House of Commons
Wednesday 29 October 2014
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Police Service of Northern Ireland
May I first convey to the House the apologies of the Northern Ireland Minister who is chairing cross-party talks in Stormont today?
It is for the Executive to ensure that the PSNI is properly resourced, and the Government have provided significant additional funding to tackle terrorism, totalling £231 million. We are now working with the PSNI to understand the impact that funding reductions imposed by the Northern Ireland Executive will have on its ability to police the terrorist threat.
The Police Service of Northern Ireland is experiencing budgetary shortfalls that the Chief Constable has said will leave it “unrecognisable”, and “put lives at risk.” What is the Secretary of State doing to ensure that budget cuts to the PSNI do not undermine the peace process or put lives at risk?
This is a very serious matter, and as the hon. Lady has said, the Chief Constable is concerned about the extent of the reductions proposed. A real concern is that a number of the cuts are in-year cuts, which makes achieving them through efficiency reforms very difficult. The Government will continue to support the PSNI with substantial extra security funding, but the Chief Constable now believes that the reductions proposed by the Executive will impact on his ability to police terrorism. We are working closely with him to ascertain exactly what that impact will be, and to see what steps can be taken to mitigate it.
13. I pay tribute to the PSNI, which does a marvellous job in very difficult circumstances. Will my right hon. Friend consider whether it would be assisted by the National Crime Agency operating in Northern Ireland, and in particular by tackling the gangs that are still operating down in South Armagh—the same gangs that used to shoot and murder British soldiers, and that are still trying to murder police officers? They should be brought to book by the NCA. (905676)
I agree with my right hon. Friend in paying tribute to the PSNI, and allowing the NCA to operate with its full remit in Northern Ireland is essential if we are to combat organised crime effectively. This matter does impact on PSNI funding, because its inability to receive the full support of the NCA and having to do the work that the NCA would otherwise do for it places additional pressures on the PSNI.
The Secretary of State will be aware that due to budget cuts the PSNI has effectively ceased all investigations into historical crimes associated with the troubles. Does she accept that that places a greater responsibility on all political parties to agree new mechanisms to deal with the past that put the needs of victims and their families first?
It is very important that political parties in Northern Ireland find a way to agree a fresh approach to the past, and that is one reason why cross-party talks have been convened. We need to listen to the needs of victims, and we must also understand the increasing pressure on the PSNI and the criminal justice system. I believe it is important that we find a way forward on that, not least to relieve pressure on the PSNI so that it can concentrate on the important policing needs of today.
I have regular discussions with the PSNI on the question of on-the-runs and Operation Red Field, and I will do so again. It is crucial that the Executive parties reach an agreement on the budget for next year, and that they take into account the crucial importance of appropriate resourcing for the PSNI, and of course the cost of policing the past.
The PSNI certainly needs to have adequate resources, not least to ensure that there are full and proper investigations into the continuing scandals involving Gerry Adams and Sinn Fein in relation to cases of sexual abuse, paedophilia, cover up, and the exiling of people from Northern Ireland to the Irish Republic. Does the Secretary of State agree that no amount of waffle or self-serving platitudes from Gerry Adams or the Sinn Fein leadership can distract or take away from the awfulness of those crimes, and the need for them to be brought fully to light?
Any abuse or sex crime is appalling, and I entirely share the right hon. Gentleman’s concerns about the allegations made by Mairia Cahill. It is genuinely a very shocking, disturbing and distressing case, and all such crimes, whether the acts themselves or any purported cover-up, need to be fully investigated by the police. An independent review is set to take place into the way the original case around the allegations made by Mairia Cahill was handled.
I am grateful to the Secretary of State for her reply and for her reference to the independent investigation by Keir Starmer into Mairia Cahill’s allegations. However, does she understand the concern and anger of people right across the community in Northern Ireland in relation to the allegations against Gerry Adams about the cover-up of the sexual abuse by his brother and his refusal to go to the police or to alert people about what was going on within Sinn Fein and the republican movement, putting other children and young people at risk? We still have not had the publication of the report by the Public Prosecution Service or the police ombudsman. Does she accept that there can be no whitewash of the black sins of Sinn Fein in relation to sexual abuse and paedophilia?
Does my right hon. Friend accept that it is quite intolerable for my constituents in Aldershot who served with the Parachute Regiment in Northern Ireland to read in the newspapers that, because of lack of resources in the PSNI, so-called historic crimes will no longer be investigated or are in doubt? It is grossly unfair to my constituents, who have served this country to the best of their ability to try to keep the peace between the warring parties, still to be living with the threat, nearly 60 years on, of prosecution.
I agree with my hon. Friend that there are many people who will suffer as a result of the announcements in recent days in relation to delays in legacy matters and criminal justice in Northern Ireland. That is an important reason to press ahead with a fresh approach on the past, to be agreed through the cross-party talks, but it is also a crucial reason for the Executive to agree a budget and to make sure that they give appropriate priority to the need for police resources when they reach that agreement.
Parades: Disputes Panel
The proposal I announced on 7 October relates to disputed parades in the Twaddell and Ardoyne area of north Belfast, responding to the call by the Parades Commission for a wider, more structured process to address the issues around parades in the area.
