Finance (No. 2) Bill
Mark Lazarowicz Excerpts(11 years, 1 month ago)
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Mr
McKenzie: It is a pleasure to serve under your chairmanship, Sir Roger.
It is blatantly obvious that families up and down the country are paying the price of the Government’s failure to come to terms with the economy and to create growth and prosperity for all. The cost of living has never been higher. I speak as someone who brought up a family in the 1980s, and I thought that times were hard then. I am now seeing those circumstances repeated in my constituency. My constituents, especially the working families, are finding it extremely hard.
One of the indicators is the rise in unemployment, yet again, across the country. That illustrates that times are doubly hard for those who can least afford it and who are struggling to get employment. In my constituency, we have been fortunate in keeping unemployment down. Before Government Members jump to their feet saying, “We did it for Inverclyde”, however, let me advise them that they did not. The reason that we have been so successful in reducing youth unemployment is that my Labour-led council has put its money where its mouth is and continued with the future jobs fund for the past two years, to ensure that our young people have a future. It has ensured that they have employment not just for a few weeks or months, and it has gone back to the employers and the young people to ensure that their employment is sustainable for years. Now, 80% of those given employment places have remained in them for more than a year, and we are glad that that success is doing something to alleviate unemployment among young people in Inverclyde.
Unfortunately, however, there has been little impact on those who have been unemployed for more than two years, and the Government have offered them no assistance other than shipping them off to a private firm to be placed in employment somewhere for a week or two. It is clear that only Labour can guarantee those people a job with a living wage.
Prices are rising faster than wages. The Office for Budget Responsibility has confirmed that, by 2015, people will be worse off than they were in 2010. That illustrates the result of this Government’s policies. Most people in my constituency feel that, while Ministers might have read economics at university, it is they who are actually living the economics, day in, day out. The cost of living has never been higher, and that is partly due to increased food prices. I encourage any Member to go round their local supermarket and do their weekly shopping, as I do. I see less and less going into the trolley, and more and more going into the till at the end of my shopping trip. Even those families who are thrifty and who shop around and buy own-brand items are seeing a dramatic increase in their food bills. They are being pushed into using food banks, which is another indicator that times are indeed hard.
In my constituency, we have the i58 project, in which one of the local churches has been running a food bank since last September. I was staggered when I visited it at Christmas. It thought that the numbers of people being referred to it had peaked at 1,000—mine is not a large constituency, after all—but the figure has continued to increase in the new year. It is deeply regrettable that we are not seeing any reduction in those numbers. Ever more families, including working families, have been referred to food banks.
Even with the steps we have taken in my area to insulate homes to try to keep energy bills as low as possible, there have been dramatic increases in households’ energy costs. That seems to happen year in, year out. There seems to be no stopping the price rises introduced by the energy companies. These ever-increasing bills spread fear, particularly among the elderly and those on low incomes. People are struggling to pay to heat their own homes. In my area of Scotland, investment in home insulation has been in place for four or five years, yet people are still struggling to pay their energy bills.
Rents have increased recently, too. Not enough homes are being built, so increasing numbers of people are unable to find social rented accommodation. They are pushed into the private sector, which has taken full advantage by pushing up rents time and again. That, too, is having a dramatic impact, particularly on those who can least afford to pay.
We have already heard about the high fuel prices. Those who are fortunate enough still to be able to afford to run a vehicle find that the price of petrol at the pump increases year after year. A number of approaches to the Government have been needed to get them to halt the increases in prices, but we continue to ask for VAT to be removed from fuel. That has one of the biggest impacts on fuel prices, as was pointed out in an earlier intervention. It was also pointed out that we can drop VAT, on an individual basis, from fuel.
There is more evidence of hard times to be seen on the high streets, with shop after shop closing, and brand name after brand name disappearing. The shops that are replacing them are loan shops, bookmakers and pawnbrokers, which shows that those on low incomes are increasingly having to make visits—perhaps on a weekly basis—to such shops in order to bridge the gap between what they are receiving and what they are having to spend on the bare essentials.
The way to deal with the increasing costs of living is through employment. All wealth comes from employment and we must make sure there are as many jobs as possible. We must create jobs by stimulating the introduction of projects throughout the country. We welcome the large projects, of course—we had great success with the Olympic games, and in Scotland I am sure we will have great success with the Commonwealth games—but the smaller projects in and around our communities need to happen as well, to stimulate local economies and get things moving. We all know of shovel-ready projects in our areas that need to go ahead, but they are not progressing.
Last year, the Government gave additional funds to the Scottish Government for shovel-ready projects. Where that money has gone remains to be discovered, as to date only £10 million has seen the light of day in projects across Scotland.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
What my hon. Friend says highlights one of the advantages of the proposal to cut VAT. Even with the best will in the world, investment in infrastructure can take a long time to get through all the resistance, which is why even now, after up to three years of trying, we are still not seeing the full benefits of that, whereas a cut in VAT would have an immediate effect on the high street, and on construction and many other sectors of our economy. That highlights why it is so important that the VAT cut should go ahead.
Mr McKenzie
My hon. Friend makes a good point. I visited some of the employers in my area in the Easter recess. Time and again they told me they needed a stimulus to the local economy from a VAT cut, to get people spending and buying things. My local construction firms in particular said they needed a reduction in VAT to get people to consider going ahead with smaller projects such as house improvements, thus creating employment locally. They felt a VAT cut would serve to stimulate that local growth and get things moving; otherwise, they could see only a bleak future, if any future at all, for the construction industry. They also brought up the continuing difficulty of being closed out of local and national Government contracts. The procurement process still seems to be far too complex and to exclude the small and medium-sized businesses that could stimulate the local economy.
Finance (No. 2) Bill
Mark Lazarowicz Excerpts(11 years, 1 month ago)
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Chris Leslie
In, out, in, out, shake it all about—who knows what is going on in the minds of Treasury Ministers? It is impossible to tell, sometimes, just by looking at them.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Further to the intervention from my right hon. Friend the Member for Delyn (Mr Hanson), the scheme could have an important impact on the devolved Administrations. Perhaps in the course of the afternoon the Minister could get a message from the civil servants to help him on that. I understood that although the Help to Buy scheme applied only to England, the mortgage guarantee scheme applied certainly throughout Great Britain, and probably throughout the entire UK. That needs to be clarified. Constituents have already asked me about the scheme and whether they would be able to apply for it.
Chris Leslie
The Minister’s pen will run out of ink as a result of the number of specific questions about the scheme that he will have to reply to, but he is diligent and I know he will address them all. I would be grateful if he could confirm that he has thought through the consequences of the design of the scheme for the devolved Administrations. [Interruption.] His gaze has not lifted for the past 15 minutes or so.
I do not wish to take up too much more time, but there are other anomalies. For example, I think the Government have said that home owners will be able to remortgage, but they will not be able to remortgage with their own bank or building society; they have to go elsewhere. Ministers need to think that through a little more carefully. If there is a genuine case for remortgaging, are they, in effect, going to create a whole set of exit fees for those consumers to have to bear and a set of new application fees? What is wrong, in the circumstances of remortgaging, with someone continuing the relationship with their existing bank or building society?
We have a number of concerns about the Help to Buy scheme. Let us leave the last word on the matter to the Office for Budget Responsibility. What was its assessment when it looked at the scheme? What view did it take about the impact that it would have on the housing market? The OBR revised down its forecasts for property transactions, despite the two new schemes that have been announced. It says, I think on page 88 of its report, that
“we have reduced our forecast relative to December to a level which is more consistent with other outside forecasters.”
There we have it. For all the announcements, the spin and the press releases about the scheme, the Treasury could not convince the OBR, which is only just down the corridor from where Ministers reside.
Mark Lazarowicz
The hon. Gentleman should stop digging and just say that the reason he will not support new clause 5 is that the Tories will not let him. If his position is that our proposal is not good enough, why does he not give an assurance that Lib Dem Ministers will work to bring forward more detailed proposals? They can do that now; after all, the Chief Secretary to the Treasury is a Liberal Democrat.
Stephen Williams
The Chief Secretary to the Treasury is indeed a Liberal Democrat. I am sure my right hon. Friend has given this policy issue a great deal of careful thought with his advisers and I am sure that if he were standing where I am standing today, he would be making similar points to those that I am making.
There are two parts to new clause 5. As well as calling for a study of—we now know—how to raise £2 billion through a mansion tax, however ill defined the composition of that tax would be, it is also meant to fund a tax cut for millions of people on middle and low incomes, as part of a fair tax system. Again, that is simply not specific enough. We do not know what it means. I am guessing—I can guess, but it would not be fair for those in the Treasury to have to guess how they would have to do such a study—that the purpose is to fund the reintroduction of a 10p rate of income tax. That is my guess, but it is a well informed guess, because the Opposition’s amendment 4 to clause 3, which we will come to tomorrow, suggests that they want to reintroduce a 10p rate of income tax. Again, however, neither that amendment nor new clause 5 gives us any detail for how that would work or, for instance, to what income band it would apply.
Perhaps that it is because the history of the 10p rate is such a miserable memory for Labour Members. I remember the 2007 Budget, which was the last one the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) introduced, when he scrapped the 10p rate of income tax specifically to fund a reduction of the rate of income tax from 22% to 20%. However, the coalition Government have made the principle of the 10p rate of income tax completely redundant, because we have introduced not a 10p rate on people with very low incomes, but a zero rate. I am sure that most of our constituents, whether in Chorley or Bristol West, would much prefer to pay a round tax rate of zero on their low earnings than 10%, which appears to be—although we are not sure—what the Labour party is proposing.
