Public Service Pension Schemes: Quadrennial Valuations
John Glen Excerpts(7 months ago)
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The Chief Secretary to the Treasury (John Glen)
There are currently more than 6 million active members of the public service pensions schemes, which cover the NHS, teachers, the armed forces, the police, firefighters, local government workers, the judiciary and civil servants. Valuations of the public service pension schemes are undertaken every four years. The valuations are important as they ensure that the full costs of each scheme are understood and fully recognised by Government, and that there is a fair balance of risk between members and taxpayers with regard to the cost of providing the schemes.
This valuation is the first time that a reformed cost control mechanism will be used. Following a review by the Government Actuary and a public consultation, the cost control mechanism has been reformed to address concerns around its not meeting its original objectives. The objectives are to protect the Exchequer, and by extension taxpayers, from unforeseen costs; to maintain the value of public service pension schemes to members; and to provide stability and certainty on member benefit and contribution levels. The reforms mean that the mechanism now only assesses costs associated with the post-2015 reformed schemes, increases the margin by which costs need to vary from the target in order for benefit, or member contribution, changes to be required from 2% to 3% of pensionable pay, and includes an “economic check” such that changes will only happen if the costs would still be outside the same margin had the impact of changes in long-term economic assumptions been included. The Public Service Pensions Act 2013, when taken together with regulations made under it and the Public Service Pensions and Judicial Offices Act 2022, provides for the introduction of these reforms.
On 31 August 2023, HM Treasury published a document that sets out how the valuations are to be conducted for this valuation cycle[1]. The document sets a range of assumptions that Departments and the Scottish and Welsh Governments must use in finalising their valuations of public service pension schemes. The document allows public service employers, Departments and scheme administrators to complete their valuations and prepare for the implementation of new employer contribution rates and take any necessary steps with respect to cost control mechanism results. The publication of this document follows a statutory consultation with the Government Actuary, which concluded in August 2023. Copies of this document, the 2023 Directions, have been placed in the Houses of Parliament Libraries.
A key factor which influences the valuation results of all unfunded schemes is a reduction in the SCAPE—superannuation contributions adjusted for past experience —discount rate which is used to express schemes’ future pension payments as a present-day cost, based on the Office for Budget Responsibility’s forecast of long-term GDP growth. The updated SCAPE discount rate was announced in March 2023 and is expected to cause increases to employer contribution rates. This is because pension payments paid in the future will be discounted at a lower rate and therefore have a higher value in today’s terms. HM Treasury has committed to provide funding, for all centrally funded employers, for increases in employer contribution rates resulting from the 2020 valuations as a consequence of changes to the SCAPE discount rate.
The outcomes of the valuations are expected to be confirmed later this year via the publication of each scheme’s valuation report. Changes to employer contribution rates will be implemented with effect from 1 April 2024, and any changes to benefits required to bring a scheme back to target cost would apply retrospectively from 1 April 2023. An additional process operates in the local government pension scheme (LGPS) (England and Wales) run by the LGPS England and Wales Scheme Advisory Board.
[1] https://www.gov.uk/government/publications/public-service-pensions-2020-valuations
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Oral Answers to Questions
John Glen Excerpts(7 months, 2 weeks ago)
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Philip Davies (Shipley) (Con)
The Chief Secretary to the Treasury (John Glen)
The Chancellor launched the efficiency and savings review in the autumn statement to focus on the Government’s priorities and identify ways in which to work more efficiently and help to manage budgetary pressures from higher inflation. The Secretary of State for Transport and I discussed the costs of HS2 during the review, which helped to inform the decision to rephase certain parts of the project as part of balancing the nation’s books.
Philip Davies
The travel between north and south is the bit of transport infrastructure that works; it is the travel across the north that does not work. What would the cost of HS2 have to reach for the Government to conclude that it no longer represents value for money for the taxpayer, or are the Government pursuing the essentially socialist policy that they will keep paying for this ridiculous white elephant irrespective of the final bill?
John Glen
I took the precaution of researching my hon. Friend’s interest in this subject, and I note that he was issuing challenges on it 14 years ago. The Government remain—as they were then—fully committed to delivering HS2 and the integrated rail plan. This is a long-term investment that will bring our biggest cities closer to each other. It will boost productivity, and will provide a low-carbon alternative to cars and planes for many decades to come. As my hon. Friend knows, we are also working, through the IRP, on a £96 billion package to improve inter-regional rail connections, which obviously affects his constituents.
Graham Stringer (Blackley and Broughton) (Lab)
Does the Minister agree that this country’s performance on productivity has been pitiful over the last 10 years? There has been virtually no improvement in productivity, and one reason for that is our lack of investment in national infrastructure. Slowing down HS2 is a bad move when it comes to improving our infrastructure, and it is years since we agreed to a third runway at Heathrow. Does the Minister agree that if we are to improve our productivity, we have to invest in infrastructure?
John Glen
I can agree with the hon. Gentleman that the investment of £600 billion in infrastructure in all parts of the country to which the Government are committed is critical to easing the productivity challenge that has faced successive Governments, and the Chancellor will introduce measures in the autumn statement to address it further.
Greg Smith (Buckingham) (Con)
HS2’s costs have ballooned since it was first conceived under the last Labour Government. As my right hon. Friend has said, owing to pressure from the Treasury the project has had to be rephased, and trains will now go from west London—not central London—to a station not in central Birmingham, which negates the benefits that the scheme’s proponents said it would bring. With costs ballooning still further, we just cannot afford it, can we?
John Glen
I am sorry, but I do not agree with my hon. Friend. I certainly recognise that infrastructure investments of this scale and with this level of ambition are never easy to deliver. I have set out the changes to the profile of the investment, but all the key elements are still on track, and we will continue to work with the Department for Transport to ensure that that remains the case.
John Spellar (Warley) (Lab)
Is the Minister not also concerned about cost-benefit analysis? Have not assumptions behind the pattern of business travel demand been changed dramatically by the pandemic, working from home and video conferencing? Is the Minister satisfied that the Department for Transport has properly re-evaluated HS2 to take account of such changes?
John Glen
Yes, I am content with that. I recognise those changes in patterns of behaviour when it comes to the use of public transport, but we also face cost of living challenges. That is why we are working so closely with the Department for Transport to, for example, continue investment in buses over the next two years, and continue to spend £200 million on capping fares to £2 outside London. We must bear in mind, however, that continued investment in transport infrastructure is key to greater connectivity across the United Kingdom and dealing with the economic growth imperative.
Esther McVey (Tatton) (Con)
It has been reported over the last couple of days that accommodating HS2 will mean fewer trains between the north and London. One station affected is Wilmslow in my constituency. Does the Minister agree that were that to happen, HS2 would no longer be value for money or good for the north? It would certainly take longer and cost my constituents more.
John Glen
HS2 is going to happen. The question is what additional investments across other parts of the rail infrastructure might benefit my right hon. Friend’s constituents additionally and more directly. I set out with the integrated rail plan the £96 billion package to improve rail connections, and many elements of that will have a direct impact on her constituents in Cheshire.
Andrew Bridgen (North West Leicestershire) (Reclaim)
As the Minister is well aware, North West Leicestershire has suffered under the blight of HS2 for more than a decade, and the whole project has recently been declared to be undeliverable. It has been unaffordable for some considerable time. Will he urge his colleagues in Government to cancel the remainder of the eastern leg and reallocate just a small portion of that budget so that we can reopen the Ivanhoe line?
John Glen
I recognise that the hon. Gentleman has strong views on this, and I know that he has been personally affected by it in the past. The project, although it has been rephased, will continue. There are a number of issues involved in ensuring tight management of that budget, and I am working closely with the Department for Transport to see that that happens.
Nadia Whittome (Nottingham East) (Lab)
Mary Kelly Foy (City of Durham) (Lab)
The Chief Secretary to the Treasury (John Glen)
The Government are committed to supporting individuals to live healthier lives. High inflation is the greatest immediate economic challenge that we must address. The Government have made it a priority to halve inflation this year. We are on the path back to the target of 2% and consumer price index inflation fell to 6.8% in July. We will continue to work with all Departments to deal with the inflationary pressures they face.
Mary Kelly Foy
Being unable to pay for essentials such as food, heating and rent has an impact on physical and mental health. It can lead to delayed diagnosis, malnutrition and serious mental health problems. As the former Health Secretary will know, prevention is better than cure, but austerity flies in the face of a preventative approach. What discussions has the Chancellor had with the Secretary of State for Health and Social Care to ensure that the NHS has prevention at its heart? Will we see a rise in funding in the autumn statement?
John Glen
Yes, I have frequent conversations with the Secretary of State and other Ministers about health budgets. We will be increasing the public health grant to £3.575 billion for the next financial year. That is to ensure that we have that real-term funding protection over the next two years, but there are a number of other interventions that we are making on delivering services more effectively, ensuring that we have the provision of additional staff with the long-term workforce plan for the NHS. None the less, I do recognise the challenges that a post-covid NHS faces in terms of the legacy of demand that is yet unmet. We are continuing to work to bring down waiting lists and we have seen significant progress recently, particularly with two-year and 18-month lists.
