workers.
I have further anxieties about the Bill. It will tie pension arrangements to the state pension age, but of course that can be changed, with no protection for those approaching retirement. The pegging of the Bill to the state pension age erodes security and certainty about the age at which members of various schemes might receive their pensions. In 2011, the Government gave only eight years’ notice of the state pension age changes, which caused great concern at the time. While we accept that actuarial changes to reflect demographics might need to be made from time to time, the Bill ought to prevent any changes from being made to the normal or deferred pension age for those with 10 or fewer years to go before they are due to retire. It is incredibly important to help people to plan ahead with their pension provision, and the Government should be able to offer a concession to ensure that such planning is possible.
Once upon a time, the Government talked about the Hutton report as something to welcome and take forward, but they have ignored Lord Hutton’s recommendation that the link between the state pension age and the age at which members of public service schemes receive their pensions should be regularly and independently reviewed. I am told that the Government agreed in negotiations that such reviews would take place, but that is not enshrined in the Bill. I will be more than happy to give way to the Chief Secretary so that he can clarify whether he is going to make a concession by providing for such a review in the Bill—[Interruption.] If he does not wish to clarify that, it will be for us to press that point by tabling amendments in Committee. I know that Ministers will keep an open mind on many of these points.
There are serious problems with questions of governance. Lord Hutton made a number of important recommendations about scheme governance, such as on the implementation of the pension policy group to consider major changes to scheme rules, on the inclusion of nominated members and independent members of pension boards, on ensuring that pension boards are responsible for the oversight of financial management, and on the commissioning of a review into how standards of administration in public service pension schemes can be improved. Such governance measures would improve the efficiency of schemes’ administration and would follow some of the best practice for scheme governance in the private sector, but the Government have not enshrined many of these recommendations in the Bill. Those omissions are important, so I hope that Ministers will look at them.
My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) talked about the importance of local government pension schemes—they are indeed schemes apart. We welcome the fact that the LGPS is funded, but as I said in an intervention, if Ministers are closing the LGPS in 2014, albeit opening new ones going forward, they must explain what will happen to the obligations under section 75 rules relating to the crystallisation of some of those debts? Hon. Members may not realise that academies and third sector organisations such as charities are part of the local government pension scheme. Forcing them to crystallise some of those deficit arrangements at the point at which the existing schemes end and the 2014 schemes begin could be financially crippling and cause major crises. The Bill also centralises a great deal of control and makes a great many anti-localist changes. Changes to the local government pension scheme will transfer power from local authorities to Ministers.
The Bill is enabling, but it is only part of a story and it needs significant amendment. We will not oppose its Second Reading, but I hope that the Economic Secretary will genuinely engage himself in the Committee stage, will keep an open mind, and will work with us on improving protections for public service workers as well as the taxpayer.
Infrastructure (Financial Assistance) Bill
Chris Leslie Excerpts(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Leslie (Nottingham East) (Lab/Co-op)
I beg to move amendment 11, page 1, line 6, after ‘infrastructure’, insert ‘within the United Kingdom’.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
With this it will be convenient to discuss the following:
Amendment 1, page 1, line 7, leave out ‘includes’ and insert ‘means’.
Amendment 9, page 1, line 11, after ‘health’, insert ‘childcare’.
Amendment 4, page 1, line 13, leave out paragraph (e).
Amendment 2, page 1, line 13, after ‘housing’, insert ‘, the function of which has a national significance.’.
Amendment 10, in clause 1, page 1, line 13, at end insert—
‘(2A) “Infrastructure” excludes the expansion of Heathrow airport before May 2015.’.
Chris Leslie
At near enough to 7 o’clock, I am glad that we finally turn our attention to the Infrastructure (Financial Assistance) Bill. Anybody following these proceedings might be astonished that we have been allowed just over two hours for the Committee stage. In our view it is unsatisfactory to leave the rules governing £50 billion of public expenditure to such scant and inadequate scrutiny. Although we do not necessarily disagree with the broad principles behind the Bill, that does not mean that we should fall short in our duty as parliamentarians to analyse, consider and improve the details of the legislation. Ministers cannot point to the House of Lords as the place where the Bill can be improved and amended if we run out of time for consideration in Committee. I think the last time the Lords sat in Committee on a money Bill was in 1995, when it considered the European Communities (Finance) Bill. This two-hour period is therefore the only opportunity we will get to scrutinise the particulars of the legislation; hence the amendments that are before us.
I want to talk to amendments 11 and 9 in this first group. Amendment 11 would make it clear that the substantive powers in the Bill, which give Ministers the ability to grant financial assistance to any persons, should be used for infrastructure in the United Kingdom, for essentially this reason: we believe that we should focus all our efforts on the domestic infrastructure needs of our country. That is why we think the Bill, if it can bring benefits, needs to focus very much on the benefits of infrastructure and bringing forward capital schemes here at home. Hon. Members will be aware that the UK has been falling behind quite considerably in the past couple of years in terms of infrastructure and capital investment schemes. Only today in the Financial Times we read about the Construction Products Association warning that
“infrastructure is in free-fall,”
and that it expects spending to fall by 13% in 2012 compared with the last calendar year, despite the hollow words of the Chancellor of the Exchequer. Noble Francis, economics director at the CPA, said:
“We are getting to the stage where the government just can’t make more announcements with nothing happening. At some stage they are going to have to launch some capital investment that sees work happening on the ground. This can be done quickly, easily and cheaply speeding up work on the repair and maintenance of roads, schools, hospitals and housing.”
The article points out that road construction, to take one example of infrastructure investment,
“is suffering in particular, with the CPA projecting a decline of 40 per cent this year and 5 per cent next year.”
Stephen Timms (East Ham) (Lab)
I am listening to my hon. Friend’s speech with a lot of interest. I wonder whether he saw the recent CBI survey and the comments by its director general, John Cridland, who described it as
“a wake-up call that businesses in Britain are looking for action”—
on infrastructure—
“and we haven’t seen any yet.”
Chris Leslie
Alarm bells are ringing from a number of eminent institutions across the country, and they are not those that one might necessarily feel were natural allies of Her Majesty’s loyal Opposition. Nevertheless, they are saying exactly the same thing as us: when will the Treasury wake up and realise that the Government’s strategy on infrastructure—this laissez-faire approach—is singularly failing? Rather than driving new schemes forward, with their Bill and the rest of their strategy, the Government seem to be waiting for others to come forward with various schemes; they seem to be saying, “Please will you dream up some ideas?” They are hoping that something will turn up, but that is an approach characterised by drift rather than leadership when it comes to capital investment.
Mr David Anderson (Blaydon) (Lab)
Is the situation not worse than that? In the early days of this Government, one of the first things they did was stop the Building Schools for the Future programme, which had been clarified and was seen as the way forward to develop new schools. There were projects involving five schools in my constituency, which would have put £80 million into the local economy, with the money spent on the private sector and building schools for those children. Those projects were frozen—the same thing happened across the country—but if they had gone ahead, we would now be in a much better position.
Chris Leslie
It is the long-term cost to public service quality and communities up and down the country that is the most frustrating thing about the Government’s approach. They have scrapped Building Schools for the Future. Who knows? Perhaps in a couple of years’ time they will realise the error of their ways and devise a “Funding building for schools” scheme, or cobble together some other name. It is no wonder that we are in this prolonged double-dip recession, with the Government pulling the rug from underneath the economy in the way that they have, chopping capital infrastructure investment away at its knees. It is no wonder that, for example, the construction sector has shrunk by, I think, 10% in the past 12 months. Nor is it any wonder that the “State of Trade” survey published by the Federation of Master Builders today—apparently it is the only survey of its kind looking at SME construction activity—says that 39% of respondents reported a decline in private new house building workloads in the third quarter of this year or that 40% predicted a further decline in the next quarter.
The Government’s record on capital investment and their approach to infrastructure are lamentable. It has never been clearer that they should be focusing squarely on the needs of infrastructure within the United Kingdom; hence amendment 11. Contrary to the claims of the Government—we will probably hear this from the Minister—figures from the Office for Budget Responsibility show that the Government will have spent £6.6 billion less over the three-year period from the spending review than Labour had planned, with budgets for schools, such as BSF, and affordable housing hit especially hard.
Stephen Timms
My hon. Friend has talked about organisations that are not necessarily natural supporters of Her Majesty’s loyal Opposition. Has he seen the recent comments from the Country Land and Business Association, which described the superfast broadband situation as “lamentable”—precisely the same word that he has just used? The association stated:
“It is becoming clear that the Government’s strategy will not meet the target date of 2015…There is no clear mechanism to put in place the universal service commitment.”
Is not this another example of the economy crying out for investment that is simply not being delivered?
Chris Leslie
My right hon. Friend makes an important point that emphasises the argument that we are making. This is not simply a question of the levels of capital investment; it is also a question of competence. It is also about the relentless need to focus on delivery, and on the detail behind the delivery. I just do not see the Treasury, as currently comprised, being capable of getting to grips with the granularity of some of the obstacles that face capital schemes. It is no wonder that we are falling further and further behind. The Treasury seems to see an obstacle and be deterred by it, rather than trying to tackle it and move past it.
Mr John Redwood (Wokingham) (Con)
We are being invited to agree to a potential £50 billion commitment. Do the Opposition have any thoughts on the pace of that kind of expenditure? What levels would they recommend for this year, next year and the following year?
Chris Leslie
It is difficult to say, when looking at a guarantee scheme or underwriting scheme, because certain things are not wholly in the control of Ministers. They are putting the guarantee out there and waiting for organisations in the private sector or elsewhere to come forward and bid for the resource. It is a bit like pushing against a piece of string; it is impossible to know what the demand will be. We do not rule out the possibility of the proposal being of benefit—of course it could be—but it is impossible to know at this stage. We are holding up a finger to test the direction of the wind. There are no time scales in the Bill, and the explanatory notes do not add any information in that regard. We want to know the judgment of the studied intellects in the Treasury.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
My hon. Friend mentioned the downturn in the house building industry. In my constituency, the total number of new house builds in the last quarter was just 10, and that is in a city whose population is growing. Does he accept that, in addition to the immediate difficulties that the construction industry is experiencing, companies that go bust and firms that close down cannot suddenly spring back into action when the economy changes? This is another reason why we need the measures that he is outlining, and that the Government have not yet put into operation.
Chris Leslie
That loss of productive capacity is another example of the permanent damage caused by recession, resulting in an inability to take advantage of the opportunities that present themselves when a recovery occurs. The International Monetary Fund released figures only last week to illustrate the damage being done by the recession to our ability to fulfil such expectations. In my city of Nottingham, not a single new affordable social house has been constructed in the past 12 months. Is that because there is no demand? Absolutely not. We have more than 12,000 people on waiting lists for decent homes. That applies in many other areas of the country as well, including Greenwich.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
My hon. Friend makes an extremely valid point about housing, but he understates the case. Infrastructure was the one sector of the construction industry that survived the early period of the recession relatively well. Indeed, by 2009, expenditure on infrastructure stood at £11.6 billion, which was the highest real-terms level for about two decades. That has now slipped away badly, because of the failure of the current Government to maintain infrastructure investment. That is the charge against them: they have allowed activity that was helping to counter the recession to be lost, and the sectors of the industry that are concerned with infrastructure are now as alarmed as the housing sector and all the others that have suffered so badly in the recession.
