Pub Companies

Toby Perkins Excerpts

Tuesday 21st January 2014 Commons Chamber

[Toby Perkins (Chesterfield) (Lab)]

I beg to move,

That this House notes that two years have passed since its resolution on pub companies of 12 January 2012; remains of the view that the Business, Innovation and Skills Committee was right to state in its Fourth Report, on Consultation on a Statutory Code for Pub Companies, HC 314, that only a statutory code of practice which included a mandatory rent-only option for pub companies which own over 500 pubs, an open market rent review and an independent adjudicator would resolve the contractual problems between the big pub companies and their lessees; further notes that pub closures are increasing, and believes that the Government should by July 2014 bring forward legislative proposals to introduce a statutory code of practice of the kind recommended by the Business, Innovation and Skills Committee.

For many Members, January in Parliament means two things. First—for some— it means the worthy, if somewhat joyless, challenge of a dry month, and secondly, it means a parliamentary debate about pubs.

This is the third January in a row during which the House has debated the regulation of pub companies. We know that pubs in our local communities are among our constituencies’ most precious assets, and a quick trawl through the press releases expressing MPs’ dismay at the fact that much-loved pubs in their area face closure will reveal immediately what an emotive issue this is, and how passionate our constituents feel about it.

I know that Members on both sides of the House will agree that, economically, socially and culturally, pubs are part of the fabric of our great nation. As well as being community hubs, they make a huge contribution to our fragile economy. Each pub employs an average of 10 people—often young people; often women, including working mums—who are finding it particularly hard to obtain other work. When a pub closes, its local economy loses about £80,000. More widely, the production and sale of beer contributes about £19 billion to the United Kingdom’s GDP, and generates total taxation revenues of £10 billion each year.

Given that a wide body of experts and more than 27,000 other people signed the 38 Degrees petition on pubco reform in just four days, today is one of those—some would argue—all too rare occasions in an MP’s life when he can vote for something that is both popular and right. In the last decade, our expectations of our locals have changed, and consumers now rank food higher than beer or sociability among their reasons for choosing a pub. As I know there is so much common ground between many Members across the House, I shall argue the case for reform in as unpartisan a way as I am capable of. [Laughter.]

[Dr Julian Huppert (Cambridge) (LD)]

Will the hon. Gentleman give way?

[Toby Perkins]

I will, on that conciliatory note.

[Dr Huppert]

I hope the hon. Gentleman will have a chance to take that step. He is right to say that there have been huge problems with pub closures, but as a result of new policies introduced by Liberal Democrat-led Cambridge city council, not only are pubs not closing, but previously closed pubs are able to reopen. Will the hon. Gentleman join me in congratulating the council on its excellent work, which has been supported by the Campaign for Real Ale and many other organisations?

[Toby Perkins]

Of course I welcome anyone taking a positive step in what is an incredibly difficult climate. At a time when there are so many pressures on pubs— 26 are now closing each week—anyone who is able to buck that trend will have our wholehearted support.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

I am possibly the only Member in the House who owns a pub. I am the chair of the John Clare Trust, which has bought the Exeter Arms, where Clare and his father used to sing and play. Unfortunately, it is closed at the moment, but we are determined to reopen it as a community pub.

[Toby Perkins]

I almost got carried away there, then my hon. Friend announced that his pub was in fact closed. However, the fact that his determination and vigour will ensure that it soon reopens gives us all a sense of enthusiasm and excitement.

My hon. Friend the Member for Edinburgh South (Ian Murray), a former Enterprise Inns landlord himself, will have the honour of winding up the debate. I also want to salute the many other hon. Members who are here today and who have previously raised this issue in debates here or in the press, or joined campaigns in their communities to highlight the problems caused by aggressive pub company behaviour.

In September 2011, the Business, Innovation and Skills Committee’s fourth review of pub companies finally settled on the view that only a statutory code with a mandatory rent-only option would put the pubco relationship on a fairer footing. I was therefore disappointed by the suggestion in today’s Government amendment that Labour should have regulated this issue before. The Government will know that it was precisely because the Select Committee wanted to give the pubcos time to get their house in order that they were given a final chance in 2010, with a timetable that the Secretary of State supported when he first came into office.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Does my hon. Friend agree that it is rather strange that the Government are using the previous Government’s decision to abide by a Select Committee recommendation as an excuse to ignore the current Select Committee recommendation?

[Toby Perkins]

My hon. Friend’s intervention gives me an excellent opportunity to put on record my gratitude—and that of the whole House and the wider coalition supporting the reform—for his work as Chairman of the Select Committee, which has led the way on this issue. I entirely agree that it is odd that, with such a large body of opinion in favour of the reform, it has been so difficult for the Government to support the recommendation that the previous Government were behind and that this Government said in 2011 that they would support.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

Many people outside the House are clearly taking a great deal of interest in this debate. We have a lot of independent brewers in the south-west, and some fantastic beers are sold in the local pubs. Many publicans there have raised the issue of the way rents are passed on with little independent assessment. Is my hon. Friend going to say something about that?

[Toby Perkins]

My hon. Friend has successfully predicted what I am going to say. I will definitely touch on that issue, because it is one of the key elements of the debate.

I also want to take this opportunity to reflect on some of the other contributions that have been made in the run-up to the debate by Members trying to support pubs in their area. The hon. Member for Leeds North West (Greg Mulholland) has been a determined campaigner on this issue. Among his many valuable contributions to the campaign, his article in the Yorkshire Post on 10 May was on message enough for the Liberal Democrat press office to promote it with the message that

“pubco terms are the biggest reason for pub closures”.

That was his view in May 2013, as I know it remains. Now, eight months later, I am disappointed to see that he has signed the amendment proposing that the Government need more time to come to the conclusion he has so consistently and persuasively argued for.

[Greg Mulholland (Leeds North West) (LD)]

The hon. Gentleman might be disappointed, but I was disappointed that he has tabled this Opposition day motion. We have had a conversation about this. My belief is that support for this issue commands a majority in the House of Commons, and that we need to do this properly, rather than through an Opposition day debate. I look forward to getting the recommendation from the Department for Business, Innovation and Skills and, at that point, getting everyone on both sides of the House together to push this through.

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[Toby Perkins]

I have tremendous respect for the hon. Gentleman, but those whose lives have been wrecked by the behaviour of the pub companies will look askance at the idea that, because of the nature of this debate, people will choose whether or not to vote for the motion. We had a Back-Bench debate on the issue two years ago, at which the motion was carried unopposed. However, the Government ignored it. In fact, it is only when the Opposition have brought pressure to bear that we seem to have achieved any movement on the issue. Today, in an entirely open and reasonable way, we are calling for all Members who feel strongly about this, as I know the hon. Gentleman does, to support the motion and give the Government the necessary impetus and the courage of their convictions to take the action that is so desperately needed.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

One reason behind pub closures is the high taxation on spirits in general and on Scotch whisky in particular. Given that spirits and Scotch whisky account for 40% of the sales in pubs, and that the level of taxation continues to escalate, should not the Government look more closely at the inevitable loss of revenue involved?

[Toby Perkins]

My hon. Friend raises an important point. There are many aspects to the debate on the future of our pubs, but this debate is about the pub companies. I will therefore resist his offer to get drawn into what the shadow Chancellor should propose to do about the taxation of the Scottish whisky industry. However, my hon. Friend rightly identifies whisky as an important product for our pubs, for our economy and particularly for the Scottish economy. Whether the statistic that he has just given us lends any credence to Scottish people’s reputation for an enthusiasm for alcohol I will leave to Members to consider.

[Bill Esterson (Sefton Central) (Lab)]

May I offer an example from my constituency to support the motion and illustrate the urgency of the matter? A constituent of mine moved into her pub a few years ago with the promise of significant investment being made in the property. Those repairs have never been carried out. She also has to buy her beer from the pub company; if she buys from elsewhere, the pub company fines her and charges her significantly more. Does not that illustrate why the motion is so important—particularly the part about rent-only tenancies—and why we need action now? Tenants such as my constituent cannot afford to wait any longer for action.

[Toby Perkins]

I could not agree more with my hon. Friend.

I shall outline how we have arrived at this position. We have now seen the full scale of the revelations from the Select Committee in its four different reviews over eight years. Examples have also been given by many Members from across the House on behalf of their constituents. The hon. Member for Northampton South (Mr Binley), my right hon. Friend the Member for Torfaen (Paul Murphy) and my hon. Friend the Member for Easington (Grahame M. Morris) are all well-known champions of the cause. Just a little research has revealed many more.

The hon. Member for Salisbury (John Glen) has told the House about the landlords of the White Horse in Quidhampton, alleging that

“Enterprise Inns signed them up to a lease on a false prospectus and…made their business completely uneconomic and unsustainable”.—[Official Report, 13 June 2013; Vol. 564, c. 476.]

The hon. Member for Meon Valley (George Hollingbery) has confirmed that

“unsustainable rent demands…from Enterprise Inns”—[Official Report, 13 June 2013; Vol. 564, c. 476.]

led to the closure of the White Hart in South Harting. The hon. Member for Romsey and Southampton North (Caroline Nokes) has written to Enterprise Inns to inform it that the Abbots Mitre in Chilbolton was

“under threat largely due to unrealistic rents and changes in terms and conditions.”

The hon. Member for Bristol North West (Charlotte Leslie) has written to Enterprise Inns asking it not to close the Lamplighters in Shirehampton.

The hon. Member for Cheltenham (Martin Horwood) has bemoaned Enterprise’s decision not to save the Little Owl, saying that

“a big company has failed to recognise a pub’s value to the community.”

The hon. Member for Pudsey (Stuart Andrew) was also concerned with saving the Owl, this time the one in Rodley, whose threatened closure he blamed on

“the mounting costs imposed by the building owners, Enterprise Inns”.