Mr Philip Hollobone (Kettering) (Con)
A key part of improving the public health and wellbeing of my local residents in Kettering is the redevelopment of Kettering General Hospital. Can the Chief Secretary to the Treasury confirm that the £400 million-plus redevelopment of KGH remains on track for completion by 2030, and that the standardisation of the design of the 40 new hospitals will help to reduce costs and increase deliverability?
John Glen
Kettering General Hospital is always at the top of my mind when I come to Treasury questions, but the bigger challenge, as my hon. Friend rightly points out, is how we ensure the efficiency of the expenditure of every pound of taxpayers’ investment in the health estate. I shall continue to work with the Secretary of State on that plan for the 40 hospitals to make sure that we achieve that.
Derek Twigg (Halton) (Lab)
In the many discussions that the Minister says he has had with the Secretary of State for Health and Social Care, what figure did they discuss with him that he estimates inflation will be at in the next financial year?
John Glen
There are a range of forecasts, but we have to deal with the reality. I am trying to ensure that, across all of the decisions that Secretaries of State make, we reprioritise effectively and deliver frontline services, but I do not have a number for the hon. Gentleman this afternoon.
Jonathan Gullis (Stoke-on-Trent North) (Con)
People in Stoke-on-Trent North, Kidsgrove and Talke find that mental health is a huge barrier to getting back into work and obviously helping to produce economic growth. That is something that the Chancellor is reported to have been considering carefully over the summer recess. My friend James Starkie and I have launched a No Time To Wait campaign to use some existing health and social care funding to get specialist mental health nurses into GP surgeries to help support people in a more preventive way—something the hon. Member for City of Durham (Mary Kelly Foy) asked about earlier. What support will the Treasury give to help the Department of Health and Social Care to enact those plans?
John Glen
My hon. Friend always has constructive suggestions in this difficult area. The Chancellor brought forward a number of interventions in the Budget to get people back into work after some of the behavioural shifts that we saw following the pandemic. We look forward to continuing to work with my hon. Friend on solutions for his community.
David Duguid (Banff and Buchan) (Con)
Ian Lavery (Wansbeck) (Lab)
The Chief Secretary to the Treasury (John Glen)
I do not accept that characterisation at all. I do understand the impact of mesothelioma, as my father died of it, but this Government have invested £15 billion to keep schools safe since 2015, and the Chancellor has set out other figures as well.
Mr Philip Hollobone (Kettering) (Con)
Mary Glindon (North Tyneside) (Lab)
John Glen
I have not heard that matter raised before, but I am very happy to take it back and correspond with the hon. Lady on it. Obviously, we have taken advice on the state pension age and have made clear our policies previously, but I am happy to look at any specific cases she raises.
David Duguid (Banff and Buchan) (Con)
John Glen
Dialogue is ongoing on this matter and I can confirm that we will continue to work on this in the coming weeks.
Saqib Bhatti (Meriden) (Con)
Andy Haldane, the former Bank of England chief economist, recently said in a Sky News interview that the Bank of England kept on printing money for longer than it needed to. It is clear that central banks across the world have been addicted to cheap money and that this has contributed to inflation across the world. Does the Chancellor agree that printing cheap and easy money has not been without consequence, and instead our monetary policy must focus on important growth factors such as productivity?
Treasury
John Glen Excerpts(9 months, 1 week ago)
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Ian Mearns (Gateshead) (Lab)
I am a little concerned about the £1.425 billion to be found from within the Department for Education’s existing budget between now and 2025, with £525 million this financial year and a further £900 million in the next financial year. Will the Minister be a bit more specific about exactly where that will be taken from within the Department’s budget to meet the teachers’ pay increase? While of course we welcome the fact that the Government are honouring the teachers’ pay review body recommendations, let us not forget that the envelope for the review bodies is set by the Government in the first place. There is something else going on in this situation: we currently have a recruitment and retention crisis among our teaching workforce, with something like 20% of newly qualified teachers leaving after three years and 40% leaving after five years. Nobody goes into teaching because of the money, but it always helps, and a rise in line with inflation would certainly help.
John Glen
I thank the hon. Gentleman for his question. I think he welcomes what we have decided to do with the 6.5% pay increase, which leaves a typical teacher with £44,300. We are reprioritising within the Department for Education’s existing budget to deliver the additional funding to schools, but we are protecting core schools funding and frontline services. We have put in additional sums of money through the spending review and subsequent fiscal events: £330 million in 2023-24 and £550 million in 2024-25. The numbers add up, and he will recognise that.
[Official Report, 13 July 2023, Vol. 736, c. 533.]
Letter of correction from the Chief Secretary to the Treasury, the right hon. Member for Salisbury (John Glen).
An error has been identified in my response to the hon. Member for Gateshead (Ian Mearns).
The correct response should have been:
John Glen
I thank the hon. Gentleman for his question. I think he welcomes what we have decided to do with the 6.5% pay increase, which leaves a typical teacher with £44,300. We are reprioritising within the Department for Education’s existing budget to deliver the additional funding to schools, but we are protecting core schools funding and frontline services. We have put in additional sums of money to fully fund this pay award: £525 million in 2023-24 and £900 million in 2024-25. The numbers add up, and he will recognise that.
Public Sector Pay
John Glen Excerpts(9 months, 1 week ago)
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The Chief Secretary to the Treasury (John Glen)
With permission, I will make a statement on the steps His Majesty’s Government are taking to deliver sound money while providing a fair deal to public sector workers. Today, I can announce that the Government have accepted the headline recommendations of the independent pay review bodies in full. We are doing this while abiding by sound money, which, as the Chancellor said at Mansion House on Monday this week, is our No. 1 focus.
We cannot grow our economy or reduce the heavy burden of national debt without first cutting high, persistent inflation. Inflation makes every person in this country poorer. It is the most insidious tax rise there is, and that is why the Prime Minister has made it this Government’s priority to halve it this year. Inflation is currently at 8.7% in May, and core inflation stood at 7.1% in the 12 months to May 2023—the highest for 30 years. It is making everything from groceries and clothes to petrol and transport more expensive, so we must and we will do everything we can to tackle inflation.
The best tax cut there is is a cut to inflation, and that means we must take responsible decisions on the public finances, including public sector pay, because more borrowing is itself inflationary. According to recent International Monetary Fund estimates, advanced economies that increased public expenditure by 1 percentage point, which would mean £25 billion for the UK, saw inflation rise by half a percentage point. Yet our decision is responsible because, unlike some unsustainable demands, we have delivered awards that do not further fuel inflation and make the inflationary environment worse.
We said we would accept the outcome of the public pay review bodies, and that is exactly what we will do. We will do so because we are proud of our world-class public servants and owe them a debt of gratitude for their service through the last few years, including through the pandemic. Our police officers work tirelessly to keep this country safe, our armed forces defend us, our doctors and nurses make sacrifices to save lives, and our teachers go to school day in, day out to educate our children. All of them, and many more across many sectors, play a vital role in society.
With these contributions in mind, new teachers will start on at least £30,000. The lowest-paid armed forces will see a pay rise of over £2,000, and the starting salary of a junior doctor will rise by more than £3,000. That comes alongside our “Agenda for Change” deal, which delivered a 5% pay rise, along with one-off awards worth more than £3,600 for the average nurse and more than £3,700 for the average ambulance worker.
Specifically, this means policing will receive a 7% headline uplift. NHS consultants, speciality and specialist doctors, salaried dentists and salaried GPs will receive uplifts of 6% this year. Junior doctors will also receive a 6% uplift, as well as an additional consolidated £1,250 increase. Prison officers in the operational bands will receive a pay increase of 7%, with larger increases for support grades. Armed forces will receive a 5% uplift, with an additional consolidated £1,000 increase.
Our 6.5% pay award for teachers will be fully funded, with the Government providing £525 million of additional funding for schools in 2023-24 and a further £900 million in 2024-25. In order to achieve this, we are reprioritising within the Department for Education’s existing budget to deliver this additional funding to schools while protecting frontline services.
Alongside generous uplifts, today’s deal strikes a balance. It is a fair deal, which recognises the anxiety caused by cost of living pressures, supports recruitment and retention, and delivers one of the highest settlements in three decades. However, it is also fiscally responsible, and delivers pay rises that are broadly in line with the private sector. It would be neither fair nor affordable to meet unsustainable demands for pay rises well into double digits. To do so would be fiscally irresponsible, increasing national debt, passing the buck to future generations, weakening the foundations of our economy and further fuelling inflation.
There will be no new borrowing or spending to fund the awards. More borrowing would simply add more pressure on inflation at exactly the wrong time, risking higher interest rates and higher mortgage rates. Instead, the awards will be funded through a combination of the significant provision for pay that was made at the last spending review, greater efficiency, and reprioritisation. Departments will be reprioritising within existing budgets and driving further efficiencies to focus spending where it delivers the greatest value.
We will also take sound choices to maximise income. We plan to increase the rates of the immigration health surcharge, which have been frozen for the past three years, despite high inflation and wider pressures facing the economy and the system in general, to ensure that it covers the full healthcare costs of those who pay it. Under our plans, the main rate will increase to £1,035, and the discounted rate for students and under-18s will increase to £776. That increase to the surcharge will help to fund the pay rise for doctors.
