House of Commons
Tuesday 11 January 2011
The House met at half-past Two o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Drugs Act 2005
We have not recently discussed this specific point, but both the Government’s sentencing and rehabilitation Green Paper and their drug strategy include commitments to encourage drug-misusing offenders into recovery-based treatment.
It may be more sensible in many cases. That is why we said in the Green Paper that we published before Christmas that we would test options for intensive community-based treatment—both residential and non-residential—and couple that with more rigorous community orders. It is important to have a punitive element for offending as well. The goal should be to ensure that offenders get off drugs, but too often that is not the case.
Does my right hon. Friend agree that the new drug strategy represents a significant shift from the present treatment system, which is characterised by repetitive assessments and conflicting funding streams, to one of payment by results—those results being the number not of boxes ticked but of addicts in recovery beyond the prison gates?
I strongly agree: we do have a problem at the moment. A recent study showed that nearly a fifth of offenders in prison who had ever tried heroin had tried it for the first time in prison. In some cases, offenders get on to drugs, and we also have a problem with treatments, with drug rehabilitation requirements that are not completed. We have to get more rigour into drug treatment. That is why the payment-by-results model that we will pilot to get offenders off drugs, for both community orders and post-release treatment, is such an attractive way forward.
Long-term Custodial Sentences
The Criminal Justice Act 1991 defines a long-term prisoner as
“a person serving a sentence of imprisonment for a term of four years or more”.
There are still some prisoners serving sentences under the 1991 Act, but the term has not been in use since 2003.
I thank my right hon. and learned Friend for that answer. I am sure he is aware that another Department is relying on the definition he provides. A lot of my constituents will be concerned that some serious offences are not attracting the term of four years that he refers to. For example, a rape recently carried a sentence of three and a half years and an armed robbery in which the offender brandished a knife carried a sentence of under four years. If we want to be serious about crime, we have to be serious about sentencing.
Nobody draws an arbitrary line. However, I quite agree that serious offences do not always attract four years’ imprisonment. I suspect that my hon. Friend’s reference to another Department concerns the Deputy Prime Minister and a prisoner’s right to vote, which I believe is the subject of the next question. The four-year divide is used for some purposes in the Prison Service: people with more than four years are regarded as unsuitable for home detention curfew before release. The approach to prisoners’ voting rights is an attempt to find a rational threshold above which it makes sense to draw the line. No doubt we will return to that issue—perhaps in a few moments.
We have taken legal advice on what is necessary. [Interruption.] No doubt the previous Government did so when they consulted and suggested a four-year margin themselves. [Interruption.] They did. They consulted twice on prisoners’ voting rights but were unable to come to any conclusion. No doubt they were desperately panting for the election date in the hope of getting over the line and leaving it to us. They contemplated the four-year figure and we have to draw a line rationally to comply with the legal obligations that the previous Government neither doubted nor cast doubt on.
Prisoners (Voting Arrangements)
Prisoners given the right to vote under the Government’s proposals will vote by post or proxy in the constituency of their normal residence. That is the basis on which prisoners on remand and prisoners convicted but unsentenced already vote under existing long-established procedures.
If, as the Government propose, prisoners serving less than four years are given the vote, the vote will be given to 6,000 violent offenders, 2,000 sex offenders, 6,500 robbers and burglars, and 4,500 drug offenders, which any sensible person, including the Prime Minister, I think, would find wholly offensive and unacceptable. Does the Secretary of State agree that it should not be the European convention on human rights that decides matters but Parliament, and will he listen not to the lawyers but to other European countries such as Belgium, where the vote is given to prisoners serving up to four months? Let us make it four months—even better, four days; even better than that, four minutes.
I do not think that anyone in government, including my right hon. Friend the Deputy Prime Minister, is under any illusion about the popularity of the proposal to be introduced. We are under legal obligations which no one is suggesting we should repudiate. As I often had to explain when I practised law to dissatisfied litigants who had just lost a case that they would have preferred to win, one can get into more trouble if one seeks to define it. If my hon. Friend wishes really to enrage his constituents and mine, he runs the risk of taking a decision that will result in thousands of prisoners being given compensation for their lost rights and in tens of millions of pounds of expenditure incurred by the taxpayer. We are in government, I am afraid, as I often find myself saying to our Liberal Democrat colleagues, and we have to act responsibly, whatever our inner feelings about the wisdom of the judgment that has been reached in the Court whose jurisdiction we still accept.
At the moment, without anybody making any fuss at all, people on remand have been casting postal votes from prison, and have probably been doing so, as far as I am aware, throughout my political career. That is also the case for people who have been convicted but have not been sentenced, including individuals convicted of serious offences. Not many of them bother to do so, and I am not aware that they have ever made a significant difference to the result in a single constituency, but the fact is that we have to address the consequences of this judgment. We propose that, even for those people with a sentence of less than four years, there should be judicial discretion to remove the right to vote as part of the punishment in appropriate circumstances.
All of this can be debated when it comes up, but I urge Members on both sides of the House not to go too far beyond expressing understandable annoyance, and not to begin to commit themselves to a course that would cost the taxpayer tens of millions of pounds, to no particular effect.
I accept the difficulty that the Secretary of State faces, bearing in mind the will of the public and the will of Parliament expressed on both sides of the Chamber. However, what analysis has he made of the situation in Belgium, where a prisoner serving more than four months forgoes the right to vote?
One by one, various countries have been challenged on that front, and one by one the more restrictive measures are falling. Some have no restrictions at all, and just allow prisoners to vote. It was necessary for the Government and my right hon. Friend the Deputy Prime Minister to take the best legal advice on what could protect us against the risk of future claims and judgments, draw a line under that and comply with legal objections. That is the basis on which we arrived at four years, and as I have just explained, there is some logic in putting a four-year threshold in, as we can refer back to the old definition of long-term imprisonment to explain rationally why we have chosen that threshold.
It is worth reminding the House that details of plans to allow people serving sentences of up to four years to have the vote was given via press release on the last Friday before we broke up for Christmas. May I ask the Secretary of State what role Ministers in his Department played in the Deputy Prime Minister’s plans, and can we take it that he, his Ministers and all the Law Officers agree with the Deputy Prime Minister that four years is the appropriate threshold?
I was obviously involved in the collective discussions, as were colleagues, and we took the best legal advice. I remind the right hon. Gentleman that the previous Government accepted the legal obligation. The Government in which he recently served undertook two consultations, and they canvassed four years as a possibility. [Interruption.] With great respect, they did canvass four years, and they also accepted that prisoners should vote in all elections, including local government elections and referendums. We have drawn back from that. We are proposing that they should vote only in parliamentary and European elections.
Legal Aid Expenditure
I have had discussions with a number of ministerial colleagues. Those discussions have covered a range of matters affecting our respective Departments, including the potential impact that our proposals to reform legal aid could have on those colleagues’ Departments.
I thank the Minister for his reply, but may I push him a bit further on the longer-term costs to the public purse of withdrawing legal aid for all education matters? Obviously, that includes school exclusions. Given that the link between exclusions and offending is well documented, is it not a false economy to cut legal aid for that type of case?
The way in which the impact will take shape in each Department—the hon. Lady mentioned education—is complicated because it involves determining whether our proposals will lead to behavioural change. We intend that that should be the case and that alternatives to court and taxpayer-funded remedies should be used to resolve disputes when at all possible.
The White Paper suggests retaining legal aid only for cases in which homes are at risk, but all housing cases carry the risk of homelessness if an early intervention is not made. A representative from a legal practice that currently gives advice to 350 people a year in the Scunthorpe area told me yesterday that most clients are referred to it by the citizens advice bureaux and the wider voluntary sector.