The hon. Member for Bromley and Chislehurst (Robert Neill), who has recently written an excellent article in support of a mandatory free-of-tie option, has said of the sale of the Porcupine in Mottingham that the public were

“incensed that their right to bid for the pub has been bypassed deliberately by Enterprise Inns and LiDL”.

The right hon. Member for East Devon (Mr Swire) told a packed crowd that he would be joining the campaign to save the Red Lion in Sidbury, which Punch Taverns was planning to sell. There are many more examples. My right hon. Friend the Member for Tooting (Sadiq Khan) joined the campaign that successfully saved the Wheatsheaf. My hon. Friend the Member for Westminster North (Ms Buck) was particularly busy: she was trying to save both the Clifton and the Star. My right hon. Friend the Member for Southampton, Itchen (Mr Denham) campaigned to save the Bittern. The list goes on and on and on.

Today we are faced with a choice. We can race to the aid of pubs in distress in our communities—pubs that are the symptoms of the great pubco disaster that plays out in every one of our constituencies and leads to job losses and the loss of a treasured community asset. We can sign the petitions; we can beg the pub companies to be fair this time; we can complain that the rents were too high or that the companies sold a false dream; we can rage against how they did not understand or seem to care about the impact on our communities; we can bemoan that they changed the rules; or, finally, we can act.

[Andrew Selous (South West Bedfordshire) (Con)]

Televised sport, especially football, is very important to many pubs. I have had news today that a pub in my constituency is in difficulty because Sky Sports wanted to charge £1,250 a month to show Sky Sports in the pub. Has the hon. Gentleman had any thoughts as to how we can try to get sport into pubs more cheaply or increase competition so pubs can show sport, especially football?

[Toby Perkins]

The hon. Gentleman makes an incredibly important point. I know that many pubs have an agonising decision to make about whether they continue to show sport, which is incredibly expensive but attracts a lot of people through the door. I am sure he raises this question looking forward this weekend to Sheffield United playing Fulham on BT Sport, which can be watched in most good public houses at about 1 o’clock on Sunday afternoon.

The point the hon. Gentleman raises highlights the fact that the proposal we are discussing today is not a panacea for all the problems of the pub trade. If our motion is supported and the Government, with our support, swiftly bring forward regulation we can all back, it will not mean that all the problems will be solved and no more will be asked of Parliament. The sports issue is important and I will speak to my hon. Friend the Member for Eltham (Clive Efford) about it, as he is putting forward Labour’s ideas on sport for the next manifesto.

[Mark Tami (Alyn and Deeside) (Lab)]

I recently met a landlord who has managed to turn around a failing pub and increase the turnover. His reward is for all the extra money to be taken away in increased rent. That destroys the incentive for people to work hard and bring these pubs back.

[Toby Perkins]

That is an important point, and we hear it time and again. Given the economic difficulties and the difference between on-trade and off-trade alcohol, people understand that there are going to be difficult times for pubs. They will also recognise that some people are not suited to running a pub and, for whatever reason, are unable to make a decent fist of it. What sticks in the craw of most fair-minded people, however, is that the majority of those who take on major pubco tenancies end up earning under £10,000 a year. It is not a case of a few people doing very well, a reasonable number making a decent living and a small number failing; we are seeing the majority failing. Under the existing perverse disincentives, regardless of whether the pub does well or badly, the pub company does all right, and many people say that even when their trade grew they got hit with higher rents or higher prices that took away all the increased revenue they had generated. It is clear that there is a desperate imperative to act.

[Andrew Gwynne (Denton and Reddish) (Lab)]

My hon. Friend recently rattled off a great long list of Members on both sides of the House who have rightly campaigned on this issue. Does he share my disappointment that as long ago as last January he brought a debate to this House during which the Government performed a U-turn saying they would seek to introduce a statutory code, which is absolutely necessary, and we had a lengthy consultation, but very little in terms of the legal framework has changed 12 months on?

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[Toby Perkins]

I certainly do share my hon. Friend’s disappointment. My sense is that there is a lot of sympathy on this issue across the House and I want to bring people together rather than tear us apart. It is fair to say that a year ago the Government did a U-turn. I was not disappointed with that at all; I was delighted. They told the House that they were going to get on with the consultation. Many people were celebrating, and they went out drinking in the pubco pubs around the country that night. A few months later the consultation started and it finished about six months ago, yet despite the overwhelming response in favour of what we are proposing today and what the Government seemed minded to consider, we still have not actually had any action. We have not changed the situation on the ground for hard-pressed publicans and all those people who have seen their life-savings disappear and who want to know that the regime is going to improve for the people who follow them.

As I was saying, we can bemoan the situation, we can join the campaigns, or we can act. We can take court action on the cause of the closures. We have within our grasp today the opportunity to prove that actions speak louder than words and stand united across the House on behalf of our communities, but also on behalf of the hundreds who are looking to us to act. In just four days since Friday, 26,762 people have signed the 38 Degrees petition on the great British pub scandal.

CAMRA is an immensely important and well-respected body. It has the best interests of the pub in its heart and in its DNA; that is its raison d’être. It boasts a membership of almost 160,000, a staggering demonstration of the importance of real ale and pubs to people across our country. If I was seeking to make a political point, I might have mischievously pointed out that, with almost 160,000 members, CAMRA is bigger than the recently reported membership of the Conservative and Liberal Democrats parties combined, but as I said I wanted to be consensual, I am not going to mention that.

We all know that a fairer relationship between pub companies and their landlords is not a panacea that will end all the challenges faced by the trade. There are others and there will continue to be asks of us in Parliament even if we take action on this scandal today, but the fact that we cannot solve every problem does not mean we should not solve this major one. From the Federation of Small Businesses to the GMB, from CAMRA to the Forum of Private Business, from Fair Pint and the all-party save the pub group to Unite the Union, a diverse coalition of interests has consistently called for a new statutory code of regulation.

Let no one say that this House or the Business, Innovation and Skills Committee have rushed to judgment. Over four reports and eight exhaustive years, the Committee gave the major pub-owning companies every opportunity to make the changes that were needed to put their house in order, yet at every turn it found that the industry moved at a glacial pace, and always reluctantly, and only because of the scrutiny of the Committee.

Although I want to pay tribute to everyone involved in the work of the Select Committee and to say that I think the work done on pubco is a shining example of the Select Committee system at its best, it should not have to be the role of a Committee not only to investigate an issue but to be the body that constantly has to chase to see whether the assurances made to it have been kept. Following the final 2011 Select Committee report, there was widespread disappointment when the right hon. Member for Sutton and Cheam (Paul Burstow) came to the House to defend opting for a self-regulatory regime. In January 2012 this House felt it had seen enough. We believed that voluntary regulation had failed and we voted unanimously for a statutory code, a vote that was ignored by the Government. Frankly, at every stage it has felt as though the Opposition and the Select Committee, ably supported by Members across the House, have had to make the running.

During oral questions to the Secretary of State for Business, Innovation and Skills in November 2012, there were three Labour pubco questions and it was suddenly announced that there would be an investigation into the success of self-regulation. A day before the Opposition day debate in 2013, the Government finally announced that they would consult on introducing a code to deliver a fairer balance between pub companies and their tenants. The response to the consultation was overwhelming: over 7,000 people responded, 96% were in favour of regulation, 67% were in favour of a mandatory free-of-tie option, 92% were in favour of open market rent assessment, and there was widespread support for a stronger independent adjudicator.

The strength of feeling was overwhelming, with 91% of respondents who ran a pub saying that the beer tie was one of the three biggest challenges facing their business, and more than nine in 10 saying they would take a free-of-tie option even if it meant paying a higher rent. It is therefore a little odd for the Government to say, as they do in their amendment, that they want to take more time to learn from the consultation. They chose the questions to ask and they got a big response. On almost all the big questions, the level of support was so overwhelming that even Robert Mugabe would have thought it was a bit one-sided, yet the Government then commissioned a report from London Economics, which critics felt was deeply flawed, apparently to try to persuade themselves against the view they appeared to have taken before their consultation. Nothing could more clearly demonstrate the failure of the big pub companies than the desire to leave them on the part of the very people they consider to be their business partners. But for all the warm words expended on the Floor of this House and elsewhere, still nothing has changed in legal terms, and every week 26 pubs close.

If the Government do not introduce a Bill on this issue in the Queen’s Speech, it is impossible to imagine that there will be sufficient parliamentary time to pass one in this Parliament. As my right hon. Friend the Member for Doncaster North (Edward Miliband) said on Sunday’s “The Andrew Marr Show”, if this Government fail the challenge set them today, everyone who feels strongly about this issue will know that, for all the rhetoric, only voting for a Labour Government will bring about the fairness that so many people so desperately want. Hon. Members will today have an opportunity to choose whether to be part of the solution or, I am sad to say, part of the problem.

There is no doubt that the existence of large pub companies, which own the vast majority of British pubs and often force their licensees to buy beer only from them, are distorting the market. As we consider their devastating impact, let us remember that 57% of Britain’s pubco publicans, people who often work among the longest hours of anyone in our communities, earn less than £10,000. The Federation of Small Businesses, brilliant advocates but hardly Marxist radicals, found in 2013 that a mandatory rent-only option would generate £78 million for the UK economy, that 98% of respondents would have more confidence in the success of their pubs and that almost 10,000 would take on extra staff or give their staff extra hours of work. Hon. Members will know that the FSB does not propose additional regulation lightly.

My own Chesterfield pubs survey mirrored many of those encouraging statistics, but also sounded a deadly warning about the cost of inaction, with many pubs saying that they were on the brink of closure and that increased rents and beer prices were key issues. This morning, the British Beer & Pub Association claimed that tied tenants’ pubs were cheaper, but that is far removed from the reality that people see in their community. At The Nags Head in Dunston in Chesterfield, I dealt with a Marston’s tenant who was competing with Marston’s managed houses just across the road that were selling the same product at up to £1 a pint less. The big pub companies and the BBPA will tell us, “Yes, there is the odd problem, but it is not typical.” They say, “You can’t offer general criticisms. We need to know about specific cases.” However, when we bring them specific cases they say, “Well, that’s just a one-off.” It seems that no evidence is good enough for them to recognise the reality of what people are seeing in their pubs. The BBPA and the pub companies are saying, “Mainly it’s just people who have failed in their businesses wanting to blame someone else.” I do not think that stands up to any sensible scrutiny.