Chris Leslie
That is a pertinent point. The Government seem oblivious to the thoughtful concerns being expressed by industry practitioners about the damage that is being done. Their ideological fixation with austerity has led them to a position in which they have completely pulled the rug out from underneath the economy, and we are still only at an early stage of being able to calculate the damage.
Barry Gardiner (Brent North) (Lab)
Will my hon. Friend answer a question on amendment 11, which proposes to add the words “within the United Kingdom” to clause 1(1)? One of the most important areas of infrastructure over the next decade will be energy, and the infrastructure required to meet our energy need will include interconnectors for electricity and gas pipelines that will come across Europe from the Caucasus. I presume that the Bill, as it stands, could incentivise investment in interconnectors and gas pipelines, but would it still be able to do so if the amendment were agreed to, even though parts of the pipelines would obviously be within the United Kingdom?
Chris Leslie
It is important to recognise that we want the benefits of any financial assistance to be felt in the UK economy. I shall deal with the details of the amendments in a moment. We believe that the scheme should focus on stimulating growth within these shores, and prioritising resources for infrastructure within the United Kingdom is the right approach. The Minister will undoubtedly point out that, as part of the guarantees under the scheme that the Government announced in July, a £5 billion export refinancing facility was introduced to underwrite the lending commitments of foreign buyers of UK exports. Of course we believe that export credit guarantees can be legitimate and helpful to construction exports, but in times of UK recession, our priorities should lie squarely here at home.
Incidentally, if there is such a great demand for the services of the Export Credits Guarantee Department—which is part of the Department for Business, Innovation and Skills—why does it appear to have underspent its existing budget in the past year? That does not suggest that there is a need to divert resources from domestic infrastructure into bankrolling foreign firms any more than is currently the case. The latest research shows that infrastructure spending within the UK will be of far greater benefit to our economy.
Indeed, the IMF had discussions last week about the multipliers. I do not want to go into too much technical detail, but the Office for Budget Responsibility used a fiscal multiplier of 0.5, which meant that Ministers thought that each pound they cut from public expenditure and capital investment would reduce economic output by only 50p. However, after examining the records of many countries that have embraced austerity since the financial crisis, the IMF reckons that the true multiplier is between 0.9 and 1.7. That has led the TUC to reveal that if the real multiplier is 1.3—somewhere in the middle of the IMF’s range—the OBR has underestimated the impact of the cuts by a cumulative £76 billion, more than 8% of gross domestic product, over five years. Instead of shaving less than 1% off economic growth during this financial year, austerity has potentially depressed it by more than 2%, which helps to explain why the economy has plunged into this double-dip recession. It is self-evident that providing financial assistance to infrastructure projects in the UK will provide a much greater stimulus to the British economy than giving financial assistance to projects abroad. Projects in the UK will boost employment in Britain; providing assistance to overseas projects will not.
Conservative Governments have a dubious record when it comes to underwriting foreign construction schemes. I am referring not only to the most recent, and much vaunted, export enterprise finance guarantee scheme, which assisted only five firms and has now folded because it was such a flop. I am also thinking of historic occasions such as that relating to the Pergau dam in Malaysia, which involved a too-close relationship between the aid being given to a foreign country and the trade that was taking place, particularly in relation to arms exports. It is very important that we learn the lessons from past failures when it comes to finance for foreign infrastructure schemes, and we particularly need to start prioritising schemes here in the UK.
Mark Reckless (Rochester and Strood) (Con)
It is important for the hon. Gentleman to follow through the logic of his comments when it comes to funding for the European Investment Bank, for instance, or substantial increases in funds flowing to support projects elsewhere in the EU. Is that something that he and his hon. Friends would like to do something about?
Chris Leslie
We definitely need more scrutiny of the resources committed through the European Union to some of the schemes abroad, but as I understand it, this Bill will not substitute for the investment that the UK taxpayer makes to the European Investment Bank and elsewhere. This is about underwriting private projects that will, hopefully, bring benefit to our economy more broadly. Our view is that we should focus our prime attention on the economic needs here within the UK.
Mark Durkan (Foyle) (SDLP)
Does my hon. Friend accept that some of us have a concern with the wording of his amendment, which specifically refers to “within the United Kingdom”? In Northern Ireland, for instance, many of the infrastructure projects are likely to have a cross-border character. Infrastructure projects both large and small sometimes have commitments of money from the Irish Government as they serve hinterlands that cross the borders. With renewable energy, of course it makes sense for significant projects to have a cross-border character. They will serve not only Northern Ireland’s but Great Britain’s future energy needs. Might not my hon. Friend’s amendment preclude sensible investment support for such projects?
Chris Leslie
I would not want the amendment to have that particular effect, and I do not think it need have it, especially if the Government were in a position to frame the legislation in such a way as to see this potential £50 billion focused very much on the needs of our own people in our own country. I hear what my hon. Friend says, but I do not think this is the be-all-and-end-all of Treasury expenditure, as there are other ways and means of dealing with those few projects that might have a cross-border character. When it comes to the underwriting capacity of this particular Bill, we think it important to prioritise investment here at home.
Barry Gardiner
My hon. Friend will be aware that the perimeter of Northern Ireland is defined as the six counties, and that the continental shelf offshore was never included in the original agreement drawn up by the Foreign Office. [Interruption.] I realise that my hon. Friend the Member for Foyle (Mark Durkan) knows this only too well. What that means is that we need clarity in respect not only of amendment 11, but of the “Short title, commencement and extent” provisions. At the moment, the Bill would preclude offshore wind development from the Northern Ireland coast. These matters may seem abstruse, but as constituted, the Bill does not make it clear that such infrastructure development would qualify for support. That question is as much one for the Minister as for my hon. Friend the Member for Nottingham East (Chris Leslie), but it seems to me that the question needs to be answered.
Chris Leslie
I am not sure I agree with my hon. Friend on the particular example he provided. It is quite clear that there would be benefit for the economy within the UK if those offshore schemes proceeded. The frustration I have is with the rather hasty drafting. Yes, we accept that it is necessary to frame a scheme that has sufficient flexibility, but there are dangers in enacting legislation that does not focus sufficiently on significant financial schemes, employment and jobs here in the UK. That is the purpose of the amendment.
Mark Lazarowicz
I am sure that when my hon. Friend’s amendment is successful, he will arrange for his noble Friends in the other place to deal with any clarifications required as a result of our debate. Earlier today we heard a statement on the west coast main line franchise, and we saw how the whole franchising system is in a state of shambles. Is that not going to have an effect on private sector investment, making it important to get even quicker investment in rail projects across the UK, through Directly Operated Railways, through Network Rail and other means to ensure that we gain the benefit—to the rail industry, to passengers and to the economy—now and not four, five, six or seven years down the line?
Chris Leslie
My hon. Friend is entirely right. This sends a message that the Government are incapable of running some of these bidding arrangements, incapable of awarding schemes in a competent and straightforward way and have no transparent or available methodology for scrutiny. That is my wider point. If we compare the laudable statements in the national infrastructure plan back in November 2011 with the actual progress made on many of those schemes to date, we see that the Government have fallen short in many different respects.
Gloria De Piero (Ashfield) (Lab)
The Prime Minister said just under a year ago that the plan for job creation made it critical to get construction projects off the ground. My hon. Friend referred earlier to the Construction Products Association, which predicts a 13% decline in spending. Is it any wonder that the director general of the CBI says that Government plans for infrastructure are hot air—a complete fiction?
Chris Leslie
Looking through the detail of that national infrastructure plan helps us to realise how far the Government are falling short. Let us start looking at some of the particular schemes that are of great concern to our constituents here in the United Kingdom. The A14 road link between Felixstowe and the midlands, for example, was promised immediate investment in the national infrastructure plan in 2011, but the Department for Transport has now said that the construction will not begin for six years, subject to agreement with various local authorities on funding packages and so forth. There is already much concern about that particular scheme.
The Mersey Gateway bridge is another example. Many Cabinet Ministers described it as incredibly important. I think the Chancellor and the Transport Secretary at the time said that it could be implemented quickly, but although the Department for Transport wanted construction to begin in 2010, there will not be a preferred bidder until late 2013. Construction will not start until the end of that year and it is not due to open until 2016, or potentially even later.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
My hon. Friend makes some important points about the consistency of Government leadership in seeing through some of the projects in the infrastructure plan. Comparison between the original plan for construction of November 2011 and the update in April this year suggests that 182 new projects have been added, but 63 disappeared without explanation. Does my hon. Friend agree that for any measures to have effect, leadership is necessary to see the projects through and to gain clarity on the outcomes we want to be delivered?
Chris Leslie
My hon. Friend is totally correct. Ministers seem to think they can come to the Dispatch Box and make a set of announcements, which will then magically happen as they busy themselves in their part-time political advisory roles or whatever they happen to be doing. If we start to walk through the projects one by one, we realise that Ministers are not gripping the issue.
Graham Stringer (Blackley and Broughton) (Lab)
My hon. Friend must have noticed during the Conservative party conference that the chaos and shambles goes right to the top. The Prime Minister claimed that work on the A11 was already under way, but any check on the Highways Agency website will show that the first spade will not be put into the ground until January. The Government simply do not know what they are doing, do they?
Chris Leslie
A pattern is emerging, but I shall not use the word “omnishambles”, which is probably past its best. There is great concern about these schemes. Thameslink, for example, is a project that is slipping considerably. The contracts for rolling stock were due to be awarded by early 2012; then it was by the summer, and now the Department says that the contract with the preferred bidder will be signed in the autumn. The Transport Select Committee is on top of that issue. It is writing to Secretaries of State asking why there is a delay with the rolling stock procurement, and I am sure that the Minister will be able to reply to that question when he responds to the debate. However, many other significant questions about delay need to be answered.
We need to know about the ongoing programme of work on the north Doncaster chord, a rail link that is greatly needed in that part of Yorkshire. The national infrastructure plan of 2011 promised that a business case would be provided by April 2012, but the proposed development is still awaiting a decision from the Secretary of State, which must be delivered before production can continue and construction can start.
The preferred bidder for the extension of the Northern line to Battersea was announced in June. A Treasury source then told the Evening Standard:
“The entire weight of the Government is being thrown behind the extension of the Northern Line”,
but nearly a year after the Chancellor’s autumn statement, the extension is still subject to the existence of funds. Despite backing from the
“entire weight of the Government”,
Transport for London can only say:
“Subject to funding being in place and permission from the Secretary of State for Transport, the new stations could be open by 2019.”
