Finance Bill
Edward Leigh Excerpts(14 years, 9 months ago)
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Sir Paul Beresford
The new clauses would provide tax relief on medical insurance premiums for people above a certain age. “Pensioners” might be a better description of them. As a very part-time dentist, I must declare a potential interest, but I had better declare a further potential interest, as birthdays keep relentlessly coming upon me—and the rest of us.
As in much of the south-east, life expectancy in Surrey is somewhat higher than the England mean. The average life expectancy in England is about 78 for males and 82 for females, while in Surrey the figures are about 82 and 86 respectively. Moreover, the proportion of those aged 65 and over in my constituency is about one in five, or 20%. It is obvious to me, as one with a professional interest in health and as an observer of my constituents’ health, that that longevity brings with it a higher demand for health care and imposes large demands on health services, especially cardiac, carcinoma and orthopaedic services. A planeload of Surrey Saga tourists would really set the airport metal detectors buzzing as the hip and knee replacements proceeded towards take-off.
The Mole Valley constituency is served by three good national health service hospitals: East Surrey hospital, Royal Surrey County hospital at Guildford, and Epsom hospital. Those hospitals have expanded in certain health areas to meet the increasing demand for treatment from the elderly, the best example being Epsom, which has a special orthopaedic unit where more than 3,000 hip and knee replacement operations are carried out annually, almost entirely on elderly people from surrounding areas such as Mole Valley. As a result of those medical problems there has been a call for an enhanced and enlarged cardiac unit at Epsom as part of the retention and refurbishment of that much-loved hospital. I have given those two examples to illustrate the increasing demand for national health service care from, predominantly, those aged over 65. That increasing demand is not specific to Mole Valley or even Surrey, but is, to a greater or lesser degree, nationwide among that age group.
My older constituents are also served by private hospital services. Some are relatively local and some are in London, but there is choice for patients. Approximately 12.5% of the United Kingdom population are currently covered by private health insurance, and about 70% of that cover is corporate while about 30% is individual. On retirement, many may wish to take over their corporate private health insurance, but the personal cost becomes a heavy factor. Additionally, many of those who fund their health insurance personally may not feel able to do so when a regular personal income is just a pension or savings. That means that, just as their need for health care is likely to increase, those individuals turn to the national health service and absorb facilities and costs that they would not use if they could be persuaded to retain or take out private health insurance and use the private sector.
Before March 1997, when tax relief was available to those over 60, it was estimated that tax relief was paid in respect of 400,000 contracts to cover about 600,000 individuals.
Mr Edward Leigh (Gainsborough) (Con)
I warmly congratulate my hon. Friend on his new clause. Is he aware that a ComRes poll of 150 Members of Parliament found that 66% of Conservative MPs supported the return of tax relief on private insurance for pensioners? That is hardly surprising when even the Major Government gave that elementary service to our elderly people.
Sir Paul Beresford
I thank my hon. Friend. One of the delightful things about his intervention is the increase in my education.
Over seven years from 1990, tax relief for the over-60s cost £560 million. However, that included a period when the relief was across all taxpayer rates. In 1994, that was reduced to apply to the basic rate of tax only. Unlike in my proposal, the relief started then at 60, not at 65, so my proposal would reduce the cost to the Revenue in real terms compared to pre-1997.
In 1997 the Labour Government cancelled the tax relief for pensioners, and Western Provident Association estimated that 40% of pensioners would discontinue their private health service. Which? magazine reported in 2002 that private health insurance coverage was lowest in the 65-plus age group. Those who choose to have personally funded private health insurance pay twice for their health—premiums and tax. It would be safe to assume that nigh on 100% of those aged 65 and above are personally funding their health insurance. It is their choice, and for many it may mean sacrificing other choices that may affect their lifestyle.
Mr Kevan Jones (North Durham) (Lab)
I rise to oppose the new clauses. I have to say that it is pleasing to see the real Conservative party still alive and kicking on the Back Benches, wanting to create a privilege for a small section of the population. I understand that when tax relief was in operation, it affected only about 5% of the population. It feels as if we are going back in time a little, because if we accepted the new clause we would be stepping back to the late 1980s, when the Conservative party introduced relief on private health insurance—I acknowledge that the new clause would apply to the over-65s, rather than to the over-60s, as was the case then. That was introduced to address a lot of the arguments put by the hon. Member for Mole Valley (Sir Paul Beresford); the aim was to try to ensure that people would be given choice. I hasten to add that people have a choice if they can afford it, but they have no choice whatsoever if they cannot. I believe, as I understand the Conservative Front-Bench team does these days, that we should seek to improve the health service and opportunities for all, rather than give a tax cut and perk to a very small section of the population.
Mr Leigh
Surely the point is that the proposal applies to pensioners, that they have paid tax all their life and that, just at an age when they might need private medical care, they find that their insurance premiums rocket. Surely it is only elementary natural justice that they should get tax relief on those insurance premiums.
Mr Jones
I disagree with the hon. Gentleman. I do not understand why a low-paid worker in South Stanley in my constituency who has worked hard all his or her life should be given no tax relief or assistance and should pay their taxes just to give a tax relief and perk to individuals who not only might be able to pay for care, but who have an advantage over them. We should seek to ensure equal access to health care.
I understand what has been said about waiting lists and the health service, but when I was elected in 2001 my constituency contained two old hospitals, one of which—the old workhouse—was a disgrace. We now have two new hospitals, thanks to a Labour Government. The hon. Member for Mole Valley mentioned hip and knee replacements, and I can tell him that the industrial legacy of a mining community meant that my area had a long waiting list; it was not uncommon for people to wait for more than two years. I recall people coming to my surgery arguing about how they could get up the list any faster. Waiting lists have more or less been abolished over the intervening 10-year period, which is testament to the changes the previous Labour Government made and the investment we put in. Investment in the health service should be about ensuring equal access to care, not about giving a tax perk to a very small section of the population—the less than 5% who actually have private health insurance—as this proposal seeks to do.
Mr Chope
It is a matter of seeing what the countervailing benefits would be, because obviously, if as a result of my hon. Friend’s new clause a lot more people who are not contributing anything towards the cost of their health care started to do so, thereby reducing the burden on the NHS, the dead-weight cost that my hon. Friend the Member for Skipton and Ripon (Julian Smith) mentions would be exceeded by the overall benefits, and a reduction in the overall burden of taxation. More people who are getting health care in this country would be paying for it, or contributing to its cost, rather than relying on the state and the taxpayer to do so.
Mr Leigh
The dead-weight cost argument is always used against ideas such as school vouchers or tax relief for health insurance, but does my hon. Friend agree that the whole point of such proposals is to help the people in the middle? Quite rightly, Parliament is concerned about the people at the bottom of the heap, and the rich can always buy their way out, but this part of the Conservative party should help the people who struggle all their lives, and pay tax all their lives.
Mr Chope
Of course, the original scheme was brought in on the basis that it would apply to everyone over the age of 60, and initially would give full tax relief to higher-rate taxpayers, so the figures would be nothing like as high under the new clause, because its proposals would apply only to people over 65, and would give only 20% in tax relief.
Mr Leigh
Is my hon. Friend not being very moderate? Surely there is an argument for giving everyone tax relief, which is how we would move to a continental-type system with much better health outcomes, and blur the boundaries between the private and public sectors. That is what we, as Conservatives, should believe in.
Mr Chope
I absolutely agree, but I think that my hon. Friend the Member for Mole Valley, who tabled the new clauses, is a gradualist by nature; that goes back to his time as leader of Wandsworth council, when he was preparing for his time in Parliament and knew that things could not be done immediately but must be done gradually. He can speak for himself when he contributes to the debate, but perhaps that gradualism is part of his thinking.