Many businesses and industries have undergone tough times, particularly in the past five years or so, but they have not all universally claimed that they have been misled by their suppliers. Corner shops have closed, but MPs are not besieged by former Londis or Spar shopkeepers claiming they have been ripped off by Londis or Spar. People in business generally know the difference between tough market conditions and plainly misleading practices.

On that note, the BIS consultation last year was sobering reading for anyone who thought that the threat of regulation would cause the industry leopards to change their spots. It told of a married couple who produced a careful budget plan before signing a lease, only to find on the day they received the keys that their pub company increased the prices, meaning the couple can only afford to pay themselves one salary. We also heard about the couple who ploughed—

[Mr Speaker]

Order. May I say gently to the hon. Gentleman, to whose speech I am listening with close attention and great interest, that I know he will want to take into account the fact that several hon. Members on both sides of the House also wish to take part?

[Toby Perkins]

That has been preoccupying me for several minutes, Mr Speaker. None the less, I would not like the couple who ploughed their life savings into acquiring a pub only to find the agreed credit order with their pubco was unilaterally withdrawn, leaving the business in ruins, to be left out of my contribution. I am glad that they found their way in.

Our motion calls for three key steps to be taken that will ultimately lead to a better future for Britain’s boozers. First, we need a mandatorv free-of-tie option. The beer tie, whereby landlords can buy products only from their pubco, works for some licensees, but for many others it means that they can buy only limited products at inflated prices. We want every landlord to have the choice of whether to go free of tie. The hon. Member for East Dunbartonshire (Jo Swinson), whom we all miss terribly, although she will be back with us soon, has previously said that she is

“committed to stamping out abuse of the beer tie”.

Clearly, there is only one way to do that.

The Government have previously committed to the principle that no landlord should be worse off than they would be in an otherwise free-of-tie pub, but the behaviour of the pub companies suggests to me that that will not happen without allowing the market to decide. Members who are worrying that such a measure would go against their free market principles should have no fear. What the pubcos are defending is an old- fashioned closed shop, whereas what we are proposing is a genuinely competitive market solution that stands up for the rights of the small entrepreneur.

Secondly, we need independent rent reviews. When a new licensee takes over a pub, or when an existing rent contract expires and is renegotiated, there should be a fully transparent and independent rent review, completed by a qualified surveyor. That would deal with so many of the horror stories that we have heard in this debate and previously.

Finally, there must be a truly independent body to monitor the regulations and adjudicate in disputes between licensees and pubcos. There is little confidence in how PICAS, the Pubs Independent Conciliation and Arbitration Service, or PIRRS, the Pubs Independent Rent Review Scheme, are operating, with many of the people going through the PICAS process unhappy with the outcome.

Those are our tests, which are grounded in the principles of building a market that works, with rules to prevent restrictive practices and big companies unfairly using their size in an uncompetitive way. I know that Members across the House share this vision, so let us unite today behind this vital British industry and this vital British institution, and deliver the change that publicans, licensees, business groups, trade unionists, beer enthusiasts and the great British public are crying out for. I commend the motion to the House.

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[Vince Cable]

That was the purpose of the Government consultation. Statutory regulation was necessary, and we consulted on how to do it. We are now evaluating the results of that process. The House will soon hear our conclusions on how to take the matter forward.

Let me repeat my appreciation for the work that has been done by Members from all parts of the House. I also thank the Business, Innovation and Skills Committee, whose Chairman is here, and the various campaigning groups for their work on the matter. It would not be amiss to single out Fair Deal For Your Local, which is the campaign that has been mobilised by my hon. Friend the Member for Leeds North West (Greg Mulholland). As part of his campaign, he has brought together CAMRA, the Federation of Small Businesses and the GMB union as well as various other groups. We are talking about local and national groups across industry and across the country.

[Toby Perkins]

I am grateful to the Secretary of State for giving way and for what he said about me being a statesman. If I may, I will press him on the timetable issue that has been raised. If he accepts that statutory regulation of some sort is necessary and the consultation overwhelmingly supports the majority of such aspects, will he at least commit to some sort of legislative action in the next Queen’s Speech, and will he say that we will not get to the end of this Parliament with nothing having changed?

[Vince Cable]

I cannot really add to what I have already said. The hon. Gentleman knows that we are following a process. I am conscious of the legislative timetable, and he will remember—indeed it is the whole purpose of this debate—that the Government did not consult in an open-ended way over this question; we consulted on a specific proposal to introduce statutory regulation, and that is what we are responding to. Although I am conscious of the legislative timetable, I will not give a specific date on which this report will be concluded.

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[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

This is a debate that I never thought we would need to have again. Last year, we were given assurances that a statutory code would be introduced; a year later, there is still no sign of it. The motion reflects the sense of exasperation felt by Labour Members—and perhaps privately by many Government Members—about the lack of progress on this issue.

[Toby Perkins]

Does my hon. Friend share my fear that we will potentially be back here another year to have yet another debate? I am pencilling that into my diary.

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[Damian Hinds]

It is difficult to go into the maths in great detail in a forum such as this, but with respect, I do not see how we can make that comparison, because we are talking about different pubs in different places.

[Toby Perkins]

The hon. Gentleman is right to say that it is difficult to make such comparisons. That is precisely why we are making the case that the only way to get genuine fairness is to ensure that people know what is a fair market rent. We can then say, “You can take that or you can take an alternative. The choice is yours.” That is the only way we will get a genuinely fair deal.

[Damian Hinds]

I have a lot of sympathy with that view and it is legitimate. We must not forget, however, that the owner of the pub also has an interest in that business thriving, and it must be an arrangement both sides are happy with. In one sense, the tie is just a way of sharing risk. It is a way of having rent that goes up when business is good, and down when business goes down. If we want to complain about how much money pub owners take from licensees, that is perfectly reasonable, but it is misleading to speak only about the tie and to say that if that went, all those problems would disappear. I do not believe they would.

I believe the single most important thing for regulation is to ensure the availability of proper financial and legal advice for new licensees. That must include someone giving advice who is able to understand and challenge what the pub company puts forward. It is called FMT—fair maintainable trade—and involves an estimate of what the pub can make, on which the rent and target return is based. If the licensee enters that arrangement with their eyes fully open, it is a commercial decision. Pub companies tell us that things are getting better and that pre-entry training, consultation and so on has improved, but it is difficult to tell that from the outside—I know the Select Committee has had more opportunity to look at that in detail.

Overall, we want more of a partnership approach between the owner of the pub and the licensee, and in the industry at its best that is of course what happens. For a long time, pulling pints has not been enough to survive and thrive in the licence trade. Such businesses are increasingly food driven, and they are trying to attract a wider range of customers while having to compete against managed houses that have different cost structures. There can be big advantages to being part of a wider group, such as consultancy and guidance on the development of the food business and menus. For some, there are other streams of business such as accommodation and retail opportunities, or—critically—improving purchasing programmes to improve margins.

It may be that as the industry evolves, the old tied model becomes less appropriate as more business goes to food and other products, and a franchising-type model may become more appropriate. It is arguably easier to do that and provide a full range of services if there are managed houses, as well as tenancies or leases. It is not for the Government to force such things through, but competition authorities can ensure there is sufficient space in the marketplace for operators who would provide a different model to licensees. The other crucial thing the Government can do to ensure that pub companies are fully mentally invested in long-term pub operations, rather than having an asset register of real estate, is make it harder to convert to residential property. If someone knows that the way they will make money out of a certain asset is by trading it well as a pub or a place where people come together to eat and drink, their minds will be focused on doing that more and more.

Where communities want to take over a pub, but that does not work out with the pub company and so on, I would like the Government to review continually the way the community right to bid works. We have a number of such instances in my constituency, and there is a great team working on the Anchor in Ropley. People are giving up a lot of time and putting in their expertise. That seems quite hard on occasion, and I hope the Government will keep that under review to ensure the process is as simple as possible.

In conclusion, we should beware of solutions, such as removing the tie, that appear to solve a lot of problems. Let us think back to the beer orders, and those who thought it was a great idea at the time in terms of breaking the vertical integration hold of brewers on individual pubs. I wonder what some of those people think about that now.

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[Greg Mulholland (Leeds North West) (LD)]

I cannot say that it is a pleasure to take part in the debate. I echo the comments made by the hon. Member for West Bromwich West (Mr Bailey), the Chair of the Business, Innovation and Skills Committee. I pay tribute to him, to his predecessor, the hon. Member for Mid Worcestershire (Sir Peter Luff), and to his Committee for their excellent work. It is a stunning example of a Select Committee. Like the hon. Member for West Bromwich West, I would rather we were not having another debate on pub companies. If we have to have one, I would rather that we were voting on Government proposals that do what the Committee has said the Government should do since 2011.

We will have to have at least one more debate on pub companies—I have shared that with the hon. Member for Chesterfield (Toby Perkins). When we have the response, we will need to bring it before the House and show that the majority of hon. Members support not only action but the only sensible and obvious action, namely the Committee’s suggestion of a market rent only option.

It is important to remember the history of pub companies. Let us be clear that we are debating pubcos because of the concerted lobbying of a number of organisations. Last year, I was pleased to bring those organisations together under the banner of the Fair Deal for Your Local Campaign. Those 10 organisations—the Federation of Small Businesses, the Forum of Private Business, the GMB, the Guild of Master Victuallers, Fair Pint, the Pubs Advisory Service, Justice for Licensees, Licensees Supporting Licensees, CAMRA and Licensees Unite—have a membership of more than 2 million people. The campaign is now supported by no fewer than 206 MPs on both sides of the House. It is supported by the whole Opposition, so there is a clear majority for action.