Right now, those agencies do not have the capacity to give appropriate support, and given that funding is being withdrawn by the state and local authorities, the system itself is in imminent threat of collapse. Does the Minister agree that if the proposals go ahead without significant additional money being invested in the voluntary sector, necessary early intervention will not take place, leading to higher levels of homelessness at a significantly higher cost—
As the hon. Gentleman intimated, the housing budget for legal aid will have savings. However, he failed to mention that it will go down from some £50 million of spending to £38 million of spending; this area of spend is not going to disappear. If an individual or family are subjected to having their home repossessed or if there is any chance of their losing their homes, legal aid will remain available.
Are Ministers not going to have to take steps to convince people that they will not be put at a disadvantage by appearing before tribunals without legal representation? Is the Minister going to take steps to ensure that voluntary organisations can provide people with the support that they would need to appear in person at tribunals?
My right hon. Friend makes an important point. This issue is wider than purely legal aid; it is also about how we give what is often non-legal advice. To a great extent, that is provided by the not-for-profit sector. I have had some half a dozen meetings in recent weeks with the not-for-profit sector. We also accept that there is a co-ordinating role across Government to ensure that we minimise any gaps.
May I urge my hon. Friend, in doing this review, to look at the spending of legal aid money on private investigators? There was a case in my constituency in which the Legal Aid Board funded a quite dangerous criminal, well known to the police, in the search for his badly battered wife and small children; it then went on to fund his case without making any effort at all to see whether his claim to be penniless was true. He went on to harass that low-income family; the woman had remarried. I urge the Minister to look into that kind of case.
In answer to a recent question, the Minister stated that appeals against decisions on incapacity benefit were 65% more likely to succeed if the appellant were represented. If we apply that to all areas of social welfare law where he is proposing to cut legal aid, that would mean at least 40,000 people each year losing appeals that they would win today solely because of the lack of representation. In the light of that and of the answer that he has just given to the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith), will he withdraw his earlier claim that individuals will be able to prepare their appeals without formal legal assistance, and reconsider these draconian cuts, which will hit the poorest hardest?
In most cases, individuals will be able to appeal to the first-tier social security and child support tribunal without formal legal assistance. Legal aid is not currently available for legal representation as the appellant is required only to provide reasons for disagreeing with the decision in plain language. For those who need assistance on welfare benefits matters, which I think was the point the hon. Gentleman went on to make, advice and assistance is available from, for example, Jobcentre Plus, the benefits inquiry line and the tribunal itself.
Shoplifting (Repeat Offending)
In 2008, the rate of reconviction within one year for adults convicted of offences related to shoplifting was 78.3%. That is an unacceptably high rate and, as set out in the Green Paper on sentencing and rehabilitation, we are committed to punishing and rehabilitating criminals and turning them away from a life of crime.
Does my hon. Friend agree that every crime of theft is a crime against society—big society and small society—and that the fixed penalty notices introduced by the previous Government are simply not working to address the issues? Will the Government focus on rehabilitating those who reoffend, particularly if they have a known substance abuse?
My hon. Friend is absolutely right. I congratulate her on her efforts in this area, which led to the police guidance being strengthened in July 2009 to restrict the issuing of penalty notices for retail theft to first-time offenders who are not substance misusers and where the value of goods does not exceed £100. She is right to point out that shoplifting is usually associated with drug addiction, and I draw her attention and that of the rest of the House to our proposals on delivering effective payment-by-results schemes to deal with drug addiction in the community.
I sincerely hope that over the course of the Parliament and by the time we get full implementation of an effective payment-by-results scheme on drug addiction, which will address the principal driver of shoplifting, those numbers will begin to decrease significantly.
In 2009—the last year for which figures are available—241 people with more than 101 previous convictions and 13 people with more than 200 previous convictions were convicted of shoplifting but were not sent to prison. Does my hon. Friend think that people with that many previous convictions should not be sent to prison? If so, how many crimes should people commit before anyone thinks about sending these creatures to prison?
Plainly I do not agree with my hon. Friend’s proposition. Prison is there for prolific and serious offenders and, by any judgment, the examples he has given are of prolific offenders. I would need some explanation of why there are such cases, where people simply have not responded to the treatments available, particularly in the new environment where we can deliver effective rehabilitation. If such people fail to address that and pick up the services that are made available, they should expect to go to prison.
Reoffending Rates (Women)
The Ministry of Justice recently published research showing that reoffending for women offenders under probation supervision was 6 percentage points lower than for similar women who served short-term prison sentences. We also publish a statistical report on women in the criminal justice system that is informed by an independent advisory group. This group has expressed interest in looking at whether reoffending rates for women vary by sentence length in the same way as it does for men.
I thank the Minister for his answer. He will know from Baroness Corston’s 2007 report that much can be achieved to prevent female ex-prisoners from reoffending by proper intervention that addresses drug use, prostitution and domestic violence. Chepstow House in my constituency, which is run by the Brighter Futures housing association, does exactly that—cutting reoffending rates and saving taxpayers’ money. Will the Minister agree to visit Chepstow House in the coming year to show his support for a charity that is putting some of the principles behind breaking the cycle into action?
I would hope to have the opportunity to do so, but I cannot promise to do so. I have yet to visit a substantial amount of the prison estate and a number of probation trusts, but I would certainly like the opportunity to visit. I suspect what is underlying the hon. Gentleman’s question is the funding issue. On funding for centres such as Chepstow House, what I can say at this stage is that we have identified funding to sustain those projects that have demonstrated effective performance and we will make an announcement shortly about what will replace the current funding arrangements.
With regard to imprisonment and reoffending, can the Minister tell the House how the National Offender Management Service is performing and what has happened to the C-NOMIS data system, which was supposed to assist it and cost £161 million prior to 2007?
The C-NOMIS information technology system was one of the greater disasters that surrounded the provision of IT under the previous Administration. Rescued out of that has been the P-NOMIS system, which does not deliver quite the co-ordination between probation services and the Prison Service that was intended of C-NOMIS. However, we will continue to work to ensure that we make the proper connections as far and as best we possibly can to ensure that IT properly supports our management of offenders.
My hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt) spoke about the excellent work done with women offenders by Brighter Futures. I know of the valuable work that is also done by the Saltbox chaplaincy project, which has cut reoffending rates to just 12% even among prolific offenders. However, these fantastic providers, along with many others in the third sector, are at risk of having to cease their effective work because of this Government’s ill-thought-through change to the payment-by-results scheme, which is still in consultation. I welcome what the Minister has said, but before third sector organisations with a track record of success on reoffending rates have to end those services up and down the country and make key staff redundant, is he prepared to give much greater reassurance that programmes will not come crashing to an end this coming March, with the loss of all that good work?
As I said, we have identified funding to sustain those projects that have demonstrated effective performance, but, as the hon. Gentleman will be well aware, the Department is not in a position to sustain funding on the current level. A total of £10 million was put aside to set these schemes up, whereupon they were then meant to move to local commissioning. There will be continuing support for the schemes from the Ministry of Justice, but we will be looking to them to win the support of local commissioners. They also have access to the Government’s £100 million transition fund, which is precisely designed to bridge that gap, as well as potential access to the big society bank.
7. What steps he is taking to increase the standard of appointments to the Bench in England and Wales. (32683)
Judicial appointments are made solely on the basis of merit. On 9 November, I announced the conclusions of an internal review of the judicial appointments process undertaken in close consultation with the Lord Chief Justice. The review did not identify concerns with the quality of appointments to the Bench.
