Oral Answers to Questions
Geraint Davies Excerpts(11 years, 6 months ago)
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Danny Alexander
My hon. Friend is right to say that the Labour party’s record on encouraging the private sector was at its most catastrophic in the west midlands, for which the figures he gave are absolutely correct. That is why another £124 million of funding for projects in the west midlands was announced in round three of the regional growth fund and why we are providing additional support for the automotive sector, which is so important in his constituency and region. Of course the improved climate for business, the removal of regulations and the funding for apprenticeships will benefit businesses in the west midlands, as well as in the rest of the country.
Geraint Davies (Swansea West) (Lab/Co-op)
Yesterday, a report from the Welsh Government showed that scrapping tolls on the Severn bridge would increase the value of the Welsh economy by £107 million. Will the right hon. Gentleman commission a report to show how quickly the cost of reducing and getting rid of the tolls would be offset by the increase in income tax resulting from more jobs created in Wales?
Danny Alexander
The hon. Gentleman mentions finance in Wales, so I would have thought he might have started by welcoming the announcement I made two weeks ago on a new funding settlement for Wales and the commitment, in principle, for the first time ever—this was never made by the Labour party when it was in government—to borrowing powers for the Welsh Government. That is a major step forward. We will hear shortly from the Silk commission, which is examining revenue-raising powers. I will certainly consider the matter the hon. Gentleman raises in response to the Silk commission.
Infrastructure (Financial Assistance) Bill
Geraint Davies Excerpts(11 years, 7 months ago)
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Danny Alexander
I did see that survey. I note that it was conducted before the Government announced the guarantees plan. However, a subsequent snap-shot poll showed a widespread welcome from the business community for the Bill. My hon. Friend will know that we have made significant changes to the planning system, including in the announcements last week, that relate directly to the threshold for infrastructure projects. Those will allow more projects of a slightly smaller scale to go through the national process, rather than getting tied up in local processes.
Danny Alexander
I will take one more intervention, then I will make some progress.
Geraint Davies
The right hon. Gentleman will know that there are schemes in America where, with the support of pension funds, the private sector builds houses on land provided by the public sector. That provides a mixed asset with social and private housing, and a revenue stream for the public sector at no cost to it. When such schemes are available, why are the Government instead saying to the private sector, “Forget about social housing for a while. Just build private sector housing”? That will have a long-term impact on the demography of an area.
Danny Alexander
The hon. Gentleman, with the greatest of respect, has misunderstood the Government’s message. Part of the guarantee programme will extend the benefit of Government guarantees to housing associations, to enable an additional 15,000 affordable properties to be built. That is why it has been welcomed by the National Housing Federation, which speaks for housing associations in this country. Housing associations recognise that they will benefit from the guarantee, because it will reduce the cost of finance and help them to build many more homes for the sadly limited amount of money that is available to this country at the moment.
The plans are also supported by the Home Builders Federation, which said:
“Government now clearly understands the constraints on delivery and has outlined action to address them.”
The Government are committed to delivering a sustainable, private sector-led recovery that is balanced across industrial sectors and geographical regions; to moving away from an economy focused exclusively on the south-east of England, which is reliant on financial services and unsustainable debt, towards an economy supported by a wide variety of industries across the United Kingdom; and to making the UK one of the best places in the world to do business, attracting foreign investment and promoting our exports. To achieve that vision, the Government are committed to delivering world-class infrastructure, thereby giving firms access to the communication and transport networks that they need, wherever in the UK they happen to be.
Danny Alexander
I must make some progress, but I will give way again later.
Housing guarantees, alongside a wider package of housing and planning reforms, will contribute to the construction of up to 70,000 homes, including affordable housing, and opportunities for first-time buyers to get on to the housing ladder. That will ease conditions in overcrowded and overpriced residential areas, and will enable people to locate near to jobs.
The steps that we plan to take, and which the Bill enables us to take, will help more companies in a wide range of sectors to grow and flourish, not just in the south-east of England but throughout the UK, and will give more people access to a wider range of opportunities. The benefits will also be felt in Scotland, Wales and Northern Ireland. The UK’s hard-won fiscal credibility should benefit the whole of the UK.
Danny Alexander
I have a bit more to say. I have been generous with my time, but I must now make some progress. The hon. Gentleman’s Front-Bench colleagues are becoming restless.
The Bill will enable major infrastructure projects to secure finance regardless of where they are based. We will work closely with the Northern Ireland Assembly, the Welsh Assembly Government and the Scottish Government to ensure that the authority conferred on the Treasury or the Secretary of State by the Bill can be used effectively to help to deliver for people in Scotland, Wales and Northern Ireland.
I shall now give way to the hon. Member for Swansea West (Geraint Davies).
Geraint Davies
In certain areas of Wales—such as Swansea, part of which I represent—the cost-benefit ratio is not always as strong as it might be. Will the Minister support, for instance, super-connectivity for Swansea, given that it has been granted to Cardiff, and better links to Cardiff airport? Passenger numbers are not great at present, but that is simply because the infrastructure has not been there in the past.
Danny Alexander
I hear the case that the hon. Gentleman is making. We have made important announcements recently, particularly in relation to rail links in and to Wales, which I hope he welcomes. I will not support specific projects that may be in gestation, but we will work with the Welsh Assembly Government, who are principally responsible for such proposals. If there are projects for which a guarantee is appropriate, we will consider that very positively in the light of the representations made to us.
As the hon. Gentleman will know, great interest has already been expressed by investors and those involved in projects since the UK guarantees idea was launched six weeks ago. Since then, about 40 companies and project sponsors have come forward, responsible for projects worth well over £5 billion and covering high-priority investment in areas such as energy, transport, water, waste and telecommunications. Detailed discussions are already taking place with, for example, those involved in the Mersey Bridge Gateway project, which is considered to be one of the world’s top 100 infrastructure projects. We have also indicated that we would be willing to consider a guarantee relating to the green deal.
There should be no doubt that the Government are in a position to deliver this policy, and the investment it will unlock, only because of the decisive action that we have taken to reduce the deficit, and the credibility that that has secured for this country. When we came to office, the UK taxpayer was paying interest rates comparable to those of Spain and Italy. Were that still the case, the course of action that we are taking now would be impossible. Because we made tough decisions to regain control of our public finances, we now enjoy interest rates of only about 2%. That is the result of a responsible approach to spending and a credible long-term commitment to regaining control of the public finances.
Despite those tough decisions, we are already spending more on critical transport and communications infrastructure directly as a Government than was spent at the height of the spending boom. We are providing £18 billion-worth of rail investment, supported by the spending review, and a further £9.4 billion of infrastructure enhancements for the rail network was announced in the summer. Ten super-connected cities—the hon. Member for Swansea referred to super-connectivity—will enjoy ultrafast broadband and high-speed wireless connectivity as a result of Government investment, with funding set aside for a further 10. We are also focusing on how we can reduce burdens and keep costs low so that investment, whether public or private, goes as far as possible.
Last week we announced a package of measures to reduce burdens on business still further, including the reform or removal of more than 3,000 regulations to reduce their impact. That constitutes the most ambitious action ever proposed by a modern British Government to set business free. Our spending plans have prioritised capital spending that supports balanced sustainable growth across the country, and our efforts to reduce burdens on businesses mean that investment has gone even further. That approach is producing results despite difficult conditions. More than 1 million private sector jobs have been created under this Government, and this year we rose from 10th to eighth in the World Economic Forum rankings of international competitiveness. The Bill could allow us to unlock even more investment without placing material additional burdens on the public finances, enabling the Treasury to support infrastructure delivery so that we can make better use of private sector finance, skills and incentives, while also managing exposure to the taxpayer.