I pay tribute to one MP who was a supporter of the Fair Deal for Your Local Campaign—the wonderful Member for Wythenshawe and Sale East, Paul Goggins, who is sadly no longer with us. I thank Paul for his support, which was yet another example of his commitment to social justice and a reform that we need if we are to have a fairer society.

The Department for Business, Innovation and Skills decided in 2011 not to do what we believed it would do. The reality is that we were outdone by some rather dodgy, behind-the-scenes lobbying. That is precisely why we set up the Fair Deal for Your Local Campaign—to ensure that, with the might of the 10 organisations behind us, we could tackle that lobbying head-on, which is precisely what we have done. It was the freedom of information request submitted by the all-party parliamentary save the pub group that outed the lobbying and led to the first debate and the unanimous vote for action.

To be fair to the Department for Business, Innovation and Skills and the Government, the motion in January 2012 said that we must have a consultation in autumn 2012. It appeared that we would not have one, but it happened. The consultation showed what we knew it would show: that the problems are as bad as ever and that self-regulation has failed. The response was the debate a year ago and the announcement of the consultation.

As someone who has campaigned on pub companies for something like six or seven years, I of course share hon. Members’ frustration. I am more frustrated than anyone and wish that the Government had responded by now, but they have not. The only reason that I shall support the amendment is that, as the Chair of the Business, Innovation and Skills Committee has said, there has been last chance after last chance for the industry, so the Government should have a last chance to act. This is that last chance. I assure the Chair of the Committee and the House that if the Government do not announce swiftly that they will back the Committee’s solution, and in a time frame that allows for legislation, they can be assured that I will lead the criticism most loudly, because it is so long overdue. That is where we are and I hope we will get a decision as soon as possible. What we are seeing from the rather desperate lobbying by industry sources are the death throes of an unjustifiable and unregulated business model, and the last sorry chapter in one of the worst and most shameful episodes of corporate abuse and financial mismanagement that the UK corporate sector has ever seen.

The Secretary of State was right to say that the issue is not the existence of a tied model, and just to correct my hon. Friend the Member for East Hampshire (Damian Hinds), it is not about the abolition of the tie. The Fair Deal for Your Local Campaign is very clear that it is about stopping abuse of the tie. That abuse is endemic because of reckless financial mismanagement, the acquisitions spree and the overvaluation scam that led to huge debts that are the reason why these companies are taking so much of the profit—often 75% and even 100% of pub profits—and stopping tenants and lessees making a living.

This is not about emotion or roses around the door, but cold, hard economics. While average tied rents are higher than free-of-tie rents—it should be the other way around, because the only justification for the tie is that if people agree to pay more for their beer they should pay a lower rent—beer prices go up and up and up, and the increases are above inflation every year.

I am delighted to see the Secretary of State back in his place. Does he know that Punch Taverns, which was the largest pub company, made an astonishing £2.271 billion in 10 years from selling on beer, simply by acting as a middle man, driving the price at the brewery down and selling on to tenants? I say to all my Conservative coalition partners—many are hugely supportive of this campaign, standing alongside the Federation of Small Business and the Forum of Private Business, and understand that this is about freeing up small businesses and giving them a chance—that this is about bringing in market forces. I say to those who are confused that this is not a market place that it working; it is an abuse of capitalism and a twisting of the market.

[Toby Perkins]

I thank the hon. Gentleman for giving way, though he has moved on slightly from the point I wanted to intervene on. On whether what we are now seeing are the death throes of a shameful part of the history of our corporate world, does he share my astonishment that the big pub companies are making the case that if their customers have the choice not to use them, they will not use them, and that that will cause them to collapse? Can he think of any other industry that would think it was credible to say, “The only reason our customers use us is because they have to, and if they don’t have to, we will collapse”?

[Greg Mulholland]

As the hon. Gentleman and, I think, many right hon. and hon. Members know, there has been an extraordinary campaign of misinformation on behalf of the big pub companies by their lobbyists the British Beer and Pub Association. I am sorry to say that it includes false statements that have been given even to the Select Committee: false statements about the reality of pub closure figures, and lots of unsubstantiated nonsense about how giving the right to a fair rent—that is all we are talking about; the right to choose whether to have a rent-only agreement—will somehow close breweries, create all sorts of disasters and close pubs. That must be stamped on. I urge all Members to read “Setting the Record Straight” by the Fair Deal for Your Local Campaign, which puts those myths to bed.

--- Later in debate ---

[Mr Robertson]

I am not at all surprised to hear that. I do not know the exact figure, but I do know that that is what has given rise to the problem, to the extent that it is one.

I recognise that there is a problem, and I want us to move on as quickly as we can, to help hard-working people who are keeping pubs going at the centre of communities. There are problems—I want to stress that point—but I want us to come up with a lasting solution that will not make matters worse. There are some benefits to the existing situation—I will come to the weaknesses in a minute. For example, a pubco can allow people who do not have a great deal of capital to enter the trade. They might be unable to afford to spend £300,000, £400,000 or £500,000 on buying a pub outright or to borrow that money. They also get their accommodation basically covered—certainly in most cases—while they run the pub, which gives them some security.

I do not recommend the tie at all, but I am concerned about what would happen to the rent if there were no tie. I am not speaking against reassessing the rent against a market level, but if we do that, what do we compare it with? If we are looking beyond pubs, we might look to McDonald’s, for example, or other franchise organisations. Is that a direct comparison? I am not quite sure how the proposal would work in detail—and of course, the devil is always in the detail. What about the repairing side of the lease? Will people with a fixed market rent be required to do more repairing of the fabric of the building than they are now? I am not throwing those questions out as stumbling blocks or trying to cause a problem, but they need answering.

[Toby Perkins]

I am happy to help the hon. Gentleman on that. The valuation would be done with transparency against the performance of other pubs. We need much greater transparency in the industry. Under the specific proposals that we have made today, the publican would be able to decide, knowing what a fair market rent was, whether they wanted to throw their lot in with the pub company, on the offer being made, or to opt out and buy their beer from wherever they chose. I hope that has answered his questions.

[Mr Robertson]

Not exactly, no, because how do we determine what the market rent level is? Is it the level for those with a tie or those without a tie? What about a repairing lease or a non-repairing lease? These are all details that need filling out, but I am not aware that they have been properly addressed. I want to deal with them and to make progress, but I am not sure we are there yet.

Tomlinson Report

Toby Perkins Excerpts

Tuesday 17th December 2013 Westminster Hall

[Guto Bebb]

I appreciate my hon. Friend’s intervention, as it highlights the fact that this is not only an issue for those businesses highlighted in the Tomlinson report but something that we are seeing in our own constituencies.

James Nicholls concludes the article I mentioned by saying that the insolvency industry—by that he means accountants, solicitors, insolvency practitioners and so forth—needs

“to stop defending practices that on close and moral scrutiny just do not stand up to the ‘smell test’.”

I say, “Hear, hear,” to that.

I will conclude my comments by discussing Clifford Chance. I have no doubt, as I said in my opening remarks, that it is a reputable firm of solicitors, and make no comment about its behaviour, which I am sure is of the highest standard. However, by choosing Clifford Chance to undertake an internal review of the allegations made against the GRG, RBS is doing itself a disservice and is not creating any confidence in that review process.

Let us think of the relationship between Clifford Chance and RBS over the past couple of years. Clifford Chance worked on the sale of £80 billion of toxic UK commercial real estate by RBS, which was called Project Isobel internally; it acted on behalf of RBS on the sale of RBS Aviation Capital; it was instructed by RBS to deal with the recent IT outage suffered by RBS and NatWest; and it advised RBS on the LIBOR scandal.

I have no doubt that Clifford Chance feels that it could act impartially on the review, but businesses up and down the country genuinely feel that they have been treated badly by the GRG and RBS and they need to feel confident that the bank is taking their concerns seriously. I would argue that the impression given of a conflict of interests between Clifford Chance and RBS is enough of a reason for RBS to think again and appoint another firm to undertake the review. I welcome the fact that RBS is willing to undertake an internal review, and it has argued that it is creating an independent internal review; but that independence must be beyond reproach. Given the commercial relationship that I have highlighted between Clifford Chance and RBS, it is difficult to make the case that the review will be truly independent and will be able to gain the confidence of the business community. I ask the Minister to convey my concerns on that matter to RBS.

Thank you, Sir Roger, for allowing me to speak for so long on this issue, as I am aware that other Members wish to contribute. My concerns are simple. I believe that the issues highlighted in the Tomlinson report are worthy of consideration, and that it is good that the regulatory authorities are investigating on the basis of the report. But it is also important that Members of this House from all parts of the country highlight their experiences with the global restructuring group. RBS is not, in my view, the only bank to have behaved badly, but RBS and the GRG are the focus of the current report.

[Toby Perkins (Chesterfield) (Lab)]

I am grateful to the hon. Gentleman for giving way just as he is concluding his remarks, which have been very thoughtful. He is right to say that the GRG might not be the only perpetrator of this kind of behaviour, but it is the focus of the report. Does he think that the evidence that he has heard from colleagues and has read in the report is enough to say not just that there might have been bad practice but that, as Tomlinson appears to allege, systematic fraud is being perpetrated by RBS—is that the case that he is making?

[Guto Bebb]

I would be extremely wary of using the word fraud. In my view, there has undoubtedly been systematic bad behaviour and I could speak at some length about West Register, which is part of RBS, and the way in which assets have been taken from businesses by the GRG and West Register—there is a conflict there. However, even with the privilege afforded by being in the House, I would be careful about using the word fraud.

--- Later in debate ---

[Toby Perkins (Chesterfield) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger, as we discuss a subject that is vitally important for small business owners across the country. As someone who was a small business owner before coming into this place, I like nothing more than the opportunity to reflect on what is happening with small businesses and, of course, the vital relationship between small businesses and their banks.