I am grateful to my right hon. and learned Friend for that answer. The judiciary in this country has for a century been the envy of lawyers across the world, but there is a perception, at least, that that has recently begun to change, partly as a result of the creation by the previous Government of the Judicial Appointments Commission—an unnecessary quango that cost an enormous amount of money. Judicial appointments were formerly made by the Lord Chancellor, having consulted the Bench and on the advice of his officials. Does my right hon. and learned Friend agree that that was a much better system and one to which we ought to return?
As I said, we have been reviewing the system. I do not think that the Judicial Appointments Commission can be criticised on the basis of the quality of appointments; I have not heard any credible evidence that people think that quality is deteriorating. However, it is costing too much, it is not very efficient, and it takes too long. Its budget is about £10 million—£9.8 million, to be precise—and it can take 18 months from start to finish to appoint a judge. In the light of the review, we will be looking at that and making sure that it operates with efficiency. Obviously, appointment on merit and getting the highest quality of appointments remains the main focus of any judicial appointments system.
Legal Aid (Welfare Advice Services)
While cost considerations are at the forefront of our review of legal aid, we remain committed to ensuring that legal aid is available to those who need it most in cases where legal aid, legal advice or representation is justified. Accordingly, we propose that specialist legal aid be retained in the highest priority cases of welfare advice, such as those involving debt, housing—for example, where someone’s home is at immediate risk, or homelessness or serious disrepair is involved—and community care. The funding of welfare advice services is a cross-Government issue, and it is being considered as such.
The Government want voluntary sector welfare advice to replace legal aid, but much of the funding for voluntary sector local advice services comes from legal aid, which is about to be withdrawn. That includes a quarter of the funding for local citizens advice bureaux across the country. I was encouraged by what the Minister said about avoiding a gap. Does he accept that there will have to be new funding from somewhere to replace the funding for advice services that is being withdrawn? In looking, rightly, for cost-effective ways to deliver advice, does he recognise the evidence from the Legal Action Group that those most in need of help are the least likely to use telephone advice services?
The right hon. Gentleman asks a pertinent question. Having spent a lot of time discussing this matter over recent weeks with the not-for-profit sector, I can tell him that very little is known about it in that sector. Even the head offices of voluntary organisations may not know what the funding is for their own local organisations. The core funding for legal help, for instance, typically comes not from the Ministry of Justice, but from the local authority. We have to make up for a decade of people overlooking the need to co-ordinate funding, by seeing what the funding streams are and ensuring that they work in the way that they should. That will involve ensuring that there is no duplication. There is currently a lot of duplication in the system.
Does the Minister appreciate that those who practise welfare law have traditionally not been highly paid, and does he realise that swathes of firms are likely to disappear? Who will stand in that breach, because those who are most in need are the least likely to be helped in those circumstances?
We believe that a cultural change is needed. We need to move away from the immediate rush to lawyers and courts, whether through mediation or, if a court alternative is required, a conditional fee arrangement, rather than legal aid. Much more should be made of those alternatives.
Victims of Crime (Support)
Victims and their families are supported through a number of schemes, including joint police and Crown Prosecution Service witness care units, the witness service and, in the case of bereaved families, the homicide service. Their rights are enshrined in law under the code of practice for victims of crime. We do, however, continue to seek ways to improve the care offered to victims through the criminal justice process.
I am grateful to the Secretary of State for that answer. There are cases in which victims, including deceased victims, have their reputation defamed during a case, in particular when mitigation is being advanced. A Victim Support report in December found that as many as 44% of victims or their families were not made aware of their right to make a victim personal statement. What are the Government doing to ensure that victims are given full support and are aware of their rights?
I share the hon. Gentleman’s feeling on the importance of victim personal statements. In the cases that he describes of victims being defamed in mitigation, it is important that victim personal statements are properly made and responsibly reported. We are doing our best to encourage that and are considering how we can ensure that such statements become a more usual practice.
Does the Secretary of State share my concern that the police and the CPS too readily recommend bail for those who are accused of domestic violence and related intimidation, thus disadvantaging the victims and their families right at the start of the process?
These are all difficult matters of judgment. Obviously, many important considerations must be borne in mind when deciding whether to recommend or grant bail, including any further risk to the alleged victims of the offences. It is difficult for Ministers or Parliament to lay down hard-and-fast rules when the people involved are fully aware of the need to protect victims from harm while proceedings are pending.
Bradley and Corston Reviews
Our plans are set out in our Green Paper on sentencing and rehabilitation, which was published in December, and they include identifying individuals with mental health problems at an early stage in the criminal justice process. The aim is to ensure that liaison and diversion services are available in police custody suites and at courts by 2014. We continue to develop our approach to meet the distinct and complex needs of women in the criminal justice system.
Given the progress made in implementing the Corston report by the previous Government’s ministerial champion for women in prison, can the Minister explain why the Government seemingly still have no plans to appoint a Justice Minister specifically tasked with dealing with women’s issues?
On that note, the Minister told the House on 20 July that
“a network of women-only community provision is being developed to support…community sentences.”—[Official Report, 20 July 2010; Vol. 514, c. 163.]
Can he tell the House now what that community provision consists of, where it is and how secure is its financial future?
I fear that I will not be able to explain the whole network without irritating you, Mr Speaker, but the Ministry of Justice has funded 44 separate projects in conjunction with the Corston independent funders. I have already answered the question about what will happen to the funding after March. We will continue a degree of funding—not on the scale that has happened before, but we are identifying the projects that are working best, which we will wish to continue to support.
Indeterminate Prison Sentences
Prisoners serving indeterminate sentences who have completed their minimum tariff are released from custody only if the independent Parole Board is satisfied that the risk of harm that they pose to the public is such that it may reasonably be managed in the community.
The Secretary of State will be aware that inmates serving indeterminate public protection sentences will have committed some of the most severe offences. Often, the reason they are not released after their minimum tariff is that they still pose a great risk or have not been able to complete the rehabilitative courses that are available. Will he either spend more money on rehabilitation inside prisons or change the method by which risk is assessed?
We addressed this problem in the Green Paper, on which we are consulting. It is quite obvious that the IPP system has never worked as either the previous Government or Parliament intended. Indeed, the previous Government made one attempt to revise it to stop the unexpectedly large numbers of people who were going into the system. IPP prisoners are almost all high-risk, and they should be released only once they have been assessed by the Parole Board, but of course it is extremely difficult to form judgments about the risks that they pose when they are in prison and sometimes unable to access rehabilitation courses. We published our proposals in the Green Paper and are now consulting on them, but we have no intention whatever of putting the public at more risk by releasing people without some assessment by the Parole Board. However, it has to be a sensible assessment that can sensibly be made.
I welcome the last part of the Secretary of State’s answer in particular. He will be aware that indeterminate sentences are given to serious criminals such as the ring leaders in the grooming of vulnerable girls for sex convicted last week at Nottingham Crown court. He will appreciate concern that, in his desire to reduce the prison population, he may release dangerous convicted prisoners prematurely. He talked about those currently serving IPPs who have served their minimum tariff. How soon does he think his proposals will have an impact on those prisoners, and how will he address the British public’s legitimate concerns?
At the moment, more than 3,000 people on an IPP sentence have completed their minimum tariff, which is the punishment for the crime for which they are sent to prison, and a very small proportion of those are being released. The numbers are piling up all the time, and recommendations are frequently made to the Department that the matter has to be re-addressed, because we have more than 3,000 people whose release from prison is totally uncertain. We are now consulting and there will be legislation in the spring, which will have to be enacted and improved by the House before a new system comes into effect. That system will retain the need for the Parole Board to make a sensible assessment of whether the risk posed by those in question can properly be managed in the community.
