University of Northampton (UK Guarantee)
Danny Alexander Excerpts(9 years, 6 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The UK Guarantees scheme was announced in July 2012 with enabling legislation, the Infrastructure (Financial Assistance) Act 2012, receiving Royal Assent on 31 October 2012. The scheme provides a sovereign-backed guarantee to help infrastructure projects raise debt finance. Guarantees for up to £40 billion in aggregate can be offered under the initiative.
The Government are confirming that they have approved a guarantee for £291.5 million to the University of Northampton for the construction of its new Waterside campus.
The Government will report to Parliament on the financial assistance given in line with the requirements set out in the Infrastructure (Financial Assistance) Act 2012.
Oral Answers to Questions
Danny Alexander Excerpts(9 years, 7 months ago)
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Ian Murray (Edinburgh South) (Lab)
3. What assessment he has made of the effect of tax receipts on the deficit in the last 12 months.
The Chief Secretary to the Treasury (Danny Alexander)
Progress has been made on reducing the deficit; it is down by more than a third from its peak and borrowing in 2013-14 was under £100 billion for the first time in six years. The latest public finance release shows that the impact of the great recession is still being felt in our economy and the public finances. The Office for Budget Responsibility expects real earnings to rise faster than inflation, and receipts are expected to perform more strongly in the second half of the year. It is therefore important to stick to the plan, which is building a more resilient UK economy.
Ian Murray
The Chief Secretary to the Treasury will be aware that although unemployment has been falling, income tax receipts to the Treasury have stayed flat, despite the Government predicting a significant increase. Does that not show that this Government are presiding over an explosion of underemployment, zero-hours contracts and low pay, and until they deal with that, they will never bring the deficit down?
Danny Alexander
First, I would think that the hon. Gentleman would welcome the substantial increase in employment we have seen in the past two or three years—after all, it was his Front-Bench team who predicted that that would not happen under this Government. In fact, 80% of the jobs created in the past 12 months have been in full-time employment, not the part-time employment he is talking about, which is greater than the level in the economy as a whole.
Steve Baker (Wycombe) (Con)
Tax receipts and deficit closure are contingent on a strong economy, so does the Minister welcome the fact that the Legatum Institute’s prosperity index shows that the UK is now the most prosperous economy in all the major EU countries?
Danny Alexander
I agree with my hon. Friend that strong tax receipts require a strong economy, and the focus of this Government’s economic policy since the coalition was formed has been to rebuild the UK economy and clear up the mess left to us by the Labour party. We now have the strongest growth in the major world economies, and Government Members should be very proud of that.
Mr John Spellar (Warley) (Lab)
Revenue officials have always been slow to catch up with the latest tax-avoidance scams in the construction industry, the latest of which is the umbrella company. Such companies are costing the Revenue huge sums and are exploiting workers. This is spreading rapidly to other sectors, including supply teaching. What is the Minister going to do about the scandal of umbrella companies?
Danny Alexander
We introduced measures precisely to deal with intermediary companies, which are often vehicles for tax avoidance or for minimising tax. We take that very seriously. If the right hon. Gentleman has evidence that he wishes to bring to my attention of specific issues that have come to his attention, I would gladly look at it.
Mark Pawsey (Rugby) (Con)
Does the Chief Secretary agree that the best way to increase tax receipts is to create the conditions for business confidence and growth? That is happening in my constituency, with the recruitment firm eResponse choosing to set up in Rugby because it has assessed that between 1,500 and 2,000 new jobs will become available.
Danny Alexander
I welcome that sort of investment, and I very much agree with what my hon. Friend says. Businesses like that one, in every constituency up and down the country, are creating jobs because they have confidence in the economic policies of this Government.
Heidi Alexander (Lewisham East) (Lab)
4. What estimate Her Majesty’s Revenue and Customs has made of the amount of uncollected tax in the last year for which figures are available.
Stephen Hammond (Wimbledon) (Con)
5. What progress he has made on his fiscal consolidation plans.
The Chief Secretary to the Treasury (Danny Alexander)
The Government inherited the largest deficit since the second world war. Since then, we have made substantial progress in reducing the deficit. By the end of last year, borrowing had fallen by more than a third. The Government’s consolidation plans have been central to the reduction in the deficit. Indeed, by the end of last year, we had implemented 70% of the £126 billion of fiscal consolidation planned for the end of 2015-16.
Stephen Hammond
Does the Chief Secretary to the Treasury agree that if we have a credible plan to reduce the deficit, we can credibly plan to protect spending on the NHS and cut taxes? As the Labour party’s announced fiscal rules would allow for an extra £166 billion-worth of borrowing over the next Parliament, there can be no credibility in its deficit plan and in its plan for this country’s economy.
Danny Alexander
I agree with my hon. Friend that Labour’s plans would put at serious risk the jobs and stability that this coalition Government have secured. There is a lesson in what he says for all parties in this House, because economic credibility is hard to win and easy to throw away. Any party that does not put forward a plan to sort out the economy or offers unfunded tax cuts to the British people will put its credibility at serious risk.