I congratulate the hon. Member for Aberconwy (Guto Bebb) on securing the debate. Everyone in the House will know how much of his parliamentary energy he has dedicated to the cause of small business redress, most notably through his campaigning on the interest rate swaps issue—an issue about which he and the Opposition share many concerns.

This debate and this report go to the heart of several big questions that Government and society need to address. What are banks for? Whom should they serve? What is the role for Government in that relationship? Where does the balance lie for banks in protecting their own interests and those of their customers when a conflict is seen to exist? A key question is not whether there has been any wrongdoing, but whether, as has been alleged in the Tomlinson report, there has been systematic fraud by Britain’s largest bank. We need to be clear that that is what Tomlinson is suggesting in his report. It is an incredibly powerful and potentially huge allegation from someone who sits at the heart of Government as an entrepreneur in residence at the Department for Business, Innovation and Skills.

The report also poses questions about how a responsible Government should balance the need to expose wrongdoing and scrutinise questionable practices, which has come across loud and clear in this debate, with the need for a measured and considered approach to evidence gathering, particularly when the allegations are as serious as those made in the Tomlinson report. The report is clear in its call for a change in the culture of British banking. Indeed, Tomlinson echoes concerns and remedies that the Opposition have already called for.

Mr Tomlinson is a much respected entrepreneur who has won admiration from across the business sector for his own business success as a British manufacturing success story, but he is involved in a long-running and bitter dispute with RBS. Given the way in which his report changed between the original draft that was sent to RBS and its subsequent publication, many people feel disquiet about the independence of the report and the strength of the evidence base that led to a report as hard-hitting and potentially damaging to UK plc as this one.

As my hon. Friend the Member for Streatham (Mr Umunna) has said and few will disagree, there were many things wrong with banking practices and many causes for concern about the way in which the relationship between businesses and the banks has been conducted in recent years and continues to be conducted today. That was why my hon. Friend publicly called for those guilty of LIBOR rigging to face jail, and why Labour has led the way in calling for decisive action on the mis-selling of interest rate swaps. We have been very much with the hon. Member for Aberconwy on that. We have been resolute in calling for speedier action to bring about closure and settlement for companies that were mis-sold products, and concerned at the way in which the Financial Conduct Authority has failed to ensure that the banks complied with timetables that they had promised to adhere to. At this stage, I would like to place on the record my admiration for the work done by Bully-Banks to highlight some of these issues and to ensure that the matter is kept under the glare of public scrutiny. Indeed, as we meet today, banks have paid out less than 3% of the amount that they have set aside for compensating the victims of that scandal.

Those concerns were also why Labour tabled an amendment to what was then the Financial Services Bill that would require Ministers to bring forward proposals to help firms to pursue collective redress against the mis-selling of swaps, which the Government combined on to vote down.

[Sandra Osborne]

Does my hon. Friend agree that tailored business loans, which are currently not included in the review, should be considered as well?

[Toby Perkins]

I think that many important points have been raised during the debate and that is certainly one of them.

We share the disappointment at the continued excesses in bank bonuses and the failure of the Government’s bank bonus levy to yield the returns that it promised. After all, we are having this debate just a day after publication of a survey showing that managing directors at banks in London are expecting a 44% rise in bonuses for 2013.

I turn now to some of the contributions made by hon. Members to the debate. Unsurprisingly, the hon. Member for Aberconwy made a series of significant contributions to the debate that he initiated. It was interesting that he reflected on the fact that Tomlinson had spoken to the all-party group on interest rate swaps. I was surprised to discover that during this process, Tomlinson never spoke to RBS and never gave it an opportunity to put the allegations that he was making in an alternative light.

The hon. Gentleman refused to take the bait that I generously offered him to say that the behaviour highlighted in the Tomlinson report would have verged on the illegal. I think that he understates the case. Tomlinson is fairly unequivocal. He is clearly alleging systematic fraud on the part of Britain’s largest bank—in effect, it is feathering its own nest by bringing down businesses that without the intervention of the bank would have survived and thrived.

[Guto Bebb]

It is fair to say that the allegations in the report are extremely serious. That is why, in my initial remarks, I welcomed the fact that the Government have referred the report to the relevant regulatory authorities—because I think that it is important that those allegations are looked at very carefully. However, the purpose of this debate was to highlight the significant effort in the media to portray Mr Tomlinson as a gentleman with a vendetta against RBS. The opportunity today was to highlight the fact that constituency MPs have seen behaviour by RBS and the GRG that is identical to that highlighted in the report.

[Toby Perkins]

There is no question about it: we have heard a lot of evidence of that sort. I agree, of course. I welcome the fact that the Government have referred the report on, but it is hard to see how they could have done anything else, on the basis of the strength of the report. The way in which the situation has been handled poses questions about judgment in terms of the seriousness of the allegations being made.

The matter will now be looked at by the Financial Conduct Authority. We are talking not about an external report to which the Government have to respond, but about a report written by someone at the heart of Government, which is apparently based on anecdotal evidence and which does not give RBS much of a right of reply. That is why I have questions.

The hon. Member for Aberconwy raised a legitimate question about the impact of the charges levied by banks on businesses that are already struggling with cash flow, and the powerlessness that businesses feel when they enter the restructuring process. In some cases, a business enters the process knowing that it is in trouble and feels as though the process is making the situation worse. I also recognise that Tomlinson highlights, as my hon. Friend the Member for Dumfries and Galloway (Mr Brown) has said, the fact that some businesses did not consider themselves to be in crisis until the moment they entered the process. The report raises many questions and we need to hear the Government’s response. It is important that we continue to put pressure on the banks, and indeed it is hard to see how that pressure will be alleviated.

My hon. Friend the Member for North East Derbyshire (Natascha Engel) highlighted suspect practices by RBS that were experienced by a business in her constituency. She repeated Tomlinson’s claim that systematic fraud was taking place. Interestingly, she asked the Minister to explain why he was certain that such practices were not occurring. Given that the report has come from the heart of Government, I imagine that he must be pretty clear that such fraud existed. I do not want to prejudge his comments, but I would be interested to hear what he has to say on that. My hon. Friend also made a significant point about the imbalance and unfairness of the relationship between banks and firms that are battling to stay afloat and do not have the resources to take on a major bank.

My hon. Friend the Member for Dumfries and Galloway raised an example from Barclays that it made it clear that such practices are not confined to RBS, although the Tomlinson report was entirely about RBS. My hon. Friend focused on businesses being driven into distress. He said that RBS was 80% state controlled. Although RBS is state owned, it has become clear under successive Governments that the bank is not state controlled; it is run in its own way. Perhaps we need to consider the fact that an organisation owned by Government is not always working in the best interest of British businesses and UK plc.

As I have said, we share many of Mr Tomlinson’s concerns and conclusions, and I now turn to the areas on which we agree. The Tomlinson report recognises the fundamental faults of the lack of competition in the British banking system, on which the Opposition wholeheartedly agree. Some 89% of small businesses are locked into the big five banks. The report also speaks of the need to change banking culture so that banks see small businesses as partners rather than merely cash cows, and so that the two can grow locally together. Such a model would not only be good for small businesses but lead to a stronger and more durable overall economy. That is why Labour proposes a new generation of local banks based on the Sparkassen model to add genuine competition on the high street. That would create a major new player that would not operate according to the same lending models as all the other banks, and would boost local decision making.

Although net lending has fallen every year during the crisis, our biggest European competitor, Germany, has seen an increase in lending over the same time. After the crash in 2008, a crisis occurred in bank lending, and far from being improved in the years since, it has continued to constrict. Tomlinson is right to say that we need greater competition. Alongside the new local entrants to the banking market, we are calling for greater bank account portability to ease the path into the market. Even a huge bank such as Santander found it exceptionally difficult and expensive to gain a foothold in the UK market.

We also agree that the culture of selling additional products and services alarmingly supersedes that of best serving customers’ needs, as was demonstrated by the interest rate swap scandal. Britain is currently facing a mutual crisis of confidence in small business lending, and in the relationship between banks and businesses more widely. A survey of members of the Federation of Small Businesses found that more than half of small businesses believe that banks do not care about small businesses, and, similarly, banks fear lending money to businesses. Such mutual distrust is one of the reasons why we have had the slowest recovery for 100 years. The Tomlinson report will, indisputably, further damage the confidence between banks and businesses. The Government have a grave responsibility to ensure that, when such damaging criticisms are made, every possible step has been taken to verify and scrutinise those criticisms before the Government endorse them.

In that context, we have significant reservations about a report that contains such serious allegations of systematic and widespread corporate fraud. There are concerns that, at best, the Tomlinson report will not be seen as being truly impartial. We have reservations about the Government’s endorsement of the report when its evidence base has not been subject to any public or, as far as we are aware, departmental scrutiny. The Secretary of State for Business, Innovation and Skills told the House during recent Business, Innovation and Skills questions that Tomlinson’s

“accusations are echoed in the report published by Sir Andrew Large, who was appointed by RBS.”—[Official Report, 5 December 2013; Vol. 571, c. 1080.]

However, the Tomlinson report states that businesses rarely survive the global restructuring group process, and that they never come out again. Tomlinson highlights the fact that

“a whistleblowing ex-RBS banker confirmed that they could not think of any occasion in which a business entered RBS’ Global Restructuring Group and came back into local management.”

The report by Sir Andrew Large showed that 50% of businesses traded out of the GRG, and that only about 10% became insolvent, so it is difficult to see how the Secretary of State could use the Large report as a justification for the publication of the Tomlinson report.

The Parliamentary Private Secretary to the Secretary of State for Business, Innovation and Skills appeared to be supportive of what the hon. Member for Aberconwy said, so I do not know whether his contribution has the Secretary of State’s implicit support. The hon. Members for Aberconwy and for Wells (Tessa Munt) certainly appeared to be working collaboratively. The allegations in the Tomlinson report are incredibly serious, and they clearly carry the stamp of Government.