Under the previous Government, the UK fell in the infrastructure world rankings from seventh in 1998 to 33rd in 2009—behind Namibia, Slovenia and Cyprus. We are now up to 24th and taking the necessary steps to make the further improvement this country needs. There can be no argument with the view that we are delivering far more than under the plans we inherited from our predecessors.
The Bill contains appropriate safeguards and checks to ensure transparency and accountability to Parliament for actions taken under it. It imposes an upper limit on the amount of expenditure that the Treasury and Secretary of State may incur, which can be increased through affirmative resolution. It also requires the Treasury to update the House regularly. In answer to a point that was made earlier, where expenditure is charged on the Consolidated Fund, the Bill requires the Treasury as soon as practicable to lay a report before Parliament specifying the amount paid. Any expenditure or contingent liabilities will be reported in the whole of Government accounts.
Rachel Reeves
The bank bonus tax is being used to do two things: first, to create 100,000 jobs for young people; and secondly, for the construction of 25,000 new affordable homes. The Opposition believe that the priority right now is construction and getting young people back to work. The Government believe that the priority is a tax cut for the bonuses. That just shows how out of touch this coalition Government are.
Nothing better illustrates the long-term costs of this Government’s short-sighted complacency than the shocking shortfall in infrastructure investment. If we want to build a productive, competitive economy for the future, we need to invest in the road and rail systems that keep this country moving; in the energy supplies that power our industries; in the information and communication networks that turn ideas into real innovations. With study after study confirming Keynes’s original insight—that construction projects can maximise the multiplier effects of new investment, creating skilled jobs in the construction sector as well as in engineering and design—there is no better time than now.
Instead, we have had from this Government countless speeches, statements and strategy documents. People are asking, “Where is the delivery?” As the CBI is asking, where are the diggers on the ground? When are we going to start turning blueprints into bricks and mortar? It was the Prime Minister who said,
“This autumn, the government is on an all-out mission to unblock the system and get projects underway”.
That sounds promising—until we realise that he said this a year ago. Since then, what have we seen? None of the road building projects in the autumn statement package have begun construction. The number of housing starts is down on 2011. Planning applications are taking longer to approve. I agreed with the Prime Minister when he said:
“In terms of job creation today, getting construction projects off the ground is critical.”
But in the year since he told us that barely one in 10 of the projects listed in the Government’s construction pipeline have moved forward to procurement or construction, and almost as many of them have moved backwards. Total UK construction output is down by more than 10% and last week’s jobs figures showed that the number of jobs in the construction sector has fallen by 89,000, bringing the total number of construction jobs lost since this Government came to power to 120,000.
The Deputy Prime Minister has promised that support for infrastructure and other private sector projects from the regional growth fund would offer a
“boost to business, which will jump start growth and create jobs that last in the places that really need it.”
That sounds like just what we need, but that was said a year ago. We know that since then just £60 million of the promised £1.4 billion has been released to businesses, creating barely 5% of the 37,000 jobs promised.
The Chancellor of the Exchequer announced £20 billion in new infrastructure investment to be funded by the pension funds—that was a year ago. We now know that this scheme will be launched next year, with funds amounting to only a tenth of what was promised back then. As the failure of this Government’s promises increases, their rhetorical displays have become ever more strident. Two weeks ago, in response to questions from my right hon. Friend the Leader of the Opposition, the Prime Minister said:
“If we look at what is planned by this Government, we see that between 2010 and 2015 we will be investing £250 billion in infrastructure.”—[Official Report, 5 September 2012; Vol. 549, c. 230.]
It is true that the national infrastructure plan sets out £250 billion-worth of projects— would government not be easy if you were judged only on what you had planned? If we look instead at what has been delivered, we see that the picture is rather different. The Office for National Statistics shows that new infrastructure orders since the second quarter of 2010 average less than £2 billion a quarter. At this rate, it will take not five years but more than 30 years for the Government’s grand plan to be delivered. The latest construction output figures released last week show that progress is slowing, not accelerating. It is no wonder that the director general of the British Chambers of Commerce has described the national infrastructure plan as
“hot air, a complete fiction”.
Geraint Davies
My hon. Friend will know that the Prime Minister boasts of an extra 1 million jobs in the private sector. Does she agree that many of those jobs are where people are moving into part-time work having lost full-time work? It is wrong that the Government penalise people who are now working less than 24 hours but used to do more, by cutting their working tax credits by £3,750. The Government are saying, “Get some more work” but these people have just come down from full-time employment.
Rachel Reeves
I thank my hon. Friend for that intervention. He will know that there are 1.42 million people working part time who wish that they were working full time. As of April, about 200,000 families lost support through working tax credits because they could not find the additional hours that they need to still be eligible for that extra support to help them when they are in work; that support helps them to avoid poverty.
It is no wonder that people are asking whether they can have faith in anything the Government are saying, given that in every area we see dither and delay. In communications, the Government have put back the 2012 broadband target to 2015 and may not meet that new deadline. In house building, recent statistics show that new housing starts are down by 24% on a year ago. In waste management, the plan promised for spring this year will now not be delivered until the end of 2013. In energy, the CBI has warned that policy changes such as the cuts to feed-in tariffs have been
“damaging to business confidence, with implications not just for immediate investment decisions but for longer-term trust in government policy”.
In transport, we still await the long-promised national policy statement on transport networks and aviation, and tough decisions on airport capacity have been kicked into the long grass. Instead of the drive, decisiveness and clarity of vision that businesses are crying out for, what do we get in sector after sector? We get dither and delay; we get initiatives and announcements driven by the desire to hit headlines rather than to deliver results.
The Bill—the Government’s latest scheme—is a strange piece of legislation. It is being fast-tracked through Parliament, with the justification that the situation is immediate and urgent. However, given this need for speed, we are bound to ask whether legislation is necessary, particularly given that, as the House of Commons Library note explains, such commitments
“do not typically require…legislation”.
The UK guarantee scheme at the centre of the Bill was first announced by the Prime Minister in a speech in May. It was re-announced by the Chancellor in a speech in June. The press release came from the Treasury in July. It is therefore hard to resist the conclusion that the Bill is designed more to create the impression of activity and delivery than to get real results in the quickest way possible.
However, the Opposition’s biggest concern with the Bill is that it is simply inadequate to meet the challenge we face. Many in industry are sceptical that it will make any difference. Even where it is taken up, the tight criteria of economic and commercial viability may mean that it amounts to only a deadweight subsidy, aiding projects that would have gone ahead in any case. The best anyone has been able to say for it is that it might help some schemes at the margin, but that is hardly commensurate with the challenge we face.
The schemes that have been most frequently mentioned as strong candidates for assistance are those the Government have announced are going ahead several times already. Let me cite one example, which the Chief Secretary mentioned in his speech. Earlier this month, he said:
“Detailed discussions are already taking place with the Mersey Bridge Gateway project”.
We certainly welcome progress, but many may experience a strange sense of déjà vu, given that a year ago the same project was announced by the then Transport Secretary, who noted that although some transport plans are long term, this one could be
“implemented more quickly…creating jobs when they are needed most.”