The construction of the Green Port Hull was due to begin this year, but Siemens now says that it will not sign a contract for the wind turbine factory until 2013. As for carbon capture and storage, the Department for Energy and Climate Change was supposedly
“developing a streamlined selection process”,
and £1 billion of capital was supposedly available to support the project, but construction is not due to begin until 2014.
Planning permission was granted in March for biomass electricity generation at Royal Portbury dock, but E.ON is currently taking time to
“review the prospects for the project in light of the UK Government’s current banding review”.
Again, a Government decision is awaited.
I am sure that I do not need to mention the issue of the 4G mobile spectrum auction and roll-out. Many Members may be checking their not necessarily 4G-compatible handsets as I speak. However, I will say that a very messy approach was taken to the auction of that particular regulatory arrangement, and that anyone who may be thinking of buying an iPhone 5 should be careful, because it will not necessarily be compatible with many possible providers. This is an example of our falling many years behind the United States, Germany, Sweden and parts of Asia. Unlike this country, they already have 4G services which are giving businesses opportunities to benefit customers.
We need only compare the much-vaunted promises of the 2011 national infrastructure plan with the actuality of the infrastructure pipeline that was announced in April. Although 182 new projects had been added, 63 had disappeared without explanation. Of the 357 projects announced in November that were updated in April, nearly two thirds were still in pre-procurement stages, and just 38 had proceeded to procurement or construction. Of the 229 that were still at the pre-procurement stage, three quarters were still at the same stage as had been reported in November 2011, and 36 had moved backwards.
Members may recall the regional growth fund, the supposed successor of the regional development agencies and, supposedly, the Government’s flagship alternative for regional economic development. Although the winners were announced in, I believe, April 2011, fewer than half the final offer agreements in rounds 1 and 2 of the fund have been put in place. Only £60 million of the £1.4 billion fund to spur growth has been released to businesses, and, according to a report by the Public Accounts Committee, the £364 million spent by the fund so far has been held up in intermediaries such as banks and local authorities.
Stephen Timms
My hon. Friend is making a powerful case, and I hope that we shall hear a response to it shortly. Has he seen the assessment by the British Chambers of Commerce which—before the election, I believe—identified 13 critical infrastructure projects, and said that although three were going ahead, there had been little or no progress on eight of them? That is a lamentable situation. Businesses across the country are desperate for those projects to go ahead.
Chris Leslie
It is very difficult to find an explanation for this Keystone Cops approach to infrastructure schemes, other than that the Government are incapable of getting to grips with the detail. I welcome the Minister to his position—he may be a new broom who will sweep everything clean, deal with the issues firmly and move many of these infrastructure projects forward—but I want to hear about his strategy for improving infrastructure on these shores, in the United Kingdom.
Hugh Bayley (York Central) (Lab)
May I intervene on my hon. Friend before he leaves the subject of the regional spread of investment? He will recall that on Second Reading I informed the House of changes in the level of infrastructure investment region by region. Some regions experienced an increase in investment between 2009 and 2011—most notably London, whose 18% increase was probably fuelled by the Olympics—but all the rest of the country, apart from three regions, experienced a reduction. Investment fell by 31% in Yorkshire and the Humber and the north-west, and by 32% in Wales. Does my hon. Friend think that the Bill, and the fund that it will establish, will provide an opportunity for some of those regional imbalances to be redressed?
Chris Leslie
I would like to hope so, but I do not advise my hon. Friend to hold his breath. We are not even talking about a fund; we are talking about promises to under-run funds in order to guarantee other schemes as they come forward. Where is the confidence? Where is the demand in the economy? Where are the private sector schemes whose organisers want to come forward? Far greater efforts must be made, and the Government must take the economic climate more seriously. We should be bringing forward schemes, prioritising UK infrastructure, and kick-starting construction here at home. We have suggested that revenue from the 4G spectrum auction should be used to fund the building of 100,000 new homes, and we are more than happy for the Chancellor to steal our thunder in the autumn—or should I say Christmas—statement on 5 December. Our amendment would ensure that the Bill focused on the British economy, and that should surely be the starting point.
Mr Redwood
I think we should be a bit careful. I thought that the Bill to which we are being invited to consent would provide solely, or primarily, for guarantees and loans, but in fact it allows expenditure and
“any… kind of financial assistance”,
which could include direct purchase. It certainly includes court or prison facilities and roads, which, in many cases, will involve no revenue, so presumably that means direct spending.
Chris Leslie
I think that the right hon. Gentleman is technically correct. The wording of the Bill is very loosely framed. We know that accounting officers in the Treasury had put a big question mark over exactly what Ministers were proposing. They wanted one line to cover them in circumstances in which things might go wrong, and they would be challenged and hauled before the Public Accounts Committee. That dates back to the 1932 concordat on public accounts, and it is being radically changed by the Bill. We do not necessarily think that that is the wrong thing to do, but it is noticeable that legislation has been presented to the House of Commons by Ministers who cannot say what it will be used for. We need information on the specifics of the schemes and the dates on which they will be supported. That is the level of detail that we require.
Amendment 9 relates to the definition of “infrastructure” in clause 1. I am sorry that the amendment tabled by my hon. Friend the Member for York Central (Hugh Bayley) was not selected; he noticed that flood defence schemes were not included in the list of items covered by infrastructure expenditure.
Our amendment seeks to insert the word “childcare”. Education is included in the set of infrastructure projects that might benefit from the scheme, but child care is quite different. We consider that to be an obvious anomaly which the Government should correct. We know that the costs of child care are afflicting many families throughout the country, a number of whom are not necessarily choosing to enter employment because the child care options are too limited or too expensive. One of the reasons why child care is so expensive is that the facilities are expensive. We do not have enough of them, and we need more investment in them.
Chris Leslie
I am happy to give way to my hon. Friend, who I know has campaigned strongly on these matters.
Kate Green
Does my hon. Friend agree that many of the infrastructure projects the Government have talked about have been in typically masculine industries? Does he also agree that one of the huge advantages of investment in child care is that it also helps to redress the high level of female unemployment—it is the highest in a quarter of a century—because it offers the opportunity for more mothers to go out to work and because that sector remains largely dominated by female employees?
Chris Leslie
My hon. Friend’s point is borne out by the statistics. Only 67% of mothers in the UK are in employment, which compares with figures of 84% in Denmark, 79% in the Netherlands and 74% in France. That reflects on the characteristics of our national output and our economy. More could be done to help those parents to gain access to employment. Families in the UK with pre-school-age children spend more on child care than is spent by this group in any other OECD country, except Switzerland. More nursery places and more not-for-profit providers of child care would help to drive down that cost. According to the OECD, the cost of child care in the UK is more than 26% of the average family income in those circumstances, whereas the OECD average is just under 12%, so this is a very significant drag on family budgets and it is holding back our economy.
The Daycare Trust has called for Government assistance to enable children’s centres, smaller private providers and not-for-profit early years providers to expand. It has pointed out that some 28,000 extra nursery places for two-year-olds need to be found in London alone, so we can clearly see that child care issues need to be considered in the definition of “infrastructure” that could obtain support under this legislation. Those are the amendments that I wish to discuss for the time being, but other hon. Members will doubtless have noticed omissions in the legislation.
Mr Redwood
My concern about this Bill is with the definitions and the amount of money involved. I am obviously very much in favour of more productive infrastructure projects going ahead as quickly as possible. There may well be utility in facilitating the Government to make guarantees, support or indemnities available at a time when the banking system is still not functioning well and it is difficult getting these things financed privately in the way we normally like. However, I start from the proposition that what we really need to be doing is generating a lot more freestanding private sector investment projects. It would be better if we took stronger and faster action to remedy the banking problems that lie underneath the problems we face in getting these things financed.
I am concerned that the wide-ranging powers in clause 1 may lead to a big increase in public spending, which would damage the Government’s fiscal targets. A lot of time and energy has been expended by Governments on reducing capital programmes to try to get public spending down to levels thought to be more compatible with reality and markets. We want to avoid this Bill becoming a way of undoing all the hard work that has been done to try to get the deficit down, at a time when this Government strongly believe that deficit reduction is crucial. The outgoing Government actually enacted legislation committing themselves to halving the deficit over the lifetime of this Parliament.
The definition of “infrastructure” in clause 1(2) is wide ranging. I thought that the type of infrastructure we had in mind for this Bill was that in subsection 2(a), which states that infrastructure is about “water, electricity, gas, telecommunications”. Those services are all provided by the private sector with charges to customers, so there is a flow of revenue that can remunerate the capital. If those projects are held up because of banking difficulties, I have every wish to encourage the Minister, newly in his job—I give him my congratulations—to expedite them. One hopes that the Government would be properly rewarded for the indemnities and the guarantees, or that they would not be necessary in the fullness of time, and so the taxpayer would not lose by this process. I am happy with that provision, which I thought was the thrust of the Bill.
However, subsection (2) also provides for mixed projects and entirely public sector projects. It includes mixed projects in the form of railway facilities. Railways are extremely heavily subsidised, and any new project is likely to require many years of future subsidy, because such projects do not normally reward the railway operator or the taxpayer sufficiently from the fare revenue. We therefore need to consider, for any one of these projects, the medium-term and long-term implications of cash outflows from the public sector, as well as the private sector revenues. Those things cause difficulty in the evaluation, as we have found recently through one of the franchise problems.
Subsection (2) also makes provision in respect of areas where spending must entirely be an expense for the public sector—I assume that we are not envisaging court or prison facilities having paying guests who would contribute towards the costs, so this money will be entirely expended by the public sector.
Chris Leslie
I am not satisfied by the Minister’s answer on amendment 11. Nothing in the Bill precludes the £50 billion from being used largely—never mind in part—to bankroll foreign infrastructure schemes. He did not address that point carefully enough. We believe that the focus has to be on economic recovery here at home in the United Kingdom. The Minister may well believe that he would not sanction schemes that strayed beyond that, but reshuffles come and go—we could even end up with a Liberal Democrat Minister in his position. Who knows what would happen in those circumstances?
For those reasons, as well as those that I enunciated earlier, I would like to press amendment 11 to a vote.
Question put, That the amendment be made.
Chris Leslie
I beg to move amendment 7, in page 2, line 3, at end insert—
‘(6A) In any agreement to give financial assistance in this section the Treasury or Secretary of State shall give reasonable consideration to clawback provisions which safeguard best value for the taxpayer.’.
The Temporary Chair (Sir Roger Gale)
With this it will be convenient to discuss the following:
Amendment 12, in clause 4, page 3, line 8, at end insert—
‘(f) the beneficial owners of any debt issued by a company receiving infrastructure assistance or one of their subsidiary companies,
(g) the beneficial owners of any company which has entered into an agreement to receive infrastructure assistance,
(h) for the purposes of this Act beneficial owner has the same meaning as that conferred by the Money Laundering Regulations 2007.’.
New clause 3—Customer due diligence measures
‘(1) Before any infrastructure assistance is given the Treasury must apply customer due diligence measures on any business requesting infrastructure assistance.
