Tax Credits
Lady Hermon Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Damian Hinds)
I beg to move,
That the draft Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015, which were laid before this House on 7 September, be approved.
I confirm, as required, that the provisions before the House today are compatible with the European convention on human rights.
The aspects of tax credits we are voting on today are amendable by statutory instruments, as laid down in primary legislation in 2002 by the then Labour Government. These and other aspects of welfare reform have of course been debated at length in the Budget debate, as well as in departmental questions and elsewhere. The underlying issues will also be debated in the Welfare Reform and Work Bill. In a response to a request from the right hon. Member for Birkenhead (Frank Field), the Government have brought the vote on the statutory instrument measures to the Floor of the House to allow all hon. Members the opportunity to vote.
Damian Hinds
Allow me to make a wee bit of progress.
Reforming tax credits and other benefits forms the first of five pillars of the Government’s approach to supporting working Britain. The second is the increase in the personal tax allowance; the third is the national living wage, the fourth is the major extensions to child care provision; and fifth is the overall sound economic management that is delivering growth in the number and quality of jobs, earnings and living standards.
Damian Hinds
It is important we see these changes in the overall context. I outlined some of the additional elements that are relevant. I certainly accept that they do not all come into play at exactly the same time, but in the course of time they do and by 2017-18 eight out of 10 households will be better off.
Lady Hermon
I am most grateful to the Minister for allowing me to intervene at this early stage. A number of my constituents in Northern Ireland feel extremely aggrieved about the change to the income thresholds for eligibility for tax credits. Before I could support the measure, I have to urge the Minister to give some guarantees on how the Government plan to mitigate its worst effects for families throughout the United Kingdom—not just in Northern Ireland.
Damian Hinds
I have been talking about some of the other elements, but these are matters on which the hon. Lady has a long track record of campaigning. Northern Ireland has a particular situation with regard to welfare reform and I hope all parties will come together to get through that. Discretionary payments are designed for housing issues in particular and were increased substantially in the summer Budget. It is possible that local authorities can use some of those funds to help out people who find themselves in particular difficulty, but I am of course very happy to meet her to go through this in more detail.
National Insurance Contributions (Rate Ceilings) Bill
Lady Hermon Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
I beg to move, That the Bill be now read a Second time.
This Bill implements our manifesto commitment not to increase national insurance contributions for employers and employees. It will be interesting to discover whether it will be opposed by Her Majesty’s Opposition now that their new leader favours a 7% increase in national insurance for higher earners.
Hon. Members will be aware of the Government’s strong record of significantly reducing the burden of national insurance. At Budget 2011, my right hon. Friend the Chancellor announced a £21 a week above-inflation increase to the employers national insurance threshold. In 2014 we introduced the employment allowance to support businesses and charities across the UK by saving them up to £2,000 every year, and that has already benefited well over 1 million employers. The Government are now going further, and hon. Members will recall that the Chancellor announced in the summer Budget that that saving would be increased to £3,000 from next April. That means that a business will be able to employ four people full time on the national living wage and pay no national insurance at all.
From April 2015, the vast majority of employers employing under-21-year-olds were lifted out of employers national insurance as well. The exemption will be extended to cover apprentices under 25, helping young people to stand on their own two feet and fulfil their aspirations.
Lady Hermon (North Down) (Ind)
I am sorry to intervene so early in the Minister’s speech, but for the sake of clarity will she explain the long title to the Bill, which appears to apply only to class 1 national insurance contributions? I presume that the other classes will be covered in due course.
Harriett Baldwin
My remarks will be so short that hon. Members will need to intervene quickly with their points of clarification on this five-clause Bill. The hon. Lady will be aware that in the summer Budget the Chancellor announced that we are asking the Office of Tax Simplification to look at class 2 and class 4 contributions. We are expecting that consultation, which opened on 21 July, to inform the Budget next year. She asks a sensible question and I welcome her curiosity.
Barbara Keeley
No, I have nearly finished.
As I have argued, the Bill provides no protection for millions of hard-working families, and if the statutory instrument on tax credits is voted through by Conservative Members, those families will be £1,000 a year worse off on average. That will be a direct result of the Chancellor’s fiscal decisions, and I believe many Conservative Members will come to regret it. Ministers should not be wasting their time on legislative gimmicks such as this so-called tax lock.
Lady Hermon
I am most grateful to the hon. Lady for allowing me to intervene. She will know that the Bill extends to Northern Ireland. I have listened very patiently to what she has said here today, but I think the people of Northern Ireland and of the United Kingdom generally are entitled to know the policy of the Labour party, the main Opposition party, after a change in the leadership and with a new shadow Chancellor of the Exchequer. What exactly is their policy on national insurance contributions? Is Labour not going to increase them? Does Labour agree with the Government that they should not be increased for five years? Is that the clear policy of the Opposition?
Barbara Keeley
Yes, it is. I am the shadow Treasury spokesperson responsible for the Bill today. [Interruption.] Well, I am standing here today. We made the pledge first. I am very pleased that the hon. Lady raised the question in the manner she did. As I say, we made the pledge first: it is our pledge. Let us get back to that point.
Rather than wasting their time with gimmicks such as this so-called tax lock, Ministers should perhaps direct their focus on supporting low and middle-income families. [Interruption.] Ministers should really bear in mind that every time they sit there laughing on a day when they are going to take £1,000 off 8 million hard-working families, they simply provide grist to the mill of people who contribute to newsletters up and down the country. The Government’s fiscal policies are too serious for Ministers to sit there laughing. I really advise them to stop it. They should direct their focus at supporting low and middle-income families who will be worst hit by the summer Budget of this Conservative Government—with or without a tax lock.
Corporation Tax (Northern Ireland) Bill
Lady Hermon Excerpts(9 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mark Durkan (Foyle) (SDLP)
I beg to move amendment 1, page 64, line 30, after “by”, insert—
“(a) an insurance company (within the meaning given by section 65 of FA 2012),
(b) a building society as defined by the Building Societies Act 1986, or
(c) a credit union registered under the Credit Unions (Northern Ireland) Order 1985 or the Industrial and Provident Societies Act (Northern Ireland) 1969.”
It will not be lost on hon. Members when they see an amendment to clause 1 at page 64, line 30 just how long a clause 1 we are dealing with, as we found in Committee. The Bill is essentially all in clause 1 and the other clauses provide the trimmings.
In Committee, I and other hon. Members raised a number of issues through probing amendments and in clause stand part discussions. One issue that I raised was the position of credit unions in Northern Ireland. As we heard on Second Reading and as the Financial Secretary to the Treasury stressed in Committee, the Government, with the agreement of the parties in Northern Ireland, have been at pains to make sure that any move to devolve to the Assembly powers in respect of corporation tax would not invite any large artificial or contrived shifts by large parts of the financial services sector. Nobody has been in the market for making sure that banks and other major financial services businesses could in any way benefit from surfing on to the devolved corporation tax rate that would be available to Northern Ireland under the Bill. Everybody is ad idem on that.
There is, however, a concern that the exclusion of the financial services sector at large could lead to inadvertent discrimination against credit unions or mutual building societies that are wholly and solely based in Northern Ireland.
Lady Hermon (North Down) (Ind)
Will the hon. Gentleman take this opportunity to put on the record the very valuable contribution made by credit unions and mutual societies in Northern Ireland, which differs from that in the rest of the UK? In particular, can he give an idea of the number of savers and those who make use of credit unions and mutual societies?
Mark Durkan
Those are points that I shall touch on in my remarks, and I am sure that other right hon. and hon. Members will do so as well. By way of response to the hon. Lady, I make the point that there have been efforts over a number of years. When I chaired the Assembly’s Committee for Enterprise, Trade and Investment, we conducted an inquiry into credit unions in Northern Ireland, which have a very large membership base and a very strong savings base, far beyond those of credit unions here, which by comparison are merely developing.