Alison McGovern (Wirral South) (Lab)
On the deficit, the Chancellor and the Chief Secretary to the Treasury have failed the test they set themselves, which is to close the deficit by the end of this Parliament. Worse than that, they have failed the test that my constituents set for them, which is to put money back in their pockets. That was said to me this week by a grandmother who is desperately worried about her grandson, as he is on a five-hour contract and unable to afford to take a day off work. What will the Chief Secretary do about that?
Danny Alexander
The first thing that we are doing is delivering on what we promised to do when we created this Government in the first place, which is to repair the deep damage that the hon. Lady has to admit was done to the economy under her party’s stewardship. We have now got the United Kingdom into a position in which we are creating more jobs than in the whole of the rest of the European Union combined, and we have the strongest growth rates in the developed world. She should welcome that as something that creates opportunities for young people.
Crispin Blunt (Reigate) (Con)
This fiscal consolidation plan will be heavily influenced by the dramatic liberalisation of pensions announced in the Budget, which will be significantly influenced by the success or otherwise of the guidance guarantee that is now being legislated for. Does the Chief Secretary agree with Ros Altmann that the Financial Conduct Authority should ensure that people who do not receive or take the guidance in this new environment are at least asked proper questions about their circumstances, such as about their partner and their health?
Mr Speaker
Order. A question can be wide, at a stretch, but it should not also be over-long.
Danny Alexander
I agree with my hon. Friend that the pensions reforms are a great liberalisation of the pensions system. We will give people, rightly, the opportunity to make use of the money that they have saved for their retirement as and when they choose. The guidance guarantee is enormously important. We have been working closely with organisations such as Citizens Advice to make sure that people have access to the guidance in the way that my hon. Friend has set out, and we need to deliver on that.
Ms Margaret Ritchie (South Down) (SDLP)
Has the Chief Secretary to the Treasury factored into his fiscal consolidation arithmetic the extra £1.7 billion contribution demanded by the EU? Does he accept that that payment is properly due under the formula agreed by the UK Government? When will it be paid, contrary to the answer given by the Chancellor?
Danny Alexander
The Office for Budget Responsibility takes into account forecasts for EU payments in its own forecasts. It did so at the time of the Budget and will do so again at the time of the autumn statement. A demand of this size in this manner is simply not acceptable, and we are absolutely right to do everything that we can to deal with the issue. That is what we in the coalition will ensure happens.
Mark Hunter (Cheadle) (LD)
7. What recent steps he has taken to reduce tax avoidance.
Bob Blackman (Harrow East) (Con)
14. What estimate he has made of the rate of growth in the economy.
The Chief Secretary to the Treasury (Danny Alexander)
In the year to the third quarter of 2014, GDP grew by 3%; it is now 3.4% above the pre-crisis peak. The International Monetary Fund expects the UK economy to be the fastest growing in the G7 in 2014.
Bob Blackman
Clearly the fact that we are leading our European partners in economic growth shows that the long-term economic plan is working. Does my right hon. Friend agree that, with the eurozone in crisis and external factors uncertain, the last thing we want to do is return the keys to those who crashed the car in the first place?
Danny Alexander
I am sorry that my hon. Friend has brought up the shadow Chancellor’s recent driving incidents, but I agree with the point that the Labour party made the economic mess that we—Liberal Democrats and Conservatives—came together in a coalition to sort out. We have made strong progress in this Parliament, including achieving the strongest growth in the G7. The last thing that the country needs is to hand the keys back to a majority Labour Government.
Mr Andrew Love (Edmonton) (Lab/Co-op)
The long-term economic plan is not working in terms of the living standards of people up and down the country. What has been the rate of growth of wages over the past year?
Danny Alexander
The rate of growth of real wages has been low, and that needs continued attention in the months and years to come. However, I hope that the hon. Gentleman would join me in welcoming the fact that millions of our fellow citizens are now in work as opposed to being unemployed, as they were under the Labour Government. We now need to work to make sure that we increase business investment, enhance productivity, and make sure that the benefits of the economic growth we are seeing are shared as widely as possible. I think that he and I would agree about that.
Derek Twigg (Halton) (Lab)
15. What recent comparative assessment he has made of growth in average earnings and the rate of inflation since May 2010.
Mr William Bain (Glasgow North East) (Lab)
T6. The Institute for Fiscal Studies has forecast that under the Chancellor’s current policies 900,000 more children will be in relative poverty by 2020 compared with 2011. Is his real attitude towards the working poor in this country too much stick and too little carrot?
The Chief Secretary to the Treasury (Danny Alexander)
The hon. Gentleman raises an important point about child poverty, which under this Government is down. That does not in any way reduce the need for us to continue taking steps to reduce child poverty, the most important of which is having an economy that creates jobs. In the end, for most people the best route out of poverty is to get back into employment.
Guy Opperman (Hexham) (Con)
May I urge the Chancellor to meet me and my hon. Friend the Member for Carlisle (John Stevenson) so that we can make the case for including the dualling of the A69 in the autumn statement? Hopefully such a meeting could be before the autumn statement takes place.