(2) For the purposes of this Act customer due diligence measures will have the same meaning as that conferred by the Money Laundering Regulations 2007.’.
Chris Leslie
Amendment 7, which stands in my name and those of my hon. Friends, seeks to ensure that the Bill provides a safeguard for taxpayers’ money. After all, £50 billion of guarantees could be underwritten for the private sector on pretty much any kind of scheme, and we heard fuzzy logic from the Minister earlier, when he said that infrastructure is not quite as defined as it appears in the Bill, and that some projects could be national and some foreign.
In some circumstances, underwriting can be beneficial and welcome—it can make schemes viable that were not viable previously and unlock infrastructure developments that might not otherwise take place, but in other circumstances there are disadvantages to underwriting. Underwriting means that gains from a private endeavour are privatised, but that any losses are socialised. The entrepreneur, the shareholder and the owner of a private company or project that benefits from the safety net provided by the taxpayer could profit well for many years if a scheme bears fruit, but if the scheme goes wrong and if there are failures in it, the losses fall on you, Mr Gale, on me, on hon. Members and, most importantly, on our constituents.
I make no apologies for standing up for the taxpayer’s best interests. It is important that we ensure that Ministers consider introducing clawback provisions that safeguard best value for taxpayers. The amendment is so unobjectionable that I cannot understand why the Government would object to it. The Opposition are simply saying that, in any agreement to give financial assistance, the Chancellor or Secretary of State
“shall give reasonable consideration to clawback provisions which safeguard the taxpayer.”
What do I mean by “clawback provisions”? Hon. Members who have served on the Public Accounts Committee will know that from time to time Governments have entered into contracts and sold privatised parts of the public sector. The purchasers have then gone on to make millions of pounds when they have sold on some of those assets. In this case, the guarantor has ended up facilitating a project, but the beneficiary of the guarantee went on to make significant sums.
We are simply saying that the Treasury needs to make sure that there are clauses in the underwriting contracts—the offers—that ensure that if significant gains are made in the long term, the taxpayer can have a share in some of the future profits. It is a basic principle—if the taxpayer helps to create profitability for a person and bears the risk of loss, that person can reasonably be expected to share some of the excess profits with the taxpayer. It is a basic principle of prudent stewardship of taxpayers’ money. It would also ensure that we deal with the question of moral hazard. We know that in some circumstances underwriting can cause difficulties if a scheme that might be shaky goes ahead as a result, which is of course a distortion of the market environment.
If schemes go ahead and make significant gains and provide future returns that are in excess of what might be expected, the taxpayer could have some rights to those. For example, in a prime executive housing site in central London developed thanks in part to the Government underwriting property market risks, the units may sell at multiples of expected initial prices, with vast profits for the developer. In the current situation, what would the taxpayer get? Foreign-owned energy companies want a pipeline stretching from our shores across the continent, which could well be underwritten by the provisions in the Bill. If we fund part of that as taxpayers, but the company makes significant long-term returns on the oil and gas, what should be the taxpayers’ share in that?
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)
Do not the Government appear to be privatising the profits, but socialising the losses? How can that be fair?
Chris Leslie
That is indeed the approach taken in some of the underwriting provisions. Of course there can be circumstances in which that makes sense, perhaps to tip a project that is viable and in the national interest from something that might not happen to something that moves ahead in a way that benefits everyone.
The amendment does not even say that every contract should have a clawback provision: we are simply saying that the Treasury should be under a statutory obligation to give reasonable consideration to the insertion of clawback clauses in the contracts. That is the be all and end all of amendment 7 and I hope that the arguments are fairly straightforward. I look forward to hearing the Minister’s view.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I wish to speak briefly to amendment 12 and new clause 3, which are both in my name. Both relate to the reports that the Government propose in clause 3 should be annually produced, and to the transparency of the companies involved in this support for infrastructure, which I welcome.
Both the amendment and the new clause follow discussions that I have had with my right hon. Friend the Chief Secretary, who is now in his place on the Front Bench with his new ministerial colleague, whom I also welcome. The amendment and new clause are prompted by the fact that we often do not know the identities of the beneficial owners of the companies with which the Government do business. Companies often have shares owned by trusts or other companies based in countries that do not require disclosure of ownership, and I shall give a few examples.
The M6 toll road is owned by Midland Expressway Ltd, which is owned in turn by the Macquarie Motorways Group Ltd, which is in turn owned by Macquarie Atlas Roads International Ltd of Bermuda. It is controlled by Macquarie Infrastructure Group, but the identity of its investors and therefore of the owners of MEL remains unknown and undisclosed. In 2006, however, they paid themselves a £392 million exceptional dividend, and over six years made a return on their investment of more than 150% a year. This sort of profit at the public’s expense by we know not whom is not an acceptable arrangement, and I want the Government to be warned against it and to ensure that all owners are in the public domain.
Arqiva, as a private sector monopoly, is regulated by Ofcom. It runs all the transmission services for all UK terrestrial television broadcasters and for BBC Radio and most commercial radio services, owns two of the four digital multiplexes, supplies the Government with mobile and wireless communications and supplies three quarters of all police forces. It receives annual revenues of about £1 billion and makes annual losses of about £250 million. The ultimate owners of the company appear to be based in Bermuda, although we do not know who they are, and Arqiva has paid no corporation tax for four years.
Thames Water, the UK’s largest water supplier and a monopoly private sector company providing a public service with which the public therefore has no option but to deal was bought by Macquarie European Infrastructure Fund in 2006. The long-term debt held by the company was £3.4 billion and is now £7.7 billion. When the company was bought, Thames Water took on all the debt taken out by its owners to buy the company, which was more than £3 billion. To do that, it set up a company in the Cayman islands, Thames Water Utilities Cayman Finance Ltd, which is registered at an address at which are registered 18,000 other companies.
Over the past four years, Thames Water has made profits after tax of £314 million, £331 million, £225 million and £247 million, and has paid dividends of £398 million, £291 million, £271 million and £480 million, but in the last tax year paid no tax. In the previous year, it paid £500,000 in tax, and the year before that £16 million, yet it has a stable operating profit of about £600 million a year. I could go on. There are health care companies, and the company currently negotiating with the London fire brigade over the water to buy the old fire brigade headquarters looks as if it is based in the British Virgin Islands and the Isle of Man.
Sajid Javid
My right hon. Friend began to make his point in the earlier debate, but was unfortunately cut short. The Government are keen to ensure that when they analyse each application that will benefit from these guarantees, they establish the identities of the true beneficial owners of every scheme. Although that process is not included in what was deliberately designed to be a short Bill, much of the detail is included in the individual schemes. It will be in the UK guarantees scheme, and also in the programme that will cover the housing element of the guarantees, which will be published shortly.
My right hon. Friend also raised a point, in relation to one of his amendments, about the beneficiaries of the debt guarantees. He may have been alluding to the actual holders of the debt instruments. Although I understand and sympathise with his principle, this approach would not be very practical because debt instruments, particularly bonds, are tradeable and so, as with gilts, it would be hard to track the owners of those instruments.
Chris Leslie
I am glad that the Minister was addressing the important amendments tabled by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), but I wish to focus on transparency in respect of not only the beneficiaries, but the person receiving financial assistance. The Minister will know that, because of the knife, we did not get to my amendment asking for the details of the persons receiving some of this funding to be placed in the public domain. Will he give a commitment that that information—the details of those beneficiaries—will be made public?
Sajid Javid
The process of analysing each of the applications under the Bill will include a thorough due diligence process, which will examine the beneficiaries in each case. The Government will not issue a guarantee if they are not satisfied with the outcome of that due diligence process. It is not the standard procedure for the Government to publish all the information they look at when making decisions on guarantees, but the hon. Gentleman should be assured that this will be a very thorough process, which will have the assistance of outside sources if required.
Chris Leslie
Although the Opposition will not oppose the Bill on Third Reading, we do not think that the matter should rest there. It is not the most impressive Bill ever placed before this august Chamber. The Minister said that he was grateful for the excellent and informative debate we have had so far, but we had a pretty farcical two hours of scrutiny in Committee; we managed to debate only clause 1 and had no debate on a third of the amendments that were tabled. I think the Government showed a large measure of disrespect to the process of parliamentary scrutiny in the way they misallocated time for today’s discussions.
This legislation is very much in the frame of mind of the “wait and see” game we are used to seeing from the Chancellor and the Treasury team. They hope that something will crop up but are not exactly sure what. The Minister said that he hoped there would be some expressions of interest in something or other but that, ultimately, he cannot predict the future. My right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) asked the killer question: what will be the measure of success for the Bill? What answer did the Minister give? Essentially he said, “We cannot not really predict that, but we are confident that projects will come forward, so judge for yourself.” That is a totally embarrassing and appalling way of managing and advocating what should be a far more sophisticated approach to making public and economic policy.
The country deserves far better than the “wait and see” approach from Ministers. Surely there should be some semblance of projections for how the Bill will be deployed and some way of gauging what that interest is, rather than just putting it out there and hoping that something will happen. But of course we must not forget that the Bill is in large part a device to make it look as though the Government are actually busy. There is one effective sentence in clause 1 that covers the blushes of the accounting officers so that underwriting arrangements can span various financial years, but essentially this is makey-uppy, make-work legislation to make the Government look determined and busy in the Chamber.
Do not forget that we will have a growth Bill in due course, although we are still not clear what will be in it. The Prime Minister famously said that we cannot legislate for growth, so we will see what becomes of that Bill.
Stephen Phillips
The hon. Gentleman criticises the Minister for not laying out what the hon. Gentleman regards as the criteria by which the Bill’s success is to be measured. What are the criteria by which the Opposition will measure the success of the Bill, given that they are not going to divide the House on Third Reading?
Chris Leslie
We did not have time to discuss some of our amendments. We wanted far more information about the nature of the loans, underwriting and even grants being given to the private sector. The right hon. Member for Bermondsey and Old Southwark (Simon Hughes) tabled some important amendments that we did not get the chance to discuss in any great detail.
My amendment 5 simply talked about making sure that the public can know to whom the financial assistance is being given—a pretty basic tenet of transparency and accountability for public resources. The Minister could not say that that information would be in the public domain. We are not even necessarily allowed to know to whom the financial assistance is being given.
The Minister says that due diligence will be thorough as far as the Treasury is concerned, but what about the rest of us? Our constituents send us here to keep an eye on what the Executive are doing with public money. Without that basic information, how are we to judge the success of the legislation?
Simon Hughes
The hon. Gentleman knows that I share his frustration that we did not have more time to look at the issues in Committee. I suggest that that is not the Government’s fault. I remember many occasions when we had exactly the same problem under the Labour Government. Rather than blaming the Government, will he and his colleagues work with us to make sure that we have a system across Parliament—just a change in the rules that gives injury time if urgent questions or statements take up time for principal legislation? That is a way of solving the problem, and we would all be much happier as a result.