At the same time, we will increase fees across a range of immigration and nationality routes, including for people coming here to live, work and study at a time of record high migration numbers. Specifically, that means increasing the cost of work visas and visit visas by 15%, and increasing the cost of study visas, certificates of sponsorship, settlement, citizenship, wider entry clearance, leave to remain and priority visas by at least 20%. We are also equalising costs for students and those using a priority service, so that people pay the same whether they apply from within the UK or from outside the UK. That will help to cover more of the cost of the migration and border system, allowing the Home Secretary to divert more funding to police forces to help fund the pay rise for the police. We will cut back on civil service recruitment in the Ministry of Defence until March 2025, helping to fund the pay rise for our armed forces.
The Government’s carefully calibrated approach to avoid increasing inflation could not be more different or further away from the economic platform offered by the Labour party. Labour’s proposals for an unfunded £28 billion a year spending spree in the second half of the next Parliament would deal a huge blow to our country’s collective efforts to tackle inflation. Members do not have to take my word for it, because we already have the view of the independent Institute for Fiscal Studies. Its director, Paul Johnson, said just a few weeks ago that additional borrowing would pump more money into the economy, potentially increasing inflation and driving up interest rates.
The action we have taken today is the most responsible way forward, striking a balance between the demands of our public sector workers and the needs of our country and economy. Industrial action has postponed more than 600,000 hospital appointments, cost our children more than 1 million days of teaching, and damaged the productivity and growth that we so clearly need in these challenging times. We have introduced and expanded this with the Strikes (Minimum Service Levels) Bill, which will limit the impacts of industrial action on the lives and livelihoods of ordinary people, who should be able to access key services during industrial action. The Bill gives us the power to set minimum service levels across key public services, such as healthcare, fire and rescue, public transport and education, and it gives us the right tools to deal with any ongoing disputes.
We must deliver on the Prime Minister’s pledge to cut inflation, so we will continue to chart the course of sound money, to the benefit of all, while making fair pay awards—awards that do not fuel inflation—to our public sector workers.
Mr Pat McFadden (Wolverhampton South East) (Lab)
I thank the Chief Secretary to the Treasury for the advance copy of his statement. Let me begin by praising the efforts of our NHS staff, teachers, police officers and members of the armed forces. The nurse who looks after someone when they are ill, the teacher who opens up new horizons for a pupil, the soldiers and police officers who keep us safe—we owe them all a great debt of gratitude. They are what make the good society, and we all rely on the public services they provide every day. Like all workers, they deserve a decent pay rise, and like all workers, they are living in a wider economic context.
The Government set out a plan at the start of the year, and then the economy intervened on their plan. They say that a plan does not survive contact with the enemy, but this Government’s plan has not even survived contact with reality. Just a couple of hours before the Chief Secretary to the Treasury gave us his statement, we heard news that the UK economy shrank in size last month. Even more worryingly, that comes after four years in which there has been no meaningful economic growth at all. Today’s Office for Budget Responsibility fiscal risk report describes what it calls a “disappointing decade” for economic growth. That disappointing decade means that, in reality, incomes for households, including the workers we are speaking about today, have stagnated and sometimes fallen. The country is less prosperous and more exposed to shocks than it should be, and that is the backdrop to today’s statement.
Ministers want to claim that all these problems are global, but inflation in the UK is the highest in the G7. Every month when the figures come out, they are higher than expected. Core inflation was up last month, not down. Food prices are rising 20% faster in the UK than in France, and three times faster than in the United States. Low growth, high prices, creaking public services—that is the legacy we have after 13 years of the Conservatives in power, with longer waiting times and waiting lists, and more than 3 million days lost to industrial action this year alone.
In his statement, the Chief Secretary to the Treasury talked of sound money, but the Government’s failings on public services have become economic failings too. Let me give the House one example. As the OBR pointed out in its risk report today, if we got labour force participation back to pre-covid levels by reducing ill health, we could reduce borrowing by £18 billion. The long waiting lists and waiting times are not just a health issue, but an economic issue. After the Conservative party put a bomb under mortgage rates last autumn, UK homeowners are now paying £2,000 a year more than those in France, £1,200 a year more than those in Belgium, and £800 a year more than those in Germany. It is not all global.
The Chief Secretary to the Treasury made a contrast with the Labour party, but Labour’s record on public services, which are at the heart of his statement, was investment and reform in the NHS, shorter waiting times and waiting lists, the highest levels of public satisfaction with the NHS since its foundation in 1948, and a fraction of the days lost to industrial disputes that we have seen under this Government. We also had better economic growth. When it comes to sound money, I remind the right hon. Gentleman that if we had continued with Labour’s rate of economic growth, the Treasury would be tens of billions of pounds a year better off than it is today.
What is the Government’s estimate of the impact on public services of funding the rises in the way he has set out? The Chief Secretary to the Treasury talked of “reprioritising”. Does that mean that the Government will cut back on capital investment in schools and hospitals in order to fund those increases? What is the estimated impact of the civil service recruitment freeze that he announced for the Ministry of Defence? What will be the impact on the NHS recovery programme that has been set out, and what will it mean for the shocking level of waiting lists and waiting times that we see under this Government? He said there would be no new money, but he also said that the pay rise for teachers was fully funded with new money. Which is it, and can he clarify the two things that he said in his statement about that?
The economic backdrop colours everything in this statement. It is no longer a matter of judging whether the Conservative Government will fail; the fact is that they have already failed. That is why the general election cannot come soon enough.
John Glen
It is not clear to me or, I think, to the House as a whole whether the right hon. Gentleman accepts the Government’s acceptance of the pay review bodies’ recommendations in full today. He seems to have written his speech as a general critique of the Government’s economic policy, without addressing what matters most to public sector workers up and down the country, which is that we have listened carefully to the evidence-based advice, as is typical over the past 13 years, and agreed with all those recommendations.
The right hon. Gentleman paints a picture of the last Labour Government and projects forward, as if it were utopia. That is why Labour did not win the 2010 general election and why one of my predecessors said there was no money left. Labour did not take those difficult decisions between 2008 and 2010, and that was the situation we were in when, I believe, he was attending Cabinet.
The right hon. Gentleman made some other observations about the economy. I am aware of the record growth over the past two years. I acknowledge the challenges we face at this point in time, and I have set them out in full with respect to inflation, but we have gone through a pandemic, where we borrowed significant sums of money. When we came out of that pandemic, we found ourselves in the first war in Europe for several generations. That is the context that the people of this country understand.
I have set out clearly all the implications for each workforce, and there will obviously be a series of written ministerial statement from each Government Department. The right hon. Gentleman also sets out some questions about waiting lists. I recognise the challenges faced in the NHS, which is why it is one of the Prime Minister’s top priorities. We have made real progress with the virtual elimination of the two-year waits, and 18-month waits are down by 90%, but I acknowledge that there is more work to be done. The £2.4 billion invested in the workforce plan will make a considerable contribution to that. The productivity review that the Chancellor tasked me with leading a few weeks ago will look further at how we can drive more efficiencies in how we spend public money.
I will finish my initial response by reiterating to the House that the decisions we have made today mean no new borrowing, no cuts to the frontline, no new taxes and no negative impact on inflationary pressures.
Steve Brine (Winchester) (Con)
My right hon. Friend the Chief Secretary can have some clarity from me: I think this is fair when we consider, as the Government must, the whole economy, and I think it is proportionate, so I welcome it. Does he agree that the NHS settlement has to be seen alongside the Budget announcement on pensions, as well as the NHS long-term workforce plan? Will he undertake to work with all pay review bodies going forward to get us to a more ordered place, where the mandate is given in the autumn and the response is heard in the spring Budget?
John Glen
My hon. Friend makes some sensible points, and he is absolutely right on the pension changes that we announced in the Budget, which the British Medical Association had been for a long time asking for, and it welcomed them. For clarity, I should make it clear that health and care workers remain exempt from the immigration health surcharge. He speaks a lot of wisdom about potential refinements to the timetable, and we will look at those carefully.
Peter Grant (Glenrothes) (SNP)
I thank the Chief Secretary for an advance copy of his statement. It was noticeable that in his initial statement he did not mention the fact that the British economy has been at a standstill since before the pandemic. It was noticeable that neither he nor the shadow Chief Secretary, the right hon. Member for Wolverhampton South East (Mr McFadden), want to admit the part that Brexit has played in that. Everybody has been affected by covid and the war in Ukraine, but only one state in Europe is suffering from the self-inflicted damage of Brexit, and that is why economic growth in the European Union is and will continue to be higher than here.
While we certainly welcome the news that the Government have finally decided to honour the pledge on public sector pay, will the Chief Secretary acknowledge that in almost every single case the pay increases being offered to public sector workers will be less than increases in the cost of living, so in real terms they are a cut? Will he acknowledge that in almost every case the Scottish Government have already settled with our essential public sector workers in Scotland, in almost every case with a substantially higher pay deal and in most cases—certainly throughout our NHS—without a single day being lost through strike action? What are the Scottish Government getting right that this Government find so difficult?