The fact is that credit unions in Northern Ireland have been precluded from having as broad a range of services to offer their members, unlike credit unions here, and the key to broadening the range of services, of course, was to have credit unions in Northern Ireland regulated by the Financial Services Authority—subsequently the Financial Conduct Authority and the Prudential Regulation Authority.
However, while credit unions in Northern Ireland will be regulated from London institutions for those financial services, they still come under a devolved legislative window. That goes back to the Northern Ireland Act 1998, which deliberately ousted credit unions from the reserved power in relation to financial services through specific mention of the fact that devolution would include the Credit Unions (Northern Ireland) Order 1985. Credit unions are therefore in a sort of dual-control legislative and regulatory environment; they are registered under devolved legislation but regulated under financial services legislation of this Parliament, and rightly so.
However, that leads to some quirks and bumps in interpretation. A credit union Bill that would address some of those issues seems to be held up somewhere in the Assembly processes. In those circumstances credit unions are particularly concerned that they might become unintended casualties of some of the restrictions and exceptions that are rightly being introduced with the devolution of corporate tax by the Government and with the agreement of the parties in the Assembly.
Mark Durkan
Exactly. I take the hon. Gentleman’s point. There is no known rational basis for it. In circumstances in which we are talking about arrangements aimed at preventing any artifice on the part of companies, just coming up with such an arbitrary figure does not particularly help. In circumstances in which we see that larger firms can be advised and assured that their existing operations of large and hopefully growing scope will be covered by the new devolved tax rate and will not be caught in the exclusion of financial services, it seems strange that the financial services entities that are not for profit, which are not taking money out of Northern Ireland but recirculating it into the local economy, would be penalised.
Lady Hermon
I have been watching the Government Front Bench and I know that the Secretary of State for Northern Ireland, the Minister of State and the Financial Secretary have been listening very carefully to the hon. Gentleman, as they should. It would be helpful to us if any one of them intervened to explain how on earth only 5% of the back office work of the Progressive would qualify for an exemption under the Bill. I am sure that the hon. Gentleman would be delighted if they did so.
Lady Hermon
Many people save with credit unions in Northern Ireland and the credit unions are assisted valiantly by many teams of volunteers. Will the Financial Secretary kindly give a reassurance—a guarantee, in fact—that if the Bill goes through unamended and the amendment tabled by the hon. Member for Foyle (Mark Durkan), which we all support, not just the parties, but even Independent Members, is not agreed to, credit unions and the Progressive mutual society will not be adversely affected when it becomes legislation?
Mr Gauke
I can give that reassurance. They will not be affected by the legislation. Credit unions have two types of income on which corporation tax could be charged. There is no corporation tax charge on their trading income, as I have set out, and their investment income will fall outside the Northern Ireland regime, as does investment income for every other business. In that sense, credit unions will be unaffected. I hope that the hon. Lady is reassured. If building societies carry out excluded trades, they will be treated as they are currently and the Northern Ireland regime will not apply. That is based on the principles that were agreed with the Northern Ireland Executive. The Northern Ireland corporation tax regime is about trading profits. If something is not a trading profit, it will not fall within the Northern Ireland regime. We are applying that consistently. As it happens, credit unions do not pay corporation tax on their trading profits anyway, so they will not be adversely affected.
Lady Hermon
I am genuinely very grateful to the Financial Secretary. He has categorically assured the House and all those who will read the Hansard report of this debate that credit unions and the Progressive mutual society will not be adversely affected by the Bill if it goes through unamended. Will he sum up how they will benefit from the legislation? It is nice to know that they will not be negatively affected, but how will they benefit from the legislation? There is an unfairness. Northern Ireland is a very small jurisdiction. It is ridiculous that banks down the road will benefit from the Bill, but that credit unions that have served all sides of the community for years and years will not benefit from it. Let him stand up and assure credit unions that they will benefit. That would be very helpful.
Mr Gauke
The first point to make is that there are certain excluded activities. Lending and investment are excluded. Whether the entity concerned is a bank or a building society, if the activity is excluded, it is excluded. There is therefore a level playing field. Secondly, we are making provision for back-office services. It will be possible for a calculation to be made on the profit that is attributable to back-office functions by applying a 5% mark-up to the cost of those back-office functions. The lower corporation tax rate in Northern Ireland—assuming that it is lower—will apply to that. That will be of benefit to institutions, including building societies, in Northern Ireland.
I would also make the wider point, which has been made by the Northern Ireland Executive on many occasions, that the ability to set corporation tax rates will be good for the Northern Ireland economy. That is why the Northern Ireland Executive want the power. What is good for the Northern Ireland economy will presumably benefit institutions based in Northern Ireland, whether they be credit unions or building societies. That is the case that the Northern Ireland Executive have made to us.
When the Northern Ireland regime was designed, it was focused on trading income for very good reasons. Over the course of the debates in Committee, there has been a wide consensus that it is correct that it is focused on trading income. It would not be consistent with that approach for me to accept the amendment. I therefore urge the hon. Gentleman to withdraw it. If he presses it to the vote, I will advise Government Members to oppose it. I understand the widespread view, which has been articulated strongly this afternoon, on the importance of the credit union sector in Northern Ireland, but accepting the amendment would be a mistaken approach.
Mr Gauke
My hon. Friend raises an important point. We are in an era when countries are generally reducing corporation tax rates. In this Parliament, we have reduced our rate from 28% to 21% and are about to reduce it further to 20%, although some advocate that we reverse some of that progress. I also note that the Indian Government set out a plan at the weekend to reduce their corporation tax rates. Certainly, I think that the whole UK will be watching the experience in Northern Ireland very closely to see what economic benefits arise as a consequence of a reduced rate.
Lady Hermon
In case we are building up false hope, I would be grateful if the Minister made it clear that reducing the rate of corporation tax—if that is what the Northern Ireland Executive decides to do in 2017 or thereafter—on its own will not rebalance the Northern Ireland economy or guarantee the creation of one extra job. We need a range of measures that combine to rebalance the economy.
Mr Gauke
The hon. Lady makes an important point, although it is for the Northern Ireland Executive to judge how to proceed. In the UK, our reductions in corporation tax have been an important part of our long-term economic plan, but they have not been the only part, and I know that the Northern Ireland Executive will want to do everything possible, in addition to this power, to put in place the conditions for economic growth. One should not pretend that this in isolation solves every problem. None the less it will be a very useful additional power for the Northern Ireland Executive, and, as my hon. Friend the Member for Macclesfield (David Rutley) said, there will be considerable interest elsewhere in how the policy develops and the benefits that accrue as a consequence.
To reduce the administrative burdens on SMEs, a special regime will be put in place. A simple in/out test will mean that the majority of companies will be spared the burden and cost of proportioning profits. More than 97% of SMEs operating in Northern Ireland meet the 75% employment test threshold and will benefit from the Northern Ireland regime.
I would like to take this opportunity to thank KPMG Belfast, the Association of Chartered Certified Accountants and PricewaterhouseCoopers for their written submissions to the Public Bill Committee and the other businesses that sent representations directly to HMRC, and I welcome the continued support shown by the Northern Ireland business community and businesses elsewhere in the UK for this measure. In January, 80% of firms polled at an Ernst & Young Ulster Hall seminar on the Bill believed that a cut in corporation tax would have a positive impact on their businesses.
As my right hon. Friend the Secretary of State for Northern Ireland made clear on Second Reading, the Bill’s progress through Parliament is dependent on the Executive parties delivering on their commitments in the Stormont House agreement, so I am pleased that the Executive has so far met their obligations. They agreed their budget for 2015-16, passing their Budget Bill last week, while the Welfare Reform Bill passed its Further Consideration stage in the Assembly at the end of February. The Government will continue to assess progress as the Bill moves forward, and in future years as decisions on implementing the powers are to be taken.