I recognise the grave disappointment that the hon. Gentleman and many in the Unionist and loyalist community feel about the situation in relation to that parade. It is important for all sides, wherever there is a dispute about a parade, to engage in a local dialogue to try to take things forward. In many parts of Northern Ireland that has proved successful in taking the tension out of parading and reaching an agreement with local residents affected.
On parading, does the Secretary of State agree that the current political paralysis in Northern Ireland is undermining already shaky local faith in its elected politicians? Although I wish the Secretary of State well, I do not believe that the Prime Minister has been engaging closely or energetically enough with the parties to ensure that the 2007 settlement remains in good faith. I make no party point on this: from experience, I know that Northern Ireland needs constant care and attention from No. 10 and I hope it will now get that.
I assure the right hon. Gentleman that Northern Ireland does get constant care and attention from the Prime Minister, not just with his decision to bring the G8 to Northern Ireland, but everyday in focusing on the security situation and repairing the Northern Ireland economy and, of course, by closely following these talks. I agree that it is vital that we do not let disputes about parades, painful though they are, get in the way of the need to reach resolution on important issues such as the budget, flags and reform of parading decisions.
The Government’s long-term economic plan is working for Northern Ireland. Unemployment is falling and economic activity is increasing. We continue to work with the Executive on our shared objective to rebalance the Northern Ireland economy.
The Northern Ireland science park recently published figures showing that the knowledge economy in Northern Ireland grew by 33% over the past five years, which is better than pretty much every other region in the UK. What action is my right hon. Friend taking to ensure that science and technology play a massive role in the future of the Northern Ireland economy?
The economic pact signed between the Government and the Executive contained an important programme to support aerospace research with Bombardier and to promote Northern Ireland’s economic activity in the aerospace and space sector. That work is going well and will continue.
News that the economy in Northern Ireland is growing is extremely welcome, especially with the increase in employment, but one potential drag on it might be the shortage of HGV drivers. What steps is my right hon. Friend taking to encourage young people to take up training opportunities to become such drivers?
These are matters for the Northern Ireland Executive, but the UK Government recognise the crucial importance of the haulage industry, which is one of the reasons why we have frozen fuel duty, which is saving the haulage industry millions of pounds every year.
The Government cite city deals as a way to support the economy in the cities and regions on this island. If the Executive put forward a proposition for a city deal for Derry, would the Secretary of State work with the Treasury and other colleagues to support and deliver that deal as a way of implementing a lot of the key targets of the One Plan?
The economic pact between the Executive and the Government was modelled on some of the approaches we take with city deals, but I would be delighted to talk to the hon. Gentleman about any proposals he might have to replicate the city deal model for Derry/Londonderry.
The Secretary of State will agree that the current political paralysis has a corrosive impact on business confidence and therefore the Northern Ireland economy. Can she clarify whether the all-party talks she is chairing are dealing with all issues simultaneously that are causing the stalemate or focusing exclusively on the budget crisis?
The talks are dealing with a long list of issues. We have taken them day by day—we did the budget, then we moved on to the legacy issues of flags, parades and the past. We will be looking at institutional questions today, and there are also proposals to look at unfinished businesses from the Belfast agreement. All these issues are important, but most crucial is that the budget is agreed, so that it is no longer causing instability in the Northern Ireland institutions.
Economic inactivity and worklessness are major underlying causes of instability and insecurity in Northern Ireland. Will the Secretary of State therefore undertake to ensure that the Northern Ireland Office gives its full support to the Heenan-Anderson commission, which we have established with a brief to come up with proposals for how the UK Government and Northern Ireland Executive can tackle the problems of worklessness in a more effective way?
I am certainly prepared to look at whatever findings that body comes up with. I was slightly surprised to see that Deirdre Heenan had tweeted that Labour did not have any policies, which I thought was quite an unusual start to the commission’s work. It is important to recognise that in this country we have had the largest annual fall in unemployment since records began. In Northern Ireland, the claimant count has fallen for 21 consecutive months. That is providing more peace of mind and security for thousands of people in Northern Ireland and it is the result of the Government’s long-term economic plan.
The October labour market survey reports that the unemployment rate in Northern Ireland for 18 to 24-year-olds has come down 4.2 percentage points over the year. The Government’s policy of reducing the largest structural deficit in UK peacetime history is delivering a sustainable economic recovery and assisting young people into employment.
As the Secretary of State will know, youth unemployment is still stubbornly high in Northern Ireland. Jobs Growth Wales has created 12,000 opportunities for young people living in Wales. Has she had the chance to study the programme with the Executive, with the hope of adopting it?
The Government are working hard to support a balanced economic recovery right across the United Kingdom. We welcome the fact that the UK economy is now growing faster than any major developed economy and that we have seen record falls in unemployment. We will continue to work hard on reducing the deficit, keeping mortgage rates low and reducing business taxes to encourage employers to take on more people in the workplace, particularly young people.
9. PricewaterhouseCoopers has noted that unemployment in Northern Ireland is falling at half the rate of the rest of the United Kingdom. Will the Secretary of State discuss with the Northern Ireland Executive some specific proposals, such as Labour’s plan for a one-year national insurance tax break for all small firms that take on new workers? Would that not help to promote employment in Northern Ireland and the rest of the UK? (905672)
We are doing better than that. We are actually cutting national insurance contributions for employers across the whole of the United Kingdom. As from April, employers in Northern Ireland—just as in the rest of the UK—will not pay any national insurance contributions at all on the people they employ who are under 21. That is real action, helping young people in Northern Ireland into jobs.