One of the biggest challenges facing the economy is a shortage of workers, so what a brilliant move to address that by charging essential workers more to come here and contribute to our economy. Can we have full details of the increases to immigration fees, including a full statement of the expected economic impact, including an indication of the likely impact on immigration numbers? Will we be driving away essential workers and causing more damage to the economy simply to feed the right-wing fantasies of the Daily Mail and the Express? Given that there is almost unanimous agreement in Scotland that we need more immigration, not less, is it not time for the Scottish Parliament, answerable to the Scottish people, to be given the powers to decide on the immigration policies we need, rather than constantly being dragged down by the failed policies of this United Kingdom Government? Does he accept that rampant inflation and stagnant economic growth are not essential, but are deliberate political choices of this failed Government?
John Glen
I thank the hon. Gentleman for his questions. I think we can agree to disagree on some of that. What we have to understand is that if we look at the growth levels over the past two years in the G7, this economy and this country have performed well. He makes a number of points. People are getting weary of this constant refrain around Brexit. There are people who voted for Brexit and people who did not; it has happened, and we will now take every step we can to maximise the benefits and opportunities and the greater discretion that we have consequential of that decision.
With respect to the specific questions about visa fees, I am sure that my colleagues in the Home Office will publish those in due course. This is a carefully calibrated decision; it is not motivated by political dogma. It is a clear decision to take necessary steps to avoid additional borrowing, and to meet the outcomes and the numbers that derive from the PRBs, which give evidence-based advice to the Government. This is a careful set of judgments. Clearly they will not please everyone, but we have to make decisions in the interests of the whole economy at this time.
Richard Fuller (North East Bedfordshire) (Con)
It was revealing that the shadow Chief Secretary, the right hon. Member for Wolverhampton South East (Mr McFadden) could not tell the House whether Labour was in favour of the pay awards or against them. Perhaps he is not sure whether Labour Members will be joining strikers who are stopping my constituents from receiving healthcare or their children from getting to school. My right hon. Friend is absolutely right that constituents have a right to expect productivity improvements to match these pay increases. Can he explain to the House a bit more about what the next steps with the productivity review will be?
John Glen
Yes, I can. I have written to every spending Minister in the past week. I will be having conversations with them and wider representatives about what can be done differently to drive savings and more productivity from the taxpayers’ money that we spend across Whitehall. To return to my hon. Friend’s previous point, I draw his attention and that of the House to what the International Monetary Fund said. For every additional £25 billion of spending, that is 0.5% on inflation. If Labour’s plan is to spend an additional £28 billion—Labour might say that it will be a bit later on in the Parliament, and it might be an attempt to outwit the Government on the massive leadership that we have shown on green finance and the green economy—that would be inflationary. The shadow Chief Secretary, the right hon. Member for Wolverhampton South East needs to come to terms with that, because the British people will in due course.
Daisy Cooper (St Albans) (LD)
Wealth creation and health creation are two sides of the same coin, so it is hardly surprising that the Office for Budget Responsibility has said that economic inactivity has increased as many more people are citing ill health as the main reason for not working. When every single part of our economy—whether farming, hospitality, science or engineering—is struggling to recruit the international talent that it needs, why on earth are this Government about to take this anti-business measure of increasing the cost of recruiting people from abroad through an increased health surcharge, rather than reversing the tax cuts for the big banks, closing the loopholes in the windfall tax and clamping down on tax avoidance, as the Liberal Democrats have called for?
John Glen
We have got record levels of migration at this time. At the Budget, we set out a clear plan to get more people in this country back into the workplace, with a number of interventions through the Department for Work and Pensions and the health service. We have had to make a fine judgment around those fees in the context of not borrowing any more money. If the Liberal Democrats wish to be taken seriously as a party of government, they will have to make the numbers add up.
Mr Philip Hollobone (Kettering) (Con)
I welcome the Chief Secretary’s statement. Would he be kind enough to confirm for teachers in Kettering that the 6.5% pay increase recommended by the independent pay review body will deliver the biggest pay increase for teachers in 30 years, that the new starting salary for teachers of £30,000 will be at its highest ever level and that the Government will be fully funding the pay award so that schools do not have to raid their own budgets to honour it?
John Glen
As ever, my hon. Friend is spot on. Everything that he said is absolutely correct. This is a significant pay settlement for teachers, and I hope that in due course we will learn that striking workforces will end their action and we can look forward with confidence to the autumn term.
Jon Trickett (Hemsworth) (Lab)
The Minister’s statement proposes that the pay rises offered, which are less than the rate of inflation for every single one of the millions of people who work hard for our public services, will be paid for effectively by what he calls a productivity drive. Is it not the case that productivity in Tory hands means cuts to services and reductions in staff? Why did the OBR say this morning that, on our present track, we will finish up with a debt 300% of our GDP? When he talks about sound money, it simply is not true, is it?
John Glen
I do not accept the hon. Member’s characterisation of the long-term fiscal risk to the economy. What I do accept is that we need to take tough decisions. It seems to me that he is saying what a significant tranche of the Labour party still believes: we can borrow, borrow, borrow and, in due course, if Labour ever gets into government, it will raise taxes sequentially, as happened previously.
Bob Blackman (Harrow East) (Con)
I warmly welcome my right hon. Friend’s statement. Given that almost every single one of the public sector union leaders has called for the Government to accept the pay review offer, does he agree that the unions should immediately cease strike action, get back to work and provide the service that the public need?
John Glen
I absolutely agree. That is indeed what we expect to see in the coming days. This is a tough decision based on evidence as well as what is right for the economy and the public sector as a whole. I hope that that is what happens in the coming hours and days.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
The truth is, the UK is in real trouble, and it is our constituents through sky-high mortgage rates and food prices who are paying the price. Our public finances are more exposed to rising inflation than other comparable countries. The UK has borrowed twice the inflation-linked bonds of any other Government. What the Government pay to borrow has risen by 2%, compared to the G7 average of 0.5%. The OBR says that UK Government debt is forecast to rise by 3.1% of GDP this year, compared with average falls of 1.8% in other European countries. Will the Minister come clean with the House and our constituents about just how close his Government have driven us to the economic precipice?
John Glen
I do not accept virtually anything that he said. What I do accept is that the whole of the world is dealing with massive inflation pressures, and if we look across the continent of Europe, we see very similar figures. Of course, they differ in some respects, but the Government are determined to bring inflation down, and today’s decisions are another contribution on that journey to halve inflation this year.
Scott Benton (Blackpool South) (Ind)
Millions of our hard-working public servants will welcome the settlement, which is fair both to them and, crucially, to the taxpayer. Can the Minister update the House on what steps he will be taking to eliminate public sector waste to ensure that the settlements are sustainable for the taxpayer?
John Glen
The first step today has been to ensure that we are not borrowing any more to make the settlement work. The productivity review that will take place in the coming days and weeks leading up to the autumn statement will be a key element of that. I have not wanted to set a target for that, because I will be looking everywhere to find better ways of spending taxpayers’ money to ensure that we deliver the services and commitments we set out at the spending review in the most efficient and effective way.
Ian Mearns (Gateshead) (Lab)
I am a little concerned about the £1.425 billion to be found from within the Department for Education’s existing budget between now and 2025, with £525 million this financial year and a further £900 million in the next financial year. Will the Minister be a bit more specific about exactly where that will be taken from within the Department’s budget to meet the teachers’ pay increase?
While of course we welcome the fact that the Government are honouring the teachers’ pay review body recommendations, let us not forget that the envelope for the review bodies is set by the Government in the first place. There is something else going on in this situation: we currently have a recruitment and retention crisis among our teaching workforce, with something like 20% of newly qualified teachers leaving after three years and 40% leaving after five years. Nobody goes into teaching because of the money, but it always helps, and a rise in line with inflation would certainly help.
John Glen
I thank the hon. Gentleman for his question. I think he welcomes what we have decided to do with the 6.5% pay increase, which leaves a typical teacher with £44,300. We are reprioritising within the Department for Education’s existing budget to deliver the additional funding to schools, but we are protecting core schools funding and frontline services. We have put in additional sums of money through the spending review and subsequent fiscal events: £330 million in 2023-24 and £550 million in 2024-25. The numbers add up, and he will recognise that.
Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)
I recently joined the Public and Commercial Services Union at East Kilbride’s Centre One tax office for its campaign on fair pay. Many told me that they were struggling on minimum wages. We have dedicated public servants who, with the cost of living, are struggling to make ends meet. Does the Minister share my concern that much more must be done to secure a fair pay deal that is acceptable to those who are working on the frontline?
John Glen
I say respectfully to the hon. Lady that we have taken a number of interventions and made a number of decisions across the board, and that does not just mean a single percentage—I set out the percentages across different workforces in some detail—and sometimes, such as within education, those distributions are designed to give more uplift to those at the lower levels. I am happy to correspond with her on anything specific that she wants to bring to my attention, obviously within the devolution framework.
Margaret Ferrier (Rutherglen and Hamilton West) (Ind)
I thank the Chief Secretary for his statement. The average time that it takes a first-time buyer to save for a deposit has climbed to a record high of 10 years, often meaning that only the most privileged in society can afford to get a foot on the housing ladder. With wages stagnating and high rents hindering saving, what steps are the Government taking to support individuals wishing to purchase their first property?