What happened in the past year? It is no wonder the Government are gaining a reputation for more talk than action. As the director general of the CBI said today,
“firms fear initiative overload and are becoming impatient with delivery, leaving many companies still sceptical about the overall impact on investment.”
Rachel Reeves
Olivier Blanchard and the International Monetary Fund have been saying for a year that if growth does not materialise the Government should think again. How much longer do we need to be in recession? How much longer must we have rising youth unemployment and rising long-term unemployment before the Government act? The IMF now forecasts that the economy will shrink this year and will barely grow at all next year. That is evidence that the Government need to rethink their strategy, and it is a shame that they have not heeded the advice of the IMF.
Geraint Davies
Does my hon. Friend agree that the reason consumer demand is so awful is that the Chancellor announced that 700,000 people in the public sector would lose their jobs? People in the public sector do not know whether it will be them or their neighbour, or whether it will be this year or next year, so they are saving not spending. That is why there is no growth.
Rachel Reeves
I thank my hon. Friend for that intervention. It is not just people in the public sector; people in the private sector, particularly in construction, which has shed 120,000 jobs since the Government came to power, are also worried about their jobs and futures and about how they will get the money to feed and house their families. There is real concern and a real lack of confidence among households and businesses.
This summer showed that things could be done differently. The Olympics showed what can be achieved with an inspiring vision—the right combination of public, private and social enterprise, with the nation united behind it. We delivered on time and on budget, and it was a perfect platform for Britain at its best. Let us hope that the Olympics provided a much-needed boost for our economy, but the lesson to learn is not that we can now rest; if we really want to seize the economic opportunities before us and build a better future, we need to repeat that effort on a much bigger scale, with a nationwide plan for jobs and growth. Let that be the lesson for today and let us get to work on laying the foundations of the economy we need to build for the next generation. Let us have a Government who follow up their rhetoric with real action.
John Healey (Wentworth and Dearne) (Lab)
I am glad that I was in my place to hear the hon. Member for Reigate (Mr Blunt) make his first speech from the Government Back Benches. He was a very serious Minister and brought a very serious mind to his brief, as he has done in this afternoon’s debate.
I see borrowing guarantees to help fund investment in Britain’s infrastructure as a good, if overdue, use of the power of government. It is creative, innovative and active government, if it works. Using the strength of the public balance sheet to underwrite private investment makes sense, especially at a time when public funding is limited and private bank lending is constrained. It should improve the credit rating of, and attract investors to, infrastructure projects, and I see those as two key tests for the policy and the legislation before us.
I welcome the Bill and want it to work. The country needs it to work. However, I say to the Minister and to the Chief Secretary, who is no longer in his place, that there are two big questions behind the Bill that, even after his long speech this afternoon, remain unanswered. They are about urgency and clarity. The value of the legislation and the Government’s borrowing and funding commitment will be felt when the first project is chosen, the guarantees are in place and the work begins. When will that be? As always with a new policy, the devil is in the detail. We have no detail and we have no idea how the arrangements allowed for in the Bill will work. The Government have already asked for expressions of interest for funding and borrowing guarantees but have published no guidance. When will that be done?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. May I make a quick point? The hon. Gentleman is making a lot of interventions and obviously wants to speak later in the debate. If he moves down the list of speakers, I presume he will understand why.
Geraint Davies
You have many very good points, Mr Deputy Speaker.
Does my right hon. Friend agree that, given that the Building Schools for the Future programme was in place and ready to go before the Government cancelled it, it would be a good idea to reinstate it and get productivity through our children as well as through the construction industry?
John Healey
My hon. Friend is right, and I hope that he gets a chance to make a speech. I will move on in a moment to some of the changes in policy and cuts since the general election that have made infrastructure projects and that sort of investment harder, not easier.
There are big causes for concern behind the two big questions I mentioned. First, there are questions and concerns about speed and how serious the Government are about getting infrastructure work going. It is almost a year since the Prime Minister promised
“an all-out mission to unblock the system and get projects underway”.
It is almost two years since the Government published their first national infrastructure plan and almost two and a half years since they set up Infrastructure UK in June 2010 in the Treasury. Most seriously, since the Government’s second infrastructure plan in November 2011 the economy has shrunk by nearly 1% and Britain has become one of only two G20 countries in a double-dip recession.
On the point of concern about clarity and simplicity, the Infrastructure Investor journal recently conducted a survey of 200 industry investors. Lack of finance, poor regulation and procurement weakness are all problems they face, but some 60% said that confusion and lack of clarity from the Government are a far greater disincentive. What matters most is confidence in the pipeline of projects, often based on clear Government policy decisions and commitments. The Government are failing that test over big projects and policies such as High Speed 2, aviation capacity and power generation. Their record on other policy decisions that at first sight have nothing to do with infrastructure is also making it harder to put in place the funding required. The abrupt change and then change again in the solar feed-in tariffs, the benefits reforms and cuts, the tripling of student tuition fees, creating “core and margin” university course places, and the rebanding of renewables obligation certificates have all changed the risks and the costs of long-term capital—so much so that a senior figure in the industry recently said to me: “Investors are now asking for the first time how you can price in public policy risk.” The guarantee scheme needs to be flexible and straightforward. The devil is in the detail, and Government revel in the detail. Is every Department going to introduce and run its own scheme with its own rules? Who in Government will be accountable for the programmes and the problems on the guarantees?
On housing, let me take issue with the hon. Member for Reigate, because the Chief Secretary and the Government are right and he is wrong. I welcome its definition as infrastructure. It is basic to people’s lives and to a good society, and central to wider economic growth and to productivity. Above all, it is a long-term good. We are still getting rent from Bevan’s post-war council housing a long time after the cost of the capital to build them has been paid.
I am looking to the Government for reassurances on four questions, especially in relation to housing. First, the Chief Secretary said that he did not want to prescribe and would not circumscribe the stages of projects that credit guarantees can support. The Treasury has said that guarantees can cover key project risks including construction, performance and revenue risk. Will that apply equally to housing as to the other categories set out in clause 1(2)? Secondly, some housing associations already have a presence in the capital markets and can raise finance in their own names, so will such organisations with significant project proposals be able to push ahead without the creation of any intermediary or aggregator?
Thirdly, the best housing developments are mixed and help to support mixed communities. The Government have said that the guarantees will support private and social housing. Will those building new homes be able to source guarantees for both sectors from the same fund scheme? Fourthly, I expect that security requirements will be part of the arrangements for the borrowing guarantees. Will developers building homes be able to provide the security on completion of those homes rather than in advance? If the Government want these guarantees to work, and to work rapidly, to boost housing, jobs and the economy, they need to provide answers and reassurance on all four points.
The Chief Secretary mentioned the 1932 Baldwin agreement, which emphasises that where financial liabilities that last beyond the term of one Government or one financial year are introduced, they should be backed by specific legislation. I believe very strongly that improved long-term infrastructure should be a shared endeavour of all parties, because infrastructure projects do not fit neatly within the political cycles and are damaged by the chopping and changing of Government policy.