Young people in Northern Ireland can be exploited rather than given employment opportunities. Tomorrow night in Londonderry an event is scheduled to mark the 40th anniversary of a young man of 16, having been recruited to the IRA, killing himself in a bomb explosion. Does the Secretary of State agree with me that Sinn Fein representatives in Northern Ireland should be helping to create employment opportunities for young people rather than trying to rewrite history about a small number of young people being given instructions to carry out bomb attacks who ended up destroying their own lives and the lives of others?
I urge anyone who is planning any form of commemoration to consider the impacts of their decisions and choices on people from all sides of the community. I certainly have concerns about the sort of commemoration to which the hon. Gentleman referred. As well as addressing matters relating to the past, it is important for both the Executive and the UK Government to focus strongly on sustaining the recovery in Northern Ireland’s economy. It is going well—unemployment is falling—but there is, of course, more to do to tackle youth unemployment. This Government will continue to do so through their long-term economic plan.
The failure of the Executive to implement welfare reform means that Northern Ireland is retaining a system that too often fails the people it is supposed to help by trapping them in dependency and discouraging work. This failure also means that financial savings are being forgone and other areas of public spending in Northern Ireland are being cut as a result—for example, the budget for policing and justice.
I think I am grateful to the Secretary of State for that garbled answer. Will she confirm that she is in agreement with all the Northern Ireland parties that the bedroom tax is a pernicious policy? Given that, will she tell us what proportion of the overall budget cuts proposed for Northern Ireland are directly related to the non-implementation of welfare reform?
I believe that of the £87 million of savings forgone for this year, around £16 million relates to the spare room subsidy, which is all about fairness to ensure that the rules for the social sector are the same as those for the private rented sector. I do not think that is an unreasonable position. The reality is that our welfare reforms are about encouraging people into work, reforming the system to ensure that work always pays and ending the perversities and arbitrary cliff edges that saw people trapped on benefits under the old system, which Labour manifestly failed to reform.
Sinn Fein MPs claim to be fighting welfare reform. When did the Secretary of State last directly challenge Sinn Fein MPs to come to this House, to take up their places and to fight it from these Benches? If they are not prepared to do that, when is she going to remove the £600,000 a year they receive for not coming to this House?
I think it would be far better if Sinn Fein took their seats. That would give them the opportunity to debate these important Northern Ireland matters. I know that the contribution of all the Northern Ireland parties who take their seats in this House to the debate on welfare reform was very much welcomed. Now is the time to get on with this. Failing to implement welfare reform is putting severe pressures on departmental spending in a range of other areas for the Executive, including policing.
National Crime Agency
Justice Minister Ford has submitted a paper to the political parties which sets out enhanced accountability arrangements for the National Crime Agency in Northern Ireland. I would urge all parties in the Executive to accept the full implementation of the NCA’s remit without further delay.
Bearing in mind last week’s statement by the Under-Secretary of State for the Home Department, the hon. Member for Staffordshire Moorlands (Karen Bradley) that the consequences of not acting on the NCA was potentially devastating, with drugs and violence on our streets, children being abused and vulnerable people defrauded, how can the Secretary of State justify that Minister going on to say
“If agreement is not reached, we will have to accept that the NCA will not be fully operational for the foreseeable future”?—[Official Report, 22 October 2014; Vol. 586, c. 967.]
Surely that is an intolerable situation, handing a veto to Sinn Fein.
The Government take their obligations under the devolution settlement very seriously, but there is no escaping the fact that this is a matter for the political parties in Northern Ireland to decide, and that choice has consequences. As the hon. Gentleman said, the decision by the two nationalist parties to reject the NCA’s remit means criminals not arrested, assets not seized, and victims suffering.
Thank you, Mr Speaker. That was very gracious of you.
In the absence of the operation of the National Crime Agency in Northern Ireland, what steps are this Government taking to ensure that Northern Ireland does not again become a honeypot for human traffickers, drug traffickers and other gangs of organised criminals?
We have been working with the NCA, Minister Ford and the Police Service of Northern Ireland to ensure that the NCA can do everything possible to help Northern Ireland, within the constraints of being able to operate only within the devolved field. It is able to do some work on human trafficking, for example, and significant effort has gone into ensuring that it can take over the cases involving proceeds of crime that it inherited from the Serious Organised Crime Agency. We are doing all that we can to maximise the support that the NCA can give in Northern Ireland, within the limitations set by the Executive.
Northern Ireland’s claimant count has fallen for 21 consecutive months, which shows that the Government’s long-term economic plan is working. The latest labour market survey shows that the level of unemployment in Northern Ireland is 6.1%, which is only marginally higher than the United Kingdom figure.
As the Secretary of State well knows, unemployment has been reduced in parts of Northern Ireland, but we can do more. The agri-industry in my constituency can provide more jobs if it is helped to do so, and the same applies to the pharmaceutical industry and tourism. What can the Secretary of State do, along with other Ministers here on the mainland, to enable those sectors to expand and provide more employment for young people and those aged over 50?
One of the main ways in which we can help is through the tax system. That is why we have cut corporation tax, which will be the lowest in the G20 by April, and why we are cutting job taxes for employers for the benefit of, in particular, young unemployed people. We think that it is vital for more people to have the security of a pay packet to take home to their families, and our tax policy has been driven by that.