John Glen
The Government have an extensive programme led by the Secretary of State for Levelling Up, Housing and Communities. I am sure that he would be happy to set out the further work he is doing in advance of the autumn statement.
Madam Deputy Speaker (Dame Rosie Winterton)
I thank the Chief Secretary for his statement.
Armed Forces and Firefighters Pension Schemes
John Glen Excerpts(9 months, 2 weeks ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (John Glen)
Public service pension schemes (PSPS) are a crucial and valued part of public sector remuneration. One of the valuable features of these defined-benefit schemes is provisions to ensure that accrued pensions of active and deferred members are adjusted at a rate set out in statute that is not dependent on investment returns. Depending on the scheme of which they are a member, the accrued pension of an active member of the career average revalued earnings (CARE) PSPS introduced from 2014 and 2015 is revalued each year by an amount equal to the change in CPI, CPI+X% or average weekly earnings (AWE).
The process for this revaluation is set out at section 9 of the Public Service Pensions Act (PSPA) 2013. This legislation specifies that it is achieved through a Treasury order made in each year for the period, which
“may determine the change in prices or earnings in any period by reference to the general level of prices or earnings estimated in such manner as the Treasury consider appropriate.”
In practice, accrued pensions of active PSPS members have been revalued in April of each year based on Office for National Statistics (ONS) estimates of the September-to-September increase in CPI for the previous year for most schemes, or based on ONS estimates of the September-to-September increase in AWE for the 2015 firefighters’ pension scheme (FPS) in England and its devolved equivalents and the 2015 armed forces pension scheme (AFPS). ONS practice is to publish each year a provisional AWE figure for the September-to-September increase in November, followed by a revised figure in December.
During work leading up to the laying of the Treasury revaluation order published in April 2023, it was noted that the Treasury revaluation orders for 2021 and 2022 specified an AWE figure based on provisional ONS figures, rather than revised ONS figures, which had been used in previous Treasury revaluation orders from 2015 to 2020. Although the legislation setting out the revaluation of PSPS does not specify a figure of AWE growth to be used for the purposes of revaluation, it is the Government’s view that the previous practice of using revised ONS estimates should have been maintained in 2021 and 2022. The Government thus intend to correct the position affecting those currently active, deferred and pensioner members who were in active service in one of the affected PSPS at any point between 1 April 2020 and 31 March 2022. This will ensure all members receive the correct amount of pension. For a member who was in active service throughout the entire period, their accrued pension up to 31 March 2022 will be up to around 0.6% larger following this change. This change in pension value will not affect the benefit entitlement of those who were active members of the legacy pension schemes for the armed forces or firefighters during the years in question if they choose legacy design benefits under the upcoming choice exercise to remedy the discrimination identified by the McCloud/Sargeant litigation.
The corrected pension benefit amounts for affected PSPS members will be provided through scheme regulations made under section 3(2)(a) of the PSPA 2013. As these regulations will be specific to the affected schemes, they will be consulted on and legislated for by the Home Office and the Ministry of Defence for the 2015 FPS England and the 2015 AFPS respectively. It will be for the Scottish and Welsh Governments to make similar changes to firefighters’ pension schemes in those countries. The FPS in Northern Ireland is fully devolved; therefore, it will be for the relevant authorities there to take forward any similar change for the FPS in Northern Ireland.
The revised position and regulation change announced in this statement will only uplift an affected PSPS member’s accrued benefits. The Government intend to consult and legislate to implement these changes as quickly as is feasible.
[HCWS921]
Mortgage and Rental Costs
John Glen Excerpts(9 months, 4 weeks ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (John Glen)
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“welcomes the Government’s drive to halve inflation, grow the economy and reduce debt; particularly welcomes the Government’s new Mortgage Charter which has been agreed by 85 per cent of the residential mortgage market and will provide support to mortgage holders through new commitments and flexibilities to help borrowers who are anxious about rising interest rates; notes the extensive package of cost of living support to help families with rising prices, worth an average of £3,300 per household including direct cash payments to the eight million most vulnerable households; and further believes that Labour’s policies to manage the economy would be inflationary, lead to higher interest rates and put more pressure on mortgage holders and renters.”
After two decades of low inflation, the world has been confronted with a bout of fast-growing prices, and we are not alone. As a result of rising prices, central banks around the world, including in the United States, Japan, New Zealand and the European Union, have been raising interest rates in order to force down the rate of price rises. As all Members will be aware, last week, the Bank of England’s independent Monetary Policy Committee raised rates to 5%. Let me say at the outset that the Bank of England and its Monetary Policy Committee has the full support and confidence of this Government, and will continue to do so as it takes whatever action is necessary to return inflation to the 2% target in the medium term. As the Chancellor was clear when addressing this place yesterday, he will not take action that undermines the Bank of England’s monetary objectives.
Gareth Thomas (Harrow West) (Lab/Co-op)
The Minister will be aware that the latest data on mortgage rates specifically shows that, since the mini-Budget, they have increased faster here in the UK than in the US. That gap in mortgage rates means that someone here with a mortgage of £200,000 will be paying £1,000 a year more than in the US. What is the Minister’s explanation for that?
John Glen
I am here to account for what has happened in the UK. Obviously, there are differences—[Interruption.] If I may answer. There are differences across the EU and the US. What I am telling the House, which is quite transparently clear, is that inflationary pressures are affecting all economies at the moment, and it is my responsibility to account for what we are doing as a Government.
John Glen
I wish to make more progress.
Where there are non-inflationary measures that we can take to relieve the anxiety faced by families, we will do so and we will do everything we can to address the situation. That is why, on Friday, the Chancellor met the UK’s principal mortgage lenders, alongside senior representatives from the Financial Conduct Authority and UK Finance, to agree new support for those struggling with their mortgage payments.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I am grateful to the Minister for giving way. Can he give an answer to my right hon. Friend the Member for Leeds West (Rachel Reeves), who asked whether the mortgage charter, which the Chancellor announced yesterday, will cover buy-to-let mortgages? Why exactly has the Chancellor not made that mandatory?
John Glen
I will come on to set out in detail what arrangements we have made. As the Chancellor set out pretty clearly yesterday, we will hear in the next couple of weeks the details of that agreement, which includes a growing number of lenders—it currently covers 85% of lenders in the country.
John Glen
I wish to make some more progress and then I will take some interventions in a moment.
At that meeting on Friday, the Chancellor secured agreement from lenders to a new mortgage charter, which we published yesterday. It sets out what support customers will receive. We are proud to say that, over the weekend, more lenders signed up to the charter, and we encourage further lenders to join that 85% of mortgage market providers.
The charter provides support for two groups of people in particular. The first group is those who are worried about their mortgage repayments. If they want to switch to an interest-only mortgage or extend their mortgage term to reduce their monthly payments, they will be able to do so with the option of switching back to their original mortgage deal within six months without a new affordability check or affecting their credit score.
For most people, the right course of action will be to continue to make payments on their current mortgage. Keeping up full repayments means that they will pay less interest overall. But this new measure means that people will be able to opt for a lower-cost approach for six months with full reversibility, giving them the peace of mind of knowing that they can try out a new approach and still change their mind later on.
Paula Barker (Liverpool, Wavertree) (Lab)
I thank the Minister for giving way. He is being very generous with his time.
With not all the mortgage market covered by the charter, there is a worry that around 1 million households could miss out on the support. Can the Minister guarantee that the measures that were outlined will be available to everyone struggling with their mortgage payments, not just those who happen to have a mortgage with one of the banks that is on the list of those that have cosy chats with the Chancellor?
John Glen
I hope that more and more lenders will be added to those 85% of providers. The details will be known in the next few weeks. This comes on top of the FCA’s rules around lenders having to take an individual approach to the circumstances of their customers, especially those trying to find a way through when they fall into difficulty.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
Will the Minister give way?
John Glen
No, I wish to make a bit more progress. I will come back to the hon. Lady in a moment.
This measure will take effect in the next few weeks and it means that a homeowner with £100,000 outstanding on their mortgage over 15 years can change their payments—with no impact on their credit rating—by extending the mortgage term by 10 years, which could save them over £200 a month, or by moving to interest-only payments, which could save them more than £350 a month. A further measure for this group of customers means that, if they are approaching the end of a fixed-rate deal, they will have the chance to lock in a new deal with the same lender up to six months ahead. However, they will still be able to apply for a better like-for-like deal with the same lender, with no penalty, if they find one when their current deal ends.
Emma Hardy
I understand why the Minister wants to have a voluntary charter, but does he agree that what we are actually seeing from the banks—this was raised on the Treasury Committee—is that they are very quick to raise interest rates on mortgages, but not so quick to raise them on savings? The difference between the interest rates being raised on mortgages and those being raised on savings is around 50%, which is completely unfair. When the Chancellor meets the banks, will he also add to the conversation the unfairness that exists when it comes to interest rates on savings? That is why I am reporting back to the Minister on the need to mandate this—because we cannot always assume that the banks will act in the interests of their customers.
John Glen
I thank the hon. Lady for her point. As the Chancellor said yesterday, he did raise that with lenders on Friday. We will continue to work closely with them on those disparities where they exist. My colleague the Economic Secretary to the Treasury, who is responsible for the relationship with financial services institutions, will also be attending to this issue. It is right that, with interest rates rising, banks should be looking to put as much of that rise as possible on to the savings rates that they offer to consumers.