Chris Leslie
Of course we can have arrangements. There are perfectly available arrangements for making sure that there is time for legislation, but the Opposition do not control the timetabling of debates. I do not want to bang on about the procedure, but suffice it to say that it was inadequate.
We did not get a chance to debate the reporting mechanisms for what happens in terms of the financial assistance given to unknown persons. The hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips) asked what measure we would have of the Bill’s success. I think that there should be reports not every 12 months, but every six months. If the issue is so urgent and there is a national emergency—if it is a case of, “Let’s get infrastructure going and press ahead with capital investment”—let us have far more frequent reports.
We do not know how much taxpayers’ money is on the line, how much is being committed per project, what form the financial assistance will commonly take, what type of companies will receive the financial assistance and even what type of infrastructure projects will receive such assistance. There are a lot of unknown unknowns in the legislation.
I hoped that we would have the chance to cover other key points. For example, I am particularly concerned about the availability of social housing. I mentioned earlier that in my city of Nottingham, not a single extra affordable social house was built in the last financial year. That is unacceptable.
Perhaps the situation will be made worse by the fact that the housing stock of certain local authorities has been transferred to housing associations, but quite a number of authorities either retain their council housing stock or have arm’s length management organisations —ALMOs—doing that. As I read the legislation, if someone’s local authority has not moved to housing associations, they will not be able to benefit from the underwriting as much as people whose local authorities have, because ALMOs and local authority-retained stock areas cannot be underwritten because of the borrowing constraints. There is a perfectly legitimate question—not a partisan question—about how we ensure fairness from one city to another and one area to another, but we did not get an opportunity to debate those issues.
Sajid Javid
I am pleased that the shadow Minister is now concerned about social housing for his constituents, because perhaps he can explain to them why, during his party’s 13 years in government, the number of social houses fell by a net 421,000 and the number of people on the social housing waiting list went up from 1 million to 1.8 million.
Chris Leslie
If the Minister were talking on the basis of having made some progress or having reached some level of achievement as regards housing policy, perhaps he would have the right to start throwing accusations about. Of course, far more could and should have been done in the past, but after two and a half years under his party’s Administration, where are we going on housing construction? According to the Construction Products Association, it is going through the floor; “free-fall” is the phrase linked to the CPA in this morning’s Financial Times.
John Healey
My hon. Friend is absolutely right. In particular, social housing construction, which was the subject of the Minister’s intervention, has plummeted by 25% in the past year. That is the direction it is going in under this Government.
Chris Leslie
Exactly; my right hon. Friend is right. Official data show that construction output is down by 11.6% on the year before, and the Construction Products Association predicts a 13% fall in infrastructure investment this year. When one starts to look at what is actually happening in the real economy and the real world today, it is clearly not about the announcements that Ministers bring to the Chamber as though they represent reality. The Bill may well go on to the statute book after this debate, but if the Government are relying on it alone, we remain concerned that the infrastructure schemes for housing, schools, child care, transport and so forth which should be proceeding will not move forward as effectively as they should.
There are other concerns that the Minister has not addressed, perhaps because the Government do not have an implementation plan that they can allude to. For example, they have not talked about state aid clearance. The Bill says that financial assistance can be given to particular industries and private sector ventures in operations, in maintenance and in repairs, but perhaps to the exclusion of other companies. What is the Government’s approach to state aid clearance from the European Union? If they hit such a barrier in the EU, will they simply say, “Well, another month, another quarter, another year has gone by and we didn’t get state aid clearance”? How are they approaching those barriers, and when will they report to Parliament about how they are going to tackle these issues? Those are more obstacles that they do not appear to have addressed in any way.
Mark Durkan
Does my hon. Friend perceive that under the Bill there is a risk of the UK Government granting guarantees to companies in a way that would mean that those companies could gazump other projects that had been developed, perhaps in devolved areas, and come in on a pretty anti-competitive basis, not only constraining the choices of devolved Administrations but ruining the chances and prospects of companies that were working on projects and making good offers in those areas?
Chris Leslie
That is the sort of point that should have arisen if we had had the opportunity properly to scrutinise the Bill.
Most people observing the Government and the workings of Parliament from outside assume that there is a level of sophistication in the Treasury and that the people there must have a level of intellect and capability that is somehow superior to the rest of us. They do not realise that when one looks inside the Treasury it is clear that those people are crossing their fingers, holding their breath, and making it up as they go along. This back-of-a-fag-packet approach to legislation simply will not do. This country’s growth prospects have been worsened by this Administration’s policies. As the former US Treasury Secretary, Larry Summers, wrote in the Financial Times this morning, economies that become stuck in a vicious circle of austerity and stagnation will find it ever harder to deal with their deficits and stabilise public finances.
The Office for Budget Responsibility’s out-turn figures show that the Government are cutting capital expenditure by more than £6 billion more than the previous Government planned. Combined with other austerity measures, this has resulted in a collapse in infrastructure investment. More than 119,000 construction sector jobs have been lost so far, and according to the Construction Industry Training Board the Government are spending £8 billion more in benefits for the 188,000 unemployed construction workers.
Borrowing is not falling, but rising this year—it is up 22% in the first five months of this financial year compared with last year. This Government are borrowing not to pay for investment and positive development, but to pay for the failures of their economic plan and to cover the costs of considerable increases in welfare in particular.
We need an alternative that focuses on action today and that understands that we need to introduce—really introduce—some of the capital schemes, roll up our sleeves and get on with them. The 4G mobile spectrum auction will take place soon and we hope that it will yield at least £3 billion. Let us put that money towards 100,000 new homes and put some serious investment into infrastructure. Let us build on some of the successes that we know Britain can deliver on infrastructure.
There is a complete mismatch between the Government’s words and their actions: our infrastructure is deteriorating, not improving; construction work is down, not up; and hundreds of thousands of young people are languishing on benefits while businesses delay the investment needed to maintain their competitiveness and market share. That is just not good enough and much more is needed than the vagaries of this Bill.
Infrastructure (Financial Assistance) Bill
Chris Leslie Excerpts(11 years, 8 months ago)
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Priti Patel
Speaking for Essex, I do not recognise that. The county of Essex has had no infrastructure spending whatsoever. Despite Essex being the county of entrepreneurs, where thousands of new businesses are started each year, and despite it being a net contributor to the Treasury, Labour neglected it. Local and regional infrastructure in Essex failed to keep pace with national and local economic growth. That is no doubt one of the reasons why the electorate booted Labour MPs out of Essex, full stop, at the last general election. It is now a Labour-free zone.
Chris Leslie (Nottingham East) (Lab/Co-op)
Is not the Maltings academy in the hon. Lady’s constituency, which opened about a year ago, a significant piece of capital infrastructure? Surely she welcomes the investment in those new school buildings.
Priti Patel
I welcome that investment in infrastructure improvements, but it was something that I had to campaign and fight for as a prospective parliamentary candidate—not even a Member of Parliament. That says something about the priorities of the last Labour Government. My constituents look with confidence to this Government to take positive action to rebuild our roads and railways, to meet the ever-increasing demands of the growing population in the county of entrepreneurs.
I urge Ministers to consider some particular projects in Essex. The first area is rail, which was highlighted by my hon. Friend the Member for Suffolk Coastal (Dr Coffey). Commuters on the Greater Anglia franchise return £110 million a year to the Treasury on a profitable franchise, but face some of the longest delays and worst facilities in the country. For a modest fraction of the money that the Government receive from the franchise, the rail service could be upgraded from being one of the worst performing in the country to one of the best. We are lobbying the Government, in particular the Department for Transport and the Treasury, to hear our case on this. Local commuters, not only in Essex but along the route of the franchise, would welcome Government investment in the line.
Neil Carmichael (Stroud) (Con)
Thank you, Mr Deputy Speaker, for calling me to speak in this important debate. This is a necessary piece of legislation, not least because we need to stimulate growth by showing that we are interested in developing our infrastructure. Such infrastructure investment has taken place in the past, but we need more, and it is important to understand what kind of investment is needed and how the process needs to unfold. We do not always remember that organisations involved in civil engineering, for example, want to see a little more confidence in the world of infrastructure investment, so that they can start to prepare for projects that are in the pipeline or that are urgently needed. We must recognise that some of those projects will stimulate further economic activity. Transport and energy are classic examples of sectors in which more investment is needed, as a stimulant to create even more exponential economic activity.
Let us take transport as an example. By investing in more transport infrastructure and ensuring greater connectivity, we give businesses a better foundation from which to grow. I know that from experience in my own constituency, where the news of the investment in the redoubling of the railway line between Kemble and Swindon on the Stroud to Swindon line has had an enormous impact. There is a real feel-good factor for the medium term in relation to the connectivity of my constituency. We need to see much more of that kind of signalling, and I welcome the thrust of the measures that relate to transport.
Another critical area whose importance we do not always recognise when we talk about investment is the energy sector. Again, the word “connectivity” is important, but we must also understand the need to provide a framework for the right kind of investment, as well as ensuring, as the Bill does, that guarantees can be put in place for those investments. For example, in the renewable energy sector, we need to think about the infrastructure required to get the energy from where it is created to the place where it will be used.
We must also encourage new technologies by providing the right policy platform to enable them to be developed and promoted. A good example is energy storage. In some sectors, we have the kind of technology that could make energy storage a realistic prospect. I have told the House before about liquid air, but I will tell it again. Liquid air provides a significant way of storing energy, but we need the infrastructure to achieve that. The Bill could provide the necessary encouragement for that to happen, and for an interest in energy to be developed.
Neil Carmichael
It is certainly not hot air. It is very cold. The technology is well worth looking into; it is all about the transfer of pressure.
The hon. Member for York Central (Hugh Bayley) talked about the proximity of the Bill to private finance initiatives and public-private partnerships, and I agree that that proximity exists. We need to learn lessons, however, from our experience of the more complicated and convoluted PFI schemes. We need more flexibility, and we need to give the public and private sectors the confidence to think, “Let’s get this done”. We need to generate a can-do approach, and the Bill will go some way towards achieving that.
Chris Leslie (Nottingham East) (Lab/Co-op)
This has been a thorough debate on not just infrastructure, but the state of the economy in general. I am afraid to say that little light has been shed on the Bill’s details, although we have yet to hear from the Economic Secretary, whom I heartily welcome to his new post as a Treasury Minister. Perhaps he will illuminate matters for us. As things stands, it looks to be a curious little piece of legislation. My hon. Friend the Member for Coventry North West (Mr Robinson) said that the Government’s policies on infrastructure were embarrassingly thin. As most hon. Members have noted, there seems to be more spin than substance in this Bill. Perhaps that is why the Government ran out of people to speak in favour of it almost an hour ago.
It occurred to me that this legislation is perhaps a classic example from the book by the new Conservative party chairman, “How To Bounce Back From Recession”, which was written under the pseudonym Michael Green or Sebastian Fox—I cannot remember which. It is all about a presentational drive to be seen to be doing something. The Government cannot specify precisely what it is that they want to be seen to be doing, but it is definitely Shapptastic.