I will finish soon, because many Members wish to contribute, but let us first put this suggestion in perspective by thinking about roughly how much it would cost. Let us suppose that an average health premium is about £2,000, which a pensioner or pensioner family would be faced with paying, and which previously their employer had paid as part of a contributory or non-contributory occupational scheme. Many pensioners would not pay that, but if we gave them the tax relief, which would amount to more than £400, I submit that many of them would carry on paying for their insurance, thereby contributing towards the cost of the health service, which would be a benefit.
The last time I spoke in a debate on a Finance Bill on Report it was about insurance premium tax. The insurance premiums paid for health insurance are already subject to tax, which the Treasury keeps increasing, so an alternative way forward might be to abolish the insurance premium tax paid on health insurance contributions. That is a separate argument and not the subject of this group of new clauses, but it serves as an example. The Financial Secretary to the Treasury would obviously say that we could not afford that—but does he realise that if we increased the number of people taking out health insurance, the Treasury would receive a lot more in insurance premium tax? I am sure that he will take that into account when he—in due course, having done the proper research—tells us the costs and benefits of the proposals in the new clauses.
We should not forget that the dynamic effect of these taxation changes could deliver great benefits and dividends. It is important to send a strong message to those who can afford to contribute towards their health care costs but who currently do not do so, that this would enable them to contribute at a lower cost than would otherwise be the case. I think that it is a well-rounded and sensible proposal, and I am delighted that it is getting so much support from colleagues on the Government side of the House.
Mr Hoban
That is the Treasury’s latest estimate, and it is a number that we are going to stand by.
In his opening speech, my hon. Friend the Member for Mole Valley (Sir Paul Beresford) said that he wanted to restrict the tax relief to the basic rate, but subsection (3) of new clause 1 would not have that effect. It suggests that the relief could be obtained at the highest marginal rate that a person paid. He has used the 1990 legislation, whereas in the 1994 legislation the relief was restricted to the basic rate.
Mr Leigh
Why does my hon. Friend think that the social insurance systems on the continent, where there is much more blurring between the public and private sectors, produce much better health outcomes? Also, why does he think that the Major Government followed this policy, which we all supported at the time? Why is this proposal different from the policy of the Major Government, which we all—or some of us—supported?
Mr Hoban
I am pleased that my hon. Friend added that qualification. I entered the House only in 2001, so I was not in a position to support the Major Government or to disagree with them. We need to look at this measure on its own merits.
I would say to my hon. Friend the Member for Mole Valley that the way in which his new clause has been drafted means that tax relief could be gained at someone’s highest marginal rate, which could mean relief of up to 50%.
Mr Deputy Speaker (Mr Nigel Evans)
We now come to new clause 5. Fiona Bruce. Not moved?
New Clause 5
Transfer of personal allowances between spouses
‘After section 37 of the Income Tax Act 2007, insert—
“37A Transfer of personal allowances between spouses
(1) This section applies to an individual who is entitled to a personal allowance under sections 35 to 37 for a tax year if—
(a) the individual is a person whose spouse who is living with the individual for the whole or any part of the tax year, and
(b) the spouse meets the requirements of section 56 (residence, etc).
(2) If—
(a) the allowance exceeds the individual’s remaining relievable income;
(b) the individual makes an election, and
(c) the individual’s spouse makes a claim,
the individual’s spouse is entitled to an allowance for the tax year equal to the amount of the excess.
(3) The individual’s remaining relievable income is found by—
(a) taking the amount of the individual’s net income, and
(b) subtracting any personal allowance to which the individual is entitled for the tax year.”’.—(Mr Leigh.)
Brought up, and read the First time.
Mr Leigh
I beg to move, That the clause be read a Second time.
In the last Parliament the Prime Minister and other senior Conservatives repeatedly expressed their commitment to recognise marriage in the tax system. There were some very strong statements, particularly by the Prime Minister. For instance, in Glasgow, in July 2008, he said:
“And when it comes perhaps to the most important area of all, families, we will take action not just to support marriage and family stability”,
because he wanted to say
“to parents, your responsibility and your commitment matters, so we will give a tax break for marriage and end the couple penalty.”
That was the leader of our party speaking during the last Parliament. This was the key policy response to the challenge of social breakdown, or the “broken Britain” phenomenon, and it became an important manifesto pledge at the 2010 election—a manifesto pledge on which every Conservative MP was elected. It was a sacred bond, as it were, with the electorate to support marriage, which was considered to be an absolutely key part of dealing with broken Britain. We put that in our manifesto.
I know that our party did not win an outright majority, but the commitment, most importantly, got into the coalition agreement with a provision for our Lib-Dem friends to abstain. I am not asking them to do anything, but I am asking our Front-Bench team to fulfil the pledge that they solemnly made in the manifesto and put in the coalition agreement. We are still waiting for it, which is why new clause 5 is so important and why I believe that, whatever else has been going on in the background this afternoon—I need not go into that—it was my duty to move it. If it had not been moved, many people involved in the Christian community or in the Christian Institute or in churches would have wondered why this new clause—clearly on the agenda this afternoon, and a vital part of what we are trying to achieve for Britain—had suddenly been withdrawn. I was not prepared to let that happen. I have therefore moved it to allow a debate, to which the Government should be made to respond.
Since the election the Prime Minister has reiterated his commitment to recognise marriage in the tax system on a number of occasions, including at his second Prime Minister’s Question Time—but no action has yet been taken. Given that the manifesto pledge is backed by the coalition agreement and pertains to the period between 2010 and 2015, the fact that the Government have not yet acted to recognise marriage in the tax system is, I hope, no cause for alarm. This debate is important: the Minister will have to respond to it later, when he can assure us that although it has not been possible to do this yet, it is definitely going to happen in this Parliament because it was in our manifesto and in the coalition agreement. At the very least, I want the Minister to say that.
Since the commitment to recognise marriage in the tax system was made last year, there have been some significant changes, which in my personal view greatly increase the need for swift action. In this context, the tabling of new clause 5 on Report to recognise marriage in the tax system is an important step. It provides an opportunity to put on the record the standard arguments for recognising marriage in the tax system and, more importantly, to set out the changes over the last 12 months that have greatly increased the urgency of taking action in this area. As I have said, the Government are obliged to respond and engage with the implications of the changes as they relate to the importance of recognising marriage in the tax system.
Let us go into a bit more detail. Apart from married couples with at least one spouse born before 1935—a number that will clearly reduce over the years—and couples in which at least one partner is blind, everyone in the United Kingdom is taxed on an individual basis. Unused tax allowances cannot be transferred from a non-earning spouse to an earning spouse.
Under the system of transferable allowances, which we have constantly promoted as a party for several years and as is envisaged in our coalition agreement, a non-earning spouse would be able to transfer the whole or part of the basic income tax personal allowance to their earning spouse. Depending on how it was introduced, the whole allowance or part of it could be transferable, and it could be limited to couples with children under a specified age, or limited to tax at the basic rate. The Government can decide what they can afford and they can bring it in gradually; there need not be dead-weight costs or the other problems that were aired in the previous debate. Moreover, I am not at all sure that it is appropriate to talk about dead-weight costs in this context at all. For 2011-12 the personal allowance is £7,475; if the whole allowance were transferable it would be worth up to £1,495, so we are not talking about huge sums of money.
Let us look at what other countries are doing, because it is important to nail the untruth that this idea comes just from the right wing of the British Tory party, or from the Christian community, when it is very common throughout the world. In fact, Britain is unusual among developed countries in failing to recognise marriage in the tax system. This is something that we did as a country, with cross-party agreement, as it was considered absolutely the right thing to do, right up to 1999-2000. Only 24% of citizens of OECD states live in countries that do not recognise marriage in the tax system in one way or another, and most of those live in just three countries—Mexico, Turkey and the UK. We are very much in the minority in not recognising marriage through our tax system. Why should we not recognise marriage when most countries and tax administrations in the world think that marriage is a force for stability? It is not unusual to want to recognise that. Other developed countries such as France, Germany, Italy and America all recognise marriage. In that context it was hardly surprising to learn that, according to the latest figures—published in May 2010—the resulting tax burden on single-earner married families in the United Kingdom was one third greater than the OECD average.