The cost of the Parades Commission was £1.01 million in 2013-14. In the preceding four years it was £1.37 million, £0.93 million, £1.07 million and £1.01 million respectively.
Rather than reducing the tension surrounding parades, the Parades Commission has actually contributed to further tension because of its bias against the Orange Order, its incompetence, and its propensity to give in to republican protesters. Does the Secretary of State agree that we now need a root-and-branch change in the way in which contentious parades are dealt with in Northern Ireland?
The Parades Commission faces a hugely difficult task in adjudicating on highly sensitive parades, and I think that it performs that task well. If the political parties in Northern Ireland want a different system for parading, that is open to them, but the only way in which to achieve that is to get round the table and consider future reform in the cross-party talks that are now under way.
Previous talks processes have demonstrated what can be achieved when political parties engage seriously and constructively, and are prepared to make difficult decisions in order to reach an accommodation.
The lack of serious political engagement in the current round of talks, which is characterised by the fact that parties are still squabbling over whether or not they are attending the talks, does not bode well for the future. Meanwhile, in my constituency, a young man has been hospitalised with head injuries, police officers have been injured, and pensioners have been terrified in their own homes after three successive nights of violence. What sanctions will the Secretary of State impose on the parties that fail to show the will to resolve the outstanding issues in this process?
It is important that all the five parties are engaging in this talks process, and I would encourage them to take this very seriously. It is crucial that we find a way forward on these matters. I wholeheartedly condemn what has gone on in the hon. Lady’s constituency not just over the last few days but over a series of weeks. There have been continuing problems with that interface. It is utterly disgraceful that the teenage boy was hospitalised as a result of this sectarian violence, and I hope it will be tackled with the full force of the law.
The Prime Minister was asked—
As I walked to Parliament this morning past the increasing numbers of people who are sleeping on Victoria street pavement, I reflected that this Government are the first since the 1920s to have presided over a real-terms fall in average wages for their people. Is this record of failure really the best this Prime Minister can offer to the United Kingdom?
What we have actually seen under this Government is a record fall in the number of unemployed people over the last year. Also, the hon. Gentleman might want to make reference to the fact that this morning, the Office for National Statistics has produced the figures to show that the number of workless households going down by 671,000 in our country. The number of children growing up in a home where nobody works is down by 387,000. What that means is all those children growing up seeing one of their parents going out to work, putting food on the table, providing for that family, proving a role model for their children. That is a record to be proud of.
Nicola Sturgeon this morning has called for a separate majority for Scotland in the event of an EU referendum, which is a reserved matter in respect of the Scotland Act 1998. Will the Prime Minister refuse her request—or demand—and will he also condemn the Liberal Democrats for what appears to be a veto over our referendum Bill?
We are one United Kingdom, there will be one in/out referendum and that will be decided on a majority of those who vote. That is how the rules should work. I am very disappointed that we will not be able to take forward the referendum Bill in this Parliament—it was not possible to get agreement on a money resolution—but people should be in no doubt: if they want an in/out referendum, there is only one way to get it, and that is to return a Conservative Government.
I am not delaying having a vote on it. There will be a vote on it. We need, in order to have a vote on it, the small matter of a negotiation to take place within Europe, which up to now the Spanish have been blocking. I think the Spanish will shortly remove their block, and at that moment we will be able to have a vote.
We all know the reason why the Prime Minister is not having a vote: it is the by-election in Rochester and Strood. He is paralysed by fear of another Back-Bench rebellion on Europe. So I want to make an offer to him. We have a Labour Opposition day next week. We will give him the time for a vote on the European arrest warrant, and we will help him to get it through.
All I can say is that I look forward to us walking through the Lobby together to vote for the European arrest warrant: two parties working together in the national interest—or maybe, given the Prime Minister’s Back Benchers, one and a half parties working together in the national interest.
Turning from Home Office dithering to Home Office incompetence, can the Prime Minister explain why the number of asylum applicants awaiting a decision has risen by 70% in the last year?
First of all, let me just add some details of the vote on the European arrest warrant, because this is an important issue. What we have achieved with the Justice and Home Affairs opt-out is the biggest transfer of power from Brussels back to Britain by opting out of over 100 measures, but it is important that we take action to keep Britain safe, particularly from serious criminals and terrorists, and the European arrest warrant offers the best way of doing that. I would stress to those who are concerned about this that the European arrest warrant is very different from the arrest warrant that was first introduced under the last Labour Government. A person cannot now be extradited for something that is not a crime in Britain, and judges are now able to reject European arrest warrants and have done so in many cases. Nor can a person be extradited if there is going to be a long period of detention. These are all important considerations.
I am sure that the right hon. Gentleman is looking forward to walking through the Lobby with somebody, because he has had rather a lonely week, with the loss of his leader in Scotland, the total shambles in Yorkshire and all the other problems that he has. His next question was, I think, about asylum and immigration. Let me just say that we inherited from Labour a complete and utter shambles: a Department that was not fit for purpose, computer programmes that did not work and an immigration system that was a complete mess. Before he asks his next question, he might want to apologise for the mess that Labour made.