I will therefore not be supporting new clause 5 in the Division Lobby and I would invite all my Liberal Democrat colleagues not to support it either. We are completely clear as a party. We support the introduction of a mansion tax. We are clear about how it should be contrived, on whom it should be levied and how the proceeds from it should be spent. We do not need anybody else to do a study for us—whether the Labour party or the Treasury—to tell us how it might work. It is a great shame that after three years in opposition, at the first opportunity that Labour has taken to say, just tentatively, what it is in favour of—rather than talking about the long list of things that this Government have done that it is against—and just a few weeks after converting to a mansion tax, the Opposition need somebody else to tell them how it will work.
Sheila Gilmore
The test of what is happening is whether the economy will be stimulated. That is the real test that we should keep under review. If we want collectively to stimulate the economy, the most direct way of doing that would be to fund socially rented houses. That would get people into jobs, who would then help to stimulate the rest of the local economy. I do not know whether an ideological aversion to that has brought about the proposals we have before us; perhaps it has, because all the affordable housing the Government seem to want to fund directly is not even affordable.
In this very week, when we are remembering the 1980s and the Prime Minister of that time, we are in grave danger of repeating what happened then. The Government chose to allow housing benefit to take the strain rather than investing directly in housing, which resulted in the problem that we now have a large housing benefit bill. The way this Government are going about even the affordable housing they say they will build, which will not of course truly be affordable, again runs the risk of increasing the housing benefit bill.
We are looking to stimulate the economy with something for which there will probably be no take-up, judging from experience, and it will not benefit the people we should really help. If we do not review this policy quickly, we could be going down a very dangerous road.
Mark Lazarowicz
As time is limited, I take this opportunity to pursue with the Minister some of the issues raised earlier by colleagues on the Opposition Benches about how the schemes will operate in Scotland and Wales—outside England. I hope the Minister can answer these questions.
Will the Minister confirm that the mortgage guarantee scheme will apply to Scotland, Wales and Northern Ireland as well as to England? If that is the case, will he indicate which Department will operate it for Scotland and the other devolved areas? If it is to be the Department for Communities and Local Government, I suggest that it would be more appropriate for the scheme to be operated by the Scottish Government or the relevant devolved Administrations.
Would it be possible for the Scottish Government and the other devolved Administrations to amend the scheme to take account of the objections raised, which will no doubt be shared by all of them, that it would benefit the buyers of second homes and people on relatively high incomes? In most parts of Scotland, Wales and Northern Ireland, prices of £600,000 are very much at the higher end of the housing market.
If someone in one of the devolved areas defaulted under the mortgage guarantee, would the cost be borne by the Treasury or the devolved Administration? I appreciate that these are technical questions but I am sure that, as the Minister has thought through the policy in great detail, he will be able to answer them.
The Economic Secretary to the Treasury (Sajid Javid)
I thank all Members for their contributions. This has been a thoughtful and engaging debate.
Both new clauses are about housing. New clause 1 would require the Government, within three months of Royal Assent, to provide a report to Parliament on how the tax system supports those seeking to purchase a second new home and how the Government plan to prevent it. New clause 5 suggests introducing a mansion tax on properties worth more than £2 million, with a view to using the revenue to fund a tax cut for those on low or middle incomes.
The Government oppose both new clauses. I will elaborate on the reasons, but first allow me to make a few points about the significant steps the Government have already taken and about our overall housing strategy, as many issues relating to it were raised this afternoon. I shall also respond to some of the other issues that were raised.
The new clauses centre on the housing measures in the Budget. The Government announced a major new package to support new development and affordable housing, alongside reforms to the planning system. The measures included the Help to Buy equity loan scheme and the Help to Buy mortgage guarantee scheme. They will give a much needed boost to housing supply, and equip those who aspire to own their home with the tools to do so.
Mark Lazarowicz
It is useful of my hon. Friend to remind us of the coincidence of Budget day, which meant misery for many ordinary people, and millions of pounds of bonuses announced by that bank. That indicates another reason why the bank bonus tax is so important: we have to do right by the public, who cannot understand how, in spite of all that has happened, some bankers get multi-million-pound bonuses at a time when most other people are having to tighten their belts in a big way.
Chris Leslie
As I was saying, Barclays has talked about confronting some of the necessary culture changes. It commissioned the Salz report after its involvement in the LIBOR scandal and the fines it received as a result, yet still that oil tanker of bonuses continued to float on, even in that particularly difficult year.
Chris Leslie
Of course that argument could be made about any demerit activity or level of taxation. People have been making that argument about cigarette taxes over the years, saying “Well, if people give up smoking, will the Treasury not lose a lot of money from it?” I do not want to divert too much into the wider principle, but I would say that a very considerable tax cut has been given to bankers by reducing the 50p rate of income tax to 45p—a cut that is providing a very significant bonus to those individuals in this year. The hon. Gentleman need not worry too much about these poor maligned executives in the banking system. I know that things must be very difficult for them—they may even have to defer the purchase of their yachts for that little bit longer—but we must start capturing and getting a grip on this issue in a way that the bank levy has not worked to achieve so far.
Mark Lazarowicz
On my hon. Friend’s last point, given that many of the banks are substantially owned by the public sector, what does not go in bonuses to the top bankers might come back to the taxpayer in other ways. On the question of the European dimension, we often hear that a bankers’ bonus tax could not be introduced only in the UK because all the top bankers would flee to Luxembourg, France, Germany or wherever. Is that not a good reason why a Europe-wide policy should be considered—precisely because there would be less opportunity for people to get away from UK taxation, which is sometimes used as an objection to a bankers’ bonus tax?
Chris Leslie
I know that Members of the European Parliament have debated some of these issues earlier this week; indeed, they have this week instituted a cap on the bonus level. We will need to reassess behaviour under that new arrangement, but I reiterate that we are confident that the revenue could be used for the purpose of helping the young unemployed.
Budget Resolutions and Economic Situation
Mark Lazarowicz Excerpts(11 years, 2 months ago)
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Guto Bebb
Indeed, and I welcome every single one of those jobs.
The worst thing about the argument that we are having is that every time Labour Members appear in the media in Wales, they complain, “Yes, jobs have been created, but they’re not our type of jobs—they’re not proper jobs.” They insult people who are going out to work and trying to earn a living in supermarkets and hotels by claiming that they are not taking the right type of jobs. People in my constituency know that a job is an opportunity to help themselves. This Government are making sure that people in low-paid jobs are keeping the money they earn because their tax rates are going down. Labour Members bribed people with their own money; this Government are allowing people to keep their money in order to look after themselves, encouraging self-sufficiency and responsibility rather than the expectation that the state will look after them. We are moving in a direction that I am proud of, because we will have a country in which people are confident that if they invest, they will be able to keep more of their money without being taxed and in which people will be able to earn money without being penalised for doing so.
In my constituency and in many other parts of Wales, we are very dependent on the small business community, which was never understood by Labour Members; indeed, they do not understand it now. I will give an example of how bad Labour is at understanding business. Labour’s Minister for Finance in Wales says that she does not believe in capitalism and prefers Marxism. If she were a trade unionist or a Labour activist, I would understand that, but she is the Minister responsible for economic development in Wales and does not believe in capitalism. She should give up her job and get somebody better to do it who will ensure that Wales can benefit from the policies of this Government.
Every single one of the small businesses in my constituency will benefit from a reduction in employer’s national insurance contributions. Labour increased national insurance contributions for people employing staff; we are reducing them significantly. Some 35,000 businesses in Wales will benefit, 20,000 of which will pay no employer’s national insurance contributions. My hon. Friend the Member for Burton (Andrew Griffiths) talked about small breweries and the fact that the beer duty escalator has been stopped, which is a good thing for the industry. In my constituency I have four small breweries that will benefit not only from the changes to the beer duty escalator, which was brought in by Labour, but from the reduction in employer’s national insurance contributions, allowing them to invest and to develop more opportunities for work in the area.
There is a 13% differential between the rate at which Labour would be taxing petrol and what this Government are doing. In a rural constituency such as mine, that is crucial—13p per litre makes a huge difference. Labour Members might not understand this because they do not understand rural areas, but in my part of the world there is an understanding that the changes to fuel duty and excise duties are crucial for a rural area that depends on self-employment and the small businesses that do understand the needs of the community and the need to invest in order to improve.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
What does the hon. Gentleman think would be the effect on rural and, indeed, urban communities in his constituency of a housing measure that will apparently subsidise people to buy second homes up to a value of £600,000?
Guto Bebb
We await clarity on that issue. However, I am absolutely terrified about the fact that the administration of that measure will be partly devolved to Wales, where the situation is astonishing. The NewBuy scheme was introduced by this Government in April 2012, but it has yet to be introduced in Wales. The Welsh Labour Government will introduce it in June 2013. In other words, 15 months after the money was made available, the Labour Government in Cardiff are still not helping people in my constituency who want support to buy new houses.
I am concerned that the Labour Government in Cardiff are not delivering. Their decisions on every single policy are made for political reasons to undermine the work of this coalition Government, and nowhere is that more the case than with how the Welsh Government refuse to co-operate with the Work programme. Many programmes in Wales are funded by money from the European social fund and they provide support to those who need it to get back into employment, but the Welsh Labour Government refuse to allow those individuals to access the Work programme and the ESF business support programmes at the same time. The Labour party’s commitment to employment growth in Wales is zero, while its commitment to wrecking the work of this coalition Government is 100% and total. The people of Wales realise the betrayal of their communities by the Labour party.