It is the lack of detail in the Bill that worries many people. My right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) questioned who will be given financial assistance and what will be defined as nationally significant infrastructure. My hon. Friend the Member for York Central (Hugh Bayley) questioned the time scale of the £50 billion for underwriting and guarantees. My hon. Friend the Member for City of Durham (Roberta Blackman-Woods) noted that the Government are coming late to the benefits of infrastructure, and have reannounced over and again the concept of UK guarantees. They were mentioned first by the Prime Minister in May and were reannounced in June by other Ministers. Only now are we getting the Bill that is supposedly necessary to underpin them.
There are dangers of making policy on the hoof in this way. However, for the time being, we will give the Government the benefit of the doubt that they will specify in Committee which projects they envisage need this level of support. We will seek safeguards for taxpayers’ money against losses that are not spelled out in the Bill, supported, I hope, by my hon. Friend the Member for Hayes and Harlington (John McDonnell), who mentioned this issue. We need to ensure, for example, that there is reasonable consideration of clawback provisions, which are normal contractual arrangements that might be needed to safeguard best value for the taxpayer.
It is unclear whether the Bill will aid social housing, particularly in parts of the country where the council housing stock has not been transferred to housing associations—those arm’s length management organisations —such as Leeds and Nottingham. I disagree with the hon. Member for Reigate (Mr Blunt) and think that housing should be considered to be part of our nation’s infrastructure. Opposition Members feel strongly about that.
There are other issues that the Minister needs to address. Will the Government run into state aid clearance issues if they are simply providing financial assistance to the private sector? Such contractual questions may come up. How will the Government overcome them?
My right hon. Friend the Member for Salford and Eccles (Hazel Blears) and my hon. Friend the Member for Walthamstow (Stella Creasy) pointed out that the Bill lacks any mention of social value. We need to leverage jobs and benefits for communities out of infrastructure schemes. The real and tangible economic consequences that should flow from infrastructure ought to be at the heart of this Bill.
One cannot look at this small set of clauses without wondering whether the Bill is sufficient for the task at hand. Guaranteeing private loans will not come close to addressing the scale of the infrastructure problems that we face because of this Government’s inactivity. It is not certain whether this technique will be successful. There are no details of which projects will be guaranteed or when they will be guaranteed. My hon. Friends the Members for Swansea West (Geraint Davies) and for Scunthorpe (Nic Dakin), among others, rightly emphasised that the country is crying out for infrastructure investment, especially to create confidence and to strengthen productivity and competitiveness in our economy.
The Government have a pretty woeful record on the delivery of infrastructure, but there has been a great deal of hot air. The hon. Member for Stroud (Neil Carmichael) spoke about the industries that he wanted to be supported in his constituency. Who can forget the Chancellor’s much-vaunted “The Plan for Growth”, which he said was
“an urgent call for action”?
He stated:
“If we do not act now, jobs will be lost, our country will become poorer and we will find it difficult to afford the public services we all want.”
Eighteen months later, that plan for growth is looking a little forlorn.
The Prime Minister himself said,
“this autumn the government is on an all-out mission to unblock the system and get projects under way”—
except, of course, he was talking about autumn 2011. My favourite was the rhetorical flourish from the Chancellor of the Exchequer, who, in his Budget speech 18 months ago, promised
“a Britain carried aloft by the march of the makers.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
Since then, the economy has, of course, shrunk into a double-dip recession.
The Government’s policies have not been helping; in fact, they have been harming. They have been causing more delay to projects that ought to be under way. My right hon. Friend the Member for Wentworth and Dearne (John Healey) talked about the risks that can arise from sort of the public policy vacillations that we have seen from the Government. He mentioned, for example, the uncertainties in planning policy, where a national planning policy framework was announced a few months ago, only for the Government to change their minds. They say they are going to suspend section 106 agreements, but they have not yet done so. A number of developers are saying, “We’ll hang back for the time being. We’ll wait rather than get on with applying for planning permissions right now.” We want the Government to make their minds up about how to move forward, but we have our concerns about their strategy.
In transport, we are still awaiting the long-promised national policy statements on transport networks and aviation, as my hon. Friend the Member for Easington (Grahame M. Morris) mentioned. In waste management, the national waste management plan was supposed to be announced this spring, but it will now not be finalised until the end of 2013. In low-carbon investment, the CBI has warned that policy changes such as the cuts to feed-in tariffs have been
“damaging to business confidence, with implications not just for immediate investment decisions but for longer-term trust in government policy.”
The Government have undermined or pulled the rug from under many infrastructure schemes. The same can be said of their approach to the green investment bank and broadband targets, which they have deferred, notwithstanding the strong campaign by my right hon. Friend the Member for Salford and Eccles for superfast broadband at MediaCity in her constituency, which she mentioned in her speech.
We need a renewed focus on the plans that the Government themselves put forward in their national infrastructure plan in 2011. None of the road-building programmes in that plan has started construction. Only one in 10 of the projects mentioned in it have moved forward, while one in 10 has moved backwards. House building starts are down 24% from the same period last year, and, on Friday, infrastructure data from the Office for National Statistics showed that the volume of new work was also down 24% on the same period last year. The statistics get worse and worse, not to mention the woefully inadequate approach to the regional growth funds, which many of my hon. Friends mentioned.
Indeed, the pace of capital investment under this Administration has slowed, contrary to the claims of the Government. The Office for Budget Responsibility’s forecasts show that under Labour’s public service net investment plans, investment would have been £2.7 billion higher than under the Government’s plans in the key year of 2010-11, £2.6 billion higher in 2011-12 and £1.3 billion higher in 2012-12. That is a difference of £6.6 billion over that three-year period between Labour’s trajectory on capital investment and the cuts implemented by this Government. That is something that even the hon. Member for Northampton South (Mr Binley) mentioned in his contribution. Reductions in capital expenditure have been relatively extreme, and I agree with him that the Government should certainly be doing better.
There are ways in which underwriting and guarantee schemes should be investigated. We do not oppose the Bill before us today, but we are a little cynical and sceptical, given the number of schemes that the Government have promoted with great flourish but then failed to deliver. My hon. Friends will remember the claim that they were going to reach into the pension funds of large fund managers across the country and take £20 billion of investment to help to support public infrastructure schemes. However, a year later we have seen only £2 billion secured, and again, it will not be forthcoming until 2013-14. Indeed, the Government’s chief construction adviser, Paul Morrell, said,
“there won’t be a barrel-load of funding coming in from pension funds for greenfield infrastructure. It’s not their business and I don’t know anyone who thinks it is.”
The Government promised a whole set of new revenue sources for new investors in the national infrastructure plan, but they have not been forthcoming. The Government have also been indecisive over the use of tax increment financing.
The Government also promised a new Cabinet committee, chaired by none other than the Chief Secretary to the Treasury himself, which was set up last year to “show decisive leadership”. A year on, we are still waiting for the Chief Secretary’s decisive leadership. I am sure that the Cabinet Committee meetings are extremely interesting, and it would be helpful if he could share with us some of the decisions that have been taken.
Businesses and those in the wider country are increasingly frustrated by the progress that this Administration are making. We have already heard quotes from key business figures. John Longworth, the head of the British Chambers of Commerce, has described the national infrastructure plan as “hot air” and a “complete fiction”. John Cridland, the director general of the CBI, has warned that
“firms fear initiative overload and are becoming impatient with delivery”.
Richard Threlfall of KPMG has said:
“Business confidence in our infrastructure is ebbing away”.
And we have only to look at the opinions of businesses across the country, as expressed to The Financial Times, to get a flavour of what is happening. It states:
“British business is fast losing any remnant of confidence in the government’s infrastructure strategy even though investment in transport, telecoms and energy has been at the heart of its growth plans since it came to power two years ago. Two thirds of British companies fear UK infrastructure will deteriorate over the next five years, according to a survey by the CBI…and KPMG”.
The Bill lacks not only substance but evidence that the Government understand what is happening in the economy and more broadly. My hon. Friends the Members for Glasgow North East (Mr Bain) and for Walthamstow made that point in their speeches. It contains nothing to address the lack of demand in the economy, and it proposes no change of direction to prevent the Chancellor’s tax rises and precipitous cuts from exacerbating the contraction in the economy. My hon. Friend the Member for Derby North (Chris Williamson) rightly pointed out the economic strangulation that the Government’s policies were exerting on the confidence and demand that ought to exist in the economy and more broadly. My hon. Friend the Member for York Central highlighted the five quarters of negative growth that have occurred on this Chancellor’s watch.
There is no recognition from this Administration that the lack of growth is resulting in a rise in welfare spending; it is up by 7% in the financial year so far compared with the previous financial year. We have also seen borrowing rise in the first quarter of this year, compared with the previous financial year. These proposals lack substance. We need immediate action rather than warm words. We will table amendments to the Bill, to test the Government’s commitment to their infrastructure plans. Either this Administration are ignorant of the causes of recession or they are wilfully ignoring our decline, for politically obstinate reasons. They are flailing around for initiatives, and they are racked by dithering, hesitancy and coalition divisions. We need action now; we cannot wait until the Chancellor’s Christmas statement on 5 December. The Bill is a fig leaf for their indecision. It is not an adequate substitute for action. Notwithstanding my welcoming the Minister to his new post, I would like to see whether the Prime Minister’s reshuffle and his appointment of this particular Minister have changed a single thing.
Oral Answers to Questions
Chris Leslie Excerpts(11 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
I applaud the work of the FairFuelUK campaign in drawing attention to such issues. Having discussed the matter with Clive Maxwell of the Office of Fair Trading, I can reassure my hon. Friend that if the call for information in which it is currently engaged yields evidence of real problems in the fuel market, it will launch a full investigation.
Chris Leslie (Nottingham East) (Lab/Co-op)
In four months’ time, more than a million families will see their cost of living rise, with the loss of child benefit and a complex tax change costing the Exchequer £100 million more just to administer. Can the Chief Secretary tell the House how many more families will have to fill out a self-assessment tax form for the privilege of losing their child benefit, and when will those complex forms begin to arrive?
Danny Alexander
Letters to people who are likely to be affected by that change will go out in October—[Hon. Members: “Which year?”] October of this year. I am surprised to hear that the hon. Gentleman objects to the change, given that it is a necessary part of our fiscal consolidation, and particularly part of our asking the wealthiest in this country to make a contribution to deficit reduction. His party should support that.
Draft European Union Budget
Chris Leslie Excerpts(11 years, 10 months ago)
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Mr Hoban
Indeed, I think that the achievement of the rebate at Fontainebleau was a signal achievement of her time in office, but of course that was done in the context of a multi-annual financial framework debate, and we are going through that process at the moment with our European partners. We have made it clear that the rebate is one of our red lines, and we will continue to stick to that, in the same way that we have been very clear about our outright opposition to the financial transaction tax. We will show backbone in these debates, but let us identify those opportunities where our power and leverage is at its highest, to maximise the price that we want in return.