Helen Goodman (Bishop Auckland) (Lab)
I agree with the hon. Gentleman about the importance of marriage, but I am not convinced that it is appropriate to encourage and recognise it through the tax system. The hon. Gentleman mentioned unfairness, and I think the question of fairness is the nub of the issue, for if the money were spent on benefits or tax credits for children rather than on a married tax allowance, far more children could be lifted out of poverty.
Mr Leigh
As so often in Finance Bill debates, the devil is in the detail. The hon. Lady has made a perfectly reasonable point. However, I hope to establish in my speech that the present system is unfair and, specifically, militates against single-earner families. That applies especially to those who are struggling out of poverty, but it is not necessarily the very poorest about whom we should be concerned. We should also be concerned about families on fairly modest earnings who are desperately trying to look after their children, and who decide that someone, usually the mother, should stay at home and care for them. But, as I have said, the devil is in the detail, and I will try to deal with the hon. Lady’s point later. It is important, and we need to tease the answer out of Ministers. We want to know why action has not been taken.
Mr Leigh
That argument has been used against transferable tax allowances. It is true that it is impossible to create a transferable tax allowance that helps everyone, but I do not consider the fact that in certain circumstances, through no fault of their own, people will not be allowed to enjoy the benefits of such allowances to be a good argument against trying to help others—and that is all we are trying to do.
Let us examine the extent of support for marriage in Britain. It is no surprise that marriage rates are at an all-time low and family breakdown is a massive problem, affecting many different areas and, it is estimated, costing us directly between £24 billion and £41 billion per annum. The “Breakdown Britain” report motivated the then Leader of the Opposition, now the Prime Minister, to come up with this policy—our policy—and launched the debate. It was promoted by my right hon. Friend the Secretary of State for Work and Pensions; although he is not present today, I pay tribute to him for his fantastic work.
Mr Leigh
I will in a moment, but I want to make a little more progress. Others will want to contribute to this important debate.
There is no doubt that the lack of support for marriage gives rise to some family breakdown, not primarily through the breakdown of existing marriages but by making marriage a less attractive and more costly option for some people than it would otherwise be. I do not pretend that that applies to everyone, but undoubtedly our present system, which is very unfair on single earners receiving relatively low wages, is a disincentive for some. As the “Breakdown Britain” report demonstrates, a child born to unmarried parents has a nearly one in two chance, before reaching the age of five, of seeing its parents split up, whereas for children whose parents were married, the figure is just one in 12. That is unmistakably a huge difference. It is, I believe, a commonly held view that marriage is a good thing.
A more recent piece of research, “Family breakdown in the UK”, set out the problem of the lack of support for marriage in the following terms:
“the problem is not divorce. While marriage accounts for 54% of births, the failure of marriages—i.e. divorce—accounts for only 20% of break-ups and 14% of the costs of family breakdown, amongst all families with children under five. Unmarried families account for 80% of the break-ups and 86% of the costs.”
The report also states:
“These new statistics demonstrate dramatically that family breakdown is a huge and growing problem and that the main driver of family breakdown is the collapse of unmarried families. A failure to acknowledge these key points will lead to the inevitable failure of any government policy aimed at strengthening families.”
That is why many Government Members believe that this policy is so important.
Chris Williamson
Given the hon. Gentleman’s proposition that the tax system discriminates against single-income households and could cause couples to break up, what does he think of the Government’s decision to force through a change in the child benefit rules for single-income higher earners with, say, three children, whose families will lose up to £3,000 per annum? If he believes that family breakdowns result from financial circumstances, he must surely believe that that will lead to even more of them.
Mr Leigh
I agree with the hon. Gentleman. I have made clear my belief that our policy of fiddling around with child benefit is entirely wrong. Child benefit works because there is no fraud and no error, and because it is a flat tax. I strongly oppose the Government’s policy, because it will attack families who are on the margin just as they get into work and emerge from poverty. I predict that we will see a U-turn on that policy, and if it is the 23rd U-turn, it will be one of the best of them.
Why does the lack of stability in marriage matter? We all recognise that most single parents do a fantastic job in very difficult circumstances—I noted earlier interventions on my speech to that effect—and they must enjoy our full support. Nothing that I am saying constitutes an attack on them. However, policy must be based on evidence, and the evidence is very clear. It shows that, on average, children who are brought up in single-parent families do less well than children brought up in two-parent families according to every significant measure: educational attainment, health, the likelihood of getting into trouble with the law, and alcohol and drug abuse. I do not think it wrong for the Government to try to recognise what works when it comes to bringing up children.
Some may be tempted to respond to what I am saying by suggesting that the principal cause of the different outcomes is not marriage but wealth, and that it just so happens that wealthier people are more likely to get married. However, the facts do not support that. No one is trying to argue that marriage is the only important consideration, or that wealth is not relevant—of course it is—but data show substantial differences in family stability between married and unmarried couples in the early years of parenthood, even after the discounting of socio-economic factors such as age, income, education and race.
Most notably, the difference in family breakdown risk between married and cohabiting couples is sufficient that even—this is an important point—the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. It is foolish to make ourselves the odd one out in comparison with other developed countries such as France, Germany and America. Why do we not recognise marriage in our tax system, and why has the Minister not fulfilled the pledge that we made in our manifesto?
As we all know, recognition of marriage in the tax system specifically through a transferable allowance brings heightened child development benefits. In a culture that encourages parents to go back to work as quickly as possible, even though research demonstrates that this is a key time for developing attachment which has huge implications for the later development of a child, the provision of a transferable allowance makes it easier for one parent to stay at home to be with their children. I am not saying that everyone will want to do it, I am just giving an opportunity. I am not requiring anybody to do anything.
Mr Leigh
I have given way to the hon. Lady once. I will make a bit of progress and if she is really desperate, of course I will let her in because I am very fond of her, as she knows, and we have served together in a Select Committee.
Polling demonstrates that staying at home is a choice that parents want to exercise. That is all that we are talking about here; we are talking about choice—no requirement. For instance, a 2008 YouGov poll for the Centre for Social Justice, run by the Secretary of State for Work and Pensions, found that 88% of parents thought that more should be done to help parents who wish to stay at home and bring up their children in the early years and 97% agreed that the Government should do more in that area. What other policy has 97% support?
A 2009 YouGov poll for the Centre for Policy Studies found that only 12% of mothers wanted to work full time, 31% did not want to work at all. Only 1% of mothers with children under five thought that the mother in a family where the father worked and there were two children under five should work full time, 49% thought that she should not work at all and fathers, when asked the same question, offered an almost identical response. So the facts are there in the opinion poll data. Only 2% thought that mum should work when her husband worked and the children were under five, and 48% thought that she should not work at all.
Many people are forced into work. Many mothers want desperately to be at home looking after their children when their children are very young, but they simply cannot afford to do so. No one suggests that a transferable allowance will solve the problem of family breakdown or make it incredibly easier for families to cope, but it will be a step in the right direction and a small gesture that we in Parliament could make to mothers who desperately want to stay at home and look after their young children.
Many women, rightly, want to work; they have good jobs. Why should we be forcing young women with very young children into low-paid jobs when they want to be at home looking after their children? Why should we create a tax system that militates against women making that choice?
Helen Goodman
I am grateful to the hon. Gentleman for indulging me. He makes a powerful point. Many mothers of small children want to work part time. I worked part time as I am sure did many other hon. Members. I want to bring the hon. Gentleman back to the facts. When the tax system changed from one that included a transferable allowance to one that did not, was there evidence of any impact on family breakdown?