The fact of the matter is that, on every single issue, this Budget is making an effort, in very difficult circumstances, to help those people who want to help themselves. As a Member who represents an area that is very dependent on self-employment, I welcome the key decision to introduce the flat pension rate. For far too long, the option of self-employment was penalised by the pensions system. The move to a flat system whereby people will benefit by about £144 a week from a guaranteed state pension is crucial. The decision to become self-employed is a difficult one to make, especially so in Wales, where it is also difficult to then provide for a pension, because the position of the public sector is so different. I warmly welcome the fact that this Government are tackling the need for a fairer pension system. Every single person in my constituency—employed or self-employed—will realise that if they put money aside for their own pension, they will be supported by a Government who are committed to supporting people to do the right thing.
Finally, one of my concerns about the current economic situation relates to financing for small businesses. This is not a criticism of the Government. Time and again I meet representatives from banks who claim that they have money available but that there is a lack of demand for funding. We have heard the same complaints from the Labour party. The key thing is that MPs can do a lot of work on this matter. During the Easter recess I will hold two surgeries to tell businesses how to get themselves fit for the lending available. Circumstances have changed. The time when money was thrown at businesses has gone, but businesses that go to the banks with appropriate business plans and ideas for development and growth should and could access money at much cheaper rates than the Welsh Assembly-funded Finance Wales scheme. MPs can stand up in this Chamber and complain as much as they want, but the key thing is that we—I know that my Government colleagues do this—work with businesses to help them access that funding, rather than complain all the time in the way that the Labour party does.
Andrew Gwynne
My hon. Friend is absolutely right. She may have read the Manchester Evening News research, which showed that Tameside, which is part of my constituency, is the worst place in the north-west of England for young people to access job opportunities. There are real issues here that need to be resolved by Government.
Some good local initiatives are being pushed through by my two local authorities. One is Tameside, a Labour local authority, and the other is Stockport, a Liberal Democrat authority. They are doing their best in very tight circumstances, not least because every man, woman and child in Tameside is losing the equivalent of £163 in central Government grant to the local authority and Stockport is losing £94 per head of population.
We are seeing initiatives such as the introduction of town teams in Denton—I am proud that my office is represented on the Denton town team—and a pooled apprenticeship scheme in Tameside, which enables firms to reduce the risk in taking on apprentices. That initiative has been ably led by the leader of Tameside council, Councillor Kieran Quinn, who set out an ambition to have every young person in work or training by 2020. Tameside council has done a deal with New Charter Housing, the local registered social landlord, to ensure that one affordable house is built per week for the next three years. Stockport has the Stockport Boost initiative, its town centre is a Portas pilot, and there are huge opportunities along the M60 corridor with its close proximity to the airport city enterprise zone and the Grand Central redevelopment. That initiative is being pushed forward by the Greater Manchester combined authority and the Association of Greater Manchester Authorities—a Labour-led, city region initiative.
Lord Heseltine talks about combined authorities and giving more responsibility to local enterprise partnerships, and that is where Greater Manchester takes a lead. He also mentions local leadership, which is a thorny issue. I personally support the idea of a Greater Manchester-wide mayor, and although I realise that others in the city region are not convinced, I at least welcome the debate started by Lord Heseltine in his report.
My final point—which I have already touched on—is about housing, which continues to be a big problem in my constituency. The new homes bonus announced by the Government in 2010 was supposed to unleash growth and help build at least 400,000 additional homes, but it has failed to deliver.
Andrew Gwynne
I will not as I do not have time. Housing starts fell by 11% last year to below 100,000—fewer than half the number required to meet housing need. The Government’s £10 billion guarantee scheme has yet to deliver a single penny of support for house building. There were a number of small things to be welcomed in the Budget, but there were no answers on growth or for communities such as Denton and Reddish. After three years of failure, it is time for a different approach.
Mark Durkan (Foyle) (SDLP)
I am delighted to follow the hon. Member for Harrow East (Bob Blackman). I acknowledge the effective advocacy that he has provided for Equitable Life annuitants. I commend him and the Chancellor and his ministerial colleagues for addressing that outstanding injustice. The issue now is to deliver not just the solution that has been designed, but the outcome that people deserve.
There are some things in the Budget that it would be churlish of me not to acknowledge from a Northern Ireland perspective. Our exclusion from the carbon price floor is hugely important, given that Northern Ireland is part of a single electricity market in Ireland. The effect of the price floor would have been to skew investment in our generating capacity in a way that would have penalised business and consumers. I am therefore glad that Ministers woke up to the problems that many of us have been raising in the Chamber for so long, ever since the measure was announced.
We already know that there is some confusion about aspects of the Budget, such as Help to Buy, the mortgage support scheme. The shadow Chancellor has rightly raised some issues and questions about the scheme, but let us be clear: whether or not it will support people with buy-to-let mortgages, there is to be no income cap whatever on the people qualifying for it. At a time when people here are all about the “aspiration nation”, there are a lot of people out there who just feel exasperation that a scheme such as this should come along with no income cap. Meanwhile, they have suffered the loss of child benefit, on which there is an income cap, starting at £50,000, with payments ending completely at £60,000. Those people are exasperated too when they hear, “Oh yes, child care benefits are coming”—in two and a half years’ time. Government Members used to criticise the former Chancellor and Prime Minister when he produced Budgets and made announcements about things that would be introduced in two or three years’ time but sold them as though they were happening at the time. They rightly criticised him for that, yet they are cheering on their own Chancellor for doing exactly the same thing, while people are suffering the loss of support for caring for their children.
The Chancellor talked a lot yesterday about investing in new energy sources, but we needed to hear about investing in energy efficiency. He talked about new house building schemes to help the construction sector, but the sector is screaming out for support for repairs, maintenance and retrofitting to support energy efficiency in our existing housing stock. Many people want to stay where they are and to improve the energy efficiency of their homes, and they should be supported in that, not least through proper, targeted VAT relief and reductions.
Similar VAT reductions should be targeted at the tourism sector. That is happening in quite a number of EU member states. It is allowed, it is effective and it traps the multipliers here at home. I do not agree with the proposals for a blanket reduction in VAT for a particular period, as it could suck in all sorts of imports and send other money out of the country. We should target VAT reductions where they will produce real benefit in home sectors, and such targeting on the construction and tourism sectors would help.
Mark Lazarowicz
I agree with my hon. Friend’s point about targeting help, particularly on building maintenance and repair and on tourism. Does he agree that one benefit of such targeting is that it would take effect very quickly and would be likely to help small business and small traders? Many of the housing measures announced yesterday were welcome, but they will mainly benefit the bigger builders. The VAT cuts that my hon. Friend is suggesting would provide a quick way of boosting the economy and helping many of the people who need help now.
Mark Durkan
I fully accept my hon. Friend’s point. The multipliers would get into gear far faster under that sort of measure than under some of the other measures that have been proposed, welcome though they are in their own context.
Certain aspects of the Budget served notice of more pain to come. The Chancellor spoke yesterday about changes that he will be making through annually managed expenditure. That sounds like a dry, technical change, but it will have a significant impact in relation to the controls that are being placed on welfare spending. We have already had the Welfare Reform Act 2012, which changed many of the rules, structures and qualifying criteria for benefits. It was designed in such a way as to allow for wide regulatory powers to place further changes and squeezes on benefits without the need for further primary legislation.
It is clear that, by moving to change the rules relating to annually managed expenditure, the Chancellor is trying to put in place more fixed envelopes for welfare spending. That will have particular implications for the way in which social security spend is managed in Northern Ireland, because the money comes to Northern Ireland not as part of the departmental expenditure limit—the DEL—but as annually managed expenditure. If that is now to be subject to some fixed-envelope procedure and capped in advance, it will put serious stress on the Northern Ireland Assembly. The Assembly is in the bizarre position of having to pass karaoke legislation that has to be exactly the same as that passed here, but it is notionally responsible for the administrative discretion on delivery. That will be a fundamental challenge for us in Northern Ireland, and we all need to wake up to that fact.
We need to be as alert to that challenge as the Executive have been on the case for corporation tax. I can see where the Chancellor is going with that, but his rate of travel in regard to corporation tax UK-wide means that, by the time any concession is delivered to Northern Ireland, the marginal benefits it will give us will be a lot less.
Richard Fuller
I appreciate my hon. Friend’s intervention, but I am not sure that I can share his joy. The impetus behind this Treasury document is the notion that enhancing loan-to-value ratios of 95% is somehow a good policy, and I need some more reassurance about that.
Let us compare the average house bought in 1997 at the average loan-to-value ratio of 80% with the average house bought in 2007—after all that price inflation—at a 95% loan-to-value ratio. Over the 20 or 25 years of their mortgage, the people who bought the average house in 2007 will have to spend £234,000 more than those who bought the average house in 1997. Increasing loan-to-value ratios depresses people’s ability to spend money on other things, because they are spending more on their mortgages. I want some more reassurance from the Treasury that this scheme will not have unintended consequences for their ability to spend money appropriately in relation to their incomes.
Mark Lazarowicz
Is not another possible unintended consequence of the measure the setting off of regionally based house price spirals, exacerbating some of the regional differences that other measures in the Budget are intended to address?
Richard Fuller
The hon. Gentleman makes a fair point, but I do not see that that would be a problem in this instance. In fact, the scheme might counteract the problem. However, it is clear that the issue needs to be sorted out as what is currently an outline becomes a fully developed scheme.