Greg Mulholland (Leeds North West) (LD)
The last Labour Government cancelled the Supertram scheme in Leeds and then told the city that it could only have a bus-based solution. Does my right hon. Friend agree that as well as devo-max and “devo Manc”, we also need “devo Yorks”?
Danny Alexander
I could not agree more with my hon. Friend, and the Deputy Prime Minister has been championing that agenda in government for the last four and a half years. If the leaders of Leeds wish to come forward with proposals for further devolution and more power over the things he has been talking about, to ensure that we get the right economic developments in the Leeds area, we would be delighted to have those discussions in an active way, to try to settle a deal there as well.
Douglas Carswell (Clacton) (UKIP)
The Chancellor has rightly said that Europe is in danger of pricing itself out of the world economy, and one way in which it is making itself uncompetitive is through its costly renewable energy agenda. Will he try to persuade his neighbour in Downing street to abandon that dogma and liberalise the UK energy market?
Public Sector Exit Payments (Recovery)
Danny Alexander Excerpts(9 years, 7 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
We are today publishing the Government response to the consultation about provisions in the Small Business, Enterprise and Employment Bill which will enable the recovery of exit payments when high earners return to the same part of the public sector within 12 months of leaving.
These provisions will ensure that the taxpayer is not paying out large sums in redundancies only to incur the cost of re-employing the same person in a similar role elsewhere. This will underpin consistency and fairness across the whole of the public sector.
This measure follows a number of recent high profile cases where individuals have received large exit payments and quickly returned to public sector roles. The Health Select Committee found that among 19,000 NHS redundancies, 17% had been rehired, and most within a year. An Audit Commission report in 2010 found that of 37 chief executives who left by mutual agreement over a two-year period from January 2007, six had been employed in another council within 12 months. In such circumstances, the justification of financial support to bridge the gap to new employment is undermined and this represents poor value for money.
The consultation ran from 25 June to 17 September 2014 and received responses from 27 organisations ranging from health care bodies, local government bodies, trade unions and professional bodies. Engagements with Departments continued throughout this period, and representations were received from their arm’s-length bodies.
Respondents broadly agree that exit payments are primarily for a loss of employment, agreeing that it was reasonable to consider a recovery provision but advised caution over complexity. We have carefully considered all responses in deciding how to move forward with the legislation, recognising the diverse range of views which reflects different work force arrangements across the public sector. As a result of this, the Government have decided to continue with the main elements of this policy:
Require high earning public sector employees or office holders to repay a broad definition of exit payments should they return to the public sector within 12 months on a pro rata basis.
Apply these measures to employees moving between the same part—or sub sector—of the public sector, with the exact definition of these sub-sectors to be determined and consulted upon at a later stage.
Define higher earners as any individual earning above £100,000.
Make changes that represent a baseline legal requirement. Where employers’ existing or proposed policies go further these measures will support rather than replace them.
Following the responses we received, the Government have made the following changes to our original proposal:
Payments in lieu of notice will not be recovered, as these are not payments for a loss of employment.
Those payments that have a potential, if not actual, monetary value will not be recovered because the difficulty of attributing a value would add an administration complexity and the likely cost of doing so could not be justified.
A decision has also been taken not to include a lower earnings threshold for a taper because of cost and complexity.
Special severance payments will be subject to the recovery provisions because they include elements that are paid in respect of loss of employment such as payments made for efficiency reasons, as well as elements that could be attributable to employer fault. Waivers from repayment could be used where these agreements relate to elements of employer fault, such as out of court settlement of an employee’s claims against an employer.
The Bank of England and public broadcasters will be excluded from the scope of this policy, recognising their unique independent status. These organisations are to operate their own proposals which adhere to the spirit of the policy, and the BBC and Channel 4 have already put in place more stringent proposals.
In relation to the Office for National Statistics and some regulators, they will operate as independent individual sub-sectors responsible for their own waiver regimes. This is consistent with independence in the production and release of official statistics, and for some regulators a statutory basis for independence from central Government.
As far as the waiver regime is concerned, there will be no option to waive recovery of payments made to Ministers and their special advisers, and parliamentary post holders.
Further details of the changes to the policy are in the Government’s response to the consultation which has been published on the gov.uk site.
The Government have decided to proceed with legislating for framework powers enabling the recovery of public sector exit payments, and will draft regulations giving effect to the policy taking account of these changes.
UK Guarantees Scheme
Danny Alexander Excerpts(9 years, 9 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The Infrastructure (Financial Assistance) Act 2012 requires the Government to report any financial assistance given under the UK Guarantees scheme. The scheme provides a sovereign-backed guarantee to help infrastructure projects raise debt finance. A commercial fee is charged to the borrower for the guarantee, determined by the nature of the guarantee and the risk inherent in the project.
The Government can confirm they have approved guarantees under the UK Guarantees scheme for Ineos Grangemouth ethane import and storage facilities (£230 million/€285 million) and Speyside CHP plant (£48.2 million).
Ineos Grangemouth will be constructing new port facilities, a new ethane tank and associated modifications to the KG ethylene cracker. This will reduce dependency on feedstock from the North sea through the import and storage of ethane from the US. The guarantee issued to Speyside will be used for the construction of a combined heat and power plant which will generate both electricity and heat.