If Labour had been in office when the issue came to prominence, we would not have been as quick as the Secretary of State has been to rush out this departmental report, about which there are many questions to answer. I am told that if Tomlinson had chosen to speak to RBS, he could have been referred to companies such as Samsonite, Fairline, Independent Slitters Ltd and many others, which would have told him that the GRG process was positive for them. He chose not to do so, and as a result the report represents serious concerns but does not reflect all points of view in a balanced way.

Had Labour been in office, we would have ensured that the FCA, which is the appropriate body to investigate such grave allegations, was immediately commissioned to conduct a full and proper inquiry before the trust between banks and businesses could be damaged by a sensational report such as the Tomlinson report. I do not suggest that bad practices do not exist or that we have not been pushing the banks to identify where they have failed their business customers, but we consider that the anecdotes in the report provide a pretty tenuous basis for such serious allegations to be made with the stamp of Government approval.

With that in mind, I ask the Minister to address the following questions. Was the Secretary of State aware of Mr Tomlinson’s ongoing dispute with RBS when he was commissioned to produce the report? If so, what assessment did the Secretary of State make of any potential conflict of interest before giving it the departmental stamp of approval? Why did the Secretary of State trumpet the report as independent when it was produced in his Department by someone with a close interest in both the party and the issues under discussion? Why were earlier references to malpractice at Lloyds removed from the final version of the report so that it focused purely on RBS, the bank with which Mr Tomlinson is in dispute, and why was RBS not shown the final report, nor given a chance to submit evidence to it?

The report is sadly lacking in detailed referencing and evidence. Given that the basis of the report seems to be that many of the businesses will have collapsed—presumably, that is on the public record—will the Department be publishing detailed citations for where the allegations have come from? Is the Minister personally satisfied that due diligence was carried out by his Department before it promoted the report? Does he agree that if the report’s claim that RBS was systematically involved in deliberately distressing businesses that would, without its intervention, have thrived, that would be a matter of corporate fraud on a huge scale, and such an allegation should be thoroughly investigated before being produced in a Government-backed report? Does he think that the appropriate level of scrutiny was given to the report prior to publication?

Finally, as we head towards a general election, I suspect we will hear from Ministers why they think the way in which the Secretary of State operated was not the way things would have been done under a Conservative Government. If we had a purely Conservative Government, would they have handled the report in the same way? If not, in what way would it have been different?

[The Financial Secretary to the Treasury (Sajid Javid)]

I will start by welcoming you to the Chair, Sir Roger, and congratulating my hon. Friend the Member for Aberconwy (Guto Bebb) on securing this important debate. I will try to address the concerns raised, and I thank all hon. Members for their contributions in this debate.

SMEs are a vital part of the UK economy; they contribute significantly to economic growth. Access to finance is important for funding investment, ensuring businesses reach their full potential, and for facilitating new business start-ups. As hon. Members who have contributed to today’s debate have made clear, it is essential that our banking system works in the interests of SMEs and treats them fairly.

I will turn specifically to the report. Lawrence Tomlinson is one of BIS’s two entrepreneurs in residence. His appointment was made by BIS officials, not by Ministers, following an open competition for which there were more than 200 applicants. Mr Tomlinson is independent of BIS, but, as an entrepreneur in residence, he has the scope to explore and raise matters that he regards as important to SMEs. His report was prepared in that context, so it was not commissioned by the Department or by Ministers. It was a personal report by Mr Tomlinson; it is not a Government report.

I will deal with the questions asked by the hon. Member for Chesterfield (Toby Perkins), which were all in the same vein. He referred to the report coming from the heart of Government, so it is worth restating that this is a personal report by Mr Tomlinson. It is not a Government report, so Mr Tomlinson was free to publish whatever he saw fit. No Ministers or officials were involved. What was eventually published by Mr Tomlinson was entirely his own choice. It was also his own choice whether to involve the banks that he refers to in the report and what resources he wanted to use.

[Toby Perkins]

The hon. Member for Aberconwy referred a few moments ago to the smell test. I do not know whether the Minister is attempting to distance himself from the report, but anyone applying the smell test would say that an entrepreneur in residence at the heart of BIS was the person selected by BIS officials to do a report that was promoted and welcomed by the Secretary of State for Business, Innovation and Skills. It does not feel independent.

[Sajid Javid]

I disagree with the hon. Gentleman. The value of the report is that it is entirely independent. It was done by Mr Tomlinson in a personal capacity. He was free to look at any of the issues that he saw as important to the SME sector. I will look at the important issues he has raised, but at this stage I want to make it clear that it was a personal report by Mr Tomlinson and not a Government report. Once that is taken into account, the answers to the questions that the hon. Gentleman asked become clear.

The allegations made in Mr Tomlinson’s report are deeply concerning, and they have raised questions as to whether banks—particularly RBS—are treating their customers appropriately. We expect all banks to act with integrity across all the business activities that they engage in. Separately, as we have heard, the new management of RBS also commissioned Sir Andrew Large to conduct an independent review to examine RBS’s support to SMEs and the decisions that they make on SME lending. Following that review, a report was published on 25 November, and RBS has committed to implement its recommendations in full.

The reports, which were not Government reports, contained some very serious allegations, as we have heard from various hon. Members, particularly from my hon. Friend the Member for Aberconwy. It is now the responsibility of the Financial Conduct Authority to undertake investigations into allegations surrounding RBS’s lending practices and treatment of small businesses.

The FCA has now considered both reports. It has notified RBS that an independent skilled person will be appointed in accordance with the FCA power under section 166 of the Financial Services and Markets Act 2000 to review the allegations made against RBS.

--- Later in debate ---

[Sajid Javid]

My understanding is that the FCA’s investigation through the skilled person will examine all allegations in the report and some similar allegations in Sir Andrew Large’s report.

I also mention, as my hon. Friend did, the Clifford Chance report commissioned by RBS and described by RBS as independent. I note my hon. Friend’s concerns about Clifford Chance; I listened carefully to what he said. Although it is for RBS to decide whom to appoint, I will ensure that his concerns are conveyed to RBS.

The hon. Member for Dumfries and Galloway (Mr Brown) discussed the future direction of RBS. He and others will be aware that on 1 November this year, the new management of RBS set out a new direction for the bank, which will lead RBS to boost the British economy rather than burden it. It will also enable RBS to focus on its core British business of supporting British families and companies. Ross McEwan, RBS’s new chief executive, has committed to improving RBS’s lending performance across the UK and announced the ambitious goal of becoming the No. 1 bank for small businesses and enterprises throughout the UK, as measured by a newly created independent survey to be run by the Federation of Small Businesses and the British Chambers of Commerce.

The Tomlinson report also recommended that state-owned banks be split into small banks focusing solely on retail and commercial lending as a means of improving competition in the banking sector. The Government are already committed to greater competition and diversity in the UK banking sector both locally and nationally, which is why we asked the Independent Commission on Banking to investigate competition issues in the UK banking sector as part of its work.

The ICB uncovered a number of issues, and we are taking forward its recommendations in the Banking Reform Bill and through other legislation. We are removing the competitive advantage that big banks get from the “too big to fail” system by introducing ring-fencing in the Bill. We have also secured a new seven-day switching service delivered by industry that will allow both consumers and SMEs to switch businesses accounts far more easily, and we have introduced a strong competition objective for the regulator, the FCA, to help it promote competition much more effectively.

The new regulators have already introduced big changes on the regulatory side to make it easier for new banks to enter the market, grow and compete with the large incumbent banks. We are also taking further action in the Banking Reform Bill by creating a new payments regulator to ensure that new and smaller banks have fair and transparent access to the payment system, and giving the Prudential Regulation Authority a secondary competition objective to strengthen its role in ensuring competitive banking markets. The Bill will also give the FCA further competition powers.

Hon. Members mentioned the future of Lloyds and RBS. At the national level, both RBS and Lloyds are in the process of divesting part of their UK banking businesses, creating new challenger banks. The Government have taken the first steps to return Lloyds to the private sector and are actively considering options for further share sales. The reintroduction of the TSB brand on the high street is great news for competition. That action is further evidence of the Government’s stated aim not to be a permanent investor in the UK banking sector.

The Government do not believe that there is a strong case for breaking up the core operations of any bank in which we have a stake. The cost of reorganisation would be attributable to the banks, and consequently to the taxpayer. The time required to execute such a reorganisation would also be lengthy, further delaying the Government’s ability to return the banks to private ownership.

Before I conclude, I turn to a couple of the other issues raised by hon. Members. My hon. Friend had concerns about insolvency, relating not just to the Tomlinson report but to the process more generally. His comments show how much he has researched the subject, so I take what he said seriously. He will know that the Department for Business, Innovation and Skills is the lead on insolvency issues, but I will ensure that my colleagues in BIS are aware of his concerns. Perhaps, if he finds it useful, I could arrange a meeting for him with the relevant Minister to discuss this important issue.

My hon. Friend will know, however, that insolvency procedures can be commenced only by a court order, and that the whole process is subject to supervision by courts. It is deliberately designed to ensure transparency, make the process legitimate and provide a forum for any disputes, as they often occur throughout such a fought process. I will take the issue forward for him and see whether more can be done to listen to his concerns.

[Toby Perkins]

I suspect that the extent to which the Minister has attempted to distance himself and the Government from the report speaks volumes. Does he believe that how BIS and the Business Secretary have handled the Tomlinson report and its impact on RBS’s performance is ultimately helpful to this Government’s future success, or does he think that it should have been handled differently?

[Sajid Javid]

I say again for the record—I hope that I have made it clear to the hon. Gentleman—that this is a personal report by the entrepreneur in residence at BIS. That has always been the Government’s position, and neither BIS Ministers, Treasury Ministers or any other Ministers have ever said anything different. Nevertheless, it is an important report. He will know that the entrepreneurs in residence initiative was started by this coalition Government in order to allow further analysis of what can be done to help the SME sector.