Let me end by making a fundamental point. Every politician in the House must recognise that our debt burden presents us all with a challenge to do more with less. The answer is not to continue kicking the can down the road. We must face up to our responsibilities, and we owe it to the generations to come to do that quickly, while interest rates are low, rather than waiting to see what—as was pointed out by my hon. Friend the Member for Folkestone and Hythe (Damian Collins)—may happen if they suddenly start to spike, and we find ourselves in a much more difficult position in trying to bring Government spending back under control.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
We are told that a number of announcements in the Budget will encourage investment in infrastructure and growth. I hope that these policies do have that effect, because that would be welcome. They are being announced again because the policies announced in the other Budgets since the election have, as yet, signally failed to bring about such growth. There is plenty of evidence about how slowly they are benefiting infra- structure and investment. The recent National Audit Office report on the national infrastructure plan pointed out that although developers notified the Government of 99 infrastructure projects under the plan, by December 2012 only three had been determined, six were expecting a decision within three months, and the remaining 90 were not even at a decision stage.
An example of announcements about infrastructure taking a long time to have an effect is the Caledonian sleeper service from London to Scotland, on which I have been involved in campaigning. It was announced in 2011 and announced again in 2012. The money for it will probably start flowing through into carriages and stations from late 2014 onwards, until perhaps 2017 or 2018. It is obviously a very good investment, but it will not have an effect on boosting the economy in 2013. It did not have that effect in 2012 or 2011, and it will not do so until 2015 onwards. What can be said of that project is certainly true of many of the other investment projects that the Government have been trying to encourage and bring about.
The Government know that they have to do more to get results in terms of boosting the economy. That is why at least some in the Government appear to want to set off a new housing boom before 2015. Of course, we all want to see the encouragement of affordable, or relatively affordable, housing for first-time buyers and people who cannot get on to the housing ladder, and we certainly want to see the desperately needed boost for the construction industry that would come from such measures. However, it is a different thing to promote a scheme that would apparently help anyone of any income to buy a house costing up to £600,000 in any part of the country. That would inevitably run a high risk of setting off an unsustainable house price boom, which, as we have learned from previous experience, is precisely the kind of thing that many parts of the country do not need. It also creates a great danger of exacerbating some of the regional economic differences that the measures in the Budget are supposedly trying to address.
When the Secretary of State was asked about this measure, he told us, in his usual emollient way, that the details are being discussed and that more consideration is going on. Most of us in the Chamber could already hear the gears crunching as the Government prepared another U-turn, or, alternatively, the Secretary of State personally distanced himself from Government policy. This policy is being spun in the media, no doubt by someone in the Treasury. It is not so much about helping people who need housing as trying to get a housing boom in 2015, and it is the wrong approach. The Government say that they are going to introduce a policy that would help people on whatever income, in whatever part of the country, to buy houses costing up to £600,000. That would particularly benefit people with high earnings in areas that already get a great deal of benefit from economic activity.
I hope that the Minister will soon clarify the scope of this policy. We all want support for first-time buyers and people who need housing, but we certainly do not want an unrestrained re-stimulation of the unsustainable housing booms that we have seen in the past.
Infrastructure (Financial Assistance) Bill
Mark Lazarowicz Excerpts(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Leslie
It is difficult to say, when looking at a guarantee scheme or underwriting scheme, because certain things are not wholly in the control of Ministers. They are putting the guarantee out there and waiting for organisations in the private sector or elsewhere to come forward and bid for the resource. It is a bit like pushing against a piece of string; it is impossible to know what the demand will be. We do not rule out the possibility of the proposal being of benefit—of course it could be—but it is impossible to know at this stage. We are holding up a finger to test the direction of the wind. There are no time scales in the Bill, and the explanatory notes do not add any information in that regard. We want to know the judgment of the studied intellects in the Treasury.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
My hon. Friend mentioned the downturn in the house building industry. In my constituency, the total number of new house builds in the last quarter was just 10, and that is in a city whose population is growing. Does he accept that, in addition to the immediate difficulties that the construction industry is experiencing, companies that go bust and firms that close down cannot suddenly spring back into action when the economy changes? This is another reason why we need the measures that he is outlining, and that the Government have not yet put into operation.
Chris Leslie
That loss of productive capacity is another example of the permanent damage caused by recession, resulting in an inability to take advantage of the opportunities that present themselves when a recovery occurs. The International Monetary Fund released figures only last week to illustrate the damage being done by the recession to our ability to fulfil such expectations. In my city of Nottingham, not a single new affordable social house has been constructed in the past 12 months. Is that because there is no demand? Absolutely not. We have more than 12,000 people on waiting lists for decent homes. That applies in many other areas of the country as well, including Greenwich.
Chris Leslie
I am not sure I agree with my hon. Friend on the particular example he provided. It is quite clear that there would be benefit for the economy within the UK if those offshore schemes proceeded. The frustration I have is with the rather hasty drafting. Yes, we accept that it is necessary to frame a scheme that has sufficient flexibility, but there are dangers in enacting legislation that does not focus sufficiently on significant financial schemes, employment and jobs here in the UK. That is the purpose of the amendment.
Mark Lazarowicz
I am sure that when my hon. Friend’s amendment is successful, he will arrange for his noble Friends in the other place to deal with any clarifications required as a result of our debate. Earlier today we heard a statement on the west coast main line franchise, and we saw how the whole franchising system is in a state of shambles. Is that not going to have an effect on private sector investment, making it important to get even quicker investment in rail projects across the UK, through Directly Operated Railways, through Network Rail and other means to ensure that we gain the benefit—to the rail industry, to passengers and to the economy—now and not four, five, six or seven years down the line?
The Economic Secretary to the Treasury (Sajid Javid)
We have heard excellent contributions from Members on both sides of the House. The shadow Minister rightly noted that the time for the debate has been restricted. That is not unusual when we first come back after a recess, but he made a fair point. However, I was taken aback when he then went on about many different issues that did not much focus on the nature of his amendments, as he could have saved some time for hon. Members to continue with a proper debate.
On the Opposition amendments, amendment 11 is designed to limit the Bill’s geographical ambit. My response is that it is clear that the scheme relies on the spending cover provided by the Bill and is designed to facilitate and accelerate infrastructure investment throughout the United Kingdom economy. The eligibility criteria have been published. For example, the guarantee scheme contains provisions requiring the infrastructure to be of national significance to the UK. Such conditions will be sufficient to achieve protection against the UK supporting other economies. If I understood the hon. Gentleman correctly, he was concerned about the potential effect on economies outside the UK.
Mark Lazarowicz
Since Second Reading, have the Government been able to develop any further their ideas on how the spending under the Bill will be allocated within areas where there are devolved legislatures? In Scotland, for instance, how much will be allocated by the Scottish Government and how much will come directly from the UK Government? Can the Minister elucidate and illuminate us on that point?
Sajid Javid
Yes. There is no geographical division within the United Kingdom as regards the total amount of £50 billion that is being allocated in the Bill. Applications will be dealt with and assessed on a case-by-case basis as they come in from different areas of the UK, including the devolved authorities.
Sajid Javid
If the hon. Gentleman will allow me to continue, there may be time for him to contribute later.
Any Government expenditure will need to satisfy the standard requirements relating to value for money, and the accounting officer will need to be satisfied about that expenditure. It is also worth noting that, as the hon. Member for Brent North (Barry Gardiner) said, making a very fair point, there may be instances where infrastructure that receives a guarantee is cross-border in nature. In those cases, we would not want to be prevented from providing financial assistance to the UK aspect of the project because of a technical limitation. I therefore beg the hon. Member for Nottingham East (Chris Leslie) to withdraw the amendment.
Amendment 9 would insert the word “childcare” after the word “health”. The amendment is unnecessary because social infrastructure, including child care, is already captured under the Bill, and so any child care facilities will be accommodated within the current definition. However, even including child care within the definition would not ensure that a provider of child care facilities was able to obtain financial assistance under the current scheme because the application will need to fall within the ambit of one of the schemes being operated which relies on spending cover provided by the Bill.
At this point, I would like to deal with the comments of the hon. Member for York Central (Hugh Bayley). I well remember that he raised the issue of flood defences on Second Reading, and he is right to do so again. It shows just how deeply he is concerned about the issue on behalf of his constituents, and I respect that. I can say again that his local flood defences are not excluded within the definition in the Bill. In the case of projects of that nature, applications should be made under the process and they will be considered like all others.
I thank my right hon. Friend the Member for Wokingham (Mr Redwood) for his kind words regarding my new position. He made two broad points. First, he rightly raised issues about overall deficit targets for the Government and their overall plan to deal with the reckless deficit inherited from the previous Government. Let me assure him that the reason we can have this programme of guarantees is the credibility that this Government have built up. Long-term interest rates and Government debt are less than half what they were when this Government came to power. That credibility is recognised by the financial markets. Sadly, the financial markets are not open for all borrowers as they were in the past. Some very viable commercial infrastructure projects cannot tap into lending in the financial markets, whether through bonds or other types of debt mechanism. The Government are using the credibility that they have built up to offer and provide these guarantees.
Mark Lazarowicz
I want to pursue an important point. Will any of the £50 billion of loans, guarantees and financing be allocated directly to the Scottish Government, the Welsh Assembly Government and the Northern Ireland Government to allocate themselves, or will every project in Scotland and the other devolved regions have to go directly to the Treasury, or will there be an intermediary mechanism to ensure that the funds will be allocated throughout the UK? An answer from the Minister would be genuinely helpful.