Shabana Mahmood
The hon. Gentleman is right to say that the perception of business is really important, but he will recognise, I think, a point that businesses often make to Members of all parties—that headline rates of corporation tax are extremely important for decisions about where to locate businesses, but that they are not the only factor that businesses take into account. I recognise the importance of this Bill for Northern Ireland, given the unique situation in which Northern Ireland finds itself. As I say, it is putting a rocket-booster under the approach taken so far to try to rebalance the Northern Ireland economy, but it will not succeed on its own—it has to be part of a wider policy framework. Despite recognition of the importance of a wider policy framework, we have not yet heard a huge amount of detail about what it will look like on the ground in Northern Ireland. These are matters largely for the Northern Ireland Executive, but they need to know and to hear that the Opposition support them in having a wider framework of policy measures around skills and infrastructure that will help to make all this a success, which we all want to see.
Lady Hermon
I am grateful. I am curious to know what reassurances a future Labour Government would give, if they were in office after the general election of 7 May—none of us has a crystal ball, so we do not know—to credit unions and the Progressive building society, which we debated earlier?
Shabana Mahmood
I am grateful for the hon. Lady’s intervention, but I am afraid that I am going to disappoint her a little because my reading of the Bill, what it is intended to achieve and of the agreement that has been struck is very similar to that of the Minister. I agree with him that a deliberate part of the agreement relates to trading profits. Under the new Northern Ireland regime, corporation tax is to be devolved only in so far as it relates to trading profits rather than other aspects of business. That part of the policy is designed to make it successful and ensure that this devolution results in a genuine rebalancing of Northern Ireland’s economy. With respect, I feel that takes care of the point about the credit unions.
I have some sympathy with the argument when it comes to the Progressive building society. I have received communication from it about how it feels it will be caught unfairly by these provisions. I felt that the amendment tabled by the hon. Member for Foyle (Mark Durkan) did not take care of the scope for profit shifting within the financial services sector. We are all alive to that threat, but I am afraid that the amendment did not deal satisfactorily with the problem that the good work of the Progressive in Northern Ireland could slip through and be accounted for, whereas everything else that could result in profit shifting would be excluded. To that extent, my reading is similar to that of the Minister, and that will certainly be our approach. I am happy to give an undertaking—dependent on the outcome of the general election—to continue a debate with Members who feel strongly about this point, as did the Minister.
Shabana Mahmood
I do not want to repeat a lengthy debate on credit unions, but I will give way to the hon. Lady one final time.
Lady Hermon
I am extremely grateful, but we need some clarity on this. There is potential for the Labour party to be in government after the general election of 7 May, so I have to ask on behalf of all the people we on the Northern Ireland Benches represent whether the Labour party is ruling out any flexibility, as the hon. Lady seems to have done this afternoon. She has said that there will be no flexibility for credit unions, whereas I think the Minister said there could be at least some flexibility to look at back-office activities and excluded trades. Is the hon. Lady ruling that out for the Labour party?
Shabana Mahmood
With respect to the hon. Lady, the whole scope of the Northern Ireland regime under the Bill relates to trading profits. Credit unions do not pay corporation tax on their trading profits, so this Bill does not impact on them. I am not sure how many ways there are of saying that; I feel that the different formulations of the point have probably been covered. If the credit unions did pay corporation tax on their trading profits, we would be having a different discussion. If Members wish to see a devolution regime for Northern Ireland that includes activities other than trading profits, so that corporation tax would be paid on investments, income and so forth, that is a big call to make. If provisions were to be applied but limited to credit unions alone, it would mean carving out an exception to the regime. Let me say that that goes beyond the context of the agreement struck between this Government and the Northern Ireland Executive—the agreement that we have supported and the agreement that is the subject matter of the Bill. I would have a huge amount of sympathy if credit unions found themselves caught because they did pay corporation tax on their trading profits, but that is not the case, so—
Ian Paisley
Thank you, Madam Deputy Speaker, for giving me the opportunity to speak in this important debate on corporation tax. Today is a red-letter day for Northern Ireland. The Bill certainly gives the lie to those who suggest that nothing ever changes in politics or that devolution does not actually do anything. It sends out the powerful signal that, after much diligent hard work, the constant dripping has eventually worn away the stone and we have achieved something positive for Northern Ireland: we have ensured that we can at last set our own rate of corporation tax.
This is what devolution is supposed to be about. It is supposed to allow the economies that make up the United Kingdom to compete according to their strengths, to set their own pace of change and to be agile. Many of us have argued for this change for a long time, and we at last see the legislation in print. We now see it moving forward on a very positive footing. So those who oppose devolution and say that nothing really changes can eat their words today, and I hope they choke on the Bill—
Ian Paisley
Indeed.
Some Members have suggested that the devolution of corporation tax is not a silver bullet, but I do not think I ever heard anyone say that it was going to be a once-in-a-lifetime, miracle-working, stand-alone solution. No one ever thought of it like that. It is one of the arrows in the quiver, to be fired at the right target at the right time.
The important thing about the corporation tax measure is that it will change people’s perceptions about our economy. We have a go-forward, low-tax, incentivised economy. Indeed, that seems to be part of the Government’s own economic plan. They have tried to reduce taxes time and again, and I welcome that. I agree with the right hon. Member for Wokingham (Mr Redwood), who has often contributed to debates in the House by demanding that we have even lower taxes across the whole of the United Kingdom. Would it not be a far better day today if the Bill were introducing a reduction in corporation tax for the whole of the United Kingdom? That is what we should really be debating, and I hope that one day Government Members will follow our lead and reduce their corporation tax to the new levels that Northern Ireland has ambitions to achieve.
The Government’s plan to reduce tax is welcome. When we look at the history of the economy of the Republic of Ireland, we see that it was not corporation tax reductions alone that supported the country’s boom years. There were other unique selling points that it is important to consider. The Republic sold the fact that it had a great, well-educated and advantaged youth population who made the country cheaper, as an offshore part of Europe, to invest in. Northern Ireland competes on exactly the same footing as that, and I believe that we can do it even better. After all, we are British. We are an offshore part of Britain: we are Britain offshore. If we can use that to our advantage as a unique selling point, we should do so, and I welcome those who will join us. As other Members have said, this change will affect 34,000-plus local companies, 26,500 of which—the small and medium-sized enterprises—form the backbone of our economy. I know that many of them welcome this measure, and I look forward to the opportunities that the legislation will create.
I welcome the fact that those on the Front Benches have changed their minds on this matter. For a long time, certain Members were like John the Baptist, in that they were preaching in the wilderness. Eventually, however, they have managed to convert; I think that those on both Front Benches recognised that they needed to do so. That is a good thing. There has been a lot of thought on this issue on both sides of the House and I welcome the change of heart, particularly on the Labour Front Bench. I remember the former Prime Minister telling us in 2007 that he could not do this. He gave us the Varney review and told us that we could tamper with this, that and the other. Indeed, the then Treasury spokesman, the right hon. Member for Leigh (Andy Burnham), said at the time that corporation tax reduction for Northern Ireland
“does not offer the best way forward”.—[Official Report, 17 December 2007; Vol. 469, c. 74WS.]
I am glad that we have recognition today that it is the best way forward, and I hope that we will have unanimity on the matter in the House.
As I have said, this is not going to be a one-night wonder; it will not change things overnight. It will probably take at least a decade before we reap the benefit of the change, but anyone who knows that Northern Ireland’s economy also has a strong agricultural sector will appreciate what I am about to say. Before we can reap the benefit of the changes, we have to sow, and today we have very good seed that I believe we are going to be putting into very good ground. I look forward to seeing the game-changing strategy that is being put in place today reaping a wonderful economic harvest for Northern Ireland over the next 15 to 20 years. I believe that anything the Republic of Ireland has been able to offer as a result of its corporation tax reduction, Northern Ireland will be able to do on steroids. We will do it better. After all, we are part of a G20 nation, and the benefits of that stability should be recognisable to all.