Oral Answers to Questions
Danny Alexander Excerpts(9 years, 9 months ago)
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Steve Brine (Winchester) (Con)
7. What measures he has introduced to reduce the level of tax paid by households.
The Chief Secretary to the Treasury (Danny Alexander)
The Government have done a vast amount to reduce the tax burden on working people. By the end of this Parliament, without the Government’s changes to the tax system, 3.2 million low-paid individuals whom we have lifted out of income tax would still have been paying income tax, it would have cost the typical motorist £10 more to fill up their petrol tank following the rise that the previous Government planned would take place yesterday, and the council tax bill for a family in a band D property could have been up to £1,100 more. This is all part of our long-term plan to build a stronger economy in a fairer society.
Steve Brine
Around 40,000 people in my constituency will benefit from the Government’s decision to raise the tax limit. That helps those on low and middle incomes to keep more of the money they earn in their pocket each month, which shows the Government’s good values in action. Will my right hon. Friend confirm how much more someone in my constituency on the minimum wage will save as a result of our actions?
Danny Alexander
My hon. Friend is absolutely right to stress the importance of lifting the income tax personal allowance, which was a Liberal Democrat manifesto commitment for working people in this country. A full-time worker on the minimum wage will pay three quarters less income tax than they would have done in 2010. A typical basic rate taxpayer will save £800 in cash terms in the next financial year.
Helen Jones (Warrington North) (Lab)
If the Chief Secretary believes in reducing taxation on working families, will he explain why those on universal credit will be subject to a 76% marginal deduction rate on extra earnings? Why do the Government believe that wealthy people have to be incentivised by a tax cut, but the poorest people need to be incentivised by a huge tax rate?
Danny Alexander
The hon. Lady deliberately ignores the fact that many people faced marginal deduction rates of more than 100% under the previous Labour Government. It is precisely because we want every single person in this country to know that they will be better off in work than on benefits that we are introducing universal credit, and she should support it as strongly as I do.
Philip Davies (Shipley) (Con)
The National Institute of Economic and Social Research has shown that a 3p cut in fuel duty would generate 70,000 new jobs, stimulate GDP by 0.2% and help to reduce inflation. The Centre for Economics and Business Research says that a cut would be even more beneficial to the economy and would be self-financing. Do the Government accept that a cut in fuel duty would be self-financing and provide a boost to the economy?
Danny Alexander
I am grateful to my hon. Friend for drawing attention to that study, which I have discussed with the FairFuelUK campaign, although I was slightly discomforted when it said it thought that the only two politicians it had met who understood the issue were myself and Nigel Farage—that was probably a surprise to both of us. The Treasury has published its own analysis on fuel duty reductions, which shows the economic benefits that they can bring.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
Given the importance of accurately calculating the tax yield from households and businesses, and that of ensuring that both pay their fair share of tax, will the Chief Secretary tell us when, following the letter from the head of the UK Statistics Authority, the Chancellor will correct the record and apologise for giving the House incorrect figures that inflated the success of his tax avoidance programme?
Danny Alexander
The hon. Lady should celebrate our tax avoidance programme because it ensures that people who avoided paying tax under the previous Labour Government now pay tax under this coalition Government. She should welcome the fact that the programme is bringing in £7 billion more than was the case under the previous Government, not criticise it.
Angie Bray (Ealing Central and Acton) (Con)
8. What fiscal steps he is taking to help businesses to invest and export.
Annette Brooke (Mid Dorset and North Poole) (LD)
12. What fiscal steps he has taken to reduce the cost of living for those on the lowest incomes.
The Chief Secretary to the Treasury (Danny Alexander)
As I said earlier, the coalition Government have taken decisive action to support families on low incomes, particularly by increasing the personal allowance next year to £10,500—a key Liberal Democrat manifesto commitment. I also mention the hugely successful introduction today of universal free school meals for infant school pupils, which, as well as enhancing educational performance, is worth £400 per child in terms of the costs of paying for those meals.
Annette Brooke
I thank the Chief Secretary for his answer. Does he agree that the Liberal Democrats have been a driving force in this Government for helping people on low incomes through the increase in personal tax allowance, and that the implementation of the universal free school meals for infant schools this week is further evidence of the Liberal Democrats really helping hard-working people on low incomes?
Danny Alexander
It will come as no surprise to the House that I wholeheartedly agree with my right hon. Friend. She is absolutely right to say that certain measures would not have happened without the role played by the Liberal Democrats in this Government. The lifting of the income tax personal allowance and the introduction of free school meals for infant pupils are just two of many ways in which our party has contributed to this Government to ensure that we are helping and that this country has a stronger economy and a fairer society where everyone can get on in life. That must be the right objective.
Mr Dennis Skinner (Bolsover) (Lab)
In the last 10 minutes we have heard that jobs are very good—part-time, no doubt—and business start-ups are supposed to be very good. If all this is true, why are all these Tory MPs jumping ship?
Danny Alexander
I could not possibly comment. They have to make their own career choices. In terms of the hon. Gentleman’s own constituents, in the past four years the claimant count is down by 40.7%, which means that there are more job opportunities in his constituency than there have been for very many years.