Chris Leslie (Nottingham East) (Lab/Co-op)
While the Minister is in such a fine and confident mood, can he give a commitment that the UK Government will settle for nothing less than a real-terms reduction in the budget for the multi-annual financial framework—that spending review seven-year period?
Mr Hoban
I have to say that talk is very cheap on the Opposition Benches, as the amendment demonstrates. They may talk things up, but what was the previous Government’s record? It was to give away our rebate in the hope of some vague common agricultural policy reform. So let the negotiations continue and we will come to the House when they are concluded; we have been very clear about what we are seeking to achieve.
Mr Hoban
The hon. Gentleman may say “Ah”, but the reality is that when his party was in office it gave away the rebate and allowed a spending increase that permitted the EU budget to rise by another 11% this year. I do not think the Labour party’s record in government is anything that the Opposition should be proud of or crowing about.
Chris Leslie (Nottingham East) (Lab/Co-op)
I beg to move amendment (a), at line 15, leave out from “States” to the end and add
“notes that the UK’s ability to negotiate a satisfactory European Union budget deal has been weakened by the Prime Minister’s failure to secure allies for a more prudent settlement in this qualified majority decision; and so calls on the Government to strengthen its stance so that the 2013 Budget and the forthcoming Multi-Annual Financial Framework are reduced in real terms.”
It is always interesting to follow the Financial Secretary to the Treasury. His motion, parts of which we agree with, states that the multi-annual financial framework—a rather clumsy phrase, but essentially a seven-year spending review for EU budgets from 2014 to 2020—needs to be on a sustainable path. Of course that is true. It is also absolutely true, as the motion states, that these are times of ongoing economic fragility in Europe. However, the motion does not mention the fact that, sadly, that is more the case in the UK under this Government.
The motion mentions difficult decisions having to be taken, but falls short when it comes to the actual matters at hand. The Minister spent almost half an hour trying to throw mud and allegations at the previous Government about what happened several years ago, but said hardly a word about what he was doing about the budget settlement for 2013 and even less about the big decision on the seven-year spending review period—a decision, incidentally, on which the Government have a veto. We are coming to that critical period of time when he and the Prime Minister in particular are potentially at their most influential, with leverage over what happens with that budget, but when we tried to get a simple answer from the Minister on whether he agreed that the 2013 budget and the multi-annual financial framework should be reduced in real terms, answer came there none. He said, “Well, we’ll try our best to do the right thing.” The motion states that the proposed 6.8% increase is “unacceptable”, but that is simply too weak. Not going for the 6.8% increase is a no-brainer. Where is the Government’s backbone?
The motion was tabled only yesterday, so it is no surprise that many hon. Members may not have seen that this crucial debate is taking place.
Chris Leslie
I am glad that the hon. Gentleman is, as ever, in his place.
If people realised how weak the Government were being in their negotiating stance, they would be totally appalled.
Jacob Rees-Mogg
The hon. Gentleman is very reasonable in all these matters and of course he wants answers from the Government, but in that spirit of frankness, does he personally regret the loss of £10 billion to the UK Government by giving away the rebate? I know he was not personally responsible for that.
Chris Leslie
The hon. Gentleman has to realise that the European Union was going through a totally different era of accession countries and enlargement. Now, we are in a post-financial crisis era, in which it is absolutely clear that, as my hon. Friend the Member for Blackley and Broughton (Graham Stringer) said, serious spending cuts are taking place in our domestic economy and budget. Many of our constituents want pro-job, pro-growth and pro-stimulus measures to be priorities here in the UK, and they feel aggrieved that some administrative budgets in the EU will continue to roll forward without the UK Government showing the restraint that they ought to show while they are at the height of their potential negotiating powers—hence the amendment that we have tabled.
Despite the Financial Secretary to the Treasury’s sudden animation when I asked him what exactly the Government are doing, the motion does not set out clearly the view, which ought to be and would be shared by all hon. Members, that the budget and the multi-annual financial framework should be reduced in real terms. It is a simple statement that would help the Government in their negotiations, and that is why the House should support the amendment.
Mr Nuttall
Some of us will oppose the amendment on the basis that it, too, does not go far enough, because it talks about reducing the budget merely in real terms. The question I therefore pose is: would the hon. Gentleman be satisfied if the budget increased in cash terms?
Chris Leslie
The hon. Gentleman was perfectly free to table his own amendment, and he pitches a perfectly respectable position. I thought that it was important to draw the Government into adopting a stronger stance, and a reduction in real terms is, at the very least, the place where we need to see the Government, but we could not get them even to that point. He has seen the motion; it falls short in so many ways.
Real-terms cuts are required now to the EU administrative budget, because in the UK we are in a double-dip recession, thanks in part to the Government’s failure on economic growth. The economy shrank in the last quarter of 2011 by 0.4%, and in the first quarter of this calendar year by 0.3%. Borrowing hit £18 billion in May, up £3 billion on the same month last year, and pressures on the UK’s finances are increasing: domestic tax revenues have fallen and income tax receipts are 7.3% down on the year to May. Today the Office for Budget Responsibility, in its fiscal sustainability report, cites projections suggesting that the public finances are likely to come under pressure in the longer term, and states:
“In the absence of offsetting tax increases or spending cuts this would widen budget deficits over time and eventually put public sector net debt on an unsustainable upward trajectory.”
There is much more evidence than ever before of the need for us to strengthen the Government’s negotiating stance. That is why it is just not good enough for the Government to say, “There’s not much we can do about it. It’s a qualified majority vote this year. We’re in a terribly difficult position,” and why in our amendment we have, sadly, had to point out that the Government have failed to win alliances for a tougher position on the budget. That is where we are today.
There was the phantom veto in December last year, when nothing was actually vetoed—everything went through with the agreement of the other EU countries, and the Prime Minister succeeded simply in alienating the UK’s negotiating position. Now, when we need to make strong arguments about reducing budgets, few are listening and open to ideas because of the stance taken by the Prime Minister in those negotiations.
Kate Hoey (Vauxhall) (Lab)
I want whoever is in power in this country to negotiate over our budget in a much tougher way. Does my hon. Friend agree that perhaps the only way for us to get the European Union to take us seriously is to say that we will not pay any more than what we think is a fair contribution and increase? Indeed, given all the waste, there should be not an increase, but a decrease.
Chris Leslie
That is why we need to change the approach of Ministers in negotiations. We have to come to a settlement. This year, we are on the cusp of Ministers having a veto power over the seven-year spending review period. This is the moment when we need them to be particularly firm.
Mr Davidson
Does my hon. Friend feel so strongly about making sure that the agreement we strike with Europe has the support of the people of Britain that he thinks the budget settlement should be the subject of a referendum? That would be an ideal way to determine the long-term budget—the people themselves voting in a referendum on whether they are prepared to accept it.
Chris Leslie
I see the tempting avenue down which my hon. Friend wants to go. I am not sure that it is necessarily good to budget by referendum. It would be simple for the Chancellor, the Prime Minister and the Minister to firm up their position and set out things much more clearly than they have in the motion. I urge hon. Members to look at the airy-fairy fudging language of the motion today—and going forwards, which the Minister does not like to talk about.
The Minister was right to draw on the Financial Times analysis, including in pointing out the reduction of just six administrative staff from the 41,000 EU posts. Some increases for pensions, for schooling allowances for EU officials and even for some of those extra accession activities in relation to Croatia, are still pencilled in by the Commission. I do not think that the administrative budget proposals on the table are justified. Instead, we should be reprioritising the resources paid to the EU budget so that they are sweated more effectively for a pro-growth, pro-jobs position—looking at energy markets, high-speed broadband and the infrastructure and structural fund changes that need to be made. I do not think that the Government have appreciated the strength of feeling on this matter.
Mr Cash
I am glad that the hon. Gentleman used the phrase “strength of feeling”. What is his strength of feeling about the fact that every justification for proposing an increase of 6.8%, in all the papers that I have read as Chair of the European Scrutiny Committee—everything in the European Parliament and the multi-annual financial framework discussions in which I took part a few months ago—is, “We need to do it because of the Lisbon treaty”? Will the hon. Gentleman, on behalf of the Opposition, now accept that the Lisbon treaty was a great mistake?
Chris Leslie
No. Some commitment appropriations are certainly being pencilled in—“We can’t undo the budget because of previous commitments”—but almost an equal number of appropriations are new programmes that the European Commission could vary and change. I am all for expenditure at European level and doing our part collectively to boost and stimulate economic growth, but there is not sufficient justification for some of the continued administrative back-office areas of expenditure that simply do not help at this time, especially when we have so many economic difficulties in the UK.
My question to the Minister is very simple: what exactly is the Government’s position? Are they in favour of a real-terms reduction in the budget or not? The Minister would not say. I urge his hon. Friends to try to pin down the Government on that, because we are at a crucial juncture. From reading the reports this week in The Guardian about a deal being done whereby we will not touch reform of the common agricultural policy, for example, I get the sense the Prime Minister likes an easy life with business as usual and wants to continue in that vein.
Kelvin Hopkins
I entirely agree that the Prime Minister wants an easy life as regards the CAP. On behalf of the European Scrutiny Committee, I recently attended a meeting in Brussels about CAP reform where I think I was the only voice calling for restraint; most of the others were calling for more spending on the CAP. What are we doing about it?
Chris Leslie
Although changes to that 40% chunk of the budget have been made, fundamental reforms must still be on the table. The Prime Minister should not wave the issue away so readily.
The Prime Minister and the Government must build some radical alliances, because the 2013 budget is decided by qualified majority voting. They must also strengthen their backbone on the seven-year spending review. This will be a key test for the Government. We know that they just want to look backwards, but it is important that the Minister takes some responsibility, because he is in the driving seat now. The Government must focus not only on the rebate but on ensuring that budgets are set at the right and prudent level. We believe that real-terms reductions can be achieved now and for the future, but the motion falls short of that. That is why we tabled our amendment, which I commend as the best way to strengthen the Government’s backbone.
Bank of England (Appointment of Governor) Bill
Chris Leslie Excerpts(11 years, 10 months ago)
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Chris Leslie (Nottingham East) (Lab/Co-op)
The hon. Member for Wimbledon (Stephen Hammond) is clearly keeping a fine Wimbledonian tradition going: when it rains, a great national treasure stands up to opine or sing for a very long time. I have always thought of him as the Cliff Richard of the House of Commons.
Stephen Hammond
Only last year I was a backing singer for Cliff Richard at the opening of the Wimbledon fair.
Chris Leslie
I am glad I was not there.
The Bank of England was established in about 1694, and we obviously must not rush these reforms. I commend my hon. Friend the Member for Hayes and Harlington (John McDonnell) for introducing this sensible proposition. If, as I hope, the Bill moves into Committee, we can refine some of the details of the accountability mechanisms. The Opposition are of the opinion that there is a need for stronger parliamentary accountability in respect of the appointment of the Governor. That ought to be done by the House of Commons as a whole, on the recommendation and advice of the Treasury Committee, rather than simply be delegated to the Treasury Committee to decide.