Geraint Davies (Swansea West) (Lab/Co-op)
I am grateful to follow the hon. Member for Stroud (Neil Carmichael), and, indeed, my hon. Friend the Member for York Central (Hugh Bayley), who laid out some of the background. It is important to see the issue in context. We hear the mantra from Government Members that it is all somehow Labour’s fault that we are in this mess, but if we track back as far as 1997, we have seen all this before—mass unemployment so that money is spent on keeping people on the dole and there is no growth. From 1997 to 2008, we saw sustained growth, people in employment paying tax, ensuring that debt was kept down and service provision up.
Then, of course, in 2008, we saw the financial tsunami—due to sub-prime debt—washing our shores. Two thirds of the debt we eventually saw in 2010 was from the banking community; the other third was from the Labour Government investing beyond earnings to sustain growth. As was graphically described by my hon. Friend the Member for York Central, we had fragile growth going into 2010, but then the new Chancellor simply announced that he would cut 500,000 public sector jobs—it is now 700,000—so it is hardly surprising that people in the public sector thought that they might lose their jobs, resulting in less spending and more saving; and we have seen pay freezes as well. This has had a knock-on effect on consumer demand—hence we have zero growth.
In terms of the public accounts, reducing a deficit is, as with any business, about both increasing revenues and tightening savings, but the focus of the new Government has been almost exclusively on massive cuts and austerity measures. Instead of focusing on growth, we now see an imbalance and a belated attempt to try to pump-prime a bit of growth. I welcome that belated attempt, but enormous problems with consumer confidence remain, making it important that infrastructure investment is focused on productive capacity.
When it comes to public accounts, it is worth remembering that, as with any business, spending on infrastructure is not like revenue spending; it is spending on assets, building up the balance sheet of UK plc. That is why I would like the Government to think positively again about spending some of this money on something like our Building Schools for the Future programme. That was about building assets to increase the skills and human capital of Britain for the next 10 or 20 years. Instead, the Government are busy trying to price people out of universities with excessive fees. Their latest announcements have generated uncertainty among the business community about the future value of GCSEs and the whole route map of education. They are saying to people, “Well, you may have GCSEs or other qualifications that are the currency of education”, but what they have done is suddenly to devalue that currency.
The main issue for today is how to spend the money on infrastructure in a public accounts-effective way. Through their massive spending on procurement, the Government need to ensure that they are focusing as much as possible on small and medium-sized enterprises. I say that because SMEs tend to employ local people and they tend to pay income tax, corporation tax, VAT and so forth. If we look at the history of this Government’s procurement in England, we find that only 6% of the money is spent on SMEs, so the great majority of it is spent on large foreign companies that do not pay tax in Britain and often do not employ local people. In Wales, by contrast, over 60% of the procurement goes to SMEs, regenerating the money, and it is all one business. We need to think carefully about how this money is contained or otherwise leaked abroad.
If we are serious about building industrial infrastructure for jobs, we need to think about the wider tax regime as well. A day or so ago, I visited an aluminium manufacturer, Aleris, which melts down scrap aluminium. The Minister may know that the energy needed to produce aluminium from scrap is 4% of the energy it takes to produce it from raw materials. No surprise, then, that China buys 20% of our scrap, yet puts penal taxation on foreign countries attempting to buy their scrap. It is the same with Russia, where the marginal tax rates are at nearly 50%. In other words, there is a strategic awareness of the value of raw materials, so why are we now in a position where we send scrap to China, which comes back as manufactured goods so that China makes the money from it?
We need to think very carefully about how the tax system works in relation to infrastructure. Tata Steel, which I am going to visit next week, provides another example. It has said, quite rightly, that it is one thing to have a European tax on carbon emissions, but if that means that steel manufacturing leaves Europe, goes elsewhere and produces more emissions, is that a good thing? To superimpose the UK’s carbon tax makes things worse.
I would also like to see more support for transport in my local area, particularly Neath, Port Talbot and Swansea ports, so that they become recognised by Europe as a core port. That should trigger, in turn, the trans-national European transport funding available. We need to think carefully about how we engineer ourselves so that we maximise the money available from Europe. Indeed, next week, Swansea university is announcing a multi-million pound investment from the European Investment Bank, which will lever in private sector money. Rolls-Royce, BP and Tata are supporting this, as are the Welsh Government. The issue is how we work together to make the most of the money available.
I mentioned in an earlier intervention that I am in favour of spending on social housing and housing in general. As I said, there is scope for some facilities to come from the private sector. For example, it could do the building, with the public sector providing the land. That allows for joint ownership of assets and a mixture of social housing and private housing. Local authorities could provide social housing on that basis, and we benefit from the rental revenue streams created.
In Swansea, Neath and Port Talbot, we have pushed ahead with the concept of the city region, which has been encouraged by the Welsh Government. Again, it amounts to having a joined-up view—it is not just for public-service delivery to make efficiencies—and it also means a genuine joining up with the private sector. That is why I have been in talks with Hewlett-Packard, which has a skills cluster in Swansea and is keen to get the work from the Government in the form of outsourcing from the Department for Transport. That would have a strategic impact on the area, which would be much better than the contract going to, say, a German company that is also bidding for that work.
We need to think in the round about what is good for Britain. My hon. Friend the Member for York Central mentioned flood risk management; I used to be the chair of Flood Risk Management Wales. The flood defence in north Wales is a railway and part of the defence in south Wales is a road. There is talk of the Severn barrage; it would be a flood defence too if it were allowed to develop. We need to get out of the silo mentality and think about UK plc in order to do what we can to build a stronger future for us all. I shall leave it there. I am grateful to have been called to speak and I hope that some of my ideas will be taken forward.
Sajid Javid
I agree with the hon. Gentleman: they are unusually silent, although they are welcome to intervene on my speech. However, I can tell the hon. Gentleman that people in Northern Ireland should be assured that the Bill is intended to help infrastructure investment throughout the United Kingdom. I agree with him that there are often some special cases in Northern Ireland, which suffers from a relatively higher level of unemployment than other parts of the UK. I look forward to receiving applications from the Province.
Two issues—two myths, I should say—arose again and again in the speeches of Labour Members. The first—
Geraint Davies
Are the Government going to become involved in the brokering of deals and the forming of partnerships with the private sector? I am thinking specifically of easyJet’s move to Cardiff airport and its discussions with First Great Western about the provision of more passenger links to ensure that when the two come together it makes sense for everyone. Are the Government willing to become involved in that?
Sajid Javid
The purpose of the Bill is to establish a structure to provide guarantees for credit-worthy projects in the private sector. Of course the Government will work very closely, step by step, with the private-sector promoters of each of the projects, and if one of the companies feels that it has a viable project that the Government should consider, it will be encouraged to discuss it with the Treasury. A specific Treasury team called Infrastructure UK, which was set up a couple of years ago, is full of specialists who understand infrastructure and have a great deal of experience. It will be keen to look at every single project, and if the hon. Gentleman has one in mind he should please present it as soon as possible.
The two myths that I heard from the Opposition—
Oral Answers to Questions
Geraint Davies Excerpts(11 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
In this case, I agreed with the first half of the question. I do not think that the Scottish Government are focused on the priorities of the Scottish people, and I made that case when I spoke to CBI Scotland in Glasgow last week. However, I disagree with his attempt to compare the record of the Labour Government with that of this coalition Government. We are spending more on capital investment than the previous Labour Government planned to spend in this period, as they set out just before the general election. We are spending more on capital investment in the essential infrastructure of this country than they did. We are also taking tough decisions on welfare and the like in order to get the deficit down and get money spent where it can create jobs.