In 2011, the Select Committee, under the watchful eye of the hon. Member for Tewkesbury (Mr Robertson), indicated that this measure was going to be a game-changer. The Select Committee is to be congratulated on pursuing this matter and encouraging the Government to look afresh at it. At that point, it had been dropped from the agenda and people thought that it was all over, and the Chairman of the Committee should be singled out today and congratulated on pushing the matter forward.
Over the past five years, the Northern Ireland Executive have demonstrated their ability to look at other good competitive economic measures that we should be embracing.
Lady Hermon
The hon. Gentleman will have noted that the Minister made the valid point earlier that the devolution of corporation tax to the Northern Ireland Executive was contingent on the implementation of the Stormont House talks. I am sure that the hon. Gentleman, who is speaking loudly for the Democratic Unionist party, would like to confirm that his party is absolutely wedded to the full implementation of all the commitments and recommendations that resulted from those talks.
Ian Paisley
This is not the place to debate all of the Stormont House agreement, but given that we were instrumental in helping to achieve it, we will, of course, be pursuing every line, every jot and every tittle to ensure that we get the best deal for Northern Ireland in all of that arrangement.
Between 2013 and 2014 we had a record year of investment in Northern Ireland. Nearly 11,000 new jobs were promoted and 23 first-time investors were welcomed into Northern Ireland. If we can do that in one year in advance of the corporation tax Bill, what can we not do if we can now go out around the world and start to market Northern Ireland as the place with what I hope will be the lowest level of corporation tax on these islands? If we can do that, we really will have the opportunity to see Northern Ireland attracting even more companies. Our attracting 23 new, high-calibre investors in the past year, in the hard economic climate we have been coming out of, is a signal that things they are a-changing.
Taxation of Pensions Bill
Lady Hermon Excerpts(9 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
The numbers that we and the OBR believe are likely to be changed as a consequence of the policy were set out in the March document. We very much doubt that there will be a huge windfall for the Exchequer as a consequence of these changes, whatever the appeal of that might be. As I have said, some revenues have been moved from future years into earlier years, but some of the claims about the impact are somewhat exaggerated and highly unlikely.
Lady Hermon (North Down) (Ind)
To pick up on the important point made by the Chair of the Work and Pensions Committee, will the Minister seriously consider putting on the face of the Bill a criminal offence of trying to deceive people out of their pension savings? That will act as a deterrent to unscrupulous organisations or individuals from the moment the legislation goes on to the statute book.
Mr Gauke
The Financial Conduct Authority has already made it clear that if, for example, anyone attempts to present themselves as providing guidance under the guidance guarantee when they are not in a position to do so, that will be looked at very seriously. There is a strong determination to ensure that the dishonest, the unscrupulous and those seeking to mislead people are treated very seriously indeed. We are talking, after all, about a regulated sector, and those who try to conduct regulated activities who are not properly regulated already face offences. I recognise the hon. Lady’s concern about whether we are determined to address those who try to defraud our constituents. Yes, we are absolutely determined to address that, and the FCA is very engaged in that process.
Mr Gauke
As I say, the FCA is very engaged in this area and has already set out its determination to ensure that those seeking to mislead face punishment. The FCA has responsibility for ensuring that regulated firms treat their customers fairly and communicate in a way that is clear and not misleading. We believe that it has considerable powers here. Of course, the Pension Schemes Bill is also important in ensuring that the FCA puts in place standards for the guidance guarantee—standards that anyone delivering that service must comply with.
Lady Hermon
I am extremely grateful to the Minister for taking a second intervention so quickly. He has been careful in his words regarding the FCA. We are talking about those who are manipulative and try to deceive people out of their entire life’s pension; it is a really serious issue. I would like him to confirm that when he refers to “serious” punishment and this being taken “very seriously”, it means a criminal conviction for these people. Will he confirm that that is how seriously the FCA will treat this offence?
Cathy Jamieson
There are two pension Bills running side by side in the House and I do not want to stray into discussing the detail of the other one which is being considered in Committee—I am sure you would not allow me to do so, Mr Deputy Speaker. However, my hon. Friend makes a valuable point.
Lady Hermon
The hon. Lady is being very generous in taking a number of interventions. She has the opportunity to confirm that the Labour party would support an amendment to the Bill to make it a specific criminal offence for unscrupulous, so-called pensions advisers to swindle innocent people out of their pensions and lifetime savings. Is that not a valuable amendment that could easily be made and confirmed by the Financial Secretary this afternoon?
Cathy Jamieson
The hon. Lady makes an important point, and I listened carefully to her intervention on the Financial Secretary. As a constituency MP, I am aware of people who have been swindled out of their life savings through unregulated, unscrupulous people giving them bad advice; indeed, the Financial Secretary has heard me talk about this issue when considering other Bills. I am very interested in what the hon. Lady said about such an amendment, which we would want to consider to give as much protection as possible to consumers.
Nigel Mills
The hon. Gentleman has to be right. The issue was raised in the Pension Schemes Bill Committee evidence sessions last week, and we will get to it again when we discuss the provisions on guidance. It is hard to work out the line between advice, which might say, “The best thing for you is to do x,” and guidance, which just says, “Here are the options and the various things to think about. Make sure you shop around. Thanks for calling.” Guidance such as that will not help people, who will forget it by the time they put the phone down or walk out of the meeting room.
We need the people getting the guidance to have worked out their financial situation—their pension pots, their debts, their other income, their state pensions and other employer provisions—so that when they go to get their guidance, they can set out their circumstances to the person guiding them, and that guidance can be focused on the sorts of choices they could reasonably make. That is probably about as far as we could get, because once someone says, “You should pay off your debts first”, they are getting into giving advice, and that may not always be right; it risks creating liabilities and people being mis-sold things. This will be an extremely hard balance to strike.
Lady Hermon
I apologise for having to leave the Chamber briefly to go to the Select Committee on Northern Ireland Affairs; duty called. I entirely agree that this is a radical and fundamental change to pensions entitlement, as regards when people can benefit from and draw down their pensions. Given that it is such a radical and fundamental change, does the hon. Gentleman share my disappointment that the Bill, which runs to 54 pages, I think, and has three clauses and a schedule, is so highly technical that no ordinary person in the street could possibly understand their pension entitlement?
Nigel Mills
It is certainly interesting that the Bill is 57 pages long and has only three clauses, with the rest dropped into a schedule at the back. However, complicated rules are being changed, to take away some penal tax charges, among other things, and I guess it does not matter how the provisions are drafted; whether they are in a schedule or a clause, we get to the same position in the end. One of the problems with pensions is that everything is so fiendishly complicated that almost nobody can understand what all the rules are.
I am concerned about the provision in which the Government seem to be repealing the requirement that people must, before buying an annuity, have had a chance to check the open market situation. Clearly, we are not taking away the chance for people to compare annuity rates, because we are not compelling them to buy an annuity, so that option will still be there. A fall-back is written into the rules that says that before somebody defaults into buying an annuity from their pension provider, they must, under regulations, have had the chance to shop around and to be given advice. That looks like a sensible provision that should perhaps be kept. Repealing it strikes me as being a little too optimistic about how well this market might work in the early years.
Moving on to the general principle of the Bill, these changes reopen the debate about how we use the tax system to encourage pensions. There is a huge annual bill for allowing people to put untaxed income into their pension scheme. According to the latest figure I have seen, the net cost is about £22.8 billion in income tax, plus £15 billion in national insurance, so we are talking about £38 billion of taxpayers’ money being used to incentivise pensions saving each year. Okay, some of that money comes back when pensions start to be drawn, but it is still a large amount. The more flexible we make savings arrangements, so that people can choose when they draw down their pension and can do so 10 years before they retire, the weaker we make the justification for saying, “We should do this pre-tax”, because we are distorting the savings market.