Mr Leigh
I confess that I cannot go back to 1999 and I do not know what data were then available to the Chancellor, but the hon. Lady cannot deny that our tax system is unfair because it militates against the choice to stay at home. Surely I can take the hon. Lady just this far, if no further—that it should be a free choice for women with young children whether they work or not, and the tax system should be neutral. That is all that we are asking for. The hon. Lady can make a speech later if she disagrees with me. I do not doubt her sincerity. I am just saying that the system is simply unfair.
Britain’s failure to recognise marriage in the tax system meant, as of May 2010, that it was out of line with other developed countries, with the effect that, far from supporting the best child development environment and being family friendly, it was placing a significantly greater proportion of its total tax burden on this family type than was the case in comparable countries. In that context, it is not surprising that family breakdown, the key driver of the broken Britain phenomenon is particularly pronounced and the case for recognising marriage in the tax system is clear and compelling. So all the arguments for recognising marriage in the tax system stand in one key area. The tax burden on one-earner married couples with children in the UK has now risen such that it is over 40% greater than the OECD average.
Mr Leigh
The hon. Gentleman knows perfectly well that I am not suggesting for a moment that people get married in order to get tax allowances—I have never said that. All I am saying is that the current system is unfair, because it militates against a family on modest earnings where one person wants to stay at home to look after children. Of course nobody gets married in order to get a little tax allowance, but why should we have an unfair tax system?
Mr Jones
I actually do not understand why all this is unfair, because the new clause would give an advantage to people who are married but do not have children. I do not know how the new clause does what the hon. Gentleman is proposing in terms of keeping family units together and alleviating child poverty.
The important point relates to what was in the Conservative manifesto. What came out of that Conservative think-tank was the idea that marriage was an important point in keeping the family unit together and ensuring that children and wider society were not disadvantaged by a breakdown in the family unit. The manifesto made a commitment to “recognise marriage” in the tax system. It proposed that couples and civil partners who were basic rate taxpayers should be entitled to transfer just part of their allowance—this was worth, in effect, up to £150 a year. That is very different from what is contained in the new clause, because it makes no mention of civil partnerships. Given the names of the people who are supporting this proposals, I suspect that this has come from the wing that has not quite gone all the way in being the new cuddly Conservative party in terms of even envisaging the idea that civil partnerships, with or without children, could constitute a family unit.
As the hon. Gentleman mentioned briefly, the policy came unstuck in the coalition agreement because this proposal is clearly not supported by the Liberal Democrats. I believe that during a general election television interview, the Deputy Prime Minister called it “Edwardian”.
Jim Shannon
I can tell the House that when I married, I married for love. I am one of those old-fashioned boys; that is just the way I am.
Mr Leigh
In the light of the intervention from the hon. Member for Linlithgow and East Falkirk (Michael Connarty), it is important to point out that we are not trying to penalise single-parent families or families in which there are two earners. All we are trying to do is remove the severe penalty on families in which there is only one earner, because our system is totally out of step with most of the rest of the world in that regard.
Jim Shannon
I thank the hon. Member for his contribution and for providing a bit of focus to this debate.
Given that the agreement pertains to a full Parliament, one ordinarily would not be concerned at the failure to action a commitment in just over a year. What we need is for legislative change to be approved by the coalition Government, to move forward and perhaps see this legislation coming through in two years. The latest publication of the international tax comparison, CARE’s “The Taxation of Families 2009-10” puts things in a very different light. It demonstrates that we are now headed to a place where the tax burden on a married family with children with one earner on an average wage is growing so much that it will soon be more than 50% greater than the OECD average. That breaks new ground, taking us into territory that not even new Labour dreamt of occupying.
Some will no doubt respond by saying that this is a result of the tax burden having to increase on everyone in the context of the debt crisis. I understand that, but it is not exactly the case. Let me quote a director of an influential think-tank, who said:
“Given that it will take some time between changing the law and implementing the actual recognition of marriage in the tax system, it is important that the Government makes this a priority, takes swift action. The change, or at least a recognition of it, should be made”.
I very much hope that that report can be taken seriously, that the Government can look further at the issue and perhaps bring it forward in future legislation.
Dan Rogerson
The hon. Gentleman has raised a useful point. However, given the existing pressures on families I do not think that the new clause is sufficient to allow that to happen, although it may be a step in the right direction. The argument presented by, mainly, Members in a particular corner of the Chamber is that on one hand that this is about incentives and on the other hand that it would make a financial difference, and I think there is a weakness at the heart of that argument.
Members have produced evidence relating to what happened at the time of the change in the tax system. My own marriage took place in 1999 and was not related to tax considerations; I am pleased to say that other factors were operating. I suspect that, given the way in which tax has risen and fallen in every Budget, if such decisions were based on tax policy we would see a huge flux in the nature of relationships and marriage.
Mr Leigh
The hon. Gentleman is making a perfectly honourable speech and his party’s position is entirely consistent, but, as possibly the only Liberal Democrat speaking in the debate, will he confirm that, given the coalition agreement, he would be perfectly relaxed if our Government produced such a transferable allowance? Surely the Liberal Democrats could simply abstain.
Dan Rogerson
The hon. Gentleman knows that I am generally a relaxed person. We in Cornwall are famed for being laid back and not wanting the hectic pace of life that some other constituencies thrive on. I am focusing on the debate about the Government’s policy in the Bill and whether the Government will choose to accept the new clause that the hon. Gentleman proposed in such an able and distinguished manner. I hope that the Government will not at this juncture look to act on the proposal in the new clause.
I am happy to update the House that during the course of the debate news reached me that Julia Goldsworthy, the former Member for Falmouth and Camborne, has announced her engagement, which I am delighted to hear. Whether she and Chris have been watching the debate and decided that this was it is unclear. I think it is unlikely, but I am delighted that the institution of marriage is taking a step forward in terms of our political life in Cornwall.
Hon. Members’ speeches have made it clear that the new clause is an attempt to send a signal to a group of people in society, but I am not convinced that we should use the tax system to send a signal. There are other ways in which we could support marriage.
Mr Chope
If there is a defect in the wording of the new clause and it fails to recognise everything that the Prime Minister said—he certainly referred specifically to civil partnerships—the hon. Gentleman may have a point about that, but he does not have a point about much else, in my submission.
Mr Leigh
I am happy to make the concession to the hon. Member for Linlithgow and East Falkirk (Michael Connarty), who spoke at some length on this point, that if the new clause is defective, I am happy to withdraw it and for the Government to bring back a new clause that includes civil partnerships. I make it absolutely clear that we have nothing against civil partnerships.
Mr Chope
My final point is that there is a read-across between the new clause and the conundrum that the Government face in the debate about the withdrawal of child benefit from families that comprise at least one higher rate taxpayer. That issue is causing a lot of angst among our constituents, particularly for parents in single income households in which one parent stays at home to look after the children. As I have said in correspondence with the Minister, in some cases one parent stays at home to look after a disabled child. If there is one parent who is the breadwinner and he is a higher rate taxpayer on an income of about £45,000 or £50,000, he will be above the threshold and will be deprived of his child benefit.
Mr Gauke
We have heard a lot in this debate about single parents. One group that will be affected if teachers go on strike and schools close on Thursday will be single working parents, who will face substantial disruption in dealing with child care. I hope that Members in all parts of the House will strongly urge teachers to go to work on Thursday.
Mr Leigh
I am quite prepared to accept that we are only Back Benchers and that the new clause may be defective, but I would be prepared not to force it to a vote if my hon. Friend now gives a firm and solemn pledge that during this Parliament the Government will honour our manifesto pledge to recognise marriage in the tax system. If my hon. Friend gives me that pledge, I will not force the new clause to a vote; if he does not give that pledge now, I will force it to a vote.