On this day of all days, there is only one person who should be apologising on immigration, and it is the right hon. Gentleman, for his total failure. He is not putting it right; he is making it worse. Since 2010, the backlog has gone up, not down, and this Government have wasted £1 billion on failed IT projects and lost track of 50,000 people. What was his promise before the election? He said that he would reduce net immigration to tens of thousands a year. What is net migration now?
Net migration is down a quarter from its peak under Labour, and net migration from outside the European Union is down to its lowest level since 1998. The right hon. Gentleman talks about records; I am happy to contrast our records any time. Under Labour, net migration quadrupled and 2.5 million extra people came into our country. In 2004, Labour gave eight new European countries unrestricted access to our labour markets. He forgot to mention immigration in his conference speech altogether. And of course there was that remark by Peter Mandelson admitting that the last Labour Government sent out “search parties” to look for extra migrants to bring to this country. I ask the right hon. Gentleman again: get up and apologise for your record.
The right hon. Gentleman could not tell us the figure. He made a promise of tens of thousands, but it is now 243,000. He published his contract with the British people at the election. On immigration, he said:
“If we don’t deliver our side of the bargain, vote us out in five years’ time.”
Why does he not just own up? He has broken his promise.
We have cut immigration from outside the EU by a third, we have closed down 700 bogus colleges and we have introduced new rules on benefits—all this clearing up the shocking shambles and mess left by the last Labour Government. Will the right hon. Gentleman just accept one thing—namely, that in 2004, the decision to allow every single new member state to come to Britain was a catastrophically bad decision? We opposed it at the time and I ask him again: will he apologise for that appalling decision?
The right hon. Gentleman has been Prime Minister for four and a half years, and it has got worse, not better. On immigration, this Government combine callousness with incompetence. They do not show basic humanity, saying that rescuing drowning people is a “pull factor” for immigration, and they are so incompetent that they cannot deliver their basic promises. Why does he not just admit that, on immigration, he has failed?
On immigration, we inherited the biggest mess this country has ever seen. Immigration from outside the EU down, benefits restricted and proper rules when new members join the European Union—all that is clearing up the mess made by Labour. What did we hear today? Not a single word of apology from a party that sent out search parties to look for more migrants. The British people know we are making every effort to control migration and that the right hon. Gentleman would make no effort at all, because he has got no leadership.
If the Prime Minister wants his European Union (Referendum) Bill to proceed, as he claims he does, all he needs to do is demonstrate a level of mature engagement on the granting of money resolutions. Is he proud of the fact that his party is abusing the privilege of Executive power and denying the clear will of this House by denying the money resolution for the private Member’s Bill to protect the vulnerable and disabled from the bedroom tax?
I am afraid the problem with my hon. Friend’s point is that his Bill is literally a bill: it would cost more than a billion pounds for the British taxpayer. That is why it would not be right to give it a money resolution. But if he believed in democracy, he would recognise that the European Union (Referendum) Bill passed this House with a massive majority and went into the House of Lords. We should reintroduce it as a Government Bill—that is what ought to happen.
Q2. The tax gap has been calculated at a massive £119.3 billion, even a quarter of which would transform public finances, yet the Government have chosen to cut Her Majesty’s Revenue and Customs’ staffing by more than 11,000 since 2010 and have utterly failed to close that tax gap. Instead, they are squeezing the poor and cutting the real wages of millions of low-paid workers. Are the Government simply protecting their fat-cat billionaire pals from paying their taxes? (905714)
Let me tell the hon. Gentleman what is actually happening on taxation: we have taken 3 million of the lowest-paid people out of tax altogether, and the fact that that means less work for HMRC is welcome; and the top 1% of taxpayers are paying 27% of all income tax—a higher percentage than ever happened under the last Labour Government.
The preposterous demand for more British money for Brussels is a small part of a much bigger picture. The big picture is that the eurozone is failing and threatening global financial stability. Countries in the eurozone have higher unemployment, lower growth and a higher risk of deflation. Why should Britain be paying for the failures of the eurozone? Does the Prime Minister agree that European leaders’ denial of the reality of the eurozone is turning it into the European economic horror version of the emperor’s new clothes?
My right hon. Friend makes an important point, which is that there is a risk the eurozone could go into its third recession in just six years, given how low growth rates are at the moment, and obviously we are not immune from that. So one of the problems we have, whether on the EU budget or on the issue of migration, is that we are the victims of the success of our economy and its growth in comparison with the eurozone. Just on the issue of the £1.7 billion bill, it is worth recalling what the Dutch Finance Minister said in an interview yesterday. He said:
“I must be able to defend it in front of the Dutch people and Parliament. As long as I can’t see the numbers, I can’t defend it and then I won’t pay before 1 December.”
I think he is right.
Q3. I am sure the Prime Minister cares about families, particularly those under great stress. Is he aware that up and down our country there are stressed families with a challenged or challenging child who cannot obtain any help from mental health services. Research that I have conducted shows that in two thirds of our country the access is not there—not in three months, not in six months and not in a year. What can we together do to stop this dreadful system? (905715)
I agree with the hon. Gentleman about the importance of mental health services. We have taken some important steps forward, for instance, giving parity of esteem for mental health in the NHS constitution, and recently announcing additional money and additional waiting time targets for mental health services. We all know from our constituency surgeries how many people are in need of these services, which may actually help them and prevent there being further pressures on the NHS if they are given.