I suspect that the only reason most people would choose to save into a defined contribution pension, locking their money away at the whim of some unscrupulous pension provider who charges them for things they do not understand and finally getting their money back 30 years later, is that they get this huge tax advantage. If we are going to start enabling people to have large amounts of that money, tax-free, a long time before they retire, does that change the equation? Perhaps we should be thinking about these things. Is this the right way to distort the pensions market? Should we not equally incentivise people to put money into an individual savings account every year and have a bit more control over it and a bit more visibility? Is that better protection for them?
We desperately want people to save money for their retirement, and we want it locked away so that they cannot spend it each year, and I suspect that using the tax system to achieve that is still very much the right answer. However, we probably need to think again about how much we are spending on higher-rate tax relief on pension contributions in order to make the system more flexible.
Ian Swales
That is a very good point. The guidance needs to be much more in the round on what may happen to people after retirement, but I suspect that that will not be mentioned in the guidance unless we can do something about it.
To go back to my example about the lady with the solar panels, I went through the documents with her, and they very clearly showed the numbers. There was no doubt: she had not been scammed. What she had signed up to was absolutely clear, and her signature was on all the documents. She said, “Oh, I just didn’t realise. I’ve an A-level in maths, so I should have realised.” What worries me is that we do not have to speak to many constituents before we realise that levels of knowledge about pensions are extremely low. As the hon. Member for Worsley and Eccles South (Barbara Keeley) has said, other consequential issues of getting older are sometimes even less clearly understood.
I am worried about the guidance, and I think that there will be concerns about whether it is appropriate and whether people have the financial awareness necessary to understand it. That goes back to the need to make people more financially literate from school onwards, but we will not solve that problem overnight. The industry is talking about having a second line of defence, and it needs to be listened to. It is a clear case of “They would say that, wouldn’t they?”—it is designed to get people to move towards the type of products that the industry is offering—but such a second line of defence might serve to protect people from themselves, as it were.
We need to watch out for scams. I listened carefully when the hon. Member for North Down (Lady Hermon) mentioned criminality in relation to people losing their pension savings. Pension release companies already impose extremely high charges for unlocking pension schemes and doing very little work. I am prepared to take an intervention from her if she so wishes, but I am a bit concerned about how to define criminality. People may make a bad decision, but that is not necessarily criminal. I agree with her, but I wonder what kind of products or service she means when she talks about criminalising those who end up losing their pension pots.
Lady Hermon
It is awfully nice of the hon. Gentleman and so kind of him to invite me to intervene. I absolutely do not want to criminalise people who draw down their pension. I am a huge fan of Radio 4, and I listen very carefully to its finance programmes. As has already been mentioned, we and many people—certainly constituents in my patch—are worried about unscrupulous so-called pension advisers who set themselves up so that people can go on to the internet, press a button and commit their life savings to them. I do not want to criminalise the person involved; I want to put into the Bill a deterrent against unscrupulous tax or pension advisers.
Ian Swales
I thank the hon. Lady for her clarification. I am sure that the Exchequer Secretary would be interested to hear more about how she defines “unscrupulous”. I agree with her, but there is more to do to be clear what that means or about conduct that the Financial Conduct Authority would regard as unscrupulous.
All this liberalisation of pensions, as the hon. Member for Amber Valley mentioned, makes pension savings more like other kinds of savings. We are also providing a big tax advantage. Removing restrictions on when pensions are taken and removing some of the tax charges and restrictions on death means that we are moving closer and closer to a simple tax-free savings market. Such a market is especially attractive for people who are very close to retirement. I have done some sums, and if one is about to take one’s pension pot, there is quite an incentive—because of the tax-free 25%—to throw in the maximum possible amount of money in the months before retirement. Somebody paying tax at the basic rate who puts a lot into their pension pot in March and starts their pension in April or May would make a 6% return on their money simply by putting it in and taking it back out again. A higher rate taxpayer would make a 16% return on their money simply by putting a lump sum into their pension pot immediately before they retire and then drawing it out again. There will therefore be clear consequences of the flexibility that we are creating. People will be more inclined to put their money in if they know that they will be able to get it out quickly. There are clear benefits to getting the tax-free amount very quickly.
We have heard about the possible later costs to the state in respect of care and so on. By definition, if people take more out of their pension pots earlier, more people will need state assistance later in life with health or care costs. I know that the Minister is aware of that issue, but I do not know whether the possible costs have been calculated or estimated.
I am more confident than most that the responsible part of the industry will come up with new products and innovations. As I said to somebody from Just Retirement last week, what people need is plain language. Even the word “annuity” is not plain language. People want a secure income in retirement. The vast majority of people who retire do not want to buy a sports car, but to have a certain income throughout their retirement. The more the industry wraps things up in mumbo-jumbo that people do not understand, the more suspicious people are of its motivations.
We are already seeing warning signs. For example, Fidelity is saying, “All this flexibility means complexity, which means higher costs, because we are not set up to run bank accounts.” I am concerned that the industry will see the changes as a new way to levy high charges. It will say that the very flexibility that the Government want to see is expensive to provide. I hope that we see the right level of competition in the market and that people come in who do not levy those high charges.
We have seen a huge fall in the number of annuities that have been taken out recently. Just Retirement has seen a 50% fall in demand for annuities. I suspect that that is partly due to uncertainty. People want to be clear what the new rules are before making a decision. Demand may pick up again, particularly if there are new products. However, there is no doubt that fewer people will take out annuity-type products.
Newry HMRC Centre
Lady Hermon Excerpts(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ms Margaret Ritchie (South Down) (SDLP)
I would like to thank the Minister for coming here to respond to the debate this evening. HMRC centres throughout the UK, including in Newry, have been subject to turbulent change since 2006, and staff have grown accustomed to their jobs being under threat. However, I was alarmed to hear that the Treasury is now offering voluntary exits and effectively seems to have decided to close down HMRC centres across Northern Ireland—in Newry, Enniskillen and Derry.
The Newry centre currently employs 134 staff, many of whom live in my constituency, and I know that this news came as a shock to them and their families. It represents a real blow to working people and families across Northern Ireland, and the removal of these jobs will be a severe drain on the local economy. These people are also vastly experienced, and as it appears they are not being offered re-deployment, this will be a great loss of expertise.
Despite being hit hard by the financial crisis since 2008, Newry and the surrounding area has great economic potential to harness north-south business development. Significant steps taken under the “Newry Vision” programme have bolstered the private sector, and consideration has been given to where public-private partnerships can be effective. The Newry area, given its strategic location on the Belfast-Dublin corridor, has been identified as a vital economic hub within the Northern Ireland regional development strategy. As has been highlighted by economists and spatial geographers such as Professor John Driscoll, the area could be the fulcrum for key north-south economic development.
However, it is critical for the balance and sustainability of the local economy that these public sector jobs be maintained. Indeed, with 12 public sector jobs per 100 of the working-age population, Newry is under-represented in public sector jobs in Northern Ireland, and removing them would put severe pressure on the whole local economy, including the private sector. Only last week, I was told that staff numbers in the administration sector of the Public Prosecution Service in Newry will be reduced, and that Driver and Vehicle Licensing Agency offices could be closed. That is still open for discussion, and hopefully the Minister with responsibility for transport here could reverse that decision.
Lady Hermon (North Down) (Ind)
I am very grateful to the hon. Lady for allowing me to intervene. She will know that the Northern Ireland Affairs Committee recently looked into the appalling crime of fuel laundering in Northern Ireland. I and the other members of the Committee were indebted to the HMRC for its work throughout Northern Ireland, but particularly in the Newry area. One thing we were very concerned about was the evidence given to us about the cost to Newry and Mourne district council of cleaning up the rubbish left behind by these criminal gangs. We need more HMRC staff in Newry, not fewer.