Mr Leigh
I am afraid that the Minister has not answered the specific question that I asked him. It is not good enough to say that we will honour a commitment, but then give no date for when that commitment will be honoured. I am very sorry, but there is not a cigarette paper between what my hon. Friends and I are proposing in new clause 5 and what the Prime Minister said, which I shall repeat:
“I believe that we should bring forward proposals to recognise marriage in the tax system. Those in our happy coalition”—
notice that he mentioned the coalition, because this is about now, in this Parliament; he was not talking about some time in the future—
“will have the right to abstain on them, I am happy to say, but I support marriage. We support so many other things in the tax system, including Christmas parties and parking bicycles at work, so why do we not recognise marriage?”—[Official Report, 2 June 2010; Vol. 510, c. 428.]
Mr Leigh
I will not be shouted down by the hon. Gentleman. He was not here for most of the debate anyway.
We made that pledge, and we should now respect it. I was hoping to be able to say that the new clause was defective, and that we would be quite happy to withdraw it and to redraft it to enable civil partnerships to be recognised. We would be quite happy if the Minister then said that it could be introduced during the course of this Parliament. However, he has not said that. I am afraid that he has not answered the points that we have put to him. We had an hour’s speech by the hon. Member for North Durham (Mr Jones), most of which did not address what we are trying to say. I want to end by saying that none of us is trying to penalise two-earner families or single parents. We are simply trying to remove the severe penalty that this country imposes on one-earner families. The United Kingdom is completely out of step with most of the world in that regard. Nothing in our proposal is radical; it is sensible and it is right, and I think that we should now have a Division on it.
Question put, That the clause be read a Second time.
The House proceeded to a Division.
Mr Speaker
Order. Open the doors for a further minute, owing to the extreme congestion in one Division Lobby.
Budget Responsibility and National Audit Bill [Lords]
Edward Leigh Excerpts(15 years, 1 month ago)
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Justine Greening
My hon. Friend makes an excellent point. The way to provide that guarantee and certainty is to pass the Bill before us today, which sets up the Office for Budget Responsibility—but does so, critically, as an independent organisation that will make its own forecasts. In so doing, it will contribute to being independent of Governments and provide credible official forecasts for the first time in our country. That will give us the certainty we need. I will come on to explain later how we ended up needing official forecasts to be done independently, referring to the problems that had arose prior to this Parliament.
Mr Edward Leigh (Gainsborough) (Con)
The Government have a serious political difficulty, to which the Justice Secretary referred over the weekend, giving rise to a considerable amount of publicity. All over the country, local authorities are loading cuts on to front-line services, yet we read today that scores of local authority executives earn more than the Prime Minister. What is the Minister’s message to local authorities? Will she insist that they deliver real efficiency savings to avoid these cuts in front-line services, which are so politically damaging?
Bank Bonuses
Edward Leigh Excerpts(15 years, 2 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Osborne
The deal that the previous Government signed with RBS as a condition of being part of the asset protection scheme stated that it should not pay bonuses in 2009, but that for the bonuses awarded in 2010—the period we are talking about now—it should pay the market rate. That was the deal that Labour signed up to. I am trying to reduce the RBS bonus pool, and I have made it very clear—as has the Prime Minister—that it should be a back-marker, not a market leader.
Mr Edward Leigh (Gainsborough) (Con)
Is not the problem with the leading bankers that they are often arsonists and firemen rolled into one? The trouble with the previous Government is that they left the arsonists in charge of the haystack. They bailed them out, but they did not protect the depositors adequately, and now they want to shoot the firemen. What is that going to achieve?
Mr Osborne
Well, I think we still have the haystack at the end of all that. My hon. Friend makes an important point, however. Of course I understand and share the feeling of anger that if we do not get a change of behaviour, these bonuses could be paid, and that is what we are addressing. However, this House will have an equally important—indeed, possibly even more important—issue to deal with later this year: the report from the Independent Commission on Banking, which we have established, again in the face of Labour opposition, to look at the whole issue of “too big to fail”. That is what my hon. Friend was talking about. The commission will look at how we can ensure that the British taxpayer does not stand behind the banks, but that the banks can be allowed to fail in an orderly way without bringing down the British economy.
Oral Answers to Questions
Edward Leigh Excerpts(15 years, 3 months ago)
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Mr Hoban
Let me remind the right hon. Gentleman what he said about Ireland on 8 May 2007:
“The Irish economy has enjoyed a good deal of success over the past few years. The corporation tax regime has contributed to that, but there have been a number of other factors”.––[Official Report, Finance Public Bill Committee, 8 May 2007; c. 19.]
The truth is that the Irish economy, like our economy under the previous Government, had a banking sector that was poorly regulated and out of control. It is because we have tackled the legacy of the Labour Government that we are in a position to help Ireland.
Mr Edward Leigh (Gainsborough) (Con)
Given the misery that economies on the periphery of Europe, such as Ireland, are suffering from the imposition of a single currency throughout Europe, will my hon. Friend advise his European partners that any future plan should be motivated by what the markets demand, and not what grandiose politicians want?
Mr Hoban
My hon. Friend makes an important point. He may have read the shadow Chancellor’s remarkable statement last week, that the euro had had no impact on the problems in Ireland. It is important that the right mechanisms are in place to tackle the problems in the eurozone, and that those solutions are owned by the eurozone. That is why the permanent mechanism that will replace the financial stability facility will be a eurozone-only body.
Autumn Forecast
Edward Leigh Excerpts(15 years, 3 months ago)
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Mr Osborne
I said right at the beginning of my remarks that these are economic forecasts and that we should treat them with the caution with which one should treat all economic forecasts. At least we explicitly acknowledge that and the forecasts are independently produced. What we have here is a central forecast; previously, Chancellors just gave a number and asserted that that was the forecast come hell or high water. That is not what the OBR is doing today. However, one can take confidence that its growth forecast for next year is in line with those of most independent commentators and forecasters. It happens to be very close to the numbers that the European Commission produced today, which were not available to the OBR or the British Government until today. We can have confidence that it is part of a group of people who look to the UK and see it growing sustainably over coming years and jobs being created.
Mr Edward Leigh (Gainsborough) (Con)
All the talk is of cuts, but with spending still rising despite these so-called cuts and with debt as a proportion of GDP rising to a staggering 70%, will my right hon. Friend remind the House that, to coin a phrase, there is no alternative to further massive efficiency savings, particularly in ring-fenced Departments such as Health where there has been a catastrophic decline in productivity in the last 10 years?
Mr Osborne
I certainly agree with my hon. Friend that an essential part of this programme for public expenditure is getting greater productivity in the public services. As the former Chair of the Public Accounts Committee, he has much to offer. The Treasury is engaging with him on this, I hope, and will engage further with him in the coming months. He is absolutely right that, in a period when there is less money available, if we do not have reform, we will have deterioration in the service. That is why we have got to have reforms and why Parliament is being asked to support those reforms in the next few months.
Financial Assistance (Ireland)
Edward Leigh Excerpts(15 years, 4 months ago)
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Mr Osborne
I seem to remember plenty of Labour Ministers standing at the Dispatch Box praising what Ireland was doing to make itself competitive, to reduce its corporate tax rates and to create a flexible labour market. That is the tragedy—it did so much in that direction to make itself competitive, but it did not properly regulate its banking system. We in the UK know the price of that.
Mr Edward Leigh (Gainsborough) (Con)
On reflection, does the Chancellor believe that our Irish friends might have been better off remaining faithful to sterling rather than eloping with the more flighty euro, and does a warm welcome await our friends if and when they return?
Mr Osborne
I am a believer in national sovereignty, so I do not propose to tell other countries what they should do with their currencies. I would just make this observation, since this has been a debate I have heard in recent years: Ireland has all its sovereign debt denominated in euros.
European Union Economic Governance
Edward Leigh Excerpts(15 years, 4 months ago)
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Mr Hoban
I thank you, Mr Speaker, for that encouragement and guidance, and I apologise for being generous in taking interventions. Let me make rapid progress.