Prisoners (Rehabilitation and Reintegration)
We continue to commission research and evaluation on that important subject. We have just commissioned an evaluation of the Peterborough social impact bond. We have also recently published the evidence report on the Green Paper on sentencing and rehabilitation, in which we reviewed and evaluated a large volume of research.
Voluntary sector organisations such as Nacro and St Giles Trust play a significant role in delivering services to offenders, and in providing related research and evaluation. As we move towards payment by results and outcome-based commissioning, which is taking precedence in the voluntary sector, what role does the Minister envisage for voluntary sector-related research and evaluation?
I agree with my hon. Friend about the importance of the voluntary sector in helping us reduce reoffending. The great advantage of payment by results, which we will pilot for community orders and post-release supervision of offenders, is that the providers make the evaluation and take the risk, and we will pay for what works. That is different from the situation until now, whereby Ministers backed projects without necessarily knowing whether they worked in reducing reoffending.
I urge the Minister to take an urgent look at the ongoing evaluation of the Choose Change project at Manchester prison and the intensive alternative to custody pilot, which Manchester probation service is running as part of a national scheme. I visited both yesterday and they seemed very effective and in line with the Minister’s objectives, yet they face financial uncertainty. Will he see what he can do?
I would be happy to look at those projects. Our aim, assuming that the pilots are successful, is for all such schemes to be paid for by results. If they work, they will receive the funding. In spite of the prison population’s reaching record levels and despite funding, reoffending rates have risen. We therefore need to institute a new system, whereby we pay for what works.
Mental Health Care (Offenders)
We have worked closely with the Department of Health and the Home Office on providing mental health care for offenders. The sentencing and rehabilitation Green Paper highlighted our commitment to identifying individuals with mental health problems at an early stage of the criminal justice process to ensure that they have access to effective treatment. An across-Government mental health strategy is due to be published early in 2011, which will focus on achieving improved outcomes for all people with mental ill health, including offenders.
I am grateful to the Secretary of State for that answer, but if more offenders with mental health problems are to be dealt with in the community, exactly what funding will be available to support them? Will the NHS, which is already being subjected to cuts, be left struggling to cope, and offenders left more likely to reoffend?
Obviously, my right hon. Friend the Secretary of State for Health is in the lead on the strategy. He is looking at ways in which to redirect his budget to get more effective community and other treatment for mental health problems. Offenders will be taken into account in the course of that, but it is important that we ensure that it is done within the available resources, and that those resources are used to the best positive effect for the community as a whole, not just offenders.
Far too many young offenders have undiagnosed mental health problems. May we have an assurance that the cross-departmental strategy that is being worked on will involve the Department for Education and concentrate specifically on young people who commit crime, often due to mental health problems?
With respect, my hon. Friend makes a valid point and we are examining ways in which we can divert more young offenders in particular out of the criminal justice system into mental health treatment when that is most appropriate. It is not unusual to encounter somebody about whom any ordinary member of the public would think, “This person needs treatment, rather than just being viewed as a criminal offender.”
In 2008, the rate of reconviction within one year for adults discharged from custody after a sentence of less than a year was 61.1%; it was 31.0% for those given sentences of one to five years, 17.5% for offenders given sentences of five to 10 years, and 6.4% for 10 years or more. The Government’s Green Paper on rehabilitation and sentencing sets out our proposals to punish and rehabilitate offenders.
That is why we have to address the appalling reoffending rates of those people sentenced to short terms in prison. There were 60,000 of those in the past year, and I am afraid that the option of sending them all to prison for 10 years does not exist, so we have to make a success of rehabilitation. We have to ensure that longer sentences are given to recidivist offenders and that we effectively rehabilitate people and break the cycle of crime through the proposals that we have presented in the Green Paper to drive that number down.
To begin with a topical statement, I must tell the House that approximately 40 prisoners were involved in a serious disturbance at Ford prison between 31 December 2010 and 1 January 2011, which resulted in parts of the establishment being set on fire. Staff withdrew from the prison’s B wing for their own safety and specially trained prison staff were deployed to regain control of the prison and assist the fire service in its efforts to extinguish the fires.
Last night, there was disorder at Littlehey prison which, I am glad to say, was brought under control quite quickly. To the credit of those staff involved, no staff or prisoners sustained serious injury.
The Prison Service manages some of the most dangerous people in society and we normally have 30 such incidents every year. I pay tribute to the prison staff and the fire service for the skill with which they handle these matters on behalf of us all.
In a statement to the House, the Under-Secretary of State for Justice, the hon. Member for Huntingdon (Mr Djanogly) said that Worksop county court would be transferring to Worksop magistrates court, and he confirmed that in answer to my question. In fact, the opposite has happened. Is he the kind of Minister who is in control of his Department and is his word his authority when he speaks to this House, or is he the monkey to his civil servants’ organ grinder?
The hon. Gentleman speaks with his usual charm. He raised this issue on a point of order yesterday and I was going to write to him today, so I am delighted to have this opportunity to address it on the Floor of the House. I am, of course, sorry for any misunderstanding or inaccuracy regarding county court services in Worksop. That no doubt stems from the fact that the announced closure of Worksop county court and the announced retention of Worksop magistrates court leads to a slightly more complex set of arrangements at the Worksop courthouse than is typical and I am pleased to be able to clarify the matter.
On the closure of Worksop county court, the counter services will cease to be available, but county court hearings will be retained at the Worksop courthouse. However, the administrative work for Worksop county court is already dealt with at Mansfield county court and, as now, court users will continue to be able to contact Mansfield county court by a variety of methods.
T2. Does the Secretary of State share my concern that releasing prisoners with £46 in their pocket, nowhere to stay and a delay of one to six weeks before they can get jobseeker’s allowance makes it more likely that they will reoffend? Will he seek to reach an arrangement with the Department for Work and Pensions so that benefits can start promptly on release? (32703)
My hon. Friend alights on a significant problem. I am in discussions with the Department for Work and Pensions and I hope that we will be able to bring forward proposals that will address that issue.
In view of the serious riot at Ford open prison, does the Minister wish to revise the statement issued by the Ministry of Justice when announcing its public spending cuts—including a reduction of 10,000 in the number of front-line staff—which said that by taking such “tough decisions” it will be able to
“punish and rehabilitate offenders more effectively”?
The National Offender Management Service is undertaking a full investigation into what happened at Ford. Obviously, the behaviour there was deplorable and we must learn every lesson we can about what happened and how we can minimise the risk in future. So far as I am aware, the prison was staffed at its normal level and we had made no changes since we took office to the arrangements under the previous Government. We should not start leaping to conclusions about whether anything was at the heart of these events other than the appallingly bad behaviour of people who had been acquiring alcohol in the run-up to new year’s eve. We are looking carefully at all the circumstances and will draw the proper lessons from that.
That is a totally hypothetical question, given that the prison had the level of staffing instituted by the previous Government to which we have made no change. It is owing to the deplorable record of the previous Government that we are having to ensure better value for money from a reduced departmental budget. It has all exploded in the past few years and now has to be looked at more carefully. However, it is complete nonsense to work out from that that we are going to reduce a particular level of staffing on the night shift at a particular prison. We are approaching the whole thing slightly more sensibly and scientifically.
T3. Will the Minister confirm whether the Department is still contracting with Clearsprings to provide accommodation for ex-offenders? The policy undertaken by the previous Government attracted a lot of ex-offenders to my constituency because of our low rental costs, and actually caused an increase in our deprivation issues and social problems. (32704)
The contract with Clearsprings to provide private rented accommodation to defendants on bail and prisoners released on home detention curfews who are otherwise without an address expired on 17 June 2010. A new three-year contract to provide a similar service was competitively tendered and awarded to Stonham, a registered housing charity. That contract commenced on 18 June 2010. Stonham does not manage any properties under that contract in my hon. Friend’s constituency.