Mike Kane (Wythenshawe and Sale East) (Lab)
13. What recent assessment he has made of the level of bank lending to businesses since May 2010.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
T4. The Chief Secretary has been keen to trumpet free school meals for six, seven and eight-year-olds. However, this week in Hackney, many of the 47% of children who are living in poverty will turn up at school not having had a square meal for six weeks. They will be fed by the free breakfast clubs that are supported by head teachers and charities. Is it not time that the Government woke up to the reality of poverty? The parents of those children can get only low-paid, part-time work if they are lucky. Is it not time that the Government took action to tackle child poverty?
The Chief Secretary to the Treasury (Danny Alexander)
The hon. Lady is right to highlight the seriousness of these issues. However, as has been said in this question session, the statistics show that child poverty in this country has come down and is coming down under the coalition Government. It is precisely because of these issues that we are introducing the policy of universal free school meals. The evidence shows that it increases take-up among low-income families, who do not always take up free school meals, and ensures that children get a square meal at school each day. I hope that she will join me in welcoming that.
Nicola Blackwood (Oxford West and Abingdon) (Con)
T3. The appalling congestion in Abingdon makes life miserable for families and commuters and inhibits local economic growth. With 600 new and needed houses planned on Dunmore road, will the Chancellor meet met to discuss why investing in a diamond junction on Lodge hill on the A34 is the answer not only to making that development sustainable, but to unlocking growth in the wider region?
Iain Stewart (Milton Keynes South) (Con)
T5. Will my right hon. Friend comment on the astonishing claim by the Scottish Government that they would default on their share of the UK’s debt if they did not achieve a currency union with the rest of the United Kingdom if—heaven forbid—independence was to happen?
Danny Alexander
The Scottish Government’s plan to renege on Scotland’s share of the debt in the event of independence is simply not credible because of the catastrophic effect it would have on the people of Scotland. Mortgage rates would go up, credit cards and bills would go up, and the Scottish Government would have to resort to the bond market’s equivalent of Wonga to raise money to pay for public services in Scotland. To default on the debt would be to punish every Scot for Alex Salmond’s failure to think through his currency plan B properly.
Mrs Emma Lewell-Buck (South Shields) (Lab)
T8. Since the Government updated the law in April, thousands of construction workers such as my constituent, Ron Boyle, are facing a new form of exploitation. Forced to register with sham umbrella payroll companies, they lose hundreds of pounds a month in bogus fees, and pay national insurance contributions that ought to be the responsibility of their employers. Will the Minister assure me that that loophole will be closed quickly, so that workers such as Mr Boyle are not continually conned out of a fair wage?
Mr Jim Cunningham (Coventry South) (Lab)
Many local authorities are struggling to implement the Government’s policy on free school meals—for example, Coventry has to find something like an additional £1 million. What are the Government going to do about that?
Danny Alexander
The Government have made available funding to pay for the implementation of free school meals for infants and to enable additional capital investment in kitchens and the like in schools. The reports from around the country are that implementation is going successfully and that this policy will benefit thousands of children and their families.
Ian Swales (Redcar) (LD)
Does the Chief Secretary share my surprise that the yes campaign in Scotland says that its economy would be stronger alone, yet it does not want the freedom to have its own currency and set its own interest rates?
Danny Alexander
I do share my hon. Friend’s concerns. As he knows, a currency union is not going to happen because it would expose the rest of the UK to economic risks that it could not control and leave Scotland unable to control its economy in the face of huge risks and uncertainty. An effective currency union needs a fiscal union and a political union, yet that is what the nationalist campaign wants to dissolve. The only way for Scotland to keep the pound as it is now is to remain part of the UK, and that is what I believe my fellow countrymen will vote for on 18 September.
Kelvin Hopkins (Luton North) (Lab)
Britain has an enormous trade deficit, especially with the EU, which is clear evidence of a misaligned exchange rate, and UK manufacturing is again suffering as the euro has depreciated relative to sterling. When is the Chancellor going to take the exchange rate seriously?
Duncan Hames (Chippenham) (LD)
The Treasury’s infrastructure fund is paying for increased transport capacity in enterprise zones, through roads and rail services, unlocking large new housing developments. Is the Chief Secretary prepared to use the fund also to pay for the internet and communications infrastructure that those homes and businesses will desperately need?
Danny Alexander
The support we are offering to enterprise zones includes access to high-speed broadband, and my hon. Friend will also know that a significant part of our infrastructure plan is precisely to invest in and ensure that high-speed broadband is available in the vast majority of homes in this country. That is certainly something we will turn our minds to again in the autumn statement.
Fiscal Sustainability Report
Danny Alexander Excerpts(9 years, 11 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
Today the independent Office for Budget Responsibility (OBR) published its fourth fiscal sustainability report (FSR). This document meets their requirement to annually prepare an analysis of the sustainability of the public finances, and provides an important insight into the state of the public finances and the impact that demographic change will have. The report was laid before Parliament earlier today and copies are available in the Vote Office and Printed Paper Office.