Imran Hussain
Time and time again the Minister seems to be ducking the central issue in this debate, which is that the charter the Government have proposed will not cover millions of people and will not provide support. Why will he not instead subscribe to the Labour position today and require all lenders to do it, so that everybody can get support? Answer the question Minister.
John Glen
I appreciate the passion with which the hon. Gentleman presents his point, but we have made an agreement with the FCA and with lenders, and in the next couple of weeks the details will be available for consumers and mortgage holders up and down the country. As I say, we have already moved from three quarters to 85% of lenders and I expect others to join in due course. We will continue to have dialogue with the FCA and to look at further ways to help consumers.
The purpose of our intervention is to provide people with more flexibility and optionality to find the best deal for their circumstances. Mortgage arrears and defaults remain at historically low levels, with less than 1%—I think it is 0.86%—of residential mortgages in arrears in 2023, a lower level than just before the pandemic.
Paul Holmes (Eastleigh) (Con)
We heard the shadow Chancellor outline the utopian elements of her compulsory scheme. Can the Chief Secretary outline which scheme goes further—our scheme, which is not mandatory but delivers 12 months before repossessions happen, or the Labour Party’s mandatory scheme?
John Glen
My hon. Friend makes a wise point, and I will come on to talk about some of the other measures in a moment. For those families involved, it is extraordinarily distressing to lose their home, so we will do all that we can to support people who find themselves in such a challenging financial position.
Barbara Keeley (Worsley and Eccles South) (Lab)
Will the Minister give way?
John Glen
No, I am going to finish answering the previous point.
As part of our strong regulatory framework for mortgage holders, banks and lenders already provide tailored support for anyone struggling, and they deploy highly trained staff to help those customers. Support offered includes temporary payment deferrals and part interest, part repayment, as well as extending mortgage terms or switching to interest-only payments. To supplement that, we agreed as part of the mortgage charter on Friday that, in the extreme situation in which a lender is seeking to repossess a home, there will be a minimum 12-month period from the first missed payment before there is a repossession without consent. I believe that that goes rather further than what the Opposition were suggesting.
Barbara Keeley
This crisis is already having an impact on renters too, and the Chief Secretary is not touching on that in his speech. I have a constituent on a rolling private tenancy who is worried sick that her landlord is going to evict her. She is worried about ending up in a hostel with her teenage daughter. She works full time and pays her way. That situation is shared by so many. Does the Chief Secretary not agree that there should be support for renters, and that the way to achieve it is to back Labour’s renters charter, including the halt to no-fault evictions and a four-month notice period for landlords?
John Glen
I do not accept that, but I do accept that there are challenging situations for our constituents up and down the country. That is why this Government have intervened and are working in this way with lenders to find a constructive package of interventions to meet the situation those constituents are in.
Anyone who is worried that they could be in those difficult situations should know that they can call their lender for advice without any impact whatsoever on their credit score. Lenders will also provide support to customers who are up to date with payments to switch to a new mortgage deal at the end of their existing fixed-rate deal without another affordability test, and provide well-timed information when their current rate is coming to an end. Taken together, those measures should offer some comfort to those who are anxious about the impact of high interest rates on their mortgage and provide support to those who get into extreme financial difficulties.
Catherine West
May I return briefly to the point made by my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley)? Last time I asked the Economic Secretary to the Treasury about the number of renters estimated to be impacted by this situation, he did not have an answer. Do Ministers on the Treasury Front Bench have an answer today on how many renters will be affected by this crisis?
John Glen
The interventions we have made provide significant scope for assistance. To find an accurate number would be very difficult, but we will continue to work with industry and with lenders to find maximum flexibility and interventions to support them at this difficult time. While we roll out those measures, tackling inflation remains the No. 1 priority of the Prime Minister and the Government. Inflation makes every person in this country poorer and it has to be tackled head-on.
Notwithstanding that, I am fully alive to the fact that some people remain in real distress. I assure hon. Members and their constituents that we will always stand ready to help where we can. That is why at the Budget we announced that the energy price guarantee would be extended for a further three months. That extension was funded in part by the energy profits levy that this Government introduced last year, recognising that profit levels in the sector had increased significantly due to those very high oil and gas prices, caused by global circumstances—including, of course, Russia’s invasion of Ukraine.
Alongside holding down energy bills, freezing fuel duty, increasing universal credit and raising the national living wage and pensions, we are giving up to £900 in cost of living payments to households on means-tested benefits. Taking those measures together, the Government are already supporting families with one of the largest support packages in Europe, worth £3,300 per household on average.
The Government’s approach makes targeted interventions to protect the most vulnerable, while maintaining a laser-like focus on tackling inflation. I believe that that stands in sharp contrast to some of the policies offered by opposition parties. The Liberal Democrats are calling for a £3 billion mortgage protection fund, which would simply pour fuel on the fire of inflation, making it harder to bring prices down. That would be such a damaging move that it is apparently even too extreme for those on the Labour Front Bench to contemplate.
However, I would say that the Labour party is not without its own flaws when it comes to offering unfunded inflationary policies. The media reports that the right hon. Member for Doncaster North (Edward Miliband) has had his wings clipped by the Leader of the Opposition for his excessive spending proposals, but in reality the shadow Chancellor is only slightly delaying Labour’s £28 billion spending spree to the second half of the next Parliament—an amended timetable, but the same reckless policy.
We said that we would halve inflation, not because it was an easy thing to do, but because it was the right thing to do. History and the best economic insights that we have today tell us that the best way to beat inflation is to stick to our plan, backing the Bank of England’s monetary policy decisions. We will stick to the plan, because it is the only way we can give relief to families and reprieve to businesses. As we have done before, we will face down these economic challenges while supporting the most vulnerable and setting us up for economic growth.
Since a Conservative Government came into power in 2010, the UK economy has grown more than those of major countries such as France, Italy, or Japan, and about the same as Europe’s largest economy, Germany, which is now in recession. We have halved unemployment, cut inequality and reduced the number of workless households by 1 million. We have protected pensioners, those on low incomes and those with disabilities. We will now overcome this inflationary period, and offer a helping hand to those who need it as we do so.
Madam Deputy Speaker (Dame Rosie Winterton)
Before I call the SNP spokesperson, I think I will have to give some firm guidance about time limits. My initial guidance would be six minutes, just so the first speaker on the Government side is aware.
Oral Answers to Questions
John Glen Excerpts(10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Rachel Hopkins (Luton South) (Lab)
The Chief Secretary to the Treasury (John Glen)
The Government undertake extensive assessment of the effectiveness of the sanction regimes, which are eroding Russia’s financial base. We have sanctioned 28 Russian banks, covering 80% of Russia’s banking sector, and frozen more than £18 billion of Russian assets, and we have implemented unprecedented trade sanctions in addition.
Rachel Hopkins
Constituents in Luton South have raised concerns about the financial sanctions regime with me. Can the Government confirm whether it is still the case that Russian account holders in the UK can hold £50,000 or more in their accounts? What is to prevent individuals of concern simply parcelling up assets through proxies into a large network of accounts below the permitted level?
John Glen
The Office of Financial Sanctions Implementation works closely with our allies across the G7 to ensure that we have co-ordinated action among our international partners on this unprecedented package of sanctions. We have frozen the assets of 1,600 individuals and entities. We have implemented 35 different sanction regimes across government. I would be happy to take away the specific question that she has asked, because it is technical, and respond.
David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)
A multimillion-pound start-up project that could be transformational in my constituency is now at risk because the Office of Financial Sanctions Implementation is yet to process an asset freeze licence application in respect of just 0.002% of the company’s capital, which was submitted in April. What steps is the Minister taking to ensure that such applications are dealt with swiftly? If I provide him with details of the company, will he ensure that the application’s progress is expedited?
John Glen
I am happy to take up my right hon. Friend’s case. We have expanded the OFSI resources. We have a monthly monitoring and efficiency dashboard. I accept how frustrating it can be for constituents’ businesses when such situations arise, and I am happy to take the matter away and get back to him swiftly.
James Murray (Ealing North) (Lab/Co-op)
As the war in Ukraine continues, we must not let up for a second on efforts to tighten the net on the accomplices and beneficiaries of Putin’s regime. We welcome the direction of the measures announced yesterday. Can the Minister confirm whether those measures will close all the loopholes and specifically the ownership thresholds, which Russian oligarchs and their enablers have been able to exploit to evade the bite of sanctions?
John Glen
The Government will be relentless in their pursuit of illicit assets. As I said, we have sanctioned 24 banks with global assets of over £940 billion and 120 elites with a combined worth of £140 billion. Working closely with our allies, we have incrementally and sequentially tightened that net and immobilised more than 60% of Putin’s war chest of foreign reserves worth £275 billion. We continue to work closely with our allies to intensify those measures as opportunities arise.
Sir Robert Syms (Poole) (Con)
I have one or two constituents in Poole who lost their jobs because they were in companies owned by Russians who were sanctioned, and they have found it difficult to have an orderly wind-up because banks run a mile from loaning those businesses a reasonable amount of money to sort them out. I know of one situation where people have not been able to get P60s as the business cannot get money from any of the banks—they do not want to be involved in anything to do with sanctions—so it cannot pay the accountants who would produce them. May I have a word with the Minister about that? In some cases, we are going over the top, and it is affecting our constituents.