Air Passenger Duty
Lady Hermon Excerpts(10 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Sammy Wilson
I am not going to go back into the history of Hansard to dispute that point. However, whether the tax has been hijacked, or whether it was originally intended to be a green tax, it is still cited today as one of those taxes that we need to hold on to if we are to cut our carbon emissions.
There is, of course, general concern about electricity prices, the cost of air travel and a whole range of issues affecting the UK economy. The previous Government were, of course, the same on green issues as the present Government, but the zeal of UK Governments to deal with such issues is not found in other parts of the world or of Europe, and that places us at a disadvantage. We have to stop this King Canute attitude to climate change whereby the UK Government think that they can somehow use fiscal powers to affect what is happening to the climate across the world, although they are damaging our own economy at the same time.
Lady Hermon (North Down) (Ind)
A label has been attached to the hon. Gentleman—quite unfairly, I am sure—to the effect that he is a climate change denier. I cannot believe for one moment that that could be true. Would he like to take the opportunity to put on record the fact that he actually believes that there is climate change?
Sammy Wilson
Only a fool would deny that there is climate change. The world’s climate has been changing ever since the world was in existence. The question is what is the cause of that climate change, and what impact might the fiscal measures introduced by the House have on it.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
Thank you, Mr Speaker. I commend the Democratic Unionist party, and particularly the hon. Member for East Antrim (Sammy Wilson), for bringing this timely issue before the House. He gave a thoughtful and considered introduction to the debate.
It is clear from the hon. Gentleman’s contribution that air passenger duty causes concern to many hon. Members on both sides of the House and their constituents. More than 100,000 people backed the petition of the fair tax on flying campaign, which resulted in a Backbench Business Committee debate in November 2012. Who can blame people for being concerned when they face a worsening cost-of-living crisis, with soaring energy bills, increasing child care costs, countless other demands on household budgets, and prices rising faster than wages in 39 out of the past 40 months since the Government came to power?
The fair tax on flying campaign is driven by a number of the UK’s leading travel organisations, including airports, trade associations and destinations. In my new role as shadow Economic Secretary to the Treasury, I look forward to engaging with those bodies and their concerns with my fresh eyes.
Lady Hermon
Given that APD is loathed and detested by our constituents throughout the United Kingdom, will the hon. Lady take this opportunity at the beginning of her contribution to commit any future Labour Government to the complete abolition of APD, and cheer us all up before we go home this evening, please?
Catherine McKinnell
It is interesting that the hon. Lady mentions cheering up—an ONS report out today says that Northern Ireland is one of the happiest places in the UK—but I appreciate that APD is a cause of unhappiness, as was clearly articulated by a number of hon. Members, particularly the hon. Member for East Antrim. I will set out the Labour party’s position on the subject later, but I want to focus on the Government’s approach—[Interruption.] Given the Prime Minister’s performance today, one wonders who is running the country.
Finance Bill
Lady Hermon Excerpts(10 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lady Hermon (North Down) (Ind)
I am grateful to the Minister for taking a second intervention so soon after the first. Does he realise that APD is particularly damaging to the ambition of rebalancing the economy in Northern Ireland, especially when there is such a low level of APD just over the border in the Republic of Ireland? Will he undertake to look seriously at the issue with regard to Northern Ireland?
Mr Gauke
The hon. Lady will be aware that we have made a number of concessions in that area with regard to Northern Ireland and I say again that we will keep those matters under review.
The Bill will support a wide variety of sectors, encourage innovation and send the clearest possible signal that business is welcome in the UK.
The Government’s strategy is underpinned by our commitment to fairness. The Bill will reward hard work and help families with the cost of living. It will lift an additional 1.1 million individuals out of income tax with the largest ever cash increase to the personal allowance. The allowance will be set at £9,440, making assured progress towards the longer-term objective of making the first £10,000 of income free from income tax. That objective will allow people to keep more of the money that they earn.
I should not have to remind hon. Members that the Bill keeps fuel duty frozen, nor that it removes a penny from beer duty. Those measures will make a real difference and support individuals on low incomes who want to get on.
We are taking steps to ensure that those with the most contribute the most. We have introduced a charge on owners of high-value properties placed in a corporate envelope, along with an extension of capital gains tax on the non-natural persons disposing of those properties. We are targeting reliefs appropriately. The cap on the previously unlimited income tax relief and the reduction of the pensions tax relief lifetime and annual allowances are significant in ensuring that everyone pays their fair share.
We have taken significant action to crack down on tax avoidance and evasion. The Bill legislates for the UK’s first general anti-abuse rule, which provides a significant deterrent to abusive tax avoidance schemes. Where they persist, it will give HMRC the tools to tackle them. Just because something is not covered by the GAAR does not mean that it will not be addressed in other ways. We have closed 15 loopholes that have been used to avoid tax, and strengthened the successful disclosure of tax avoidance schemes regime. Since its introduction in 2004, more than 2,000 tax avoidance schemes have been disclosed to HMRC. The changes made in the Bill will improve the information that promoters have to provide to make it even more effective.
Our position is clear: non-compliance and contrived tax arrangements will not be tolerated. The Bill will help to reduce the tax gap, make the law robust against avoidance and optimise our operational response.
Chris Leslie
Fortunately for the hon. Gentleman, but unfortunately for the rest of us, there are still two years of this Parliament to go. He has probably two years of employment left in his parliamentary career and although we think there should be a Labour Member in his seat, we will miss him.
In two years’ time, we will set out the detail in our manifesto. When the Conservatives are in opposition after the general election, we hope to implement a radical manifesto that actually does something to benefit our economy. Today, we would implement a mansion tax that would raise a significant sum that we would give away as a tax cut for lower and middle-income households with a new 10p band of income tax. Government Members struggle with this, but we will judge what needs to be in the manifesto in two years’ time when we can judge the needs of the economy.
Government Members think they already know what their fate will be in 2015, hence the Chancellor coming forward with his cuts programme for 2015 when any responsible Chancellor would be rolling his sleeves up this summer and getting on with bringing forward capital infrastructure investment and doing something to stimulate the economy now. There is nothing in the Budget, nothing in the spending review and, more to the point, nothing in the Finance Bill to help growth. Indeed, the most interesting measures are conspicuous by their absence. There is no mansion tax, although there is provision for an annual tax on enveloped dwellings, which usefully illustrates that it is feasible to move in that direction.
Lady Hermon
In an earlier intervention on the Minister I asked about air passenger duty. In the context of Northern Ireland, would the hon. Gentleman and his colleagues agree to reduce air passenger duty? Rebalancing the economy in Northern Ireland will be difficult to do if this matter is not addressed. Where do the Opposition stand on reducing air passenger duty more generally?
Chris Leslie
I am sorry that we did not have the opportunity to consider this matter on Report. I think it was given some consideration in Committee. I think we are still waiting for the Government’s review to come to fruition—I am happy to give way to the Minister if he wants to confirm that—and we need to see the evidence. If we feel that any changes in tax and in spending are necessary, we want to spell out clearly where we would get the resources to pay for them. The fact that the Government have ignored not just our advice—[Interruption.]
Public Service Pensions Bill
Lady Hermon Excerpts(11 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lady Hermon (North Down) (Ind)
The Bill must, of course, be compatible with the European convention on human rights and the jurisprudence of the Strasbourg Court. Will the hon. Gentleman reflect on whether this retrospective provision on accrued property rights is compatible with the convention? Would it be in keeping with our commitments under the convention to take away property rights retrospectively and without compensation?