Sajid Javid
That is a good question. It reminds me that I cannot remember any Member from Scotland or Northern Ireland being present during our lengthy debate on Second Reading. The recess was about to start, so perhaps they though it was a good opportunity to take a longer break. Let me be clear: this is a United Kingdom Government Bill. It is based on macro-economic policy, which is a reserved power for the United Kingdom Government, and takes advantage of the credit-worthiness of the United Kingdom Government. Members discussed the referendum on Scottish independence earlier, and this scheme is a great example of the strength of the United Kingdom when it works together. If we asked project sponsors in Scotland whether they would prefer a United Kingdom Government guarantee or a Scottish Government guarantee, I know which one they would pick. On deciding how those guarantees are used in devolved areas such as Scotland, the United Kingdom Government would work closely with their counterparts in the Scottish Executive, but the final decision would be for the United Kingdom Government.
I do not want to say too much about amendment 10, tabled by the hon. Member for Hayes and Harlington (John McDonnell), because the issue has come up a number of times, but I will point out that international connectivity is an important issue for overall economic growth. This Government believe that maintaining the UK’s status as a leading global aviation hub is fundamental to our long-term international competitiveness, but we are also mindful of the need to take full account of the social, environmental and other impacts of any expansion in airport capacity. That is why we set up the independent commission under Sir Howard Davies, which will issue its final report in the summer of 2015. Any decision on whether to support any of that report’s recommendations will be taken by the next Government. In any case, the coalition agreement is clear on this issue. That represents the Government’s position clearly, so I do not think there is any need for the amendment and ask the hon. Gentleman not to press it..
Amendment 4 was tabled by my hon. Friend the Member for Reigate (Mr Blunt), who said that he raised the issue on Second Reading. I remember discussing it with him at the time and afterwards. The Government believe that the definition of “infrastructure” should be broad enough to include housing, because housing and rented homes are a fundamental part of supporting a young dynamic work force and millions of other people, as well as of increasing the overall supply of housing. Including housing in the Bill’s non-exhaustive, illustrative list makes clear our intention to introduce major investment in the UK and increase the number of houses being built and occupied.
I reassure my hon. Friend, however, on one of his key points. In no way does this deal with planning issues or take away planning authority from local authorities. He should be reassured that the Localism Act 2011 is unaffected —there is no change to that—and the Government have no plans under this Bill to impose housing on any local authority with different views. This is about providing financial support for housing projects that meet the Bill’s criteria.
Sajid Javid
I beg to move, That the Bill be now read the Third time.
We have had an excellent and informative debate. I am grateful to everyone who has taken part in scrutiny of this important Bill and to members of all parties who have contributed as it has passed through the House, and I am grateful for the constructive, thoughtful and considered approach that has been adopted by most Members.
When the global crisis hit, the United Kingdom was among the hardest hit. Our recession was among the deepest, our deficit was among the largest, and our challenge to deliver sustainable recovery was among the greatest. The Government have set out a comprehensive strategy to deal with the challenges that we face. Fiscal, monetary, tax and structural reform are all playing their role to deliver our objective of lasting recovery and sustainable public finances. That strategy has reduced the deficit and helped to deliver near-record low interest rates.
As a result of the tough decisions that the Government have made and the responsibility and credibility of our long-term fiscal plans, the UK is a safe haven in a global debt storm. Ten-year gilt interest rates are now 1.9%, less than half what they were when we came to power. We are in a position to help unlock private sector infrastructure investment because of the strength and credibility of the UK Government’s balance sheet.
Mark Lazarowicz
May I briefly develop a point that I raised earlier? The Minister confirmed then that the Bill was a UK-wide measure, and that funding from the scheme would be provided for all parts of the UK from the Treasury. Will he now confirm that it will be possible for a private sector project in my constituency in Edinburgh to apply directly to the Treasury for support, without needing to go through the Scottish Government?
Sajid Javid
Yes, I can confirm that any application will go directly to the UK Treasury. If an application were made by one of the devolved areas, the Treasury would consider working with its counterparts in that area, but the decision would be made by the Treasury itself.
Finance Bill
Mark Lazarowicz Excerpts(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
The arrangements that will be in place following the legislation will mean that repairs and alterations will be chargeable for VAT. However, the listed places of worship scheme will apply to both types of work. It has been the case for some time that repairs involved the payment of VAT. The listed places of worship scheme will enable people to reclaim the VAT costs relating to those repairs. An extension—which is an alteration, rather than a repair—will now have VAT charged to it, but it will be possible to reclaim it through that same scheme. The scheme is now more generously funded than it was before the Budget, which means that a higher proportion of the costs that the churches would have incurred will now be able to be reclaimed. We have taken steps that the churches have widely welcomed.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I am sorry to have missed the beginning of the Minister’s remarks on this subject. I was actually checking up on certain aspects of a similar issue in my constituency. He said that the Church of England was content with the arrangements, but I hope that he will accept that it is not just the Church of England that is involved. I have a lot of churches, places of worship and listed buildings in my constituency, and I have been contacted by a church that was in the advanced stages of preparing to carry out work that could be seriously affected by the proposals. Will the Minister guarantee that, if the funding for the scheme does not meet the requirements, he will look again at the level of funding provided? Will he also monitor the scheme closely to ensure that no extra bureaucracy is introduced that could delay projects that would otherwise go ahead?
Mr Gauke
The hon. Gentleman is absolutely right to say that not just the Church of England is involved. I said earlier, however, that the Church of England had led on behalf of all the churches on this matter. On his second point, we have made the transitional rules more generous for churches that were close to commencing work at the time of the Budget. I obviously cannot comment on the specific case in his constituency without knowing all the details, but I think that he will find that many cases in which plans had reached an advanced stage will benefit from the transitional rules. He mentioned the funding for the scheme. We believe that this is a generous settlement, but we will of course keep such matters under review. He also mentioned bureaucracy. The scheme is organised by the Department for Culture, Media and Sport, but the Treasury will also take a close interest in it. The two Departments have worked together very effectively on this matter, and we are keen to ensure that the scheme works in an adequate way. I would underline the point that the representations that we have received from the churches suggest that they are happy with the arrangements.
Catherine McKinnell
I was talking about the situation at RBS, which was caused by a total administrative meltdown and computer failure; it had nothing to do with regulation. On the subject of regulation, Conservative Members called for less regulation. Politicians on both sides of the House need to consider where we go from here.
Mark Lazarowicz
Whatever people say about the banks’ responsibility for things that happened in the past, there can be no doubt that what has happened at RBS in the past few days is the responsibility of people running the bank now and of those responsible for the financial sector now, who include the Government.
It is not just those on low incomes who suffer from the damage caused by the difficulties at RBS, which obviously is trying its best to resolve them. Businesses in my constituency have contacted me saying that if the problem is not resolved immediately, they face closure. The Government need to take that issue seriously, but clearly they are not.
Catherine McKinnell
I absolutely agree with those sentiments. When discussing the impact that the total administrative failure at RBS had had, particularly on those on low wages but also, as my hon. Friend has just said, on small businesses, I was shocked and taken aback at the political opportunism involved in jumping up and raising a question about regulation, which is entirely irrelevant to the matter that I was discussing.
Catherine McKinnell
My hon. Friend makes a powerful intervention and reminds me particularly of my own region, the north-east, where too many people lost out on opportunities in the 1980s and never quite recovered from the experience. When I talk to young people today, I find that some of the brightest are coming out of school and choosing not to go to university or college but instead to try desperately to find whatever work opportunities might be available to them because, apart from the fact that they are put off by the tuition fees, they are so worried that if they did step on the ladder and go to university they would come out at the end to find there were still no opportunities. There is a deep sense of anxiety among young people that the Government need to be seriously aware of.
That is what is so concerning about the scrapping of the future jobs fund, which was not only providing real opportunities for young people and breaking the cycles of lack of opportunity, but helping businesses to open up and take on young people in particular. The Government replaced it with the work experience scheme, which they eventually rolled out last year and which offers only eight-week, unpaid placements. There is nothing to say that that is not valuable in itself, but it is simply not doing enough for enough young people. It is also available only for people under 21, so it does not cover unemployed people who have left further or higher education. Again, that compounds some of the anxieties that young people are expressing to me when they say that if they go on to college or university they will be no better offer at the end and they will instead be saddled with a lifetime of debt.
Mark Lazarowicz
It is worth remembering, is it not, that this younger age group, who will no longer be getting jobs under the future jobs fund, but only its successor, will also be one of the main targets of the Government’s cuts in welfare benefits?
Charlie Elphicke
For me, the issue is the size of the bonuses not in the private banks, but in the taxpayer-owned banks. That is the real concern that we ought to be focusing on. That is why the Government’s bank levy is the right way forward.
Charlie Elphicke
Let me develop my point and I will then take further interventions.
The Government’s bank levy is the right way forward because if we take too much money out of the banking system, we will be pulling out capital. If we pull out too much capital through taxation—or, indeed, through dividends—we will constrain the ability of the banks to lend. We have a crisis in which banks are not lending because they are hoarding capital. If we pull more capital out of the banking system, it will constrain the granting of mortgages and loans to small businesses. In my constituency, that is an important issue, because many small businesses are having great difficulty in getting the lending that they need.