Geraint Davies (Swansea West) (Lab/Co-op)
Will the Chancellor consider extra investment in the ports of Neath, Port Talbot and Swansea in order that they become recognised by the European Commission as core ports and therefore trigger TEN-T—trans-European transport network—investment in an area where it is much needed?
Mr Osborne
I am keen to see further investment in our ports. I am happy to engage in a specific conversation with the hon. Gentleman about his proposal and, if necessary, speak to the Welsh Government about it.
Financial Services Bill
Geraint Davies Excerpts(11 years, 11 months ago)
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Chris Leslie
We are trying to ensure that the Government fundamentally address the question. These provisions give the Minister and the Treasury the power to make by order amendments to many of the rules, statutory instruments and suchlike that affect mutual societies. We think that they should have the capability to measure progress on mutuality in order to help to smooth progress towards fulfilling the coalition’s pledge.
Given that we have before us a financial services Bill, our constituents would expect us to be talking about firm and defined measures to make progress on diversifying the financial services sector. Unfortunately, they would be disappointed by the Treasury’s progress on that. The Treasury website has a very scant, short set of paragraphs stating the coalition agreement’s desire to promote mutuals. It says:
“The Treasury is developing policy and delivering legislative changes to…meet this aim.”
That is basically it—a statement but no substance. I want the Minister to tell us what progress is being made in fulfilling that objective. It is not good enough merely to talk about consolidating existing rules or legislation and wrapping that up as though the Law Commission’s recommendations somehow fulfil Government promises. We want to see more action.
Geraint Davies (Swansea West) (Lab/Co-op)
Given that there is an appalling sovereign debt crisis in Europe affecting Greece, Spain, and so on, with the possibility of contagion, and given that we learned the lessons about the stability of mutuals following what happened in 2008, does my hon. Friend agree that it is remarkable that the Government are not pressing forward to reduce such risks by increasing diversity and promoting co-operatives?
Chris Leslie
My hon. Friend is entirely correct. When the Government have an opportunity to return to the market state-owned assets that the Treasury took in the height of the financial crisis, they simply look for a return to the vanilla plc model. They take a business-as-usual approach rather than taking the opportunity to rethink how we might have diversity in the financial service sector and in business operations. Yes, we need some organisations run on a plc model, and we have plenty of those, but why not think about opportunities to promote the non-profit or mutual sector? Northern Rock was a classic case in point. No adequate consideration was given to that option. A member buy-out suggestion would have been entirely feasible, but it was not considered seriously enough.
At this point, I pay tribute to the all-party group on building societies and financial mutuals. It made a series of recommendations a year ago, urging the coalition to adopt
“a comprehensive policy strategy to implement its Coalition Agreement commitment to promote mutuals.”
It stated that the Treasury should be proactive in promoting the interests of financial mutuals within the Government. One of the first conclusions in the summary of its report was:
“HM Treasury appears to have taken a reactive stance to the mutual sector beginning to deal with important issues such as building society capital, but little else of substance.”
I do not want to labour that point, because time is short.
Chris Leslie
The credit union sector deserves far more support and encouragement than it receives, and previous Governments of all parties have failed to do enough to promote it. The demutualisation agenda of the 1980s and early 1990s significantly reduced the size of the building society sector, and compared with other developed countries mutual providers have a very small market share, particularly in the financial services sector.
Geraint Davies
We used to hear about the share-owning democracy, but there have been tidal shifts in people’s desire to take risks and own shares. Does my hon. Friend agree that we have a moment in time at which we can change direction and have more diverse ownership among the population and a new culture of business? The Government are missing a trick.
Chris Leslie
Now is the time to think about the culture change that we want to see in the financial services sector. Yes, there are some good plc structures, but we have an insufficiency of good mutuals, building societies and so on. There should be new entrants of that type, and current ones should grow to provide some proper competition to the big banks.
Geraint Davies
The amendment requires the Government to measure the number of mutuals and their share of the market. In so doing, it brings the Government to account. If there is no point to that, and if we want only what the hon. Member for Wycombe (Steve Baker) called “spontaneous order”, we would not have the Office for Budget Responsibility, and we might as well forget measuring and management. The amendment seeks to bring the Government to account, and should therefore be supported.
John Healey
There is a saying that what is measured matters, and if it matters, measure it. In many ways, that is the core of the argument being made by Opposition Members.
Sixteen per cent. of those who aspire to own their own home and who borrow to buy do so from building societies. Roughly one in six of us borrows our mortgage from a building society. That significant market share is gradually growing. That is why I have argued that building societies are the unsung success of British financial services. They are certainly unsung by a Government who promised to be their champion.
In my view, building societies are the quiet strength of British financial services, but it is time that that strength was properly supported by Government policy and action. Mutuals look at the coalition agreement and point to the words on the paper, but they cannot point to the action that followed. The amendment is designed to force the hand of the Minister, the Treasury and the Government. I am surprised that it finds any objection on the Government Benches, because it simply seeks to hold the Government to the promise they made
Mark Durkan
I thank the hon. Gentleman for that intervention, as it shows exactly why people should be worried. If the best argument that Government Members can make is that this amendment is modest and merely permissive, people should be worried that the Government are opposing and rejecting such a straightforward, common-sense amendment.
Geraint Davies
I shall be brief, Mr Deputy Speaker. The coalition Government say that they want to encourage diversity in the market and increase the proportion and number of mutuals, yet they refuse to agree with measuring the number of mutuals or their market share. Anybody who is serious about any policy should want to measure it in order to manage it and show that it has been successful; otherwise they come across as completely hollow. Given that we have the Office for Budget Responsibility and so on measuring important things such as outputs and economic performance, I cannot understand why we cannot include mutuals as part of that portfolio.
David Rutley
I understand the hon. Gentleman’s strength of opinion, but is he not aware that these data are readily available? We need only go to a market research firm or to researchers in the City to find that the data are readily available.
Geraint Davies
But as I have just said, if that is the case why do we need the OBR? We could go on the internet, like the hon. Member for Birmingham, Yardley (John Hemming) did, and then say, “I’ve got a figure from a reliable mate in the City.” This is completely absurd—
John Hemming
Just for clarification, I looked up the BSA figure for the market share of mutuals, and it indicated that the market share was increasing. The BSA is not a friend of mine in the City, and the information is already being measured and reported on.
Geraint Davies
My point is that second-hand information is available in all sorts of marketplaces, but the Government make a great virtue of the OBR, and of other reliable and robust statistical sources, in order to measure the effectiveness of the outcomes of their policies.
Geraint Davies
I hope that this intervention is not just another repetition of the same thing.
John Hemming
It is difficult to see where the OBR comes into all this; it is not being handed the task of measuring things.
Geraint Davies
This is about having the reliable and consistent measurement of data in order to measure the effectiveness of policies, rather than having to rely on looking at the website of whatever trade association we are talking about. That is the essence of this amendment and it is why I support it.
The hon. Member for Stone (Mr Cash) mentioned the Rochdale pioneers, and I am glad that he did so. At that time, the idea of co-operation, co-operatives and mutuals was forged very much in the fire of unbridled capitalism and an economic Darwinism that I know some hon. Members would like to see return in the so-called “spontaneous order” of things. In that unbridled free market, the weaker members of society were being crushed, and a collective, mutual ownership emerged, through mutual societies and co-operatives, that enabled normal people to share risks, benefits and ownership, and to reinvest surpluses in their mutual. That is why those organisations grew, and I am very proud consistently to a have supported them.