T4. The plight and vulnerability of many of the UK’s sex workers and prostitutes was highlighted for the people of Suffolk by the tragic events surrounding the Ipswich prostitute murders. Does the Secretary of State agree that it is vital that we have in place a proper strategy to help the rehabilitation of sex workers when they are released from prison, particularly to break the cycles of abuse and drug and alcohol dependency, and to support those people with mental health problems? Will he also visit my— (32705)
My hon. Friend is right. These are extremely important issues, and the successfully piloted sex workers custody and community training course will be rolled out across the women’s prison estate with the aim of enabling staff to support the resettlement needs of women engaged in street-based sex work. Working in partnership with sex workers to support projects, it aims to assist women by breaking down barriers that may prevent them from accessing support.
T5. Will Ministers take the opportunity to look at the latest report by Citizens Advice on civil recovery and consider how we can stop the use and abuse of civil recovery against shoplifters by many retailers up and down the land? (32706)
In view of the case involving six defendants that was dropped yesterday, is the Secretary of State aware that there is a lot of disquiet about the crossing of the line from a police constable going undercover for seven years and his inciting illegal action? Would it not be appropriate for a senior Minister, be it him or the Home Secretary, to make a statement to the House? As I have said, there is a good deal of concern and disquiet about what has occurred.
These are, of course, operational matters for the police. I understand that there is to be an investigation into what appears to have been a lack of proper supervision of the officer concerned, but undercover operations are immensely important across a range of criminal activities, in keeping the public safe.
T6. With the Government’s announcement of the Green Paper, and their intention to cut prison numbers and strengthen community sentences, will the Minister outline to the House his plans for the role of the probation service and probation trusts, given that those two organisations are likely to have a vastly increased work load as a result of the policy? (32707)
First, let me emphasise that the Green Paper does not set out an intention to cut prison numbers and to substitute with community sentences and so on. We have given our best estimate of what we think the consequences of the Green Paper will be. However, the number of people who will go to prison will depend on the courts and their decisions. We expect that the number may be reduced by about 3,000 over the next few years. We are looking in particular at community payback, and at how we can introduce more competition in that—which the previous Government were contemplating—and diversify the way in which it is provided. We need to make community sentences more effective, but the key thing about them, as with everything else, is that they must be appropriate punishments for the crimes that the people concerned have committed.
In December I discovered that constituents who were appealing against their benefit decisions at the tribunal service, for which the Ministry is responsible, were having to wait for appointments or tribunal dates for between six and nine months. Given that those individuals will suffer a financial penalty in that time and that a significant number will win their appeals, does the Minister think that that is acceptable? What will he do to remedy it?
We announced proposals in the Green Paper on drug-free wings and drug-recovery wings, which will work in conjunction with the wider application of the payment-by-results scheme in the community. That sits alongside all the efforts to police prisons effectively and to keep drugs out of prisons, through the effective use of all the resources available to the Prison Service and the police.
Tomorrow I will be meeting representatives from my local citizens advice bureaux, Merseyside Employment Law and Merseyside Welfare Rights, who are part of the Justice for All lobby of Parliament. They will be raising their deep concerns about the severe impact that the cuts to legal aid will have on people in my constituency who are disabled, have low incomes or are unemployed. Will any of the Ministers here today be meeting anyone from the Justice for All lobby tomorrow?
I have not received a request for such a meeting, although I would be very happy to attend if a request came in. However, as I said before, the point is that we have to cut legal aid; indeed, the hon. Lady’s party has recognised that we need to cut the amount of legal aid paid. It is important that we redirect the scarce resources that remain to the most vulnerable, and that is what we will be doing.
I received a reply from the Ministry of Justice saying that the Data Protection Act 1998
“does not cover the…retention and storage”
of the records of deceased persons. That means that hospitals have incentives to lose, mislay or hide records in cases where there is some suspicion about what happened. Can the Minister read my early-day motion 1220 and have urgent discussions with the Department of Health to see whether we can review legislation in this area?
I am not entirely sure how welcome the return to Ford of those prisoners will be to the inmates who remain there and who have just seen their community facilities entirely destroyed. On a wider point, we want to move towards establishing proper recompense for victims, although I do not think that we will be recompensing prisoners in that institution. Restorative justice will now be a principle that we shall adopt extremely strongly.
As part of the consultation for the Green Paper, the Justice Secretary has just announced public meetings in Leeds, London, Nottingham, Bristol and Manchester. Birmingham has the largest legal community outside London, and the west midlands is the largest conurbation, so I am just wondering what he has against Birmingham.
Before any decision is made to withdraw legal aid for families dealing with special educational needs tribunals, will my right hon. and hon. Friends work with the Department for Education, particularly in the light of its proposed Green Paper on the reform of SEN procedure, to ensure that the families of children with SEN get all the help and support that they deserve?
(Urgent Question): To ask the Chancellor of the Exchequer to make a statement on bankers’ bonuses.
We inherited from the previous Government a failed system of banking regulation and a situation where billions of pounds had been provided to bail out bankers with nothing demanded in return. It was a something-for-nothing deal that rightly left the British people seething with anger, and the British people and this Government will not accept extravagant bonuses this year without a change in behaviour. So this is what we are doing.
First, we are replacing the disastrous tripartite system for regulating banks that was established in 1997. Instead, our plan is to put the Bank of England clearly in charge. Secondly, we have created the Independent Commission on Banking to review the structure of the banking sector and address the issue of banks that are too big to fail. The previous Government’s failure to address that issue brought this country’s economy to its knees. The commission will report this autumn. Thirdly, we have introduced a permanent levy on the banks, in the face of opposition from the previous Government. This new banking tax started coming into effect last week and, once fully operational, will raise £2.5 billion each and every year, or £8.8 billion over this Parliament. We are also looking at the International Monetary Fund’s proposed financial activities tax, and we will work with international partners to secure agreement. Fourthly, we have demanded that the banks sign up to the code of practice on taxation—[Hon. Members: “Ooh!”] Well, the previous Government created the code, but we discovered that only four of the 15 major banks had signed up to it when we came into office. All 15 have now signed up to the code of practice. We are also legislating in this year’s Finance Bill for tough anti-avoidance measures directed at some of the practices in the financial sector that no one had previously attempted to stop.
Specifically on remuneration and bonuses, on 1 January this year we introduced the most stringent code of practice of any financial centre in the world. For the first time, there will be a strict limit on the amount of bonus payable in up-front cash. Also for the first time, there will be a requirement that 50% of bonuses be paid in shares or other non-cash instruments, which bank employees will not be allowed to sell on for an appropriate period. Guaranteed bonuses will become the exception and not the rule, as was the case under the previous Government, and crucially, the new bonus code has been significantly extended. It will cover payments and bonuses at 2,500 firms, whereas the code that we inherited covered pay and bonuses at only 25 individual financial firms.
When it comes to the Royal Bank of Scotland, I am having to deal with the thoroughly inadequate contract negotiated by the previous Cabinet; the House might not be aware that it puts no constraints on RBS bonuses for this year. Indeed, the contract signed by the previous Government explicitly encourages RBS to pay bonuses at market rates. Despite this, we have made it clear to RBS that we will have a smaller bonus pool than last year and that it should be a back-marker in the industry, instead of the front-runner it once was.