Charlie Elphicke
I am all too aware that my constituency has had a difficult time and that youth unemployment has been rising. It rose significantly in the last Parliament under the previous Government, who completely mismanaged the economy. I welcome the fact that the jobseeker’s allowance count in my constituency has fallen in the latest figures. That is really positive. All of us are, of course, concerned about unemployment and want to see more jobs and money. That is why we need to get the banks lending again. That will help businesses to expand and to create the jobs, money and prosperity that we want to see.
Mark Lazarowicz
I am a little unclear about the logic of the hon. Gentleman’s position. He is against taking money out of the banks in the form of a bank bonus tax because it would affect the capital that they can lend to businesses. I think that is a fair assessment of his position. However, that criticism also applies to the bank levy that his Government are in favour of. How is it that he is in favour of a bank levy that takes capital out of banks, but against a bank bonus tax that is paid for by the people who get the bonuses?
Charlie Elphicke
My position is that the bank levy strikes the right balance. That is why I asked the shadow Minister whether her proposal would be in addition to, or an alternative to, the bank levy. That is significant. She is arguing, on the gross figures, for more than £3 billion more to be pulled out of the banking system. That would have an immediate effect on the capital that banks can lend to small businesses and hard-pressed home owners.
Graeme Morrice
I agree, and I shall deal with that aspect of bank lending in due course. It is vital for people’s trust in British banks to be restored as quickly as possible.
Mark Lazarowicz
Is not one of the tragedies the fact that the hundreds of thousands of people who work in the financial services sector—many thousands of them in my constituency and that of my hon. Friend—are being let down by those who are receiving the big bonuses? I was shocked and horrified by what is being done in their name, because they are often the victims of the criticism and the policies in the banks which have led to today’s debate.
Graeme Morrice
I agree. Many of my constituents who work in the banking and financial services sector contact me regularly to express concern about what their employers are doing.
Rushanara Ali (Bethnal Green and Bow) (Lab)
I support the new clause because today more than 1 million of our young people—one in five of them—have no job. That is not because they are not trying to find work and it is not because they are not working hard to get experience and skills; it is because in this flagging economy—in this double-dip recession created by this Government’s failed economic policies—the jobs just are not there. Yet, at the same time, we see the banks paying out huge bonuses to some of those responsible for the economic mess we are in. Britain is now bottom of the pile for social mobility, and that is due to this Government’s failures. The top 1% of our society now control a greater share of the national income than at any time since the 1930s. Despite these crippling inequalities, this Government’s priority has been to give tax breaks to millionaires while building their austerity programme on the backs of some of the poorest in this country.
The current labour market is a bleak place. The hardest hit by unemployment remain women and older people, who face discrimination in the labour market, and of course young people. Long-term unemployment is at its highest since 1996. As my hon. Friends have already said, youth unemployment has increased by more than 100% in the past year. That is a travesty, because it means that we have failed to help young people live up to their ambitions and find the jobs they want—or, indeed, find any jobs at all. It also means that a great wealth of talent and productivity is being lost. That is a travesty, too, and one this Government should be ashamed of. According to a recent Association of Chief Executives of Voluntary Organisations report, that will cost the Treasury £4.8 billion this year and it will cost the economy £10.7 billion in lost output. I support the new clause because the Government’s plans are driving a wedge through our society, leaving too many people behind.
Social mobility in this country has ground to a halt, and as I represent one of the most deprived areas of London, I see that all too clearly; it has always been hard, but now we are moving backwards. Every week, I meet young people in my constituency who are losing out. My area has one of the highest rates of youth unemployment, at more than 8%. The loss of the education maintenance allowance is making it harder for these young people to stay on in school. The lack of jobs makes it seem like the rising cost of university or education is just not worth it. Georgia Rowe, a student at one of the colleges in Tower Hamlets, recently said to me:
“I thought about university but it doesn’t guarantee a better job. You might as well not be in debt.”
This is the generation of young people who are being left behind.
That is why Labour has proposed the real jobs guarantee to help give our young people a chance, as we know the scarring effects that long periods of unemployment can have. People need work experience, training and to learn the skills that make them more employable in today’s difficult labour market. I know what a massive difference it can make to a young person’s chances if they get a little experience. Programmes such as Job Ready, which is hosted by Futureversity in my constituency, and Skillsmatch, and those of the Adab Trust and City Gateway, along with access to a job, can help people overcome the psychological barriers to economic opportunity, and build ambition and confidence. They connect business and young people, opening up new opportunities and partnerships, but those programmes are all struggling without adequate support.
The Work Foundation has rightly called the Government’s approach to youth unemployment “piecemeal” and “fragmented”. The Government’s headline plan to get young people back into work through the Work programme and youth contract is failing. They have managed to get only about a third of those on the programme into jobs, and in this age of austerity that is not good enough. Recent figures in my constituency showed that at least 15 people were chasing every job vacancy. The Government should be looking for real ways to help solve these problems and not continuing to kill off jobs and growth prospects through their draconian austerity measures.
Young people in my constituency can see the opportunities a short distance away in Canary Wharf and the City of London. They want to know how to get jobs there. They see bankers in the city getting tens of thousands of pounds in bonuses while unemployment soars. This is what happens when social mobility grinds to a halt. Those kids in my constituency, who are as talented and aspirational as any others, simply do not have the same opportunities, so it does not seem like such a bad idea to ask those who have so much to pay a little more.
When I consider the behaviour of the banks and some of their employees, I do not always see shining examples of socially responsible companies. The finance sector is a vital part of our economy and many companies and their staff behave responsibly, but too many of the highest paid behave the worst, as we have seen with the Barclays bank scandal. Such behaviour is at best reprehensible and at worst criminal and requires inquiries and investigations as soon as possible, yet those people are some of the highest paid in the country. Bob Diamond earned 600 times more than the average income in my constituency, so a tax on the excessive bonuses received by people such as him is only too fair. But instead the Government are reducing the tax paid by banks, with the bank levy raising just over half as much in 2011-12 as Labour’s bank bonus tax would have raised this year.
Mark Lazarowicz
I was interested to hear my hon. Friend say that Bob Diamond’s bonus and salary were 600 times the average wage in her constituency and want to highlight that point. Most of us understand that top bankers will probably be paid a lot more than most people in the country under any system, but such a discrepancy is obscene. That is what people find so disgusting and what they want to see tackled.
Rushanara Ali
I thank my hon. Friend for his intervention and hope that the Government are listening. They must understand how serious the matter is and the deep resentment and anger that are felt in constituencies such as mine. The borough that contains my constituency is also the borough in which Canary Wharf is based and the injustice of some of the behaviour and the worst abuses in the banking sector must be addressed. The Government must take responsibility.
Grahame M. Morris
I would have more respect for the hon. Gentleman’s intervention if he had sat through the whole debate, because those points have been raised. It behoves the Government to do more, not less; we have to learn from the lessons of history. I urge hon. Members to support new clause 13.
Mark Lazarowicz
I want to say a few words in support of a bank bonus tax. I emphasise that I am supporting that not to bash the bankers, but to end the unacceptable face of banking in the form of an excessive bonus culture that is still far too widespread.
As I said earlier, the vast majority of people who work in financial services certainly do not get vast bonuses; many thousands of people in my constituency work hard behind bank counters or in bank offices serving customers, and they are often on modest incomes. Many have paid with changes in working conditions, while others have paid with their jobs, when redundancies flowed from the financial crisis caused by the irresponsibility of senior executives. We are not targeting those people; we want to do something about the small minority who are still getting excessive rewards.
A study published at the end of June showed that average pay for chief executives at 15 leading banks in the US and Europe increased by 12% over the last financial year. That may be less than the 36% increase in the previous year, but whatever the increase—it is about 50% when we add both increases—it is wildly out of line with falls in profits and share prices that have frequently characterised the sector. That is not performance-related pay in any sense that most people would understand and it is certainly not a performance that would justify what is effectively a further tax cut on top of a tax cut for the highest paid.
A tax targeted on bank bonuses is necessary because the existing attempts to curb the bonus culture have so obviously failed. That is the key point. The issue is not about saying that people should not be very well paid at the top of banks and financial institutions, but we want to get away from a position in which sums wildly in excess of anything that could be said to be deserved are paid as a matter of course. None of the steps taken so far has changed that culture, even in an era of financial crisis among the banks and beyond.
The second reason why we want a bank bonus tax is that it would raise money for some valuable purposes. The issue of jobs for young people affects all our constituencies. My constituency normally comes in the middle range of unemployment across the UK, and we have seen a substantial increase in youth unemployment. I certainly want that issue to be tackled in my constituency.
We are also saying that the bank bonus tax would be used to provide affordable housing. That, of course, would bring two benefits. First, it would bring more housing into the sector. Constituencies such as mine have to some extent, although on a lesser scale, experienced the same phenomenon as happened in London, where high rates of pay in certain sectors such as financial services have pushed up house prices and made it harder for people on lower incomes to get affordable housing, so this proposal would be important for those people as well. Of course, building affordable housing and new homes also gives a boost to the economy through providing new jobs in the construction sector and helps people who have been out of work because of the collapse of that sector in many parts of the country.
Our proposal of a bank bonus tax would not only tackle the excessive bonus culture but provide jobs for our young people and affordable homes, giving a boost to the construction sector. I therefore hope that the House will support it.
Mr Hoban
We have heard a series of slightly strange speeches by Labour Members. We have become accustomed to their belief that they left us a golden economic legacy, but the reality is that when they left office unemployment was higher than when they came into office. They seem to believe that the problems of youth unemployment started under this Government. At least the right hon. Member for South Shields (David Miliband) has the good sense to recognise that it is a long-standing and deep-seated issue and that its growth started under the previous Government.