On the issue of sanctions, the same principle applies for those eurozone countries that are in breach of the stability and growth pact excess deficit procedures. In the run-up to the crisis, there was a lack of fiscal discipline, for those inside and outside the euro. Despite the existence of the stability and growth pact and the excess deficit procedure, the eurozone was still undermined by a failure to exert fiscal discipline, and a number of member states in the eurozone have to take tough action to tackle the deficit.
To avoid a recurrence, the Commission and member states in the eurozone have sought to reduce the discretion on the application of the sanction process. The position reached by eurozone countries is set out in the taskforce report. Again, it is worth reminding the House that the sanctions regime does not apply to the UK by virtue of protocol 15 of the current treaty.
Chris Leslie
It was certainly worth punctuating the debate with that point, which my hon. Friend made forcefully and well.
Mr Leigh
Will the hon. Gentleman now kindly respond to the intervention from my hon. Friend the Member for Rochester and Strood (Mark Reckless)? Is the Labour party prepared ever to fight for a repatriation of powers, and would it be prepared to use the veto that it has used for the purposes of this measure as a bargaining chip to gain that repatriation of powers?
Chris Leslie
Our perspective is clearly different from that of the hon. Gentleman. I want to consider what is on the table. There are details still to come when the European Council meets in December, and we shall have to look at those proposals then. It seems to me that there is a case to be made for some sort of objective analysis of just what transfers of policy may or may not be involved in the proposals that are before us today.
Alignment (Clear Line of Sight) Project
Edward Leigh Excerpts(15 years, 8 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move,
That this House approves the proposals for simplifying the Government’s spending controls and financial reporting to Parliament, as set out in the paper, Alignment (Clear Line of Sight) Project, Cm 7567, of March 2009, and the response of October 2009 to the relevant report of the Liaison Committee (Second Special Report of the Liaison Committee, Session 2008-09, Financial Scrutiny: Parliamentary Control over Government Budgets: Government Response to the Committee’s Second Report of Session 2008-09, HC 1074).
The motion seeks the authority of the House to implement changes to the structure and content of the Supply estimates that set out departmental spending plans and are subject to approval by the House. These changes stem from work that began under the previous Government, and which has enjoyed cross-party support throughout. The aim of the changes is to provide a simpler and more effective system of public spending control.
As hon. Members will remember, the previous Government announced in the Green Paper, “The Governance of Britain”, in June 2007 that they would simplify the spending control framework and the Government’s financial reporting to Parliament further to enhance consistency and transparency at all stages of the process—budgetary spending plans, parliamentary Supply estimates and expenditure outcomes in resource accounts. That will lead to the following: a simpler and more transparent system, making it easier for Parliament to understand and challenge Departments; a strengthening of the existing budgeting framework by underpinning it with parliamentary control; and the streamlining of Government spending documents, making it easier to understand what is happening with public money.
Government’s and Parliament’s control and scrutiny of public spending is currently managed against four different frameworks. First, there are the national accounts, an integrated set of economic accounts covering the whole of the economy. Those accounts are produced by the Office for National Statistics in accordance with the European system of accounts 1995. National accounts are used to determine fiscal performance. Secondly, there are budgets, which are defined by the Treasury and used to control public spending. Budgets are allocated by the Treasury in spending reviews and reported on to Parliament at successive pre-Budget reports and Budgets. Certain elements of budgets are aligned to national accounts definitions. Others, such as those introduced with the move to full resource accounting and budgeting in 2003-04, relate to commercial-style accounting concepts and are designed to improve value-for-money incentives in Departments.
Thirdly, there are Supply estimates, which seek annual parliamentary authority for the expenditure of individual Departments following the plans set out in spending reviews. Estimates are largely, if not entirely, aligned to generally accepted accounting practice—GAAP—accounting definitions, rather than to national accounts, although they do not encompass all of the departmental expenditure and income that would be accounted for under GAAP. There are significant differences between estimates and budgets: about a third of departmental spending in budgets is not included in estimates, and about a sixth of what is included in estimates is not in budgets. Fourthly, there are resource accounts, which report Departments’ actual spending during a particular financial year, following GAAP, as adapted for the public sector. That means that there are some substantial differences compared with budgets and national accounts.
Those four frameworks have developed in different ways over the years for good reasons, since they serve different purposes. However, the result is significant misalignment between the different frameworks, with only two thirds of Government expenditure fully aligned across budgets, estimates and resource accounts.
Current misalignments can broadly be broken down into two categories. First, there are differences in the various boundaries—the entities and spending included in budgets, estimates and accounts. Those cover both different types of income and expenditure within the budgets and the different treatment of entities within respective boundaries. For example, the spending of non-departmental public bodies scores in budgets, but the grant-in-aid paid to those bodies scores in estimates and resource accounts, not their total spending. Secondly, there are differences in the policies. Specific transactions are often treated differently between the three frameworks. Examples include capital grants, provisions and other non-cash items within budgets.
At present, there are significant differences between the ways in which the three main elements of the public spending control framework define and treat expenditure. Those three elements are: departmental budgets as set by the Treasury; departmental Supply estimates as authorised by this House; and departmental resource accounts presented to this House after the year-end. To give just one of many potential examples, departmental estimates and accounts currently include only the spending of the relevant Government Department, whereas budgets also include the expenditure of any non-departmental public body for which the Department is responsible. This means that Departments have different controls against which to manage, and that it is very difficult to track spending from plans through to out-turn. That, in turn, limits the scope for effective parliamentary scrutiny and adds to the complexity of managing public money; it also requires time and effort to reconcile the frameworks.
The principal aims of the proposed changes are therefore to increase the transparency of public spending information; to improve accountability to this House and to the wider public; to make it easier for Government Departments and other public bodies to understand the controls to which they are working; and to provide a more efficient control framework that builds in the right incentives to deliver better value for money.
As I have said, the different frameworks have developed in different ways over the years, and for a range of reasons. For example, international standards have helped determine the definitions of expenditure currently applied within both accounts and budgets, with budgetary definitions being determined by Government but supporting internationally recognised fiscal definitions, and accounting policies reflecting international financial reporting standards adapted for the public sector context. Some misalignments between those frameworks will inevitably remain. What matters most is that they occur only where there is good reason, and that they are properly understood and kept to a minimum.
Budgets and estimates will be fully aligned under the new framework. The remaining misalignments will be with resource accounts—amounting to about £22 billion—where enforcing alignment would be contrary to the principles of the alignment project. By far the largest example, amounting to £19 billion, is the treatment of capital grants paid by Departments to the private sector, local authorities and public corporations. That is because capital grants are treated as resource spending in departmental accounts, reflecting international financial reporting standards, but as capital spending in budgets, reflecting national accounts treatment. As hon. Members will recognise, this is not a straightforward area.
Nevertheless, there is much improvement that can be made while adhering to these standards, and the alignment project represents an excellent opportunity to achieve greater consistency between the different frameworks. The main changes designed to achieve the aims of alignment are the extension of the departmental estimates and accounting boundaries to accommodate non-departmental public bodies and other bodies classified to the central Government sector, bringing their expenditure within the coverage of estimates presented to Parliament for approval. The power to do that, through a Treasury Order listing the bodies to be consolidated into estimates and accounts, was provided in part 5 of the Constitutional Reform and Governance Act 2010.
It is worth spending a couple of minutes reflecting on the different nature of non-departmental public bodies, which vary enormously in size and in the functions they carry out. Consolidation will include bodies that spend very large amounts of public money, such as the Environment Agency and the Legal Services Commission, which will be consolidated within the estimate and accounts of, respectively, the Department for Environment, Food and Rural Affairs, and the Ministry of Justice. Both those bodies spend over £1 billion per annum. Some of these bodies are charities—the national museums and galleries, for example—and others have statutory independence, so it is important that we create alignment in a way that neither constrains their freedom to act nor puts their status at risk. The provisions of the 2010 Act, approved by this House earlier this year, include protection for that independence, so that we can combine operational freedom with financial accountability.