Chris Leslie
The hon. Lady has hit upon an important point. There are questions about whether it impinges on basic human rights to claw back retrospectively property—assets—that has been legitimately accrued, yet there is a provision here in the Bill to allow that to happen. Of course, Ministers could say, “Well, even though we’ve allowed for the possibility of retrospectivity, we’re not actually legislating for it now, although we might want to leave open the door to do it in the future.” That would be the point when it would impinge on the convention. She makes an incredibly important point. That is the extent of the possible outrage being left open in the Bill. All legislation is supposed to be signed off as being compatible with the ECHR, but that is a moot point and a matter of interpretation. She has focused on a crucial point.
The explanatory notes state that clause 3(3) has been included to facilitate the necessary adjustments to
“pension schemes to accommodate changes in law or where the government does not want to delay the benefit of a particular change but needs time to work out the consequences and appropriate method of making the change.”
Amendment 10 would not necessarily hinder those technical operational issues. Given that it would retain clause 3’s intended purpose, as set out by the Minister, and that the Government have promised not to reduce accrued benefits, there can surely be no legitimate grounds for opposing the amendment.
This is not an Opposition whim. We are cutting and pasting text from the Superannuation Act 1972: for 40 years, those provisions have protected the accrued benefits and rights of ordinary working people, and we are seeking to replicate those protections in the Bill. The amendment would not hinder or adversely affect the Government’s intentions, but would be of enormous benefit and reassurance to millions of public service workers. As the Minister knows, that concern arose extensively in Committee, where we debated the issue at length. I shall be grateful, therefore, if he reflects seriously on the strength of opinion voiced so far from across the spectrum—from employee representatives and others who want those safeguards enshrined in the Bill.
Sajid Javid
I thank the hon. Member for Nottingham East (Chris Leslie) for tabling amendment 10, which gives us the opportunity to discuss member protections again. This is a serious issue, and although we had some long debates in Committee, it definitely bears revisiting. We have a duty to consider how best to protect the interests of scheme members.
The Government have made a clear public commitment to protect the rights that people have built up in their current schemes. We have said clearly and on several occasions that past service in final salary schemes will not be affected by pension reform. The commitment to honour rights in old schemes is built into the Bill. The power in clause 3, to which the amendment pertains, could be used only for the purpose of setting up new schemes in scheme regulations or for transitional or consequential purposes.
Secondly, there is the umbrella protection in UK general legislation that restricts state interference with personal possessions such as pension rights, unless such interference is lawful and proportionate. This protection of property rights is also an area of the European convention on human rights. This Bill is compatible with that convention. Of course, Ministers and others making scheme regulations are always bound to act in a way that is compatible with the law. This will prevent scheme regulations from proposing unlawful changes to protected pension rights.
Lady Hermon
I am sorry to interrupt the Minister so early, but would he kindly explain for the benefit of the House the jurisprudence of the Court of Strasbourg that allows him to say with such confidence that this Bill is compatible with the European convention on human rights? What is the jurisprudence to support that contention?
Sajid Javid
I am pleased that the hon. Lady is asking for clarity on this important question. When the Government put this Bill together, it was important, as with any measure, to make sure that it was compatible with existing legislation, including the European convention on human rights. I mentioned it here not to raise the issue of compatibility—of that I have no doubt—but to say that the convention provides protection for property rights. It represents another layer of protection that should reassure people that high hurdles would exist if any future Government tried for whatever reason not to honour the commitments made by this Government.
Sajid Javid
The hon. Gentleman has approached this issue in a very thoughtful way. We consider that the high hurdle of
“with a view to reaching agreement”
should not apply to every scheme change that might need to be made. I appreciate that the hon. Gentleman has a different view about when it should apply, but I think I have made the Government’s case clear.
Lady Hermon
The Economic Secretary has elaborated at great length on clause 19. My concern, however, is that clause 20 refers to consultation
“with a view to reaching agreement”,
rather than until consultation is reached. If agreement is not reached, what will happen? Will the changes be imposed on workers, in which case consultation will merely be an exercise and a formality?
Sajid Javid
The requirement of
“with a view to reaching agreement”
is a high hurdle. I cannot remember the phrase the hon. Lady used, but I can say that the requirement is not a tokenism of any kind—it is a genuine commitment. It is in clause 20, so where this is required it is a clear commitment that the Government will have to honour. The second part of her question was about what would happen if an agreement was not reached. I hope that such situations would be rare, but it is clear that if an agreement could not be reached the Government would have to make the final decision, as is absolutely right.
Lady Hermon
May I gently ask the hon. Gentleman to remind the House that prison officers in Northern Ireland also run a particularly grim risk? After a gap of almost 30 years, a prison officer, David Black, was murdered recently in rush-hour traffic on a busy motorway on his way to work. Prison officers in Northern Ireland run an additional risk. It is an absolute disgrace that prison officers are not exempted in clause 9.
Ian Lavery
The hon. Lady makes a powerful point. Prison officers in Northern Ireland have had a particular problem with security for decades. They have the same security problem here, although it is definitely not as bad as the problem experienced during the troubles in Northern Ireland. Nevertheless, prison officers put their neck on the block at all times. I have been out socialising with members of the Prison Officers Association when they have been approached by ex-convicts. They were out having a decent time, and those people were coming up to them. They addressed the prison officers very politely, but I have to say that they looked rather strange. I would not want them coming to talk to me. We need to look at the security of the people who work in the Prison Service. As I have said, we need to protect those people.
The hon. Member for Finchley and Golders Green said that members of the police force were highly trained, and that they needed shields and other forms of protection. He said that they were out on the front line when there were problems, and that they would get stuck in to try to resolve them. Prison officers and psychiatric nurses do that on almost a daily basis, and it is not very pleasant for them. There are also problems in the Prison Service and the health service, when prisoners are not only violent but spit in people’s faces and when blood is thrown at people’s faces causing all sorts of distress.
It is common sense to try to ensure that prison officers and psychiatric nurses are added as part of the exemption under clause 9(2), just as we rightly wish to protect police officers in their daily duties. Our brave armed forces and our firefighters are other examples, so we should look to protect the prison officers and psychiatric nurses, whose duty is solely to protect us, in the same way.
I will not press my amendment to the vote, as I do not want to divide the House. Should I say that we are too conciliatory on this issue, and should I say that Members of all parties seem to agree—albeit to different degrees—on it? Rather than split the House on it, I gently ask the Minister at least to consider the amendment to ensure that psychiatric nurses and prison officers are included in the provisions of clause 9(2).
Richard Fuller
It is a pleasure to follow the hon. Member for Banff and Buchan (Dr Whiteford), who made some important points about Scotland.
I oppose Opposition amendments 15 and 16. It was absolutely right for the Government to continue to recognise the specific nature of the roles played by our fire and rescue workers who are firefighters and members of our police forces and armed forces, and it is right that that is reflected through having a lower retirement age. I pay tribute to the Government for recognising that and for pursuing it through legislation.
Members have talked about the issue of physicality. I agree that it is an important issue, but we should not have a specific provision on it in this Bill. In setting pensions, we have a hope that masquerades as a realistic assumption: people are living longer and we are increasing the retirement age, and we hope that people will perform their work as easily in their later years as in their younger years. We hope that is the case, but it cannot be assumed. If people do not save, they run the risk of having a period of poverty, because they might not be able to continue their work until their pensionable age, so there will be a gap in their earnings. As a nation, we have indebted ourselves over the past 20 years far more than any other country. People in this country have not saved to protect themselves financially.
I do not think this specific issue is pertinent to the Bill, however, as it covers all types of employment and all regions—not only Scotland, but the rest of the United Kingdom, too. I therefore ask the Opposition not to push their amendment to a vote as I believe a broader debate would be more appropriate.