The arguments have already been enunciated. It is important that pre-confirmation hearings take place, that recommendations can be made by the Treasury Committee, and that then Parliament as a whole can decide. That would be the best way to proceed.
I do not want to speak for long because I want my hon. Friend to have the chance to secure his Bill’s Second Reading and to pass it on to Committee, where we can talk about these details. The Government’s proposals will vest the Bank of England with significant and radical new powers, particularly over what is known as macro-prudential policy making, through the new Financial Policy Committee and the Prudential Regulatory Authority. The Minister rather coyly suggests that the Financial Conduct Authority does not have a dotted line to the accountability process within the Bank. We all know that this is not just about a powerful bank, but about the immensely powerful Governor of the Bank of England. Some have described that person as a superhuman individual and the appointment will clearly be of major national significance to our economy and to the finances of our constituents and businesses up and down the country.
We debated the question of improving internal checks and balances for the Governor of the Bank of England when we considered the Financial Services Bill. The Opposition said at the time that the court of the Bank of England needed radical improvement and that its role should be more supervisory. That recommendation came from the Treasury Committee, yet there was resistance from the Government. It is now not unreasonable to want to improve and enhance the external checks and balances on the Bank of England and I do not think that would in any way compromise the independence of the operational monetary policy decisions over interest rates. I do not think that those things are at all incompatible.
It would have been nice if the Financial Services Bill could have been amended in the Lords in such a way, but the Government resisted that. We need to ask why they are so frightened of giving Parliament—in which, by the way, they have a majority—the opportunity to have that debate on pre-confirmation hearings and given to give the Treasury Committee the power to make a recommendation that the House of Commons could make on its own.
It is important to note that other central banks in other jurisdictions have similar arrangements. In the United States, for example, Congress has oversight over the appointments.
Kwasi Kwarteng
The contrast with the United States of America is very interesting, but surely the point is that Congress in America has jurisdictional right of veto over a whole range of appointments. That does not apply to this House, so to focus simply on the appointment of the Governor of the Bank of England without considering other appointments seems to be slightly bizarre, if that is the development the Opposition want to see.
Chris Leslie
It is strange to hear ambitious and thrusting Government Back-Benchers seeking to continue to be neutered, saying, “No, please don’t give us any more of a say or any more powers. We don’t need any and it would be wrong for us to have any involvement whatsoever, even if that simply meant rubber-stamping the recommendations made by the Treasury Committee.” I am baffled that hon. Members should want to continue to hobble their role in such a way.
Mr Gyimah
I thank the hon. Gentleman for being so well versed in my career history. I want to ask him about the substance of the issue that he is supposed to be discussing. Let me go back to his point about the United States: the big difference is that in the United States the Executive is not part of the legislature. Here, the Executive are part of the legislature, so when the Chancellor and the Treasury Committee appoint the Governor of the Bank of England, we still have a route of accountability via the Executive and the Select Committee. We do not need the same veto as Congress given how our constitution works.
Chris Leslie
We could have a long constitutional discussion, but essentially I do not think that anything is lost by airing more openly and transparently the background and the thinking of candidates for appointment as the Governor of the Bank of England in the Treasury Committee and then giving Parliament a say.
Mike Freer
The hon. Gentleman referred to openness and transparency and to my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) as neutered—although I am sure he is not. As a former Minister in the previous Government, the hon. Gentleman will have been privy to discussions on openness and transparency. Can he share with us the views of the previous Government on openness and transparency in the appointment of previous Governors?
Chris Leslie
Of course, the previous Government did not vest in the Bank of England such significant macro-prudential powers and we had a different regulatory approach, although that is a debate for another day. The fact that the Bank of England is so supremely powerful under this Government’s proposals makes the case better than I could for giving Parliament this say and this oversight. That is why it is eminently sensible to give the Bill a Second Reading. We can talk about detailed improvements to it in Committee. I personally do not believe that we should leave the responsibility entirely with the Treasury Committee, with only 12 members, and think that all Members should have a final say guided by the Committee’s view. That would be the best thing to do. I commend my hon. Friend the Member for Hayes and Harlington for making this proposal.
Interest Rate Swap Products
Chris Leslie Excerpts(11 years, 11 months ago)
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Chris Leslie (Nottingham East) (Lab/Co-op)
I congratulate the hon. Member for Nuneaton (Mr Jones) on the speech he just gave. We have heard some fine speeches from Members from across the Chamber, but I wish to pay tribute to the hon. Member for Aberconwy (Guto Bebb) for his speech, for which he definitely deserved the applause he received. This is one of those cross-party issues that shows that from time to time the House of Commons can come together to try its best to send a strong message to the Government and the regulators to try to get some action, in particular from the banks.
My hon. Friend the Member for Chesterfield (Toby Perkins) and I met people from more than 50 small and medium-sized enterprises a couple of weeks ago. We heard harrowing stories and felt that sense of injustice that so many hon. Members have expressed in their contributions. We heard about bankruptcies and the job losses that can follow, and about the human cost and the misery that have ensued. We are dealing with incredibly serious questions, and we deserve nothing less than a swift and serious response from the Government and from the financial services authorities.
Martin Horwood (Cheltenham) (LD)
I very much welcome the hon. Gentleman’s remarks and echo the sentiments of many hon. Members. I just wish to say that there may be more Members, like me, who have been prevented from speaking in detail by the sub judice rule today and that concern about this issue may be even more widespread than this debate has revealed so far.
Chris Leslie
That is a very good point, and, reading between the lines, we can see exactly the strength of feeling that the hon. Gentleman expresses.
Helen Goodman (Bishop Auckland) (Lab)
I do not know who my hon. Friend met, but I wonder whether the stories he heard were like that of my constituent Mr Les Wood. He borrowed £9,000 from HSBC and has since repaid £133,000 to HSBC—a totally disproportionate sum.
Chris Leslie
That story has been repeated time and again. For those of us who might have come across the problems in anecdotes related to us in our surgeries, today’s debate has revealed that they were not one-off cases; there was a pattern.
Let us remind ourselves of what the banks have been doing. They saw an opportunity in new firms ambitious to succeed and to grow, and in firms in need of loans to invest in new plant and processes. The banks sought to attach complex hedging products to the loans, allegedly giving the impression that that was a requirement of the loan—we have heard how many times businesses were told it was part of the package deal—and that credit could not be obtained otherwise. Small firms were told that the products were just insurance policies: the upside protections were emphasised, but the downside risks were hardly mentioned. Then, when the course of the economy took a turn—we will not go into that today—leading to interest rates plummeting over the past couple of years, the firms were forced to pick up the punitive costs of the downside risks of the hedges. The banks have profited significantly at the expense of small firms.
Today we have heard revelation after revelation of breathtaking abuse of the small firms that have been caught out—firms up and down the country, from chip shops to child care centres, builders to bed and breakfasts. I pay tribute to The Daily Telegraph business section, which has pursued this issue tenaciously. It highlighted the case of Adcock and Sons, a Norfolk electrical retailer that took out an interest rate swap on a £970,000 loan. The product, known as an asymmetric leverage collar, cost the business £2 for every £1 of benefit it offered. As The Daily Telegraph reported, what really rubbed salt into the wound was that the arrangement resulted in Barclays Capital profiting by £100,000.
This is not just a story of product asymmetry; it has many other facets. For example, as we have heard today, agreements are too often not made in parallel with the line of credit, but extend way beyond the end of the loan. Guardian Care Homes has been mentioned: it had two swaps whose term exceeded the loan by 10 and 15 years respectively—totally ridiculous. We have also heard about the punitive costs of servicing the swaps, and the back-breaking breakage fees—sometimes 50% of the total loan cost, averaging, we are told, about £1 million just to reverse out of the agreements.
Questions have been asked today about the competence of those selling these specialist products and the commissions that skewed their judgment. Banks were, at best, taking advantage of what we in the trade know as “information asymmetry”—in other words, unsuspecting customers and cunning banks—but at worst their behaviour was extortionate. Court action to try to obtain a remedy has not been easy: we have heard about gagging clauses in out-of-court settlements, where they have been made. Those problems are compounded by the fact that the clock is ticking on people’s right to complain and pursue redress.
In recent months, Opposition Members have done their best to raise these issues. In the Financial Services Public Bill Committee, we tabled amendments that would have given small firms better access via the FSA to the super-complaints power and stronger collective proceedings powers. The Financial Secretary, who is not here today—I think he is at a conference in Turkey—rejected the amendments, saying that he did not want to comment directly on interest rate hedges issues as they were a “matter for the FSA”. That response was not substantive, and I hope that the Economic Secretary can rise to the occasion today and respond seriously to the heartfelt concerns that have been raised in the debate.
The Government rejected other amendments we tabled to the Financial Services Bill on the need for a fiduciary duty of care for customers, both individuals and SMEs, when they are taking out these products. The Chancellor has rejected Vickers’ advice—it appears that the banking reform Bill will have nothing to improve customer protection. Vickers, of course, highlighted that in the ring-fenced retail arrangements we should be very careful about interest rate swaps, hedging and derivative products moving into what might be called the normal vanilla nature of banking. That is something all hon. Members might want to spend a little time considering when scrutinising the proposals set out in the White Paper that the Treasury has just produced.
I met FSA representatives yesterday and we talked about its supervisory investigation. I am told that it has been looking at a random sample of 50 or so cases in each of the banks. They have been listening to the tapes of some of the sales calls that took place and looking back at them. I am told that its target is to announce some action by the end of this month, which I sincerely hope it will do. Having listened to the debate and heard the strength of feeling on these questions, it occurs to me that any small businesses that have not yet complained or raised these issues with the FSA must do so as soon as possible. The FSA’s hotline number is 0845 606 1234. I hope that those firms will ring and let the FSA know, because it is our best hope at this juncture.
I am looking for four particular assurances from the Minister today at the very least. First, she and the regulators need to extract from the banks an assurance that no customer who complains will be treated adversely because of the complaint. There is potential for a sense of victimisation, and we need absolutely to get out of that space. Secondly, we should have a moratorium on foreclosures while the complaints of the customer concerned are being considered and their case is under review, because firms are going under and going into liquidation and bankruptcy every single day. We have to ensure that some backstop is put on the process.
Thirdly, we need agreement by the banks that customers who were sold hedges for longer than the term of the loan should have the right to cancel and move out of the breakage fee arrangement. Those are the minimum criteria we need. Also, banks should extend the statute of limitations, the sense that complaints have to be investigated within a particular time scale. The banks should show more grace in these circumstances.
Small businesses are the lifeblood of the British economy. They account for 48% of private sector turnover, employ 14 million people, have a turnover of £1.5 trillion, and of course they make up 99% of UK enterprises. They deserve to be treated better by our banks and to be supported more effectively by the Government. They certainly deserve the full backing of both sides of the House for an urgent solution to this serious problem.