In the coming weeks, all the banks will be announcing their pay and bonuses for this year. I confirm that we are in discussions with the banks to see if we can reach a new settlement, where the banks pay smaller bonuses than they would otherwise have done; are more transparent about those they do pay; make a greater contribution to local communities and regional economies; treat customers more fairly; and, above all, lend materially and verifiably more than they were planning to lend to the businesses of Britain, especially the small businesses, so that they can grow and create jobs this year.
This is what a new settlement with the banks should look like: they should lend to the British economy; contribute to the British Exchequer; provide jobs for British people; be responsible on pay and bonuses; and make sure that Britain is a world centre of a properly regulated and internationally competitive financial services industry. If the banks cannot commit to that, I have made it clear to them that nothing is off the table. I will keep Parliament informed of our discussions—and if the Opposition who created this banking mess have a better idea, let us hear it.
We are here to hold the Government to account. I have with me the coalition agreement, and I believe that I can still sense the scent of the rose garden upon it. This is what it says in paragraph 1:
“We will bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector”.
Where are those detailed proposals? When will we see them? Here is what the Chancellor said in his spending review statement in October:
“Fairness also means that, across the entire deficit reduction plan, those with the broadest shoulders will bear the greatest burden; those with the most should pay the most, and that includes our banks… Today we set out very clearly, for all to take note of, our objective in taxing the banking industry going forward… Our aim will be to extract the maximum sustainable tax revenues from financial services.”—[Official Report, 20 October 2010; Vol. 516, c. 951-956.]
But he has given the banks a tax cut from £3.5 billion to £1.2 billion and they will benefit more than any other sector from the cut in corporation tax. Cuts affecting children will contribute well over £5 billion and students will contribute £2.9 billion. Does the Chancellor think that children and students have the broadest shoulders? The man who said in opposition that no bonus should be higher than £2,000 will not even implement legislation forcing transparency about those receiving more than £1 million.
Where is the Deputy Prime Minister who, when not signing student pledges not to increase tuition fees or unveiling posters about VAT bombshells, was saying:
“Doesn't it make you angry that the banks have been allowed to ride roughshod over our economy, and are still handing out bonuses by the bucket load?”?
So in just seven months, the coalition goes from the scent of the rose garden to the stench of broken promises. The Chancellor who said, “We’re all in this together” bows to the rich and powerful while bearing down on everyone else. His sneering arrogance will not get him out of this one.
I do not know how much longer we are going to have to wait for a serious economic proposal from the shadow Chancellor. I suspect that time is running out for him. Let me repeat that we have introduced a code of practice that extends to 2,500 firms. There were 25 firms covered by the code of practice presided over by the right hon. Gentleman when he was in the Cabinet. We have introduced a permanent bank tax, which he and the Cabinet stood against during the general election.
The shadow Chancellor says that he wants a properly regulated banking system. However, he has opposed our proposals to regulate the banking system, we still do not know whether he supports the proposal to give the Bank of England a serious role, and—let us be clear about this—he has absolutely no idea about how to increase lending in the British economy, which he did nothing to achieve when he was in the Cabinet. Part of the pattern of an Opposition who have no serious plans to clear up the mess that they created is their habit of jumping on every passing bandwagon,
People will look at the shadow Chancellor and say that, although it is difficult to think of a way in which he could reduce his economic credibility further after the week that he has had, he has done just that today.
First, what steps are the Government taking to ensure that an international agreement is reached on the need for more transparency in regard to bonuses and remuneration? Secondly, does the Chancellor believe that shareholders should be much more actively engaged in restraining pay and remuneration, given the evidence that we heard from the chief executive of Barclays this morning that no conversations on the subject had taken place between Barclays and its shareholders?
I certainly want to see much more international action on transparency, and I have held discussions with all the European Finance Ministers about how that can happen. We also want the Basel III arrangements to be implemented by all the G20 countries, and to be translated properly into European law.
I strongly agree with the my hon. Friend’s sentiments about shareholders. We want them to be more involved in pay and remuneration, and we want to find a way of improving corporate governance in that regard. That is one of the issues that we are discussing with the banks, and I know that the Department for Business, Innovation and Skills is considering it as well.
Order. There is, understandably, enormous interest in this subject, but I remind the House that what is being discussed is an urgent question rather than a full-length statement. If I am to accommodate a reasonable number of Members, brevity from Back Benches and Front Benches alike is vital.
Voluntary organisations and community groups face cuts of at least £3 billion this year. If we are really all in this together, would it not be better for the banks to use their profits to support those community groups, rather than paying themselves up to £7 billion in massive personal bonuses?
Bonuses amounted to £11.5 billion when the right hon. Lady was in the Cabinet, although that has not been recognised by any Labour Member who will stand up and ask a question today. What we are trying to do is persuade banks to make a greater contribution to communities, business and the regional economy, which we want to be supported.
On 1 September last year, the last Chancellor said that the bankers’ bonus tax had failed to change the City’s attitude to pay. He said that the tax was likely to be a one-off, and would not be reinstated by the coalition because it had failed to change bankers’ behaviour. Does my right hon. Friend agree with that?
The last Chancellor of the Exchequer has directly addressed the question of whether the bonus tax in the form in which he introduced it last year could be repeated this year. He thinks that it could not, because behaviour has changed. Indeed, we have seen base pay rise in response to the bonus tax. However, as I made clear in my statement, we are seeking a new settlement with the banks, and nothing is off the table if they cannot agree to that.
Why is the right hon. Gentleman not extending the existing tax on bankers’ bonuses, which has yielded £3.5 billion in the past year? Does that not prove that this is a Government of the rich, by the rich and for the rich, and does the right hon. Gentleman not realise that this rancid stink about bankers’ bonuses simply will not go away?
The right hon. Gentleman may not know it, or perhaps he did not really believe it, but he fought the last election on a manifesto—written, incidentally, by the Leader of the Opposition—that committed the then Government to opposing a unilateral levy. We have introduced such a levy, and it will raise almost £10 billion in the current Parliament. We are extracting from the banks revenue that the last Government did not extract. Indeed, they opposed the method that we have introduced.
In the future, will my right hon. Friend come to the House and let us know the extent to which the banks have complied with the requirement to lend more to businesses in my constituency? There was little sympathy for them under the last Government, when big bonuses were provided and they received little help from the bankers who received those bonuses.
An absolute central part of any settlement we might reach with the banks will be a material and verifiable increase in the amount of lending to British businesses, especially medium and small businesses. [Interruption.] Labour Members mutter, but they secured absolutely nothing for British business when they bailed out the banks. They had the money in their hands to give to the banks, and they secured absolutely nothing in return.
A quick glance at today’s newspaper financial pages shows that the share price of RBS is 40p today compared with 52p this time last year, while that of Lloyds was 66p today compared with 64p a year ago. My constituents in Leeds West would not expect bonuses for such performance, so why should taxpayers’ money be used for the bonuses of our nationalised banks?
The deal that the previous Government signed with RBS as a condition of being part of the asset protection scheme stated that it should not pay bonuses in 2009, but that for the bonuses awarded in 2010—the period we are talking about now—it should pay the market rate. That was the deal that Labour signed up to. I am trying to reduce the RBS bonus pool, and I have made it very clear—as has the Prime Minister—that it should be a back-marker, not a market leader.
Is not the problem with the leading bankers that they are often arsonists and firemen rolled into one? The trouble with the previous Government is that they left the arsonists in charge of the haystack. They bailed them out, but they did not protect the depositors adequately, and now they want to shoot the firemen. What is that going to achieve?