In that vein, we welcome the Tomlinson report, which is why we take its allegations seriously and why we are pleased that the FCA has acted quickly so far to consider them. This debate has shown how much parliamentary interest there is in the issue on behalf of our constituents, due to the number of small businesses in our constituencies that have come to us with similar concerns.

Autumn Statement

Toby Perkins Excerpts

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

My hon. Friend and neighbour has been a champion of small businesses. I am delighted that the change that we have brought about today with a £1,000 discount for shops and high streets will mean that in Congleton, Holmes Chapel and Middlewich, the people whom she represents will get a better deal.

[Toby Perkins (Chesterfield) (Lab)]

The self-congratulatory tone of the Chancellor and Government Members would be slightly less nauseating if it was not for the fact that people in Chesterfield are £1,600 a year worse off despite the fact that they are in work. As he reads out the fall in unemployment numbers, he will know that a huge number of those in jobs are under-employed. It used to be that going from unemployment to work made people better off. Does it not sicken him as much as it sickens me that on his watch people come to my constituency surgeries saying, “I am now in work and I am no better off than I was when I was on the dole”?

[Mr Osborne]

First, we are making work pay, through the changes to the welfare system, so that people are better off in work than out of work. This is the last Labour question and perhaps this is what the Opposition stand for: they would rather have people on welfare—[Interruption.] They would rather have an economic plan that was destroying jobs and putting taxes on business up than a plan which in his constituency has delivered a 21% fall in unemployment and a 14% fall in youth unemployment. He should get up and support the plan that is delivering that for his constituents.

Cost of Living

Toby Perkins Excerpts

Wednesday 27th November 2013 Commons Chamber

[Chris Leslie]

Thank you, Mr Deputy Speaker.

[Toby Perkins (Chesterfield) (Lab)]

My hon. Friend is being incredibly generous in taking interventions. May I encourage him to continue taking them, because every time he does so he utterly destroys the weak arguments made by Government Members? Does my hon. Friend recognise, like the 5,000 people who signed the “freeze that bill” petition in Chesterfield, that the Conservative party has nothing to say on energy prices because it is utterly beholden to the very energy companies that are impoverishing my constituents?

[Chris Leslie]

My hon. Friend is correct. The Government are afraid of the energy companies. We are not yet sure why they are so afraid to stand up to the big six, but it is clear that the Chancellor’s solution of simply shifting £100 or so off an energy bill and on to the taxes of all our constituents will not convince people that they have the answers. The switch is so obvious it can be seen in the dark. It is a palliative that merely shunts the costs from a bill payer to a taxpayer. It fails to tackle the root cause of the problem, which, as my hon. Friend has said, is the excessive profiteering of the utility companies. Government Members are going to have to try a lot better than that next week.

--- Later in debate ---

[Sajid Javid]

I will comment on that because it reflects the hard work of the people of Burnley and their local MP. Why are people facing challenges up and down the country? The reason is simple and can be summed up in just three words: the Labour party.

[Toby Perkins]

The Minister asks why people are suffering a cost of living crisis, and he referred previously to Labour’s recession. Labour’s recession was over by the time he became a Member of Parliament, and it was a recession caused by the bankers. Will he remind the House what he was doing when Labour’s recession finished?

[Sajid Javid]

What I can do is remind the hon. Gentleman what was going on in his constituency during Labour’s recession. During Labour’s last term, unemployment in his constituency increased by 56%. So far, under this Government it has declined by 26%, which I think he would welcome.

Oral Answers to Questions

Toby Perkins Excerpts

Tuesday 5th November 2013 Commons Chamber

[Mr Osborne]

I completely agree with my hon. Friend that unless we have a credibly economic plan to grow the economy, deal with public finances and support business rather than tax it, we will get the reaction the shadow Chancellor got from the CBI, whose members said that the hairs on the backs of their necks stood up as they listened to all the terrible things that a Labour Government would do to them. The truth is that we are fixing the economic mess the shadow Chancellor left behind, and that is the best way to improve people’s living standards.

[Toby Perkins (Chesterfield) (Lab)]

T2. The Chancellor was warned that his cuts would choke off the growth that had returned to the UK economy when he took the job in 2010. Of course we welcome the fact that Britain is finally returning to growth, but does he not realise that if he had taken the advice of my right hon. Friend the Member for Morley and Outwood (Ed Balls) earlier, we would not have had three wasted years, the average working person would not be £1,500 worse off, and the talents and potential of 1 million young people would not have been laid to waste?

[Mr Osborne]

I remind the hon. Gentleman that the shadow Chancellor said that our economic policies would choke off the recovery in the spring of this year—the very moment when the recovery was under way. When will a Labour MP welcome the fact that our GDP has grown by 0.8% and unemployment is coming down? When will Labour acknowledge that it is our economic plan that is delivering that?

Spending Review

Toby Perkins Excerpts

Wednesday 26th June 2013 Commons Chamber

[Mr Osborne]

I can give my hon. Friend the absolutely clear commitment that we will bring forward the proposals to recognise marriage in the tax system—the proposals we set out in our manifesto that are provided for in the coalition agreement—in due course.

[Toby Perkins (Chesterfield) (Lab)]

The Chancellor has told us today that he is going to bring forward infrastructure spending, but of course we have heard it all before. We reflect on a record of complete failure on infrastructure spending, whereby the money he announces does not actually get delivered. Why should we have any more confidence that what we have heard today will be any more successful than what he has brought to us previously from that Dispatch Box?

[Mr Osborne]

Because the road schemes that we committed to at this Dispatch Box got their planning permission, or are getting it, and the construction is starting. Some of those road schemes have been completed. The same is true with the schools and all the other pieces of infrastructure. One of our big problems was the complete absence when we came into office of a bunch of plans that were ready to go and had planning permission. We have had to do all that. I am all for speeding up Whitehall and the planning process, but I seem to remember that the Labour party voted against the planning reforms. So when we try to make those changes, which the former Chancellor was good enough to acknowledge are needed because of all the problems that previous Governments have had, actually he has opposed them.

Banking Reform

Toby Perkins Excerpts

Monday 4th February 2013 Commons Chamber

[Greg Clark]

We agree with my hon. Friend, and that will form part of the Bill.

[Toby Perkins (Chesterfield) (Lab)]

The Minister is absolutely right to say that the reputation of our banks has never been lower. We hope that we will start to see the important changes we need. One reason for that reputation is the experience that many small businesses had with interest rate swap agreements. While many welcome the FSA announcement on that, there are still some concerns about whether people will really consider that they have had justice at the end of the process. Will the Minister confirm what representations he has made to the FSA about what it should find during the deliberations, and will he give us any assurances that the interest rate swap problems we have had in the past will not reappear in future?

[Greg Clark]

The hon. Gentleman raises a very important point. I met the Federation of Small Businesses and the Bully-Banks organisation and I conveyed their concerns to the FSA, which the hon. Gentleman knows is set up to be the independent regulator. I think most people were relieved that the FSA proposals of last week will result in compensation for the affected businesses within a rapid time frame. What happened is totally unacceptable, and is another feature of the scandalous decline in reputation that the banks have suffered. Small businesses in particular have a right to regard their bank manager as someone who acts in their interests, rather than someone who flogs them dodgy products that they do not need in the first place. That is a breach of trust in banking. I am absolutely insistent that the FSA should conclude this process, giving full recompense to those who have been mis-sold products.

Autumn Statement

Toby Perkins Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

In my statement, I had to choose just a couple of hon. Members who have brought that issue to my attention, but I should put it on record that my hon. Friend was one of those who came to see me to campaign for action on empty property rate relief to mitigate the damage that it has done to some of our cities and towns since its introduction by the previous Labour Government. The 18-month grace period will help the construction of new commercial premises, and I congratulate him on the work he has done on behalf of his constituents to bring that about.

[Toby Perkins (Chesterfield) (Lab)]

The Chancellor has taken on a ghastly, ghostly, deathly pallor that suggests he knows that he has been rumbled. The money from the 4G mobile auction has not come in yet. When it comes in, he can spend it on whatever he likes, but he cannot offset it against borrowing before it has come in. Why does he not come clean and admit that borrowing has gone up and the rest of it is just a con?

Oral Answers to Questions

Toby Perkins Excerpts

Tuesday 6th March 2012 Commons Chamber

[Mr Osborne]

The personal allowance is increasing from April. We inherited a personal allowance that was £6,475. It is going to be £8,105 in April. That will take 1.1 million people out of tax and deliver a tax cut to 23 million or so basic rate taxpayers. I say to my hon. Friend, to my colleagues in the Conservative party and to my colleagues in the Liberal Democrat party that this is a coalition policy. It was part of the coalition agreement. It was in the Liberal Democrat manifesto, but I am also proud that it is a Conservative Chancellor who is implementing it.

[Toby Perkins (Chesterfield) (Lab)]

T4. If the Chancellor had cut less than the Darling plan and at the same time was borrowing less, we would be calling him a genius. What word would he use to describe somebody who has achieved the opposite?

[Mr Osborne]

I did not really understand what the hon. Gentleman was saying. He seemed to suggest that we should be cutting less than the Darling plan, so the Opposition are now abandoning even the deficit reduction plan that they claimed to have when they were last in government. It just shows how all over the place they are.

Living Standards

Toby Perkins Excerpts

Monday 5th March 2012 Commons Chamber

[Rachel Reeves]

My hon. Friend is right when she sticks up for the people of Stoke, who, like many of our constituents, will be hard hit by the changes, which do nothing to encourage people to go back to work, and instead encourage people to stay on the dole, because they will be better off on benefits than in work.

[Toby Perkins (Chesterfield) (Lab)]

I hope I can add some weight to what my hon. Friend is saying. I was contacted by a local small business owner in my constituency—Keith Bannister, who runs Harley’s pub, which people in Staveley will all be aware of. He told me that three women on his payroll are threatened with the loss of their tax credits. They have told him that they will have to give up work if that happens, but he knows that if he increases the hours of two of them, he will have to lay off the third. It just does not make sense, does it?