Labour Members seem to forget that when they left office the deficit was out of control. We have tackled that and reduced the structural deficit by a quarter.
Mr Hoban
The challenge that we face is dealing with the economic legacy left by Labour, with the huge boom in financial services and the huge bust that followed.
We have heard Labour Members’ story that they presided over a golden age in the financial services sector. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) could not bring herself to admit that the scandal over LIBOR fixing took place between 2005 and 2008 or that the interest rate mis-selling that affected so many small businesses took place in the same period leading up to the financial crisis.
Labour Members deplore the bonus culture, but let us not forget that when they were in government, bonuses were paid out in the year that they were earned and paid out in cash. That was the hallmark of the age of irresponsibility that characterised their time in office. This Government are taking action to tackle the bonus culture. This Government have introduced rules to ensure that bonuses are not paid out in the year they are earned but spread over a three-year period, that they are not paid out in cash but in shares, and, crucially, that they can be clawed back where there have been problems in the business or where there has been wrongdoing. This Government have tackled the bonus culture in the UK whereas the previous Government let it run riot, and we have seen the financial consequences of their so doing.
Mark Lazarowicz
The bank bonus tax was first introduced by the previous Government. In fact, I think that our Government should have done much more about the bonus culture in the banks in the past and was wrong not to do so. However, will the Minister at least accept that at no stage did his Government suggest any action whatsoever to tackle the bonus culture? He should not suggest that the responsibility lies only with Labour but accept his share of the responsibility as well.
Mr Hoban
We have taken action to tackle the bonus culture by ensuring that the interests of shareholders and management are aligned and that where there is wrongdoing bonuses can be clawed back. That is a significant change that has happened since this Government came to office. In the same way that we are remedying the regulatory failures left behind by the previous Government, particularly by the shadow Chancellor, the inquiry set up into the fixing of LIBOR will ensure that in future LIBOR is regulated to fill the hole in the Financial Services and Markets Act 2000 and ensure that there are criminal penalties for manipulating LIBOR—again, filling the hole left by the shadow Chancellor when he designed the regulatory system.
Amendment of the Law
Mark Lazarowicz Excerpts(12 years, 2 months ago)
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Andrew Griffiths (Burton) (Con)
It is a pleasure to take part in this debate and to listen to the contributions. I was particularly pleased to listen to the speech made by the hon. Member for Birmingham, Erdington (Jack Dromey), who is no longer in his place. In his usual articulate and erudite manner, he opposed every single measure that the Government had brought forward to cut the deficit. He opposed changes to welfare, to benefits and to housing, yet he had not a single idea about how his party would begin to cut the deficit—the terrible legacy that we were left by the last Government.
I pay tribute to the Chancellor and the Treasury team for yesterday’s Budget announcement. I wanted a Budget that was good for business and hard-working families, and I feel that I got that. Thousands of families will be lifted out of paying tax as a result of yesterday’s announcement. It is important that that measure is particularly beneficial to women, who tend more to be part-time or low paid workers. A measure that lifts people out of paying tax is particularly helpful to the women in our society, and that is a good thing.
Now I come to the “but”, both as the MP for Burton and chair of the all-party group on beer. The Chancellor said that he intended to make no changes to the duty regime. That was a little disingenuous, shall we say, as he knew—and I knew, and brewers up and down the country knew—that that meant an increase of 5% on beer duty because of the continuation of Labour’s beer duty escalator. That is putting jobs and livelihoods at risk.
In the past four years, beer duty has increased by 42% in this country. Our beer duty is now the highest in Europe—eight times higher than France, 10 times higher than Spain and 11 times higher than Germany. We pay 40% of all Europe’s beer duty, yet we represent only 13% of its beer consumption.
We have seen a 52% increase in duty over recent years, yet only a 10% increase in revenue and, as a result, a 25% drop in beer sales in this country. Yet beer is a great British product. Some 80% of beer drunk in this country is brewed here. There are 800 breweries across the country, which employ people in all our constituencies. Compare that with the wine we drink, 90% of which is imported, and we see the unfairness of the current duty regime. Yesterday’s announcement will cost an average pub about £2,800. I commend the 106 MPs who signed the early-day motion in support of freezing beer duty.
I turn to the unfairness in how the system treats beer and cider. Cider pays half the duty of a 4% beer, and at high strength—8%—beer pays four times the duty on cider. That means that breweries and pubs suffer. The cider industry tells us that the reason is the increased costs in running an orchard and growing apples for cider.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Why, in the hon. Gentleman’s opinion, is there such discrimination in the coalition in favour of cider?
Andrew Griffiths
I should say that what I meant when I spoke about the Chancellor was a lack of clarity in relation to yesterday’s statement.
I have with me a private and confidential presentation—
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
The Chancellor’s Budget speech painted a positive picture, in some ways, of what his policies are doing for the UK economy. However, although some businesses in my constituency are doing well, at the grass roots, among small businesses, I find a lot of people who are very worried about the future of their businesses, and that many of those who have been struggling to survive over the past year are now on the brink. I am sure that my constituency experience is typical of that of many Members in constituencies up and down the country.
That is why the Chancellor has made a dramatic mistake by rejecting Labour Members’ call for a temporary cut in VAT, which could have provided an immediate boost to businesses, created jobs and provided real relief for those on the lowest incomes. On the main street in my constituency, there are all sorts of shops, offices and other types of businesses, and I am genuinely worried that many of them are in great danger of going over the cliff edge if there is not an immediate boost to the economy such as a reduction in VAT. The temporary VAT reduction that Labour introduced at the end of its period in government certainly had that effect, and another temporary reduction would be an important boost for all types of businesses, but particularly small businesses, in my constituency and up and down the country.
Kwasi Kwarteng (Spelthorne) (Con)
The hon. Gentleman talks enthusiastically about businesses. Do not the measures in the Budget to cut corporation tax support business?
Mark Lazarowicz
The measures on corporation tax will have a beneficial effect on some businesses, but not so much for the smallest businesses. I am particularly concerned about the small businesses in a fragile situation in many parts of my constituency, which does not, relatively speaking, have very high unemployment overall, although some areas do have high unemployment.
First, we need a general 2.5% reduction in VAT that would benefit all types of businesses, as well as relieving people on low incomes, in particular, from the difficulties in which they find themselves as a result of the general economic situation and the policies of this Government. We also need targeted cuts in VAT. It is extremely disappointing that yet again the Government have rejected the call, not only from Labour Members but from organisations such as the Cut the VAT Coalition, which has called for VAT on home maintenance, repair and improvement work to be cut to 5%. That would not only be a boost for the depressed construction sector but would create work for joiners, plumbers, electricians and painters, and opportunities for young unemployed people looking for their first job.
Of course, one has ask how one would pay for a temporary cut in VAT. If the argument is that the top rate of tax is being cut because it will bring in more income by encouraging economic activity—a fairly dubious argument in my view—surely temporary cuts in VAT of the kind that I and my party have argued for are much more likely to lead to an immediate increase in economic activity than the cut to the top rate that is proposed in the Budget.
Neil Parish
I am interested in why you say that it is dubious to cut the rate from 50% to 45%, when in 13 years of your Government, you did not put it up from 40% to 50%.
Mr Speaker
I am sure that that is what the hon. Gentleman meant. It would be good in future if that is what he said.
Mark Lazarowicz
Those points were covered earlier in the debate.
I want to highlight the problems for businesses in my constituency. I say again that a cut in VAT would certainly make a difference for businesses in my constituency that are on the brink. Such a reduction in VAT would increase business activity, increase sales, increase the taxation income of the Exchequer and decrease unemployment, with a consequent cut in spending on benefits. The boost for smaller retailers and smaller companies in the construction sector would have other beneficial effects. From my constituency office, which is in a street that is still relatively well occupied, I can see shops and businesses closing and the resulting cycle of deterioration not only in the local economy, but in the local environment. I can see that happening in my constituency. That is why I believe that the temporary reduction in VAT that we have called for would be a great boost not just for business, but for the wider economy.
There were some announcements in the Budget that will benefit my constituency. There was confirmation that Edinburgh will be one of the cities that will benefit from superfast broadband and the green investment bank was also mentioned. However, those two announcements have been made a number of times already. The announcement about superfast broadband for Edinburgh and a number of other cities was made at the end of last year. The fact that the Chancellor chose to highlight those innovations again only goes to show the lack of imagination in the Budget when it comes to growth. We could have had a Budget for jobs and growth. Instead, we had a Budget with very few specific policies. That is regrettable and it is bad for the country.
I hope that the Government will change course and reduce VAT, if not in this Budget, then at a later stage, to support smaller businesses in the construction sector, which would benefit greatly from such a change.
Oral Answers to Questions
Mark Lazarowicz Excerpts(12 years, 2 months ago)
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Mr Osborne
My hon. Friend is absolutely right. The gap between the economic performance of the south of England and the north of England and, indeed, all parts of the UK increased under the Labour Government, so all those policies for regional development agencies, The Northern Way and all that led to an increase in disparity in our country, and manufacturing as a share of our national economy halved. We have introduced the regional growth fund, and we have enterprise zones and major transport schemes such as High Speed 2, to shrink the gap between the north and the south and to make sure that all parts of our economy benefit—[Interruption]—so that we have a better record than the one when the right hon. Member for Morley and Outwood (Ed Balls) was sitting in the Treasury.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
The Royal Bank of Scotland has today announced that it is cutting 300 jobs, mainly in Edinburgh, and transferring the work to India, where 250 jobs are to be created. Will the Chancellor intervene and tell RBS that the public did not put billions into it just to let it export jobs in that way?