Well, I think we still have the haystack at the end of all that. My hon. Friend makes an important point, however. Of course I understand and share the feeling of anger that if we do not get a change of behaviour, these bonuses could be paid, and that is what we are addressing. However, this House will have an equally important—indeed, possibly even more important—issue to deal with later this year: the report from the Independent Commission on Banking, which we have established, again in the face of Labour opposition, to look at the whole issue of “too big to fail”. That is what my hon. Friend was talking about. The commission will look at how we can ensure that the British taxpayer does not stand behind the banks, but that the banks can be allowed to fail in an orderly way without bringing down the British economy.
Because I am clearing up the mess left to me by the hon. Gentleman’s party. This Government have done more in the last seven months to create a safer, more properly regulated banking system than Labour did in 13 years. As of the beginning of this year, we have a new code of practice that applies to 2,500 firms, compared with the 25 firms that were regulated under the previous Government, and, as I have said, we are seeking this new settlement with the banks that will, I hope, lead to a material increase in the amount of money that they lend to the British economy, and a material decrease in the amount they would otherwise have paid in bonuses.
In the real world, jobs are being lost, wages squeezed, and taxes are rising, while businesses cannot get the credit they need and home buyers cannot get the mortgages they want. Does the Chancellor not recognise that that austere backdrop makes the very idea of a £7 billion bonus-pot toxic in the real world? Does he not regret washing his hands of this last night, and, effectively, giving the green light to a return to the bad old days of big bonuses?
It is precisely the real-world situation—where businesses need more lending, communities need support and we need more investment in our regional economies—that I am seeking to address. As the hon. Gentleman well knows, as a Member from Scotland, we need a successful, properly regulated financial services sector that employs tens of thousands of people in Scotland and, indeed, hundreds of thousands of people across the United Kingdom. That is what we are seeking to agree with the banking system. The fantasy world is the one that the Labour party occupies, where it bears no responsibility for the mess in which it has left this country.
The Chancellor must understand the level of public anger about huge bank bonuses and recognise that obscene rewards for short-term gain without regard to the long-term consequences were part of the problem that led to the banking collapse in the first place. Surely it is to avoid a repeat of that that bank bonuses should be restrained and, importantly, weighted towards sustainable long-term performance, rather than short-term speculation.
I agree with all of that. We want to see bonus restraint; we want to see bonuses lower this year—[Interruption.] Lower this year than they were under the Labour Government. That is one objective. Secondly, we want to see bonuses deferred. Thirdly, we want to make sure that they do not reward risk-taking that goes badly wrong—that is why we want the ability to claw back. We also want to get away from the system—again, this thrived under the previous Government—of guaranteed bonuses, which people got regardless of what happened to their financial institution. That is precisely what the code of practice addresses, it is precisely why we are looking at greater transparency and greater shareholder involvement, and it is precisely why I want this new settlement with the banks.
Is not the truth of the matter that this Government want the students, the homeless and the disabled to pay for this deficit, while their banking friends—the Tories’ banking friends—will get off scot-free, despite causing the problem in the first place? It is a bucket load of hypocrisy.
I congratulate the Chancellor on his Department’s excellent record on tackling banking excess, which contrasts so favourably with the lamentable record of the Labour party when it was in government. Bonuses are only part of the mix of compensation, so could he update the House on the progress that the Independent Commission on Banking has made on tackling remuneration?
The Independent Commission on Banking is examining the structure of the banking industry and is specifically examining the “too big to fail” issue. It is examining competition in the banking industry, because in recent years we have seen an enormous consolidation of the industry. On taxation, I should of course have mentioned that banks pay income tax on the bonuses and employers’ national insurance at 12.8%.
The Chancellor said in his statement that he expects the banks to make a greater contribution to local economies and local communities. Can he tell the House how much he expects them to set aside for that purpose and how he proposes that they should distribute it?
One of the issues that we are talking directly to the banks about is lending into regional economies outside London and the south-east—that is in addition to the contribution that they make to the whole national economy. That regional emphasis is a very specific part of the discussions we are having.
The Chancellor has already told the House that under the banking contract, bonuses were actively encouraged by the previous Government for the current year. Can he tell the House whether lending to cash-strapped small businesses was also encouraged under that contract?
Nothing meaningful was secured on lending to small businesses by the previous Government at the very moment when they had maximum leverage: when they were bailing out these banks. That is part of what we are dealing with. We are also dealing with the situation in which they bought their very large stake in the Royal Bank of Scotland—as I have said, the deal explicitly says that the bonuses covering the year 2010 should be paid at market rates. I am saying that we want to see the bonus pool smaller and the Royal Bank of Scotland as a back-marker, rather than a front-runner.
Was it coincidence or careful Treasury planning that ensured that the amount projected in this year’s bonuses was the same as the £7 billion that the Government have taken in cuts? Does the Chancellor understand why people in this country make an equation between those two and are so very angry about it?
Of course I understand the British people’s anger at the economic mess that the banking community and the previous Government helped to create, but they also support those with a serious economic plan to put right those mistakes. At the moment, they are not hearing a serious economic plan from the Labour party.
The financial transaction tax is something that the international community is looking at and it is on the agenda for the G20 discussions. Almost everyone who looks at the idea accepts that it would have to be done internationally or else business would probably disappear overnight. It is on the international agenda and we are engaging in that discussion.
The Chancellor should realise that the public will be angry at a Government who do not take action against the bankers who caused the financial crisis and have got back to bonuses as usual. Can he, for the record and in a moment of transparency, tell the House whether there is any disagreement in the Cabinet about the Government’s policy?
The Cabinet is completely agreed. [Interruption.] I know that the Labour party finds the idea of a united Cabinet difficult, but there is a united Cabinet that wants to see the banks lending more than they did under the previous Government and paying less in bonuses than they did under the previous Government, with more transparency, more shareholder involvement and more contributions to the community. That is what we seek to negotiate and I am doing that with the Business Secretary on behalf of the Cabinet.
Of course it is right that they attract both income tax and employers’ national insurance contributions. I know there is an issue with the economic credibility of the Labour party at the moment but it is worth reading what the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), said when he explicitly and directly addressed the question of whether the tax he introduced a year ago could be reintroduced in exactly the same form. He said that it would be difficult to do and that it would have to be a one-off because people would find all sorts of imaginative ways of avoiding it in future. We have to deal with that reality, but as I have made very clear, we seek a new settlement with the banks and if we do not agree a new settlement—if they are not able to meet our requirements—then nothing is off the table.
Unemployment in Tottenham is now the highest in London, benefits have been cut and students are being asked to bear the burden. Will the Chancellor take the opportunity to condemn the statement of Bob Diamond this morning that bankers should stop apologising for the economic crisis?
The apology should start with the previous Labour Government. Unemployment is high in the right hon. Gentleman’s constituency because it rose under the previous Labour Government and we are having to deal with welfare costs because they soared under the previous Labour Government. When it comes to student fees, I believe that he was the Minister responsible for higher education who commissioned Lord Browne to do his report. Frankly, opportunism and the Labour party go hand in hand these days.
When my constituents complain about bankers’ bonuses, it is usually in the same breath as highlighting poor banking practices such as overcharging as well as issues with their ability to get credit for their business. What assurances can the Chancellor give that those poor practices will stop?
It is explicitly those sorts of practices that are part of the discussions we are having with the banks. We want to ensure that they treat customers, including small businesses and households, more fairly, to look at the overcharging issue and to make sure that families and business are given good advance warning of the need to renegotiate terms. That is all part of what we seek to renegotiate. As I have said, we have heard absolutely no positive proposals from anyone in opposition. That says a great deal.