The Prime Minister will be aware of the outstanding work done at Porton Down in my constituency to combat Ebola. However, Public Health England has refused to evaluate fully an option to create a UK centre for global response to infectious diseases at Porton and instead persists with its recommendation to move many key scientists elsewhere. Will the Prime Minister meet me to discuss that matter and ensure that the future of public health, the life sciences industry and the taxpayer are well served by the decision ultimately made for public health in England?
Let me, through my hon. Friend, thank everyone at Porton Down for the vital work they do on these sorts of diseases and indeed for the work they are doing on testing for Ebola, as it requires brave and courageous people to carry it out. On the meeting that he wants, the Health Secretary is sitting next to me and he says he is happy to meet him to discuss this issue in detail. We want to see life sciences and these areas succeed in Britain, and Porton Down has an important role to play.
Q4. I have held a dozen public meetings on immigration over the past few weeks, and it is absolutely clear that my constituents in Dudley do not think it is fair that people should be able to come to the UK to be unemployed. They do not think that people should be able to claim benefits as soon as they arrive, or, as the Prime Minister proposes, after a few short months. They think that people should have to work and contribute and pay into the system first. They certainly do not think it is fair that people should be able to claim child benefit for children living abroad. When will he be able to sort out those things? (905716)
I do not want to be uncharitable to the hon. Gentleman, who put his question in a reasonable way, but I long remember the years when he sat behind the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) as his Parliamentary Private Secretary, and I do not think that he whispered any of those things into his ear—he whispered quite a lot of other things into his ear by the way. I absolutely agree that we need to deal with this issue about sending benefits home, and we will . We have already lengthened the amount of time that people have to be here before they claim benefits, and we want to go further on that. But we must be frank about this: the British people are our boss, and they want this issue sorted. It is not simply about people coming here to claim or to abuse the system, but about the pressure on our health and education systems and on our schools and communities. The people want it addressed and they know that, with this party, we will address it.
Q5. I thank the Prime Minister for meeting Lawrence Dallaglio and me to discuss the lack of innovative radiotherapy, and I welcome his help in trying to solve the problem, but is he aware that NHS England overspent the cancer drugs fund by £30 million last year and that it has taken that money from the radiotherapy budget? Will he look into that and get NHS England to put that money back into radiotherapy? (905717)
I very much enjoyed meeting the hon. Lady and Lawrence Dallaglio, who is doing excellent work on these more innovative radiotherapy treatments that should become more widespread; the case that he makes is extremely powerful. The overspend on the cancer drugs budget was the result not of some sort of maladministration but of more cancer victims wanting more drugs, and under this Government they are getting them. That is not disadvantaging other parts of the health service, but I will look very carefully at what she has said and ensure that these treatments go ahead.
I know what I said about the Barnett formula, and I will not go away from that. What we need to see in Wales is a real debate about what I call a double yes—yes to another referendum on tax-raising powers and yes to those powers so that the Welsh Assembly takes greater responsibility for raising and spending more of its own money. That is the right pathway.
Q6. As there has never been a major hospital in Montgomeryshire, my Welsh constituents have always accessed treatment in England. They have to wait a minimum of 26 weeks for treatment. Their close neighbours living over the border wait a maximum of only 18 weeks. Does the Prime Minister think that that is fair? (905718)
I know that there are some real issues of fairness here, and that there are many more patients travelling from Wales to England than there are from England to Wales. Waiting times are quite different. For example, the typical average waiting time for a hip replacement in England is 70 days, but in Wales it is 170 days. That is not right. The Opposition cannot have it both ways. They want to blame the politicians in England for the NHS, but they take absolutely no blame for the appalling state of the NHS in Wales.
This week, Jamshed Javeed, a young science teacher from Bolton, a husband and a father, has pleaded guilty to serious terrorist offences. Like hundreds of others, he has been radicalised by a poisonous ideology. The Home Secretary promised in her conference speech to make Prevent a statutory duty on all public sector organisations, and she promised a counter-extremism strategy that would tackle all forms of extremism. When will the Prime Minister take action and make the resources available necessary to implement that promise?
As the right hon. Lady knows, I have great sympathy with her views. I think there is cross-party agreement between at least me and her about the importance of combating not just violent extremism but all forms of extremism. She will be delighted to know that the Home Office is drawing up this strategy, and we had our first discussion of it in the extremism taskforce. Progress is good, and we do want, as she said, to put these arrangements on a statutory footing. There may be opportunities in the anti-terrorism legislation that will come before the House, and I want us to make progress on all these issues.
Q7. Does my right hon. Friend agree that the field of poppies at the Tower of London is a stunning and deeply moving way of honouring all those who lost their lives in the first world war? Does he further agree that it serves as a timely reminder that in any conflict there can be a terrible loss of human life? (905719)
My hon. Friend is absolutely right. It is a stunning display, and it is extremely poignant and reminds us of how many people gave their lives not just in that conflict, although obviously the slaughter was horrendous, but in so many conflicts since then where our armed services personnel have been defending our freedoms and our way of life. Perhaps it is particularly poignant in this week when we think about the final troops returning from Afghanistan, and the 453 servicemen and women who were lost and the many hundreds who will be living with life-changing injuries whom we must make sure we look after for the rest of their lives.