Mr Osborne
As the hon. Gentleman well knows, the Government’s shareholding in the Royal Bank of Scotland is managed through United Kingdom Financial Investments Ltd, an institution created by my predecessor, another Member for Edinburgh, the right hon. Member for Edinburgh South West (Mr Darling), and we have no plans to change those arrangements.
Banking (Responsibility and Reform)
Mark Lazarowicz Excerpts(12 years, 3 months ago)
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Mr Umunna
Ultimately, the taxpayer had to put about £1.2 trillion into the system to support it. Juxtaposing that with the amount paid in tax by the sector, I am not sure that it comes to the same sum. I get the point that the hon. Gentleman is making. I do not deny that the financial services sector has contributed in tax receipts, but that is not outweighed by what we have had to pay out to save it from itself.
The status quo will not do. Change is essential. In November last year, Bob Diamond, chief executive of Barclays, said in his BBC “Today” business lecture that
“the single most important thing for banks and for businesses now is to focus on helping to create jobs and economic growth; and being able to do that requires us—banks in particular—to rebuild the trust that has been decimated by events of the past three years; and that rebuilding trust requires banks to be better citizens.”
I agree with Mr Diamond, but actions matter far more than words to people and businesses.
At the Business Secretary’s instigation, the Government established the Independent Commission on Banking, for which he deserves credit. If its recommendations are implemented, they will help to deliver a banking system that supports our economy’s interests in the long term. However, a number of things must happen to address the issues in the short term, not least of which is the matter of remuneration, which can be corrosive of public trust in our banks.
First, greater transparency on pay in the banking sector is needed. A good place to start would be immediate implementation of the Walker review. In 2009, Sir David Walker recommended new rules on the disclosure of bankers’ remuneration within pay bands above £1 million. In government, we legislated for that fairly modest scheme to be put in place so that irresponsible remuneration practices could be identified and rooted out. So modest were the proposals that the now Business Secretary told the House at the time that Sir David had produced
“an embarrassing mouse of a report”.—[Official Report, 30 November 2009; Vol. 501, c. 900.]
In the June 2010 Budget, the Business Secretary and his coalition partners pledged to take forward these modest proposals, but in November 2010 the Chancellor suddenly declared that he would not countenance implementation unless he could secure international agreement for the measures. In giving evidence to the Treasury Select Committee in December 2010, however, RBS’s Stephen Hester indicated that unilateral adoption of the Walker review proposals would not put the UK financial services sector at a significant disadvantage. Given the modesty of the Walker review proposals, why on earth will the Government not implement them?
Secondly, to increase accountability, we have said that an ordinary worker should be placed on the company remuneration committees setting pay. I do not understand why the Government have been so resistant to this idea. The Business Secretary has said that he is very sympathetic to the idea but has raised practical objections on the basis that there are many FTSE companies whose employees are predominantly overseas. These practical obstacles can be overcome, however, not least through technologies such as telephone and video conferencing, which in this day and age are a common feature of board meetings.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Having a worker on the board is not just about accountability. Would it not also address the fact that remuneration committees tend to comprise people much like the people whose salaries and bonuses they are assessing? It is not surprising, therefore, that they decide in favour of higher bonuses and salaries. That is another reason a different voice is needed on the committees.
Mr Umunna
I agree with my hon. Friend. First, an employee understands what is going on in the business—perhaps, in some respects, better than a non-executive director—and, secondly, employees have a stake in the business, and if the business fails, they ultimately pay the price, as thousands of RBS employees going through the redundancy process are now realising.
Mr Umunna
I will move on, so that I can finish and others can get in.
What else needs to happen? The banks are accountable to their shareholders, and the Government have told shareholders to be more active. A starting point should be for the Government to practise what they preach in relation to their shareholdings in the publicly owned banks, particularly in the setting of pay and bonuses. It seems that their default position at the moment is that they do not want to get involved unless forced to do so. That has to change. More responsibility is needed. The public rightly expect the culture of excessive bonuses to stop. That means that bank executive remuneration that is described as performance-related should be just that: related to performance. Very large bonuses should be paid only to reflect genuinely exceptional performance, if trust in the system is to be maintained. The public expect the same of other organisations enjoying taxpayer subsidies. Network Rail—part of an industry backed by a £4 billion taxpayer subsidy—is a good example. It was planning to push through a new bonus scheme under which senior managers were due to receive 60% of their salaries as a bonus every year, and a further 500% at the end of each five-year funding period. That kind of bonus culture is unacceptable to people and difficult to fathom. Again, the Government did little to stop that, but in the end the Network Rail board saw sense.
Mark Lazarowicz
My hon. Friend is being generous in giving way. When bonuses are paid for performance, is it not also important that they should be paid for performance that is related to the activities of the people receiving them? They should not be bonuses that could depend on factors that have nothing to do with the activities of the directors concerned, as would have been the case with Network Rail.
Mr Bailey
I acknowledge that, shall we say, continued repetition on that theme earned the right hon. Gentleman a certain notoriety among Government Back Benchers of the time. Most people would look back and say, “Yes, there was some truth in what he said,” but they would also say, “Let’s see if he lives up to what he said.” That is what my Committee and I will seek to find out.
The situation is profoundly worrying and contravenes the sense of fairness in this country. To most people in the street, there is something perverse about a system that punishes people on low and medium incomes for something for which they were not responsible, yet those who were responsible are rewarded. Even worse, that sense of injustice is compounded when the taxes of people on low and medium incomes finance that reward. It not only offends a deep sense of fairness but, it could be argued, it is socially and economically dysfunctional. That is the context of the debate.
Mark Lazarowicz
Does my hon. Friend agree that among those who have the right to be most angry at what happened are the many thousands of people who work for banks, such as many individuals in my constituency, who are not on higher pay and do not receive massive bonuses, but who keep the banks going by working in offices, branches and so on? They are the real victims of this saga, more so than anyone else.
Royal Bank of Scotland (FSA Report)
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Mr Hoban
My hon. Friend makes an important point. We have made it clear that we want to give the new regulatory organisations that independence, power, authority, discretion and judgment to get on with their job, so that we ensure that we tackle issues that need to be tackled and ensure that there is tough regulation where that is needed. For example, we are going to introduce powers for the Financial Conduct Authority to ban particular products—a power that has not been available so far. We are prepared to take those tough decisions and let the regulators get on with their job.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
One of the features of the RBS takeover of ABN AMRO was that lots of people warned against it at the time, and not just with hindsight—many people in the financial services and elsewhere warned of severe consequences. Was the decision to go ahead with that takeover about not just the role of Sir Fred Goodwin, but the fact that those who were meant to prevent him from doing such things did not do so? Was this not only about a question of regulation, but about a culture of takeover, acquisition, internationalisation and over-ambition which was at the heart of the problems of RBS and other places? What will the Minister’s proposals do to prevent that kind of attitude from affecting future managements and future banks when the current financial crises have passed?
Mr Hoban
The hon. Gentleman makes some important points. It is important that shareholders play a more active and engaged role in businesses in which they have a holding. My right hon. Friend the Secretary of State for Business, Innovation and Skills has commissioned John Kay to conduct a review of long-term interest in business and business investment. We need to strengthen corporate governance in boards, as they clearly were not sufficiently robust in their challenge to executives. One of the things that has happened in the FSA is that a much more robust approach is being taken to understanding and examining people who want to hold positions of significant influence in our major banks, including those who want to become board members. That is a good way not only of raising the quality of people in the boardroom, but of ensuring that they are robust enough to stand up against a dominant and aggressive chief executive officer.
Arch Cru Compensation Scheme
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Tom Greatrex
I agree with my hon. Friend and I will make some of those points later in my remarks. We are only at the beginning of uncovering what went on, and the situation is worrying for many other funds. There are also questions for regulators that I will go on to address.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I congratulate my hon. Friend on the way he presents the subject under discussion and on securing the debate. The fact that MPs from all four nations of the UK and five political parties are present indicates how widespread the problem is throughout the country. We clearly need an inquiry and to find out what has been going on. We do not want a repeat of the Equitable Life saga when it took 10 or 15 years before people got sight of any money. We need an inquiry, but we also need action by regulators and the Government to try and help people who, as my hon. Friend pointed out, in many cases made what they believed to be a low-risk investment for their later years. They will not be able to wait 10 or 15 years.
Tom Greatrex
I agree with my hon. Friend. It is important that people get their money and that they get it in the right way. I will make that point later in my contribution. Capita is an outsourcing group. The structure works so that Capita assumes a legal responsibility for the assets and subcontracts management back to the fund house. It is effectively an outsourcing operation.
While preparing for this debate I had the opportunity to speak to some individuals who used to work for Capita. What they told me shocked and appalled me. I was told that there was relatively little oversight over funds in Capita Financial Managers, and that there was a small team of people, a high staff turnover, and lots of relatively young and inexperienced staff who worked for over 300 funds at the same time. One individual who previously worked for Capita told me that Capita was
“not the best managed firm and the compliance culture left a lot to be desired. Capita is not particularly well respected in the industry and it is no surprise to me that they found themselves in trouble.”
Those remarks contrast greatly with the way that many people viewed Capita on the basis of their investments. Capita is a household name that for many people has a degree of respectability. People made their investment decisions partly because Capita’s name was attached to that investment.