One of the questions that arises is: why has there been a slight falling away of mutuals over the past few decades? Partly it has been because the Conservatives pushed demutualisation to get quick profits for their friends, who are involved in the capitalist system to make quick profits. Then, in 2008, we have this tsunami and suddenly people wake up in the debris of this chaos realising that some of the surviving organisations are mutuals, and they rightly ask why that is. The answer, of course, is that the focus of mutuals—their raison d’être—is not about just reaching out to maximise profitability and taking irresponsible risks; it is about delivering services for their members, who have equal shares. As a result, the time of mutuals is back.
This is a time of enormous global financial turmoil. We all know about the risks from the sovereign debt of Greece, Spain and elsewhere, and the knock-on impacts of that. We also face a great deal of risk from German banks and other financial institutions that do not have the inherent solidity and risk management of the co-operative system. If the Government are serious about this, now is the time to move forward. The coalition Government have said that they will move forward, but they cannot even be bothered to measure the market share and the number of mutuals. So how seriously can we take them? The answer, self-evidently, is: not seriously at all. The top management consultancy McKinsey has the mantra, “If you can’t measure it, you can’t manage it.” That company knows that that is self-evidently the case, but we are saying here, “We don’t really want to manage it. We won’t measure it. It does not really matter.” That is what is coming across, and it is a great shame that it is.
Labour Members are saying, “Let’s paint a picture of how things are changing. Let’s try to use that to make progress and to actively encourage credit unions, housing co-operatives and so on.” Such organisations tend, by their very nature, to be locally owned, with local benefits for local people. That contrasts with the situation described by the hon. Member for Stone, whereby a member of the Royal Bank of Scotland may find that Santander has suddenly sent them part of their bill, and they wonder why that is and whether there is a risk from the Spanish contagion, linked into the Greek risk. Somebody was mentioning that sort of situation to me the other day, and of course it arises because of the global nature of these organisations.
People want the security and assurance of knowing that they can go to local co-operatives and be offered loans if they save, whereas they would be excluded from high street banks, which would say, “You’re too poor. We can’t give you an overdraft”, but if people were in a credit union they could get one. A lot of this is about risk management and stability, but it is also about ethics. We know that mutuals—the Co-op in particular—are trying to promote fair trade, sustainability and so on. If we are serious about encouraging risk management, and a better and fairer future for all our communities with mutuals, we should be serious about pushing forward the top line of this amendment—that to manage it, we should measure it. I very much hope that the Minister will accept this modest amendment.
Mr Hoban
We have had a wide-ranging debate on mutuality, and it has acted as a peg for discussion. As is clear from this evening’s contributions, we all recognise the strength of the mutual sector, its importance in providing choice and diversity, and the benefits it brings. A couple of times, however, Opposition Members seemed to elevate mutuals into semi-religious institutions. Let us be realistic about some of the issues that mutuals faced during the crisis. Some mutuals had to be bailed out by others, and the first use by the previous Government of the special resolution regime was on the Dunfermline building society. A number of mutuals strayed from their core business model, which had consequences.
One hon. Member—I think it was the hon. Member for Harrow West (Mr Thomas), who is no longer in his place—referred to mutuals supporting their branch network. I recall that one of the first Adjournment debates I replied to as a Minister was as a consequence of Nationwide closing a number of branches in south-east London. All mutuals face commercial pressures, which needs to be acknowledged.
Geraint Davies
What the Minister says is true, but does he accept that there is a differential outcome and that, on balance, because of the lower-risk structure, the mutuals do better than conventional capitalist banks?
Mr Hoban
It depends on risk management and the business model that mutuals follow. There is a different set of constraints around building societies, which helps to ensure their stability, but that does not mean that they are immune from some of the mistakes that have caused failure in the past.
The clear intention of the Bill—we discussed this at length in Committee—is to ensure that regulation does not discriminate against mutuality, or indeed any other type of ownership, simply because it diverges from the norm of public or private ownership. I believe that the Bill delivers that result. For example, in clause 22, new section 138K requires the Prudential Regulatory Authority and Financial Conduct Authority to analyse the impact of the proposed rules on mutual societies. This will help to build up a base of impartial evidence to allow the regulators to continue to assess whether mutuals are being treated appropriately within the regulatory system. It is important that regulators think through very carefully the impact that their rules will have, particularly on mutuals.
Oral Answers to Questions
Geraint Davies Excerpts(12 years ago)
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Geraint Davies (Swansea West) (Lab/Co-op)
Rather than giving £10 billion to the IMF for the European bail-out fund, would it not be better to invest that money in a growth strategy in places such as Swansea to generate jobs and growth, and avoid the situation of the Chief Secretary suddenly announcing a further 5% cut in departmental spending, allegedly for a rainy day?
Mr Osborne
The political opportunism and empty opposition of the Labour party was brutally exposed yesterday when the shadow Chancellor opposed the contribution to the IMF and the right hon. Member for Edinburgh South West (Mr Darling), a former Chancellor of the Exchequer and one of the few people to emerge with real credit from the last Government, completely contradicted him. Not only are the Opposition not taken seriously at home, they are not taken seriously abroad either.
Budget Leak Inquiry
Geraint Davies Excerpts(12 years, 1 month 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.
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Geraint Davies (Swansea West) (Lab/Co-op)
Leeks are normally very popular in Wales, but given that only 4,000 people in Wales pay the 50p rate of tax, compared with 94,000 in London, taken alongside the regional pay leak, this represents a massive transfer from poorer people in Wales to richer people in London. Does the Minister not agree that spreading that sort of fear through leaks ahead of the Budget announcement is disgraceful, and has he not admitted that he has given leaks by referring to our alleged leaks?
Amendment of the Law
Geraint Davies Excerpts(12 years, 1 month ago)
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Gavin Williamson
I will happily talk about what happened under the previous Conservative Government, although it is going a little way back. Between 1992 and 1997, exports from the manufacturing base in this country grew and gross value added grew, because we created an environment in which manufacturers could grow. That did not happen under the last Labour Government, when jobs and businesses were destroyed. The Chancellor is committed to reversing that. I can give many examples of businesses that failed under the Labour Administration. This Government are committed to helping businesses grow, which is to be welcomed.
Geraint Davies (Swansea West) (Lab/Co-op)
The hon. Gentleman is being gracious in giving way. I should say that my background is in multi-national companies and in starting my own businesses successfully. Does he accept that after his Government came to office, the growth forecasts reduced massively between the first and the second year? According to the Office for Budget Responsibility, the size of the economy will be down by £50 billion a year for ever because of his Government’s policies.
Gavin Williamson
I thank the hon. Gentleman for making those comments. It is fascinating that the International Monetary Fund has predicted that Britain will grow faster than Germany and France. It is true that the eurozone has had a negative impact on this country, but people see us as a country that is well run, with a Chancellor who is committed to making business growth happen. That is why we will grow faster than Germany and France. I am sure that the hon. Gentleman will welcome that.