According to the OBR’s analysis, policy action taken by the Government over the past year has had a substantial positive impact on long-term fiscal sustainability, reducing the projected level of debt in 2063-64 by 66% of GDP. As a result of demographic change, debt is projected to rise to 84% of GDP by 2063-64, and in the absence of policy change the OBR projects that net debt would have risen to 150% of GDP in 2063-64. This improvement is in the context of updated population projection from the Office for National Statistics which has revised up the projected scale of the demographic challenge.
Nevertheless, the FSR’s key conclusion is that,
“longer-term spending pressures, if unaddressed, would put the public finances on an unsustainable path".
As the OBR notes in its analysis, this is due to the spending pressure generated by an ageing population, which is projected to increase age-related spending by 4.8% of GDP from 2018-19 to 2063-64.
In addition to projecting the impact of demographic change on public spending, the FSR examines the long-term sustainability of tax revenues. It has projected that tax revenues will remain at a relatively constant share of GDP from 2018-19 onwards, but has highlighted the challenges faced by sources of revenue in decline, particularly revenues from North sea oil and gas.
Notably, the FSR’s projections of state pension expenditure incorporate the Government’s announcement at autumn statement 2013 that the regular reviews of the state pension age will be guided by the principle that people should expect to spend, on average, up to a third of adult life receiving the state pension.
Setting the state pension age with regard to life expectancy reduces the risk that future Governments would have to take emergency action to ensure sustainable public finances, as it allows the Government to respond regularly to changes in demographic data. The European Commission and the International Monetary Fund (IMF) have also advocated the introduction of linking pension spending to life expectancy. The OBR projects that this policy change will have a substantial positive impact on long-term fiscal sustainability, with state pension spending projected to be 0.9% of GDP lower and debt 17% of GDP lower by 2063-64 than if the state pension age had risen with currently legislated changes.
The new state pension age guiding principle complements reforms which have already been made to state pensions, such as the single tier. The new simple state pension for future pensioners, set at a level above the standard minimum guarantee in pension credit, will not cost any more than the current system overall and enable individuals to plan for retirement with greater certainty. The OBR projects that by 2063-64, the new system will generate savings of around 0.5% of GDP.
Reforms to the state pension come alongside the Government’s reforms to public service pensions, which will rebalance taxpayer and member contributions in the short term while ensuring costs are sustainable and fair in the long term. New scheme designs, the rebalancing of costs between members and taxpayers and switching to uprating by the consumer prices index (CPI) is projected to lead to savings of 0.6% of GDP a year by the 2060s.
The Government are committed to ensuring that our public finances are put on, and remain on, a sustainable path for the long-term. The OBR analysis makes it very clear that the Government’s medium-term fiscal consolidation plan is the most vital step towards achieving long term fiscal sustainability.
As part of this commitment, both parties of the coalition have agreed that once debt as a percentage of GDP begins to fall in 2016-17, it should continue to fall in future years. At autumn statement 2013 the Government announced that over the course of this year they will review the fiscal framework and that the outcome of this review will inform an updated Charter for Budget Responsibility to be presented to Parliament alongside autumn statement 2014.
As part of its public service reform seminar series announced at Budget 2014, the Government will hold a seminar on long-term sustainability with a focus on health care and technology, and how advances in technology can be harnessed to deliver efficient, cost-effective health services in the future.
Land Registry
Danny Alexander Excerpts(9 years, 11 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
In March 2014, I published the results of the first evaluation of tax arrangements for off-payroll contracts in the public sector following the introduction of tighter rules in May 2012 when I published “The Review of the tax arrangements of public sector appointees”.
For senior management where the tax arrangements of individuals should not be open to question, the May 2012 review specified that, regardless of their tax arrangements, board-level officials and those with significant financial responsibility should be on the payroll of the Department or other employing body. This is unless there are exceptional circumstances, and such exceptions should not exist for longer than six months.
Two Departments, the Department for Environment and Rural Affairs and the Department for Transport, each received a fine for failing to ensure that senior appointments are on-payroll within six months of appointment.
I am continuing to monitor compliance with these rules and have recently identified a breach at the Land Registry, where a senior Land Registry board member was engaged off-payroll for longer than six months. As a result, a fine of £1,030,176, the largest for an off-payroll breach so far, has been imposed on the Land Registry for breaking these rules.
I have also written to the Secretary of State for Business, Innovation and Skills, as the parent Department for the Land Registry, asking him to set out the action he will take to hold the Land Registry to account.
While the vast majority of off-payroll contracts are in place for legitimate reasons, I am committed to ensuring that the public sector demonstrates the highest standards in this area. I will continue to monitor compliance to ensure this is the case.
Recovery of Public Sector Exit Payments
Danny Alexander Excerpts(9 years, 11 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
Last month, the Government announced that the Small Business, Enterprise and Employment Bill will include legislative provisions to ensure exit payments are recovered when high earners return to the same part of the public sector within 12 months of leaving. These provisions will mean individuals are not over-compensated and will ensure value for money for the taxpayer. The intention is to underpin consistency and fairness across the whole of the public sector.