The Chancellor has given the impression that the new bonus restrictions have been implemented at his instigation, whereas, of course, they have been introduced to ensure compliance with EU rules, particularly those of the capital requirements directive and the Committee of European Banking Supervisors. The directive was opposed by Conservative MEPs. As for disclosure, Stephen Hester has indicated that the industry is quite relaxed about the implementation of a unilateral disclosure scheme. In the light of his comments, will the Chancellor reconsider the implementation of such a scheme, so we can at least know what is paid in the sector?
As I said, we are looking for greater disclosure. We are also seeking agreement at European level, because this is an international industry. These are perfectly sensible steps to take, and we have introduced in this country the toughest financial code on bonuses of any financial centre of any size anywhere in the world.
The UK financial industry will pay £54 billion in taxes this year—more than any other industry—and its 1 million employees will pay a further £25 billion in income tax. Does the Chancellor agree that those tax revenues will help to pay for our schools and hospitals, and to cut the record budget deficit left by the Labour party?
It is, of course, important—I said this in my statement—that we have a successful but properly regulated financial services industry, which employs hundreds of thousands of people, including thousands of people in many constituencies represented in the Chamber. It used to be the case—although perhaps it is not the case any more—that senior Labour politicians would at least acknowledge that. That is why I would much rather reach a settlement with the banks, and that is what we are seeking to do. We want a successful industry that pays a proper contribution to the Exchequer and lends more to British business, and that is my objective.
Does the Chancellor of the Exchequer think it fair that pensioners and hard-working families in my constituency are paying 2.5% more in VAT as a result of his Government’s broken promise on VAT, while the bankers get away scot-free?
We have introduced a permanent bank levy. An argument was made at the general election by Labour Treasury Ministers and the Labour Prime Minister that we should not introduce a levy unilaterally, as it would make Britain uncompetitive. That argument was aired then, and we have now introduced a permanent bank levy. I do not know whether the Labour party supports it or not, but it will raise almost £10 million during this Parliament, and it applies each and every year, rather than being a one-off.
Has the Chancellor noted that in The Guardian this morning, when given the opportunity to support the idea of continuing the bank payroll tax, the right hon. Member for Edinburgh South West (Mr Darling), whom I cannot see in the Chamber, refused to back the opportunistic policy of the Leader of the Opposition?
While the Chancellor acquiesces to the bankers’ demands, his Government propose to cut the sick pay of workers who are genuinely off sick. May I therefore ask the Chancellor: where is the fairness in that?
Where is the fairness in a record budget deficit? That is what we have to address. We are taking difficult measures; I know that every single one is opposed by the Opposition, who created that deficit, but that says more about them than it does about our plan.
Two hundred and fifty thousand people or thereabouts are eligible for the 50p rate, which came into effect in April. As I have said, other taxes, too—such as employers’ national insurance—are levied on bonuses, and in the Finance Bill, which we have published in draft, we have taken specific measures, on which we will seek to legislate later this year, to deal with some of the avoidance practices in the financial sector that were allowed to proliferate under the previous Government.
I have made it very clear that I want to see bonuses lower this year than they were in the last year of the Labour Government. That is the objective. The Labour party either supports that or it does not, but that is what we are seeking to achieve with the banks.
I share and understand the concerns that people have about the sheer scale of bankers’ bonuses, but it is also vital to look at how bankers are measured. When the Governor of the Bank of England came to the Treasury Committee in November, he said that he felt it was better to reward bankers according to return on assets rather than return on equity. I wonder whether the Chancellor believes that that view merits further consideration.
That is one of the issues being considered, and I noted the Governor’s comments. The code of practice has a number of constraints on how bonuses are paid. It is a vast improvement on last year’s situation, and will help create a better regulated banking sector.
When the Chancellor’s colleague the Prime Minister said in 2009 that no bank with significant taxpayer support should pay bonuses of more than £2,000, was he jumping on an Opposition bandwagon or was it a serious policy initiative? If it was the latter, what has changed since 2009?
That was about the time when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), the then Prime Minister, said:
“The day of big bonuses is over.”
That is the kind of rhetorical—[Interruption.] That is the situation that we have inherited—no proper code of practice, no permanent bank levy, no plan for improving the system of regulation. We are putting in place measures that we believe will materially improve lending in this economy and the regulation of our banking system. Every single one of them has, for opportunistic reasons, been opposed by the Labour party.
On BBC television yesterday, the Leader of the Opposition stated that Labour’s bankers tax brought in £3.5 billion whereas the Government’s levy would bring in only £1.3 billion. Will the Chancellor confirm that the right hon. Gentleman got his figures incorrect? Actually, Labour’s bankers tax brought in just £2.3 billion, whereas the Government’s levy will bring in more, at £2.5 billion.
My hon. Friend is right. When the bonus tax was introduced by the previous Chancellor, he explicitly said that there would be displacement activity and that the net receipts to the Treasury would be less. Those have been looked at by the Inland Revenue and verified by the independent Office for Budget Responsibility. They are less than the £2.5 billion or thereabouts that our bank levy will raise on a regular year-on-year basis once it is fully up and running.
What are ordinary hard-working constituents listening to the Chancellor’s announcements from millionaires’ row today to do but conclude that his message to them is that we are not all in this together, and that his message to the bankers is, “Carry on filling your boots?”
Will my right hon. Friend give the House an indication of the time scale within which he expects the banks—particularly those such as RBS, in which the taxpayer has a substantial shareholding—to make proposals on how they will increase responsible lending, on reasonable terms, to small and medium-sized businesses in my constituency and the constituencies of right hon. and hon. Members across the House?
The discussions are taking place now. In the next couple of weeks, I expect to be able to come back to the House with the conclusions of those discussions. The pay packages and bonuses for UK banks will be announced either right at the end of January or in early February; those for American banks will be slightly earlier.
A lot of people will be particularly disappointed, because how the Chancellor is speaking today is so very different from how he spoke in opposition. As someone who has recently been going downhill fast, does he understand how depressed people will be about what they are hearing from him today compared with what he said as shadow Chancellor?
I hope that what people are hearing from us today are serious proposals: to increase lending in our economy, which is very important; to reduce the bonus pool, so that it is not as large as it was under the Labour Government; and to increase the contribution to communities in the way that we all want to see. That is what we are seeking to agree with the banks. As I say, there is absolutely no proposal to the contrary from the Labour party, which actually created this mess, and feathered the nests of the banks, while it was in office.
Does the Chancellor share my view that one reason why there was no bank levy under the Labour Government was because, in Lord Mandelson’s words, they were
“intensely relaxed about people getting filthy rich”?
The Deputy Prime Minister threatened very serious action against bankers who sought to pay themselves unjustifiable bonuses. Should we regard the Chancellor’s answer today as a description of the very serious action that the Deputy Prime Minister was talking about?
Does the Chancellor agree that, in addition to getting the banks to lend more to business, we should be focusing on getting the maximum sustainable tax take from banks? That involves concentrating on the tax take, not just tax rates—a mistake that the Opposition often make.
Absolutely. What we want is the maximum sustainable tax revenue—that is the objective of this Government—and, indeed, to get the maximum sustainable lending into the British economy. We are trying to link the two in a settlement. I have no idea what the Labour party is proposing, but this is the sensible way forward.
May I give the Chancellor another opportunity to answer the question? When are we going to see the detailed proposals for robust action, as promised on page 9 of the coalition agreement, specifically to target—bankers’ bonuses?
“It says here.”
What I would say is that we have introduced the code of practice, which extends the coverage of the code to 2,500 firms rather than 25. We are taking that action, and as I have said, we are also seeking a lower bonus pool than existed when the party that the hon. Lady supports was in government last year. That is a sensible step forward in the current climate.