John Glen
Those points demonstrate how serious and extensive the Government’s actions are, but I recognise that sometimes unfortunate situations arise and I am happy to look at that case and take it back to the Office of Financial Sanctions Implementation.
John Cryer (Leyton and Wanstead) (Lab)
To pursue the issue of proxies raised by my hon. Friend the Member for Luton South (Rachel Hopkins), am I right in thinking that the Minister said a few minutes ago that he was prepared to examine the possibility of taking action against proxies and those persons of interest who use proxies?
John Glen
What I would say is that the Government are committed to an ever-tighter grip on illicit finance and those individuals close to Putin who make a material contribution to his regime. Obviously, I will not commit on the Floor of the House to individual extensions to what we have already done, but I have set out the range of sanctions regimes that exist across multiple Departments of Government and I am happy to receive representations on whatever case the hon. Member wishes to bring to me.
Bob Blackman (Harrow East) (Con)
Richard Burgon (Leeds East) (Lab)
The Chief Secretary to the Treasury (John Glen)
The Government are doing three things to reduce inflation. First, we remain steadfast in our support for the independent Monetary Policy Committee of the Bank of England as it takes action to return inflation to its 2% target. Secondly, we are making difficult but responsible decisions on tax and spending so that we do not add fuel to the fire. Thirdly, we are tackling high energy prices by holding down energy bills for households and businesses, alongside investing in long-term energy security.
Richard Burgon
The rich and powerful have repeatedly sought to blame workers for high inflation, even though workers’ real wages have been falling as inflation soars. Many leading economists now say that profiteering by certain corporations, not wages, is driving price rises. The French Government have taken action to limit food prices, and Spain has introduced rent controls. When will this Government start targeting the profiteering that is helping to drive inflation?
John Glen
We continue to have constructive dialogue with industry and different sectors. I met supermarket representatives a few weeks ago, and the Chancellor and others in the Treasury will continue to have these conversations. I think most people recognise that we face common global challenges and that different economies will respond in different ways.
Mr John Baron (Basildon and Billericay) (Con)
Theresa Villiers (Chipping Barnet) (Con)
The Chief Secretary to the Treasury (John Glen)
Controlling public spending and ensuring that the interventions we are making prioritise growth enablement is a relentless activity. The household support fund of £2.5 billion continues to be an additional source of support for households, but there are no quick fixes; there is a relentless pursuit of the goals that we have set out at the start of this year.
Chris Elmore (Ogmore) (Lab)
Mr Alistair Carmichael (Orkney and Shetland) (LD)
John Glen
As the right hon. Gentleman knows, the farming support payment is ported to Scotland and operates on a different basis because it is devolved. We have committed to the sum of £2.4 billion for the duration of this Parliament and there are a number of schemes where the uptake is now increasing. I will continue to engage with my colleagues at DEFRA as those schemes develop further.
Mary Robinson (Cheadle) (Con)
The last bank in the entire constituency of Cheadle is about to close, so I was delighted when, following my interventions and direct conversations with LINK and appeals from the community, Bramhall was chosen to be LINK’s 100th banking hub recommendation. It will be invaluable for residents, but they will be left without banking services until it is open. Will the Minister look into bridging options in the interim, between the bank closing and the hub opening, or consider imposing requirements on banks to remain open until a hub is implemented?
Sir Chris Bryant (Rhondda) (Lab)
For the first time in my 20 years as an MP we have a real housing crisis in the Rhondda. Two thirds of people own their own homes, but lots of people who have relied on the commercial rented sector are finding that landlords are selling their properties because of decisions made about taxation and, because there is a cap on housing benefit, they do not want to continue in that market. Dozens of people are being evicted week in, week out. Will the Government look closely at what is happening to protect people in constituencies such as mine, so that they can keep their own homes?
John Glen
I am happy to meet the hon. Gentleman to discuss what is happening in his constituency. Obviously, there have been a series of changes since the section 24 change in the Finance Act 2015 and there are particular pressures in the housing economy at the moment, but I am happy to meet him to discuss that further.
Matt Hancock (West Suffolk) (Ind)
I welcome the work that the Chancellor and the Prime Minister have done to promote work on artificial intelligence done here, and in developing an ecosystem for that. It is clear that the UK has an opportunity to lead on this, especially on regulation, if we get it right, but only if we seize that opportunity now. What is the Chancellor doing to make that happen?
Her Late Majesty Queen Elizabeth II: Funeral and Related Events
John Glen Excerpts(11 months, 1 week ago)
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The Chief Secretary to the Treasury (John Glen)
The death of Her Late Majesty Queen Elizabeth II on 8 September 2022 and the period of national mourning that followed was a moment of huge national significance. Body Estimated costs incurred Department for Culture, Media and Sport £57.420 million Department for Transport £2.565 million Foreign, Commonwealth and Development Office £2.096 million Home Office £73.68 million Ministry of Defence £2.890 million Northern Ireland Office £2.134 million Scottish Government £18.756 million Welsh Government £2.202 million Total £161.743 million
During this period, many hundreds of thousands of people came in person to pay their respects, at the Lying at Rest in Edinburgh, the Lying in State in Westminster, as well as in London and Windsor for the state funeral on 19 September. Many more people also came out to support His Majesty The King and other members of the Royal Family as they travelled around the UK during this time.
The Government’s priorities were that these events ran smoothly and with the appropriate level of dignity, while at all times ensuring the safety and security of the public.
As Departments finalise their accounts ahead of publication in the coming months, the Government are now able to publish an estimate of the costs associated with delivery of these events by the main Government Departments and devolved Administrations involved, as follows.
All figures are the marginal costs, meaning money spent specifically on the events, as opposed to costs that would have been incurred in any case. Where necessary, additional funding was provided by the Treasury to meet these costs. This included fully refunding the Scottish Government, Welsh Government and Northern Ireland Office for their respective costs, which in turn they were able to repay to partners who also incurred costs.
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Cost of Living
John Glen Excerpts(11 months, 1 week ago)
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The Chief Secretary to the Treasury (John Glen)
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“welcomes the Government’s action to halve inflation, grow the economy and reduce debt; further welcomes the Government’s action to take advantage of the opportunities presented by Brexit, including the passage of the Genetic Technology (Precision Breeding) Act which will boost UK food security; supports the Government’s extensive efforts to support families up and down the country with the cost of living through significant support to help with rising prices, worth an average of £3,300 per household including direct cash payments of at least £900 to the eight million most vulnerable households; and notes that the SNP and Labour would fail to grip inflation or boost economic growth with their plans for the economy, which would simply lead to unfunded spending, higher debt and uncontrolled migration.”
The world has been challenged by a series of events, including covid and the war in Ukraine, with knock-on effects to economies in every continent. In each of those, the Government have risen to the challenge. When covid hit our shores and the entire country had to isolate to save lives, we delivered groundbreaking and historic support to keep businesses afloat and families going. When our ally and friend Ukraine was invaded, we led the way to provide support internationally, and we continue to do so. The Prime Minister just yesterday announced further air defence missiles and support for our ally. Now, with economic challenges at our door, we continue to take the actions necessary to support the most vulnerable and set our country up for long-term, healthy, sustainable growth.
Already, as a consequence of the steps we are taking and decisions we have made, our country has avoided a recession. The International Monetary Fund has said that we are on the right track. Measures in the spring Budget deliver the largest permanent increase in potential GDP the Office for Budget Responsibility has ever scored in a medium-term forecast. That is as a result of Government policy. We have grown the economy faster than France, Japan and Italy since 2010, and at about the same rate as Germany since 2016. Just today, we see the unemployment rate remaining historically low. Inflation of course remains a concern, and we cannot afford to be complacent.
While I would not usually seek to give economic lessons to Members on the SNP Benches, it seems to be worth explaining in this instance that the reality is that high inflation in our country cannot be separated from global events. Other countries are experiencing similar situations to the UK. In the UK, inflation has primarily risen because of Putin’s illegal invasion of Ukraine and global supply chain pressures, which have pushed up the price of energy, goods and raw materials. Domestic inflationary pressures have also risen, as the UK labour market has remained tight, and challenges in recruitment have been reflected in strong wage growth. That has also pushed up the cost to firms of producing their goods and services, and that has been passed on into higher prices.
If we are to answer the challenge of high inflation, we must first accept that high inflation is a global challenge, which many major central banks are tackling. Nevertheless, I know that right now for many in society rising prices, including rising food prices, are causing worry and significant anxiety. People want to know when things will get back to normal and how they will be supported in the interim. Let me answer that directly. The Prime Minister pledged to halve inflation this year, and the latest Bank of England forecast published last Thursday shows that we are on track to meet that pledge. From its peak above 11% at the end of last year, inflation has begun to fall. Both the Bank of England and the OBR forecast that inflation will quickly fall later this year. We are also focused on growing the economy, reducing the burden of public debt, cutting NHS waiting times and stopping the boats. Those are all priorities of the British people, and therefore they are this Government’s priorities, too.