HM Treasury is today launching a consultation on the “Recovery of Public Sector Exit Payments”, seeking views on the proposed changes. The consultation has been published online: https://www.gov.uk/government/consultations/recovery-of-public-sector-exit-payments. It closes on 17 September 2014.
The Government welcome responses and will give careful consideration to these before taking a final decision.
Scotland Analysis
Danny Alexander Excerpts(9 years, 11 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The Government have today presented to Parliament the 15th and final paper in the Scotland analysis programme. “United Kingdom, united future: Conclusions of the Scotland analysis programme” (Cm8869) sets out the programme’s key findings on currency, businesses and jobs, the affordability of public services, personal finances, and Scotland’s place in the world.
The paper shows that Scotland is better off as part of the UK, now and in the future:
The best of both worlds: With a strong Scottish Parliament, Scotland can make its own decisions in devolved areas, while sharing risks and resources with the other parts of the UK. More than 200 UK public institutions serve people in Scotland, underpinned by shared principles and values. If Scotland votes for independence this will come to an end. Scotland will leave the UK and become a new, separate state.
The advantages of the pound: As part of the UK, Scotland has one of the oldest and most stable currencies in the world, supported by the UK’s strong political union. It would not be possible to recreate today’s arrangements if that political union did not exist. That is why all three of the largest political parties in the UK have ruled out sharing the pound or the Bank of England in a formal currency union.
Lower taxes, higher public spending: A great weight of evidence says that Scotland’s finances are stronger as part of the UK. Independent experts agree that the UK offers people in Scotland lower taxes and higher public spending than would be possible in an independent Scotland. HM Treasury estimates that this is worth £1,400 per person per year for each person in Scotland. The Government of an independent Scotland would exercise additional responsibilities, but it would also have to choose whether to raise taxes, or cut public services, or both.
The Scotland analysis programme has examined how Scotland contributes to and benefits from being part of the UK, and how the rest of the UK benefits from its partnership with Scotland. The work is comprehensive, based on expert legal opinion and robust publicly available data. It has been informed by professionals in their fields—particularly those in Scotland.
Oral Answers to Questions
Danny Alexander Excerpts(10 years, 1 month ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The Institute for Fiscal Studies has said that there have been significant falls in real earnings as a direct but delayed result of the 2008 recession. The actions that the Government are taking are working, including taking 3.2 million people out of income tax by 2015-16, thanks to our policy of increasing the income tax personal allowance, and also because of the strong, sustained and welcome growth that we see in the figures today.
Stella Creasy
Of course, one of the other things that are growing in our economy is personal debt. We know that 40% of the public struggle to make it to payday, and for a third of those people it is repayments on the debts they built up under this Government that are the problem. What impact does the Minister think that that personal debt mountain will have on his long-term economic plan?
Danny Alexander
Household debt income ratios have fallen during this Parliament, as the hon. Lady will know, but—this is a good lesson for the Labour party—there is no shortcut for increasing people’s living standards, which is the answer to the question she poses, and no short cut to increased productivity in our economy. That means increasing growth in the economy and sticking to the coalition’s plan, which is being delivered by Liberal Democrats and Conservatives in this Government. That is the important thing to do for the next few years to ensure that we have a stronger and more sustainable economy in this country.
Miss Anne McIntosh (Thirsk and Malton) (Con)
Has my right hon. Friend had a chance to consider what the impact would be on annual rates of inflation and growth of a potential 1% increase in national insurance contributions, and particularly the impact of that on the NHS budget?
Danny Alexander
It would have a significant impact on almost every working person in this country. The Government’s direction of travel, led by the Liberal Democrats, has been to reduce the burden of taxation on working people. Some 26 million working people have seen their income tax bill reduced this month by £700 a year, thanks to the decisions that this coalition Government have taken to increase the personal allowance to £10,000.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
Perhaps the Chief Secretary can do better at answering this simple question. Next year, the Chancellor will have been in post for five years. Will the Chief Secretary confirm that figures from the Office for Budget Responsibility show that over that time real wages will have fallen by 5.6%, leaving working families worse off, not better off, after five years of the Chancellor’s stewardship of the economy?
Danny Alexander
The hon. Lady will know that the OBR forecasts earnings to grow more rapidly than inflation throughout the forecast period—that is the answer to the question. I have to say that the hon. Lady seems to have been listening to the shadow Chancellor rather too closely. I notice his recent quote:
“I had no awareness at all that there had been any damage”.
He was referring to his car rather than to the British economy, but it is about time that the Labour party apologised for the mess that it made of the latter.
Neil Carmichael (Stroud) (Con)
7. What fiscal steps he has taken to encourage manufacturing in the UK.
Charlotte Leslie (Bristol North West) (Con)
8. What steps he is taking to secure funding for infrastructure projects.
The Chief Secretary to the Treasury (Danny Alexander)
Through difficult decisions on day-to-day spending, we have prioritised vital capital investment in infrastructure projects. Last year I set out a £100 billion pipeline of specific projects right the way through to the end of the next Parliament, including many projects in the south-west of England. For example, the hon. Lady and I were both present on Friday when we announced funding for Bristol’s successful bid to be the green capital of Europe.