Lady Hermon
What justification does the hon. Gentleman think there could possibly be for excluding from clause 9(2) prison officers, and in particular those in Northern Ireland, who live daily with a deadly threat from a brutal enemy called dissident republicans?
Richard Fuller
The hon. Lady has spoken eloquently and passionately about that point. I do not know whether she was present earlier when I expressed my personal view, but her point may fit in with it. In addition to the issue of physicality, in undertaking their work the people employed in the careers identified in clause 9(2) put their lives at risk. If that is the case for prison officers in Northern Ireland, too, they should be included, and I would be interested to hear what my hon. Friend the Economic Secretary has to say about that.
Sajid Javid
We have had a good debate on this set of amendments, but I am afraid that for reasons of time that are beyond my control I will not have an opportunity to respond on all of them. The main theme in this group is the link between the new normal and deferred pension ages and the members’ state pension age. That will help manage the financial uncertainties associated with longevity changes over the long term. It was a key recommendation of Lord Hutton’s report and is one of the foundations of the Bill.
The average 60-year-old is now living 10 years longer than in the 1970s. Although that is to be celebrated, it would be irresponsible not to react accordingly to ensure that pension provision is sustainable. Clearly, no Government can allow such a trend to continue unchecked.
In the short time I have, I shall deal with the amendments in the order in which they have been selected and I will start with 13, 14 and 15. The deferred pension age in the new schemes is vital given the vast number of public servants who claim deferred pensions. That is why the Bill sets the deferred pension age in all schemes as equal to the state pension age, including in the police, firefighters and armed forces schemes. As Members are aware, a normal pension age of 60 in the police, firefighters and armed forces schemes is in line with Lord Hutton’s recommendations and recognises the unique nature of the work involved.
The amendments proposed by the hon. Member for Nottingham East (Chris Leslie) cannot be accepted by the Government, for two reasons. First, it would be unfair to other hard-working public servants, both those in active service and deferred members whose pension ages would be the state pension age. Of course we value the work of all our police, firefighters and armed forces, but once those people stop doing those jobs, there is no reason for them to be able to take their deferred benefits earlier than everyone else.
Sajid Javid
I am sorry, I do not have time.
There is no reason for those workers to be able to take their deferred benefits earlier than everyone else because they are no longer exposed to the unique characteristics of their former employment and no longer need an earlier pension age in respect of them.
Secondly, we must consider the cost. As we are all aware, the costs of pensions are increasing owing to increases in life expectancy. The state pension age link for deferred benefits is a crucial means of getting those costs under control. For example, if a firefighter leaves service at the age of 30 to work, say, as a civil servant in an office for the rest of his career, should his pension still be available unreduced at the age of 60?
Sajid Javid
The hon. Gentleman will know that this Government have introduced changes to private sector pensions that will help to increase take-up. I am glad that he has raised the policies of previous Governments, because I was about to come on to them.
Belated changes by the previous Government in the previous decade exacerbated the unequal treatment of members within schemes by introducing reforms that only applied to those who joined from a given date. Those same belated and limited changes also sought to limit costs increasing further in the future. It has often been stated—without foundation, I may add—that those reforms were sufficient to return public pensions to a sustainable footing. They were not. The reforms did not address the historic increases in the cost of providing public service pensions that had taken place in the preceding decades. Instead, they provided for any further increases from that point to be shared between employees and employers. That was simply not enough, and is why Lord Hutton concluded that the status quo is not tenable. His report states:
“Future costs are inherently uncertain”
and that
“the general public cannot be sure that schemes will remain sustainable in the future.”
Through the Bill, our reforms to public service pensions will make a difference. Through the framework we have set out, we will ensure that public service workers get a good quality pension that is among the very best available. Members will continue to receive guaranteed benefits with no exposure to investment risk or fluctuating annuity rates, unlike in many private sector schemes. We will also ensure that the taxpayer gets a fair deal by rebalancing the costs between the beneficiaries and other taxpayers, and by capping their contribution to the schemes, so that costs cannot again spiral out of control.
Until now, pensions have failed to keep pace with changes in longevity. This is without doubt the single greatest risk to the affordability of schemes in the future. The Bill will ensure that members continue to receive defined benefit pensions, and we will ensure that longevity changes are managed by linking scheme retirement ages to the state pension age.
Lady Hermon
Will the Minister give a commitment to revisit clause 9(2) to ensure that prison officers do not have to work to 65, particularly in the light of the brutal murder of prison officer David Black by dissident republicans on 1 November in Northern Ireland? Will he give that commitment this evening?
Sajid Javid
The hon. Lady spoke passionately in the debate about this issue and I am sorry that we ran out of time to deal with it. I will respond to it now, but I am sure that she will not be surprised to learn that I cannot give that commitment. There are exceptions to the link to the state retirement age for certain services—Lord Hutton mentioned the police, firemen and others—and that is what we have taken on board. If she will allow me, I will move on.
As Lord Hutton and others have sought, we have committed to review the appropriateness of that link as changes are made to the state pension age in the future. That commitment is important in ensuring not only that the link continues to remain appropriate in terms of members’ capacity to work, but that the costs of schemes are appropriately managed.
The Bill will introduce stronger governance, administration and transparency frameworks so that Parliament, the public and scheme members can be assured that the schemes are being run and managed properly. Taken together, the key changes will put public service pensions back on to an affordable and sustainable footing—a sound foundation that can prevail for the next 25 years, a deal that can endure for a generation.
Throughout the Committee’s consideration of the Bill and earlier in this Chamber, it has been clear that both sides recognise the urgent case for reform. The Opposition have set out their support on occasion. It is, of course, fair to say that there remain a few areas—we have discussed some today—where matters are not yet resolved to all parties’ satisfaction. However, I suggest that those areas of disagreement are few and do not detract in any way from what the Government are seeking to achieve with the reforms. We have committed to considering further how members and their representatives are engaged in the administration and future change to their schemes.
Loans to Ireland Bill (Allocation of Time)
Lady Hermon Excerpts(13 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Hoban
I do not wish to pre-empt the remarks that my right hon. Friend the Chancellor of the Exchequer will make on Second Reading, but I can provide that assurance to my hon. Friend.
The Bill is needed to provide statutory authority for the Treasury to pay out the funds involved. Any loan agreement is contingent on obtaining that necessary authority. In improving the overall package of financial assistance to Ireland, our international partners need to be sure that the UK will have the necessary legislation in place to allow it to fulfil its part.
Lady Hermon (North Down) (Ind)
Will the Minister clarify one point that confuses me? The Bill is entitled the Loans to Ireland Bill, but the explanatory notes, which I know are not binding, keep referring to, and imply that there is, a single loan. How many loans will there be to Ireland? Is there a limit?
European Union Economic Governance
Lady Hermon Excerpts(13 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Hoban
Let me make some more progress; otherwise, hon. Members will not have the opportunity to participate in the debate. Let me continue for a few more moments.
Many organisations and individuals, including the IMF and the OECD, scrutinise our economy and our budgets. Many make recommendations or, as happened recently, praise our fiscal consolidation plans. We have nothing to hide from any of these bodies that want to look at what we announce to Parliament or at the economic figures published through the Office for National Statistics or through Departments. It is our decision whether or not we listen to their advice. The UK will continue to prepare its Budget independently; others can make recommendations about it, but, crucially, we are under no obligation to take action and, by virtue of our opt-out, we are not subject to sanctions. Any recommendations, as with those made by any other body, will remain just that. It will be down to the Treasury and Parliament, not to the EU, to construct our Budget.
Lady Hermon (North Down) (Ind)
I am enormously grateful to the Minister for taking my intervention. As the hon. Member for Stone (Mr Cash) said, these regulations are entirely binding on the United Kingdom. Can the Minister assure us that, if the Government decline to give the information requested under these regulations, the European Commission will not take enforcement proceedings against the UK Government for not complying with them?