Mr Edward Leigh (Gainsborough) (Con)
Does my hon. Friend recall that in 2007, the Treasury Committee acknowledged
“that the requirements of the alignment project mean that it is not possible for Parliament to maintain control over gross totals. We are concerned that without adequate levels of information regarding income, Parliament’s authority may be diminished.”
How can the Minister reassure Parliament that our authority over Supply will not be diminished in any way following alignment?
Mr Hoban
No, I want to make some more progress. A number of Members on both sides of the House wish to participate in this debate, and I am conscious that there is also private business after this.
I want to talk now about the next stage of the alignment process: the coverage of estimates and budgets by including all non-voted budgetary expenditure and income in the estimates presented to Parliament. Parliament will not be asked to approve this spending as it will already have separate legislative authority, but Members will see the full picture of departmental budgetary expenditure. For example, spending financed from the national insurance fund will now be included in the accounts and the estimates, even though it does not have to be voted on annually. Going back to the point raised by my hon. Friend the Member for Gainsborough (Mr Leigh), we will align the treatment of income in estimates with budgetary controls. Income will be retained by the Department, provided it is of a type allowed to be netted off budgets and included in the description of income in estimates. To this end, a new description of all relevant categories of income will be included in estimates and replicated in Supply legislation. That will ensure that such information is disclosed in the estimates, and those bodies will therefore be accountable for those sums.
We will simplify the presentation of expenditure information by fully aligning budgets and estimates, reducing remaining differences with accounts to those that are absolutely necessary, and providing clear reconciliations between any necessary misalignments that remain.
Mr Leigh
Let us get this absolutely clear. Although the Treasury originally said that there might be a problem with this information coming to Parliament, the Financial Secretary is going to make sure that it is fully available because he appreciates that this is an incredibly complicated and difficult matter for Members of Parliament to come to grips with. There is no point in having an alignment project if less information ends up coming to Parliament and the situation is less clear than it was before. I think that my hon. Friend has given us the necessary reassurance, but I wish to press him, so that there is no doubt that we will get just as much information as we have always had.
Mr Hoban
My understanding is that that is the case. What we will also be able to do—this deals with something that frustrated me when I first came into the House—is track information from budgets set by the Treasury to estimates and to the out-turns. That consistency of information will help Members of this House to hold the Government to account on how public money is being spent.
These changes have been the subject of constructive cross-party consultation over the past three years. During the previous Parliament, the then Chief Secretary to the Treasury submitted three memorandums on alignment to the Chairmen of the Treasury Committee, the Public Accounts Committee and the Liaison Committee, in November 2008, March 2009 and February 2010. The March 2009 memorandum contained detailed proposals for achieving alignment and was published as a Command Paper. All the Committees indicated their support for the proposed changes, and the Liaison Committee took the lead in providing detailed responses. I am grateful to that Committee for its engagement with, and support for, the alignment proposals throughout. The Committee noted in its report on financial scrutiny published in April 2008 that the alignment project was “potentially an historic development”. I fully endorse that view.
The Liaison Committee published a further report in July 2009, which was, again, strongly supportive of the proposed changes. It also made reference to wider issues related to the parliamentary scrutiny of public spending, including the number of days available for debates on the estimates and the outcome of spending reviews, and the scope of such debates. This Government’s establishment of the Backbench Business Committee represents a significant step forward in this area. That Committee has at its disposal 35 days in each Session, some of which are taken in Westminster Hall, to schedule debates on subjects of its choosing, including the scrutiny of public spending.
This Government are fully committed to enhancing transparency in public spending and supporting effective scrutiny by this House. We have already published data held on the Treasury’s public spending database going back to 2005-06. Further measures are being taken that will see details of all new spending of more than £25,000 published from November 2010.
Mr Andrew Tyrie (Chichester) (Con)
The hon. Member for Harrow West (Mr Thomas) strayed rather a long way out of the line of sight of the line of sight project, if I may say so. His points about the importance of the Office for Budget Responsibility are well made and well taken, and that is something that I hope my Committee will consider and something that I am not yet convinced we have achieved. However, I think that that is a debate for another day.
These proposals will significantly improve parliamentary scrutiny of spending. The previous Labour Government deserve a lot of credit for having put this work in train, just as the coalition Government deserve some credit for acting on what they inherited. I also want to pay tribute to the Liaison Committee and its staff and, in particular, to the work of the Treasury Sub-Committee under the chairmanship of my hon. Friend the Member for Sevenoaks (Michael Fallon). He put in a great deal of hard work on all this, some of which is now bearing fruit. I understand that he intends to catch your eye in a moment, Mr Deputy Speaker, and he will no doubt make these points in more detail. However, in the 2007 report he expressed a number of concerns, and two main concerns in particular. One was about the timetabling of publications and the other was about the treatment of income lines in the estimates. On the first, the Government have proposed to publish their departmental reports and accounts by mid-June of each year and to publish the main estimates earlier. That is a step forward. On income streams, the Government’s original proposal—this has been mentioned—was that the House of Commons would vote only on the net estimate. That would have been a step back from the current arrangements whereby Parliament at least votes on both the gross and net figures.
The Treasury Sub-Committee, when considering this matter, acknowledged that with alignment it would not be possible for Parliament to maintain controls over gross totals, but it argued strongly that adequate information should none the less be provided. That is the point that my hon. Friend the Member for Gainsborough (Mr Leigh) made a moment ago.
On the question of income streams, I think that the Government’s latest plans are a great step forward. Let me explain why. If I get this wrong, the Minister can intervene and tell me. As I understand it, under his proposals any income used by Departments to support spending must be of a type specifically approved by Parliament. That is the first key point, of which there are four. The second is that tax receipts cannot be used as income by Departments to boost spending. In other words, the tax receipts must still go to the Treasury in the normal way. The third is that information on estimated income will still be presented to Parliament and the fourth is that Departments will still be required to explain variations between planned income and actual income at the year end. The Minister has not intervened on me yet, so I have high hopes that I have got that right. If I have, the Government have gone a long way towards satisfying the concerns of the Sub-Committee’s report of the previous Parliament.
This is a complex area with a lot of unknowns still as we develop these changes. We must be realistic about what is achievable and we must be clear that there was no golden age when Government estimates were routinely rejected or reduced. The House of Commons abandoned any attempt to debate estimates in that sort of detail not in the post-war era, as many people suppose, but sometime in the 19th century.
I am also clear that great care needs to be taken before pressing for dramatic increases in powers for Parliament in this area as they can have unforeseen consequences. It is certainly worth considering, for example, ensuring that supplementary estimates are approved by the relevant Sub-Committee, but I am wary of anything that could create the conditions for the growth of a pork barrel style of politics in Britain through the back door. I have been an advocate of stronger Select Committees for many years and we have a lot to learn from our counterparts in Congress, but I do not think that we have much to learn by importing pork barrel politics.
Mr Tyrie
If my hon. Friend will forgive me, I am near the end of my remarks and I would rather get to the end because I have discovered—surprisingly on this subject—that quite a few people want to speak.
We will have to see whether the proposals provide better opportunities for the Select Committees that shadow spending Departments and we will soon see whether they can start to scrutinise better the spending decisions taken by them. We will have to wait to find out whether these Committees take up those opportunities—that includes the Treasury Committee, which also monitors spending Departments.
I warmly welcome these proposals from the Government. We now need to monitor them carefully.
Mr Edward Leigh (Gainsborough) (Con)
Thank you, Mr Deputy Speaker, for calling me in this important debate.
The effective monitoring of Government expenditure and the exercise of control over it by the House of Commons is crucial to why we are here at all, but over the centuries it has become virtually impossible for ordinary Members of Parliament to understand what is going on. It is like the classic Schleswig-Holstein question—only three people understand it, and one of them is mad and one is dead. It is so complicated and so difficult.