I will move on briefly to families. It is often said that raising the personal allowance is a Liberal Democrat idea. Members will be shocked to hear that the matter was raised with me many times during the general election campaign. I told people that if I was elected as their Member of Parliament, I would do all that I could to ensure that personal allowances increased so that the lowest-paid—
Geraint Davies (Swansea West) (Lab/Co-op)
Unemployment is at a 17-year high, more people than ever are being forced into part-time work, there are cuts in tax credits to the low-paid, 170,000 children will be forced into poverty in the coming year, growth is down, the deficit is up, 700,000 public sector workers are being sacked, services are being slashed and the Office for Budget Responsibility says that the Budget measures will have no impact on growth forecasts. What better time to reduce the 50p tax rate to 45p? There are 4,000 people in Wales who pay the 50p tax rate compared with 94,000 in London. Again, then, we have a Budget where the rich get richer and the poor get poorer. There are hidden measures, too, such as the £3 billion being taken from pensioners in their allowances and family tax credits going down for the poorest.
Of course, we need growth to clear the deficit. Labour had a good record on growth—1997 to 2008 saw record post-war growth levels. Then we had the financial tsunami, and obviously the current Government inherited a deficit, but two thirds of it was due to the bankers and a third due to the Labour Government spending and investing above its earnings. That was the right thing to do to sustain growth and not fall into a depression. The Conservatives arrived and immediately focused not on growth but on cuts and announced 500,000 job cuts in the public sector—and Bob’s your uncle, people stopped spending money, consumption fell, growth flatlined and the deficit rose by £150 billion. That is complete incompetence.
The Tory plan is to shrink the public sector, to squeeze the poorest and to move too far, too fast. Owing to these changes, the OBR has made a one-off change in its predictions of £50 billion—3.5% to 4%, as mentioned earlier, of the whole economy. The focus is 20% on tax and 80% on cuts. Perhaps that is the wrong balance for managing the budget. The focus is on getting rid of the budget deficit in four years instead of halving it in four years. Perhaps that is the wrong focus. Furthermore, the cuts themselves are not targeted fairly.
Most recently, we have heard about regional pay. In Swansea, 40% of workers are in the public sector, and 60% of them are women. Already many people are facing job cuts—part of the 700,000 job cuts. They already face zero pay increases for two years, followed by 1% increases for two years, and with inflation at about 5%, that is nearly a 20% real-terms cut in their pay. The last thing they want to hear is that there will be further cuts to regional pay. We need to stimulate private sector investment through, for example, investment in electrification of the railway to Swansea. Wales’s share of High Speed 2 would be £1.9 billion, but instead Wales can look forward to a Trojan horse of cuts to the Welsh Assembly Government, as this idea of regional pay is geared towards health, education and the like. There is a real danger that a general practitioner in Swansea will say, “Hold on, I want to live in Bristol.” There is a concern about the migration of quality workers.
My father—and, indeed, the father of the hon. Member for Worcester (Mr Walker)—was involved in the Driver and Vehicle Licensing Agency and the Mint moving to Wales. These are important resource that help to support the Welsh economy, but now there is a move to reduce that by cutting people’s wages.
What should we do? My view is that a temporary, targeted fiscal stimulus in the autumn, on VAT, national insurance and investment in infrastructure—such a stimulus has been commended by the Institute for Fiscal Studies—would be a sensible idea. In the case of Swansea, if VAT was reduced for one year to 17.5%, it would mean £450 per household. There are about 103,000 households in Swansea, so that makes £46 million in the local economy. That equates to about 3,000 jobs at £15,000 a job. That would have a big impact on confidence, on getting consumer demand going and on getting growth on to a better trajectory.
Similarly, reducing VAT on home improvements would stimulate private sector building, which is important because at the moment it is on its knees; and of course we need to invest in a range of infrastructure projects to support the economy for the future. I have already mentioned rail but investing in our ports, again in Swansea, is also important.
I, too, support doing more to get what we can out of emerging markets and hooking up small businesses in this country to those markets. In Britain we have one of the biggest digital economies in the world—£120 billion—and we have an opportunity for growth in that economy. I support some of the focus on entrepreneurial support, in terms of loans and skills. The problem is that people are now coming out of university with excessive debt.
Oral Answers to Questions
Geraint Davies Excerpts(12 years, 2 months ago)
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Mr Osborne
The reason we have put forward the policy is that those higher-rate taxpayers who do not have children are not in receipt of state benefits, so it is quite difficult to remove state benefits from them.
Geraint Davies (Swansea West) (Lab/Co-op)
The Chancellor and his Government are considering the complete removal of all subsidy to disabled manufacturing workers in Remploy. Does he accept that, as a minimum, the subsidy should be at the level of unemployment benefit and reflect the knock-on cost on health in order to avoid making a net loss by putting those people on the dole?
Mr Osborne
We are seeking to use the same amount of money in a better way, and it is a very sensitive issue, which hon. Members from all parts of the House are concerned to ensure we get right. We are working very closely with disability charities to come up with a future that is right for the people who have disabilities and want to work.
Oral Answers to Questions
Geraint Davies Excerpts(12 years, 3 months ago)
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Mr Hoban
My hon. Friend should bear in mind that the deficit on traded goods between the UK and the EU is £43.9 billion but that the deficit outside the EU is even larger at £54.7 billion. We should be encouraging businesses across the UK to invest more and to export more to places in the EU, as well as to Brazil, Russia, India and China. I encourage him to talk to businesses in his constituency and encourage them to export more to close that gap.
Geraint Davies (Swansea West) (Lab/Co-op)
Does the Minister accept that, unlike some other EU members, we have flexible exchange rates, flexible interest rates, market access and very limited exposure to the euro bail-out? Is it not time that we invested in a growth strategy to take advantage of those opportunities and build Britain so that it is strong again, getting rid of the deficit to growth and not cutting?
Mr Hoban
The key thing is to have a credible fiscal and economic policy. The Conservative party and this Government have that credible economic policy, whereas the Labour party has no idea where it wants to take the economy. The measures we are taking to tackle the deficit which keep interests rates low are providing the biggest benefit we can give to businesses to help them grow in future.
Youth Unemployment and Bank Bonuses
Geraint Davies Excerpts(12 years, 3 months ago)
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Danny Alexander
I am going to make some progress, and I will give way again shortly.
Across the wider economy we are doing everything we can to foster renewed prosperity, create new jobs across the UK and return the country to sustainable growth. Whether we are talking about regulation, the planning system, reducing corporate taxation, our investment in infrastructure or the tax cuts that we are delivering for low-income workers, we are putting forward ambitious plans—plans that we need in these difficult times.
Danny Alexander
I will give way in a moment.
The Opposition do not seem to realise that tackling that deficit is the vital precondition to sustainable growth. It is only by tackling the deficit that we can provide the certainty, stability and low interest rates that are critical to a recovery. The past 18 months have seen sovereign debt downgrades across the Europe, bail-outs of the weakest Eurozone economies, and countries racing to consolidate at the behest of the bond markets.
Mr Ruffley
That is an interesting suggestion. I also think that the former Prime Minister should make a personal apology when our Prime Minister, who is an infinitely better one, strips Sir Fred Goodwin of that ill-deserved knighthood.
Currently, there are excessive bonuses within the sector that give capitalism a bad name. They have fostered the belief that there is a class of people who pay themselves pretty much what they like while the rest of the country has to deal with the consequences of what many of those people served up to this country by way of financial crisis. The idea that this is something that Conservatives are casual about is utterly false. The speculation by the Mayor of London about what the greatest pro-enterprise Prime Minister of the previous century would have thought of today’s sorry state of affairs was interesting. He said that we should ask
“what Margaret Thatcher would have thought of a system where directors sit on each other’s “remcoms”—remuneration committees—and defend each other’s expanding awards, even when the directors in question have presided over commercial disaster of one kind or another. She would have thought it was absurd.”