Alan Brown (Kilmarnock and Loudoun) (SNP)
How does stopping the boats help the cost of living crisis?
John Glen
The point I was making was that stopping the boats is a priority for the people of this country, and this Government are focused on the priorities of the people of this country. We are on track to meet these pledges to make our country and all nations, including Scotland, better off. It is also worth remembering that Scotland already has one of the most powerful devolved Parliaments anywhere in the world. The Scottish Government have substantial tax powers, including in relation to income tax, and agreed borrowing powers to further increase their spending, which I am sure the First Minister will be considering.
David Linden (Glasgow East) (SNP)
The Minister talks about Scotland having one of the most powerful devolved Parliaments in the whole world. How does he feel about Lord David Frost’s accusations that it has too much power and some of it should be taken away? Is that official Government policy now?
John Glen
I am not aware that Lord Frost is a member of the Government. I speak for the Government, and I am clear about what the situation is.
As it stands, the Scottish Government are well funded to deliver all their devolved responsibilities. The 2021 spending review set the largest annual block grant in real terms of any spending review settlement since the devolution Act, and that provided an average of £41 billion a year for the Scottish Government. That settlement is still growing in real terms over the three-year spending review period, despite inflation being higher than expected. On top of record spending review settlements, as a result of UK Government decisions at the autumn statement and the spring Budget, the Scottish Government will receive an additional £1.8 billion over the next two years. All that means that the Scottish Government are continuing to receive around 25% more funding per person than equivalent UK Government spending in other parts of the UK.
Chris Stephens (Glasgow South West) (SNP)
Since the autumn statement, food inflation has risen and is now at 19.2%. Can the Minister tell us what specific measures the Government will put in place to address food inflation?
John Glen
I fully acknowledge the pressures of food inflation—they are in line with those of many of our friends and neighbours, but less than in Germany, for example—and I will come on in a moment to set out the interventions the Government have specifically made to deal with that.
In addition, we are investing directly in Scotland, with £349 million of funding allocated through the first two rounds of the levelling-up fund, as well as establishing two new green freeports. As the Prime Minister has already said,
“all this talk of needing any more powers is clearly not appropriate”.
The SNP and the Scottish Government do not fully use the powers they have already. While, as we have seen today, SNP Members speak about a referendum that I do not believe they have a mandate for, we are levelling up and investing directly in local communities across Scotland.
Let me address the points raised by the hon. Member for Glasgow South West (Chris Stephens).
Alan Brown
If this Union is so successful, so good for Scotland and we benefit so much, why do we need money out of a so-called levelling-up fund?
John Glen
I think the principle of levelling up across the United Kingdom recognises that we do not have symmetry across the local economies of the United Kingdom, and it is about investing to improve the productive capacity. Let me make some progress.
Let me look at the economic matters at hand. As I mentioned earlier, energy costs have contributed significantly to price rises. That is why we are paying half of people’s energy bills. At the Budget, we announced that the energy price guarantee will remain at £2,500 for the next three months, funded in part by the energy profits levy. Just under £26 billion between 2022-23 and 2027-28 is expected to be raised by the levy, on top of around £25 billion in tax receipts from the sector over the same period through the permanent tax regime. This measure is saving the average family a further £160 on top of the energy support measures already announced. That includes this Government’s help for all domestic electricity customers with £400 off their energy bills through the energy bills support scheme, and in providing a £200 payment for households that use alternative fuels such as heating oil through the alternative fuels payment scheme.
Alongside holding down energy bills, increasing benefit payments, increasing pension payments, a council tax rebate, the multibillion-pound household support fund—attracting Barnett consequentials—and freezing fuel duty, we are giving up to £900 in cost of living payments to households on means-tested benefits. That means that more than 7 million households across the UK have been paid a £301 cost of living payment by Wednesday 3 May as the first of three payments. This will be accompanied by a £150 payment for people on eligible disability benefits this summer, and a £300 payment on top of winter fuel payments for pensioners at the end of 2023. The latest payment follows on from up to £650 in cost of living payments delivered to households on means-tested benefits by the Government in 2022, with an additional £150 for individuals on disability benefits and £300 for pensioner households. Altogether, support to households to help with higher bills is worth £94 billion, or £3,300 per household on average across 2022-23 and 2023-24. Aside from helping the most vulnerable, the OBR’s analysis shows that, taken together, the freezing of fuel duty, changes to alcohol duty and the extension of the energy price guarantee will further lower consumer prices index inflation by 0.7 percentage points this year.
Peter Grant (Glenrothes) (SNP)
Could the Minister explain to me what has happened to the energy coming out of a country such as Scotland, which is a net exporter of energy, that suddenly makes it almost three times as expensive as it was before? Where is the 200% or 300% increase that people are paying on their fuel bills going? It is not going to the people of Scotland, so who is taking that money?
John Glen
I have set out the number of interventions we have made to support individuals and the taxation levies on energy companies that we have set.
With inflation running high, I understand the temptation of some to accuse companies of profiteering, and the hon. Member for Paisley and Renfrewshire South (Mhairi Black) mentioned that in her opening speech. I would like to be clear with the House that the Government stand against that practice. At a time of high inflation, companies should not be seeking financial gain at the expense of their customers. Fortunately, we have not seen widespread evidence of this in the UK thus far. Corporations’ gross profits as a percentage of GDP were 21.4% in the third quarter of 2022, which is in line with an average of 22% over the last 20 years. The net rate of return for non-financial companies—a measure of company profitability—fell in the third quarter of 2022 and remains lower than 10 years previously. Instead, companies have been hit by a combination of rising labour, energy and raw material costs, and have reacted accordingly. As I have said, and it bears repeating, we do not expect them to profit excessively, but we cannot expect them unsustainably to absorb all cost increases, so the best course of action is the course we have charted thus far—to bear down on inflation.
This is a Government of action and delivery, as I have set out. We have pledged to tackle inflation, bring down debt and grow the economy, and we are doing just that. We said we would help the most vulnerable through these challenges, and we are, and we have refined and developed those interventions to suit the evolving circumstances. We are focused on strengthening our great Union, halving inflation by the end of the year, easing the pressure on households, and boosting the economy and protecting growth—proving our economy is more resilient than predicted—as well as boosting employment to well above pre-pandemic levels and ensuring more people have the security of a steady wage. As a united Government, we will continue to remain focused on what really matters to the British people.
Madam Deputy Speaker (Dame Rosie Winterton)
I call the shadow Secretary of State.
Public Service Pensions: Cost Control Mechanism and the Reformed Scheme Only Design
John Glen Excerpts(11 months, 1 week ago)
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The Chief Secretary to the Treasury (John Glen)
The Government have today published a policy statement on the cost control mechanism (CCM) in public service pensions titled “Public Service Pensions—the Cost Control Mechanism and the Reformed Scheme Only Design”.
Following recommendations from the Independent Public Service Pensions Commission (IPSPC) in 2011, the CCM was introduced into the valuation process for the reformed public service pension schemes in the Public Service Pensions Act 2013 following consultation with member representatives. It was designed to ensure a fair balance of risk regarding the cost of providing defined-benefit (DB) public service pensions between members and the taxpayer. If, when the CCM is tested, scheme costs have increased or decreased by more than a specified percentage of pensionable pay compared to a target cost, then member benefits—and/or member contributions—in the relevant scheme are adjusted to bring costs back to target.
Following a review by the Government Actuary and a full public consultation process, the Government confirmed in October 2021 that it would implement three reforms to the CCM in time for the 2020 valuations:
Reformed scheme only design;
Wider 3% cost corridor; and
Economic check.
The policy statement published today provides further details on how the reformed scheme only design will operate from the 2020 valuations onwards, in particular with regard to those pension scheme members in scope of the remedy for the McCloud litigation.
“Reformed schemes” in this context mean the public service pension schemes introduced as part of reforms following the IPSPC review, from 2015 for most public service pension schemes and from 2014 for the local government pension scheme for England and Wales. The reformed scheme only design means that the CCM will only consider past and future service in the reformed schemes, with legacy scheme costs excluded from the mechanism. This will lead to a more stable CCM and ensure consistency between the set of benefits being assessed and the set of benefits potentially being adjusted, thereby ensuring fairness for both taxpayers and scheme members.
However, pension scheme members of most schemes in scope of the McCloud remedy will have a choice between benefits in respect of their service from 1 April 2015 and 31 March 2022 to be calculated on the basis of the reformed scheme or the previous, legacy public service pension scheme. The policy statement confirms that all service on or before 31 March 2015—31 March 2014 for the local government pension scheme in England and Wales—will be excluded from the CCM as this service is exclusively in the legacy schemes. All service from 1 April 2022 onwards will be included in the CCM, as this service will be exclusively in the reformed schemes. In particular, the statement provides details of how service during the McCloud remedy period—1 April 2015 to 31 March 2022 for most schemes—will be treated under the reformed scheme only design and concludes that McCloud remedy costs will not have a material impact on the CCM from the 2020 valuations onwards.
The full policy statement can be found at: www.gov.uk/government/publications/public-service-pensions-cost-control-mechanism-and-the-reformed-scheme-only-design
A copy has been placed in the Libraries of the House.
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