Of course, we want to meet the A and E targets every week of the year, and that is our aim, and that is why we put £12.7 billion extra into the NHS. There are 800 more doctors working in our emergency departments than there were when I became Prime Minister. One of the pressures that we face is 1.3 million more patients every year going into accident and emergency. [Hon. Members: “Why?”] There are a lot of shouts of “Why” from Opposition Members. They might start with their own GP contract. They might think about that. We need to enhance GP services, put the resources into A and E, improve public health, help with our frail elderly—all the things set out in Simon Stevens’ excellent plan, which needs to be backed by the money and the successful economy that this Government are delivering.
Q8. More people live in Essex than voted yes in the Scottish referendum. With fairness needed for citizens in all parts of the United Kingdom, does the Prime Minister agree that what Scotland gets, so should the people of Essex and East Anglia? (905720)
This is becoming something of a theme in my hon. Friend’s questions. The best answer I can give is that if we are to keep all our promises to the people of Scotland in terms of additional powers to the Scottish Parliament, including tax-raising powers, as I believe we should, we must make sure that Members of Parliament for Essex or other counties and towns in England, have the ability to vote on these issues as they affect England in this House. My concern is that the Labour party seems to have completely given up on this issue. It is happy to have an all-party agreement when it comes to Scottish powers, it is happy to have an all-party agreement when it comes to Welsh powers, but for some reason, when it comes to England, it has absolutely nothing to say.
Q9. Will the Prime Minister explain why, in Scotland, Northern Ireland and Wales, it has been possible to reach a settlement with the Fire Brigades Union on the question of pensions and early retirement, yet in England, where the new Minister was having constructive discussions, last week somebody above her said, “No, no more”, and now we face a four-day strike? Will the Prime Minister intervene, show some common sense, get the FBU round the table and sort this, because it could be sorted tomorrow? (905721)
I hope that the hon. Lady is right that this could be sorted out tomorrow, because I think that is what everyone wants to see. I am sure that all Members have met members of the Fire Brigades Union in our constituency surgeries and listened to their arguments, but in the end this has to be settled by the employers and the trade union. I know that the Minister will have listened very carefully to what the hon. Lady has said.
Q10. Is the Prime Minister aware of Shropshire’s economic success? Over the past few months we have seen more jobs created in the county than ever before. In fact, since the previous Labour Government left office, we have seen a dramatic fall of up to 46% in the number of people claiming jobseeker’s allowance. In fact, today we have the lowest unemployment record ever in the county, and in The Wrekin parliamentary constituency it is just 1.9%. Is not that more evidence that the Government’s long-term economic plan is working? (905722)
I am grateful to my hon. Friend for bringing that to the House’s attention. The fact is that the claimant count in his constituency of The Wrekin is down by 40% over the past year alone, and we now have 2 million more people employed in the private sector since the election. As I said at the outset of Prime Minister’s questions today, the figures for the fall in the number of workless households—homes where no one has been working—including homes with children, are not just statistically important; it is a socially and morally important fact that children will grow up in homes where someone is working. The employment rate for lone parents has also gone up. [Interruption.] I know that Labour Members do not want to hear good news, but the fact is that, because our long-term economic plan is working, we are getting the British people back to work.
Q11. I know that the Prime Minister, like me and the rest of the Democratic Unionist party, is fully committed to the full implementation of the military covenant. Why, then, have the Government failed to keep records for all the 30,000 personnel who served in Afghanistan and returned to the United Kingdom of Great Britain and Northern Ireland, many of whom came back with injuries that should have been given priority for treatment under the military covenant? What steps will he take to rectify that situation? (905723)
As the hon. Gentleman knows, we want to see the military covenant honoured properly in every part of the United Kingdom, including Northern Ireland, and I am happy to help with that. On the issue of how we keep in touch with veterans, I think that we have made some breakthroughs. The veterans information service now contacts all those who have been discharged from the armed forces a year after they leave, as set out by my hon. Friend the Member for South West Wiltshire (Dr Murrison) in his report. We are copying from the best countries around the world on how we help our veterans, and because we are taking the LIBOR funds—multimillion pound funds from the City—and putting them into veterans charities, there is real money to support our veterans.
Does the Prime Minister agree with senior US officials who said last week that Qatar is still a permissive jurisdiction for terrorist finance? Will he press the emir and report back to the House on what action is being taken within Qatar and on those individuals named on the UK sanctions list?
The Prime Minister: I will be talking to the emir very shortly, and of course we will discuss all these issues, particularly how we can work together to combat extremism. Qatar has recently introduced a new Act to ensure that charities are not abusing charitable status and giving money to inappropriate organisations, and we will want to ensure that that is working properly. I commend my hon. Friend for his persistence on this issue, because it really does matter that we work with all our allies to ensure that extremist and terrorist groups do not get the support that they seem to be.
Q12. Research published this week shows that there are now more than 5 million workers stuck in low-paid jobs, women’s wages are lower now than they were a year ago and the gender pay gap is widening. We on the Opposition Benches have been clear about how we would strengthen the national minimum wage. What is the Prime Minister going to do to make work pay? (905724)
What we need is more jobs, which we are getting. We need to see the minimum wage increase, which it just has. Then we need to lift people out of tax by raising the tax threshold. We are doing all three of those things. On the minimum wage, we have just seen it go up to £6.50. What we have seen from the Labour party is a plan to put it up to £8 by 2020, but reasonable assumptions about inflation rates show that the minimum wage will have gone beyond that level by 2020. These geniuses on the Opposition Front Bench thought all summer about what would be a really good plan to help people, and they decided to cut the minimum wage. No wonder they are melting down in Scotland, they have a crisis in South Yorkshire, nobody trusts the shadow Chancellor and nobody believes the leader. It is the same old Labour party—a complete and utter shower.