All Conservatives think that is absurd and that something must be done about it. We think that two things should be done. First, we want to encourage people of talent to come to the UK, stay here and make the City of London the greatest financial capital on planet Earth. The second thing we need to do is foster a regime in which performance is more closely tied to reward. Quite frankly, that is not extant.
I suggest that a new blanket tax on bankers’ bonuses would undermine those aims, or at best do nothing to advance them. It would do nothing to distinguish between cases in which an executive had genuinely earned a reward by turning around a failing organisation, increasing profitability or increasing returns to shareholders, and cases in which executives had taken advantage of lax scrutiny to take excessive rewards for their failure. There is a distinction between the rich and the undeserving rich, of whom Sir Fred Goodwin is a terrible exemplar.
Geraint Davies
The hon. Gentleman talks about bankers, but he will be aware that among the FTSE 100 companies, there has been an average 49% increase in directors’ pay, and many of those companies have not had a proportionate increase in share value or profitability. Is he saying that his Government should introduce specific measures to cap pay increases for non-banker directors of FTSE 100 companies? If he is not, he is saying nothing.
Mr Ruffley
I am not suggesting that for a minute, and if the hon. Gentleman bothered to read the motion, he would see that it relates to excessive bankers’ bonuses.
The fact remains that we have to be careful when we talk about a tax on banking. My right hon. Friend the Chancellor sensibly introduced a levy on bank balance sheets, something that the Labour party was not prepared to do. We were one of the first countries in the world to do that, and it will raise more than £2.5 billion a year. Instead of introducing another tax as the motion proposes, we should do more to discourage the granting of excessive bonuses in the first place. That would have a very happy by-product. When Robert Jenkins gave evidence to the Treasury Committee last week—for those who have not been initiated into these affairs, he is a member of the interim Financial Policy Committee, and a former banker—he said something very interesting:
“Every £1 billion of less bonus would support £20 billion of additional small business lending.”
I defy anyone on either side of the House to deny the wisdom of that.
I am talking about the unjustifiably excessive bonuses paid to executives in banks that have failed or are failing. Stephen Hester is, we are told, looking to accept a bonus for 2011, despite the fact that his bank’s share price has fallen out of bed. Eric Daniels, who was the chief executive of another failed business—Lloyds-HBOS—took seven-figure bonuses before he was booted out. What the Labour party needs to understand is that that culture, which we all deprecate, did not grow up in the past 18 months. I hope that Labour will show a bit more humility in this debate than it has done so far. It did not regulate the banks properly; it sat by while these bonuses were being paid, year after year; and it gave knighthoods to the miscreants who accepted them. Incidentally, it was the Labour Government who allowed some private equity bosses to pay very little tax—less tax than the cleaners in their offices. We shall therefore take no lessons from Labour on regulation and on what we do about a state of affairs that I think we all agree is unacceptable.
Shareholders are not doing their job sufficiently well; that is why I urge the Government to change the law so that the threshold for shareholder approval of remuneration packages is shifted from 50% to 75%. I know that Fidelity, one of the largest holders of shares in UK banks, strongly supports that. Also, fund managers do not have much incentive to think in a long-term fashion; that is why I hope that the Financial Policy Committee, when it is up and running, and the Prudential Regulation Authority—the new regulator—will ensure that the Financial Services Authority’s remuneration code, which covers only 2,500 firms, covers very many more. Bonus clawback—clawing back money given to executives who depart in disgrace and failure—is something that the Government need to talk about. Lloyds is apparently looking into that.
More tax is not the answer; better regulation, under this Government, is.
Geraint Davies (Swansea West) (Lab/Co-op)
At the centre of this debate is the question of what the optimum balance should be between growth and cuts, and in what time scale we should bring down the deficit. I contend that the debate should not be some sort of auction about who will cut what when; it should be about who has the most creative, realistic growth strategy, predicated on what has happened in the past. Let us look at the Labour party’s record, to which people have referred. Post-1997, we created 2 million more jobs. We replaced interest rates of 10% to 15% with very low rates, thanks to the independence of the Bank of England. With those jobs and those taxpayers, we doubled our investment in the health service and reduced debt. We have a fine record to build on.
In 2008, as we all know, there was a financial tsunami, generated by sub-prime debt in the United States. Our then Prime Minister, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), got together with Barack Obama to ensure that we delivered a fiscal stimulus, and that there was not a depression. We had a shallow recession, and then fragile growth. Then the Tories arrived, and immediately announced 500,000 job cuts. Consumer confidence and demand were thrown out with the bathwater. Immediately, people in the public sector thought that they were going to lose their jobs, and would not spend money. People in the private sector stopped taking on employees, and we ended up with the deficit rising. The deficit forecast is now £158 billion above what it was; when Labour came in, the deficit forecast was falling. The question is what we should do to bring back confidence.
Charlie Elphicke
Will the hon. Gentleman explain whether he agrees with the shadow Chancellor, who said the other day,
“we are going to have keep all these cuts”?
Geraint Davies
I am not opposing having to make savings and cuts. I am saying that the key is growth. As a business man in Swansea said to me, “It would be no good laying off my workers and selling my tools if I was making a loss; I would need to grow my sales while making savings.” That is the focus. That is why there is a five-point plan focused on national insurance for the building industry, on VAT for extra consumption, and on taxing banker bonuses to generate jobs and infrastructure growth.
In addition, we need a credible growth strategy focused on the growth opportunities in the global economy, namely the emerging consumer markets in India, China and south America. What are we doing to re-engineer our financial markets, our modern manufacturing, and our services, so that they are tailored to those markets? What will we do about getting capital opportunities from surplus-rich countries such as China, or oil-rich countries, so that they invest in our infrastructure? What are we doing to skill ourselves up for future markets? Those questions do not seem to be being asked or answered tonight.
In Swansea, I am talking with prospective manufacturers from India about linking up with the university and providing a manufacturing base to build on the cutting-edge life science research taking place there. I am talking with possible investors about investing in manufacturing facilities. There are companies such as Tata near Swansea, which are already investing in the modern manufacturing of steel, which will have six layers and can create its own energy and heat, so there are new global opportunities. This debate has been completely focused on who will cut most, when. That is going nowhere. We cannot cut ourselves out of this economic problem. We have to grow, invest and reposition our industry.
Glyn Davies (Montgomeryshire) (Con)
I should like to give the hon. Gentleman another chance to support the Opposition’s policy of acknowledging both that they support the cuts programme introduced by the Government and that they made quite a few mistakes when they were in government.
Geraint Davies
We need a balance of savings—certainly not cuts against our productive capacity—with the main focus on growth and jobs, as has always been the case. The shadow Chancellor said that he cannot predict the future—he does not have a crystal ball—and in three years’ time, with the situation ruined by a Government who have destroyed industry and opportunity, it is likely that we will face an even worse situation, so promises cannot be made about reinstating things subject to Government cuts. The key point is that unless we have a growth strategy, as Barack Obama is trying to do—and Europe is trying to reskill in a global environment —we have no hope, given the Government mantra that all that they can do to save business is cut, cut, cut. All that that leads to is the death of industry. I shall leave it there, and let us focus on growth.