That is why I was happy to attempt to serve on the Liaison Committee in the last Parliament with Michael Jack, who was the Chairman of the Environment, Food and Rural Affairs Committee and John McFall, who was the Chairman of the Treasury Committee. We tried to gets our own heads around the subject, and it made our heads hurt to try and understand what was going on. I hope that some of the comments in our Liaison Committee report have found their way back into what the Government are trying to do—indeed, I know they have, because the previous Government replied to our report. There is nothing partisan about this. Both sides of the House are agreed that the present system is broken and we must do something about it.
As we made clear in our report, the present arrangements present obstacles to sensible and informed scrutiny of public expenditure. It is extraordinary that we have estimates days, but we never discuss estimates. When I tried to interest the Liaison Committee in this work in the last Parliament, there was a collective groan from the Chairmen of the other Select Committees. They said that their people were interested in policy not money, but money is all-important. Policy flows from money. How extraordinary that after centuries of accumulation, like barnacles on the ship of state, we never discuss the Budget in detail.
The Budget process is a farce—not the Budget statement, although in previous years, as we know, much of it was hidden in the Red Book. In the Finance Committee— the Committee that considers the Budget—there is only a matter of seconds available to consider each amendment. Scores of amendments are tabled, the Government swat them all away, and there is no proper debate, and the estimates days do not deal with estimates.
My hon. Friend the Member for Chichester (Mr Tyrie) spoke about the American process, which works. The Office of Budget, a presidential body, proposes a budget. The President may propose, but Congress disposes. In our system, the Chancellor and the Prime Minister propose, and the Chancellor and the Prime Minister dispose. Parliament has very little effect on the process.
In America, there are hundreds of hours of meetings on the budget process. I know that my hon. Friend mentioned pork barrel politics. That is a regrettable aspect of the process but it is often much exaggerated. Recently, Senator Byrd died at the grand old age of 90. I might still be here at the age of 90, boring the House with these matters. We know that Senator Byrd showered largesse on West Virginia, whereas it is impossible for me to give a single penny to Gainsborough, or in the case of my hon. Friend, to Chichester, but surely there is a sensible halfway house, so to speak, whereby the House can receive reasonable, sensible information, we can know what is going on, we can have estimates days that discuss the estimates, and we can make a difference.
That is why I suggested in the last Parliament that there should be a triple lock on the scrutiny process. The right hon. Member for Barking (Margaret Hodge), the present Chairman of the Public Accounts Committee, has already spoken in the debate. We have a superb post-audit system in the UK, perhaps one of the best in the world. Although we have one of the best audit systems in the world—actual audit systems through the National Audit Office, and parliamentary audit through the Public Accounts Committee—we have one of the weakest Budget processes. When the Hansard Society produced a report before the Liaison Committee examined the matter in the last Parliament, in terms of effective parliamentary scrutiny we were at the bottom of the heap, together with New Zealand, ranked lower than any other democratic Parliament in the world, bar none. Such was the weakness of our parliamentary control.
What I suggested was a triple lock. We already have, as I say, a good audit system. Is it not surprising that it is so difficult to interest the other Select Committees in money? On education, for example, we had an hour and a half on a statement today with people battling over policy, yet it is difficult to get the Education Committee to get to grips with the education budget, from which those policies derive.
I think we need a specialised Budget committee, which will be a Select Committee of the House and have a permanent membership, like other Select Committees. When, under the alignment project, the Government bring forward various proposals, there would have to be a trigger mechanism when any Department sought to increase its budget by a certain amount. That could trigger a potential inquiry by the Budget committee, which would have to be resourced by the scrutiny unit of the House and by the National Audit Office.
Thus we would have a particular committee, a kind of appropriations committee, which is the most powerful congressional committee. It would have to have real teeth, not just be a talking shop. I hope my hon. Friend the Member for Chichester will not mind my relaying our private conversation earlier. He said that once we gave such a power to any Select Committee, pork barrel politics would inevitably flow from it. There would have to be safeguards, a process and gradual reform, as we always have in the House. No Government will suddenly surrender to a Select Committee or to Select Committees of the House the kind of powers that congressional committees have, but surely there is no harm in our waving the flag, as parliamentarians, for greater parliamentary control.
We would have the PAC as a kind of audit system, and a Budget committee looking at the Budget in detail in a way that the Finance Bill Committee cannot do. The third part of the triple lock on wasteful spending in Government should be some kind of Star Chamber within Government. The Treasury do a fantastic job, but when spending was increasing very rapidly during the past 10 years, it was overwhelmed by the sheer volume of decisions pouring on to officials’ desks. It was perhaps too much of a paper-based exercise. Perhaps the Chief Secretary could not get adequate control of it.
I believe that Ministers and their officials who were proposing the expenditure of large sums of money should have to come before a Star Chamber to justify their proposals and to be questioned in private and give honest answers. I have served on four Select Committees of the House in more than 20 years. Do we ever have Ministers and officials giving entirely honest answers to our Select Committees? No, because those are held in public and Ministers and officials deal with questions by playing a dead bat. I am not denigrating the role of Select Committees and I quite understand the game that Ministers and officials play in front of them, but there has to be some equivalent process privately within Government, so that as expenditure plans are being dreamed up, there is proper control and reform.
Such scrutiny will continue to be a dry subject which nobody understands or is interested in unless the Government, in the alignment process, listen to what we were trying to say. We said:
“To be properly effective improvements in presentation need to be accompanied also by improved opportunities for Members—as individuals and through select committees and front benches—to debate the figures (both in the form of the formal Estimates for the current year and the spending plans for future years).”
That is absolutely vital.
We want a clear line of sight and to know in simple terms, whether from the Department for Education or the Ministry of Defence, what they spent last year and plan to spend next year. There would be a day in Parliament when we could debate it and vote on it, and that would start to bring Parliament back into the process. In doing so, that would surely restore Parliament to what it should be about: Members acting on behalf of their constituents to control public money, so that very large sums of money are never again spent without adequate controls. That is a great prize. For all the technicalities of our discussion, for all the difficulties and for all the talk of “moving from cash to resource accounts”, “the introduction to Government budgets” and “the concept of departmental expenditure limits”—all those words that, frankly, leave most Members cold—in the end, this is not a technical process. It is a process of real parliamentary democracy, and is therefore to be warmly welcomed.
Government Spending Cuts
Edward Leigh Excerpts(15 years, 10 months ago)
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Mr Laws
The right hon. Gentleman is simply wrong if he thinks local government is incapable of making efficiency savings. All the people I know in local government believe that significant efficiency savings can be made. He does not allow for the significant change that the Government have announced, which will mean that by ending ring-fencing, there is more freedom for local government to decide where those cuts fall, and to make sure that they fall in the areas that are not priorities. I should have thought that as a former Education Secretary, he could have brought himself to congratulate the Government on the way that they have managed to ring-fence the schools budget and the Sure Start budget.
Mr Edward Leigh (Gainsborough) (Con)
I welcome the return to the Treasury of stern, unbending Gladstonian Liberalism. Will the Chief Secretary confirm that if we are to restore the nation’s finances, all Departments, including Health, Education, International Development and Defence, must play their part? For instance, such has been the catastrophic decline in productivity in health over the past 10 years that we can make significant efficiency savings without endangering front-line services.
Mr Laws
I am grateful to my hon. Friend for his kind comments about Gladstonian Liberalism. I hope that this is not only Gladstonian Liberalism, but liberalism tinged with the social liberalism about which my party is so passionate.
In the savings that we make, we are seeking to ensure that we cut with care. We have demonstrated this week that we can find efficiency savings and also put money into the areas that many of us in the House are passionate about—protecting education and putting more money than the previous Government did into social housing. We have shown that we can deliver both of those, but I agree with my hon. Friend that we must make sure that even those areas where the overall budgets are protected are driving out efficiency savings. There are considerable efficiency savings that can be made in the Ministry of Defence, in health and in education, and we must make sure that even as we protect the totality of those budgets, we shift money to the front-line services that matter most.