[Rachel Reeves]

It would be better if he was advising the Treasury, rather than the people who are currently doing it, because that is absolutely right, and it gets to the heart of the problem.

Indeed, that seems symptomatic of a wider problem with this Government: rushing out announcements to generate headlines before the costs have been counted; dreaming up the next big idea, when they should be focusing on the impact of their policies in the real world. We heard over the weekend that the Prime Minister had lost his blue-skies thinker. However, it might not be such a bad thing, because in tough times such as these, our constituents need a Government with their feet on the ground, not with their head in the clouds. I hope that this debate gives the Government a much needed reality check, because it is not too late to change course and protect hard-pressed families from further hardship and strain, inflicted on them by this Government.

It is the job of this House to ensure that our constituents’ voices are heard and their struggles taken into account, and that the impact of Government policies on their lives is fully understood. Labour Members hear every day from our constituents, and from the people we talk to around the country, about how hard it is to make enough money to pay the bills, find work or keep businesses afloat. It is not too late for the Chancellor to correct the mistakes that he is making with child benefit and working tax credits. I urge the Government to commit now to an urgent review of the child benefit changes and to use the money from a crackdown on stamp duty avoidance to cancel the damaging cut to working tax credits.

There is still time to listen to the families who will be hit by the restrictions on working tax credits, 78% of whom said in a survey for USDAW—the Union of Shop, Distributive and Allied Workers—that they would be unable to find the additional hours needed to keep their tax credits. There is still time to listen to the many families hit by the change who cannot work extra hours because they have disabled children or other caring responsibilities. The Government have refused to exempt those families where one parent is a full-time carer. There is still time to listen to the Child Poverty Action Group, which warns that the change will

“cause a surge in child poverty of hundreds of thousands”.

There is still time to listen to the children’s charities and organisations speaking up for hard-pressed families—including Barnardo’s, Carers UK, Citizens Advice, the National Children’s Bureau and Working Families—which today wrote to the Prime Minister urging him to think again. There is still time to listen to one woman—Mary, from Belfast—who said:

“I can’t get my employer to give me the extra hours I need to qualify. There are people in my work who have had to take redundancy or cut their hours from 36…to 12 hours a week…Where does he think we are going to pluck the extra hours from? It’s a joke.”

Frankly, Mary is right.

On child benefit, there is still time to listen to the Institute for Fiscal Studies, which says that the Government’s proposals will

“create a bizarre and economically damaging set of incentives”.

There is still time to listen to the hon. Member for Christchurch (Mr Chope), who said that the Government’s plans would lead to

“a lot of unfairness and injustice”.

He is right. There is also still time to listen to the hon. Member for Peterborough (Mr Jackson), who said that the Government’s policy was “barmy, tokenistic and unfair”. He, too, is right. I look forward to both of them, and others on the Government Benches, joining us in the Lobby this evening to tell the Government what they think of their policies.

All day, we have been getting smoke signals and spin from the Government. The Deputy Prime Minister says that they are thinking again, yet the Secretary of State for Justice says that they are not. Who is right? I look forward to getting an answer on what the Government’s policy on tax credits and child benefit actually is. It is a shame that no member of the Cabinet is in the Chamber tonight to give that answer and to talk about Government policy.

With 16 days to go until the Budget, the families that are about to be hit by the changes need certainty and commitments. The motion gives Members on both sides of the House an opportunity to dispel any doubts about the seriousness of our commitment to families and to fairness, and to show that we have listened to our constituents and our consciences. We have an opportunity this evening to stand up for fairness in tough times and to vote to protect family incomes by supporting the motion.

--- Later in debate ---

[Glenda Jackson (Hampstead and Kilburn) (Lab)]

rose—

[Toby Perkins]

rose—

[Mr Gauke]

I want to make a bit more progress.

That is also why we increased the child tax credit by £135, in line with inflation, which means that, by this April, it will have increased by £390 since May 2010. It is telling that the Opposition motion makes no mention of this Government’s plans to increase the personal allowance, no doubt because their last contribution to the debate on income tax for the low paid was the 10p debacle.

--- Later in debate ---

[Mr Gauke]

Thank you, Madam Deputy Speaker.

Increasing the working hour requirements for a couple is entirely fair. It is absolutely right that a couple with children should put in more hours than a lone parent before receiving working tax credits. This also creates a clear work incentive signal to potential second earners who could benefit from working tax credits if they moved into work or increased their hours.

[Toby Perkins]

The Minister referred to universal credit. Is not one of the most foolish parts of this policy the fact that it will be out of date within 18 months or so in any case? This will potentially mean a lot of people deciding to get out of work, but it will be superseded by the policy on universal credit. Why not just wait until universal credit comes in?

[Mr Gauke]

I come back to the point I made previously. With the difficult financial situation we inherited, we needed to take steps, and one of them was to increase the threshold for a couple from 16 to 24 hours. That seems perfectly reasonable and fair in the context of a 16-hour requirement for lone parents.

--- Later in debate ---

[Stephen Williams (Bristol West) (LD)]

We have debated many Opposition motions on the economy and public finances in the past 20 months, and this one is little different from the many others that I have discussed—I have spoken in all these debates. We are asked to focus on the needs of hard-pressed families—we are hardly likely to disagree with that—and on pensioners, but the whole tenor of this motion, like all the others that have gone before it, is that the coalition Government should do more for some people and should reverse the planned changes that they have set in train. So despite the U-turns that the shadow Chancellor and the Leader of the Opposition have made in recent weeks on the need to cut the deficit, we are exactly where we have been before on all other Opposition days. We are back with uncosted proposals somehow to make us all believe that tackling the deficit can be a painless and, indeed, invisible process of fiscal rebalancing. It is as if public finances can be restored to health by magic, with no tax rises and no expenditure cuts—it simply is not credible.

[Toby Perkins]

The hon. Gentleman mentions the importance of tackling the deficit, but he will recognise that by 2013 this policy will be out of date because of the incoming universal credit. What is the point of putting 200,000 people through tremendous pain for the sake of 18 months? When the Government review their books in 2015 that figure will have entirely disappeared, so why not wait until the universal credit has come in and sort the system out at that point?

[Stephen Williams]

I thank the hon. Gentleman for his intervention and I think he made the same point to the Minister. The coalition Government have a five-year programme of reform, which includes cutting the deficit as well as long-lasting reform of our entire welfare state, which has evolved over a long period of time. Many of the reforms, whether they are on the universal credit, pensions or other parts of the welfare state, are designed to last for a generation whereas the deficit reduction measures are, of course, short-term measures, painful as they might sometimes be. I acknowledge that for many households and some families what this Government are having to do—not because we choose to do it, but because we have to do it—causes discomfort.

What matters most to all households is putting our public finances and our economy back on track. That gives our country fiscal credibility and allows our Government, businesses and households to borrow and invest at affordable rates.

--- Later in debate ---

[Toby Perkins (Chesterfield) (Lab)]

This debate is an example of how the Government’s thirst for cuts—any cuts—has blinded them to the basic foolishness of the policies that they are pursuing. Even when their cuts are demonstrably ineffective, counter-productive and unfair, they plough ahead with them because they cannot countenance any alternative. The hon. Member for Bedford (Richard Fuller) has just said that it would be unfair to pass on the deficit to future generations, but the Government are, by their own admission, borrowing £158 billion more because of their failure to get growth into our economy. The question is not whether we have a deficit; it is about the best way to pay it off.

Anyone who understands anything about this Government will recognise that deficit reduction is their primary priority. However, their proposed changes to working tax credit will not move them one penny piece closer to that objective. There are 335 Chesterfield families, and 635 children, who will lose up to £4,000. There are 1,305 people in my constituency alone—working families who are trying to play by the rules and do their bit—who are having the rug pulled out from under their feet. Yet this policy, which will have a huge impact on working families across Britain, will be defunct by 2013, when universal credit comes in. It will therefore not move the Government any nearer to their target of eradicating the deficit by 2016, or 2017—whatever the moving goalpost.

More working people will be forced to give up work and to rely on benefit, which is the polar opposite of what the Minister wants to achieve. These changes will lead to parents being £728 a year better off out of work than staying in work without the tax credits. Why would a Government who support marriage and the family introduce harsh fiscal measures that are likely to put more pressure on those families who stay together? The Union of Shop, Distributive and Allied Workers has stated that 78% of its 410,000 members working in retail cannot get extra hours at work.

The Government’s policy of cutting child benefit for higher rate taxpayers is entirely chaotic, as has been exposed by several Members. If two members of the same family earn £42,000 each, that family will keep its child benefit, but a single parent on £43,000 will lose theirs. About 170,000 families could increase their net income if an individual in the family managed to lower their pre-tax income to just below the higher rate tax threshold. The policy creates a perverse disincentive to success, and it is wholly anti-aspirational. It is unbelievable that a Conservative Government should introduce such a policy.

In the few moments that I have left, I should also like to make the case for the principle of universality in the system. Beveridge’s principle for the welfare state was that it should be a contributory system. Of course, some will receive more than others, based on their need. That is absolutely right, but the idea that we are all entitled to basic support such as child benefit, the state pension and the winter fuel allowance is a good one. At a time of ever-increasing resentment from those who pay taxes towards those who get benefits, stoked up by the Government and some of their friends in the right-wing media, we should all be fighting hard to protect the universal principle.

The Chancellor recognises that people on £43,000 a year earn more than the average, and he therefore thinks that people will perceive them to be loaded. Let me tell him that someone on that income with three children and living in a four-bedroom house is not loaded. They have to watch what they spend. They worry about the cost of fuel and about their energy bills. They see prices going up while their income stagnates. The Chancellor is making a huge mistake if he does not recognise that. We are debating the policies of a Government who have failed to get growth back into the economy and who are bringing forward illogical proposals that will make the situation worse.