Charlotte Leslie
I know this Government are committed to large infrastructure projects, but will the Chief Secretary recognise the value of more modest, branch-line rail infrastructure projects, such as the Henbury loop line in Bristol, which is vital to the community and to jobs? Will he look closely at providing the extra funding needed to reopen the line, not as a dead-end spur, but as a circle line around the city, which would unleash the economic dynamism of Bristol?
Danny Alexander
I am grateful to my hon. Friend for raising that point. It was raised with me in Bristol on Friday and I know she has raised it directly with the Chancellor of the Exchequer. It has also been put forward by the West of England local enterprise partnership in its strategic economic plan, which is being discussed as part of the growth deals process, so I urge her to encourage people locally to continue to advocate for the project as part of that process.
Bill Esterson (Sefton Central) (Lab)
9. What recent estimate he has made of how much the reduction in the additional rate of income tax to 45% will be worth each year for a person earning £1 million a year.
Simon Wright (Norwich South) (LD)
10. What steps he has taken to reduce the cost of living for people on low incomes.
The Chief Secretary to the Treasury (Danny Alexander)
The coalition Government have taken decisive action to support families on low incomes. Increasing the personal allowance, for example, will take 3.2 million individuals out of income tax altogether by 2015-16. We have helped to freeze the council tax, frozen fuel duty and reduced energy bills, providing universal free school meals for infant schools and introducing tax-free child care support of up to £2,000, all on top of the most important thing, which is an economic plan that is delivering strong and sustained growth for this country.
Simon Wright
This month more than 3 million low-paid people have been taken out of paying income tax altogether since 2010, as a result of delivering the Liberal Democrat manifesto commitment of a £10,000 tax threshold. Can my right hon. Friend say how the impact of this policy on low-income workers compares with the previous Government’s policy of abolishing the 10p tax rate?
Danny Alexander
That is a very good question. My hon. Friend and I are both very proud of reaching the £10,000 tax-free allowance goal that the Liberal Democrats set in our election manifesto. Our increases in the tax-free allowance total more than £3,000, which is considerably more than the width of the former 10p starting rate band and is, of course, a 0% band. In that sense, it is literally twice as good as the previous policy.
Sheila Gilmore (Edinburgh East) (Lab)
For the 17% of wage earners who are already below the income tax threshold, much of what has been said is not of much help. Will the Chief Secretary directly commit to helping low-paid families with child care costs by reinstating the 80% level rather than the 70% level, which he introduced, so that people in that category can begin to gain rather than simply stand still or become worse off?
Danny Alexander
I am sure that if the hon. Lady had had longer, she would have welcomed today’s growth figures and the jobs and employment opportunities that that has created for people right across the United Kingdom, particularly in Scotland. The 3.2 million people that the hon. Lady mentions have already been taken out of tax by the actions of this coalition Government—something that she did not welcome. Of course, the extra opportunities to increase their time in work also helps those individuals. We are increasing our support for child care, with the Government providing free hours, extending support under universal credit and introducing tax-free child care, too. This Government have done far more than any previous Government to help working people with children get back into work.
Kate Green (Stretford and Urmston) (Lab)
11. What recent assessment he has made of the effect of his fiscal policies on the level of child poverty.
Andrew George (St Ives) (LD)
T5. I thank my right hon. Friend the Chief Secretary to the Treasury for visiting Cornwall last week, when he will have been impressed by the resourcefulness and enterprise in the Cornish economy. Will he make sure that those charged with managing the Cornwall EU structural fund programme are granted the appropriate delegated powers of intermediate body status in future?
The Chief Secretary to the Treasury (Danny Alexander)
I was indeed impressed, and also convinced by the strong support from the Cornish businesses I met for the policies the Government are putting in place to secure the long-term future of the British economy. Having announced on that visit the Government’s recognition for the Cornish identity, values and culture under the European convention, it would seem odd not to take seriously the request that there should be a degree of autonomy in the management of the European structural funds programme. I urge my hon. Friend to work with the local enterprise partnership to make that case strongly to the Government, as part of the growth deal process.
Danny Alexander
I can confirm that the scheme is meeting our expectations. It is a major scheme for the region, with estimated investment of £102 million. The Secretary of State for Transport, who is in his place, confirms that it is on track and scheduled for completion in December 2014. I am pleased to be able to tell the House that a major milestone was delivered yesterday, as the Elveden bypass opened to traffic for the first time.
Lindsay Roy (Glenrothes) (Lab)
If the Government’s economic plan is working so well, why is the Chancellor planning to borrow £190 billion more than previously planned?
Danny Alexander
I did indeed see the fantastic work at Anthony Best Dynamics, which supplies 20 out of the top 20 automotive companies in the world. Yesterday, the Deputy Prime Minister and I visited the Transport Research Laboratory to announce £500 million of support over the next five years to ensure that the United Kingdom is the best place in the world to develop and manufacture ultra-low emission vehicles.
Valerie Vaz (Walsall South) (Lab)
According to the Office for National Statistics, unemployment in the west midlands has risen to 8.2%. Can the Chancellor explain why?