At 3.30 this afternoon, 120 members of the Royal Navy, the Royal Marines and the Royal Fleet Auxiliary will march through Carriage Gates down to the North Door of Westminster Hall in commemoration of all they have done for this nation in Afghanistan and across the globe. Will the Prime Minister, other Members from both Houses and staff throughout the Palace find time to join me at the great North Door of Westminster Hall to thank them for all they have done?
I will certainly encourage all hon. Members to do this and I will examine my own diary to see whether there is any chance that I can come along too. We should take every opportunity to thank our armed services personnel, particularly for what they have done in Afghanistan. Fourteen long years we have served and many people have been there once, twice or even on three different tours. They deserve our thanks and congratulations for their service and courage.
Q13. Last week, the Prime Minister was asked why 16 health organisations, which include doctors, nurses and patients, say that health and social care services in England—that is the bit he is responsible for—are at breaking point. He has made a lot of allegations about the position in Wales. Can we now have an English answer to an English question? (905725)
What I would say to the right hon. Lady is that of course there are pressures in the NHS but I think it is worth listening to the new chief executive of NHS England—someone who worked for the Labour party when it was in government—who said:
“Over the past five years…the NHS has been remarkably successful…We’re treating millions more patients than five years ago...the NHS has become some £20 billion more efficient”.
Those are things that we should recognise. Of course there are pressures, but what we need, and Simon Stevens says this very clearly, is improved efficiency and to make sure that we get rid of unnecessary demand for the NHS by investing in public health—and, yes, money is required. But as Simon Stevens puts it, we get more money only if we have a successful economy. As he said,
“a tax-funded health service requires a healthy UK economy”.
We have a healthy UK economy, and we will have a strong NHS.
Q14. A recent TaxPayers Alliance study revealed that the amount of taxpayers’ money being spent on union office space is the equivalent of £27.4 million at London market value, with a square footage equivalent to that of the Kremlin. Does my right hon. Friend agree that it is time for further political funding reform? (905726)
I think it is necessary to cap the donations that unions make to parties and that should be introduced. My hon. Friend comes up with an ingenious idea: if trade unions have so much extra space, maybe they should do what the Government are doing and make additional space available to entrepreneurs so that we can have more start-ups and more enterprise. That is a contribution that the trade unions could make.
Q15. May I tell the Prime Minister that sadly my constituent better known as Boomer, Port Vale football club’s beloved mascot, had a stroke last week? He was discharged home only to be told that he could face an eight-week wait for urgent speech and language therapy. Can the Prime Minister set out how the Government will ensure that there are community stroke specialists and speech and language teams giving the right community care support from day one, in both Stoke-on-Trent and the rest of England? (905727)
The hon. Lady is absolutely right that we need to do better in treating the consequences of a stroke. The NHS has made some very big improvements on diagnosing and treating stroke victims as a stroke happens; we have seen that with the better arrangements for taking people to hospitals that have that expertise. But what is now required is more effort really to look at how we can make someone who has had a stroke have a better quality of life. More money is going into that. More research and effort are being done, and I am happy to look at her particular case.
Points of Order
On a point of order, Mr Speaker. Following the failure of the European Union (Referendum) Bill because the Labour and Liberal leaderships will not trust the British electorate on this issue, what guidance can you give on how best to proceed given that there is no money resolution?
I have to say to the hon. Gentleman that it is not for me to offer guidance on that matter. Procedural matters relating to Bills which have been committed to Public Bill Committees are matters exclusively within the competence of the Chair of the said Committee. Moreover, as I rather imagine that he knows, but I emphasise for the awareness of Members of the House more widely, money resolutions are exclusively a matter for the Government. Those are waters in which the Speaker does not tread.
Further to that point of order, Mr Speaker. In respect of the provision and tabling of money resolutions, and further to your advice a moment ago, can you please tell the House on what previous occasions there have been circumstances where, on Second Reading of a private Member’s Bill, the will of this House has been clearly demonstrated through a desire to proceed with that Bill but has been frustrated by an Executive who are clearly abusing the privilege of their Executive power in the way that they are with the private Member’s Bill on affordable homes?
I do not wish any discourtesy to the hon. Gentleman, but it is not for the Chair either to be subject to, or the purveyor of, a history lesson on these matters. I would say to the hon. Gentleman, who is nothing if not an eager beaver, that he should consult the Journal Office, and I think that he will go away, as a result of so doing, significantly better informed.
On a point of order, Mr Speaker. Following the most violent and vitriolic abuse, using Twitter, of my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), an individual was jailed for four weeks. Despite this, or perhaps because of it, the abuse has worsened and deepened on precisely the same issue in the same violent way. If the medium used were a newspaper, I am quite certain that the House would demand that the editor be dragged to the Bar of the House and forced to explain himself or herself. What advice would you give, Mr Speaker, on how to handle the internet, and specifically Twitter, which is the medium by which this abuse against one of the Members of this House is continuing on a most violent and daily basis?
I am grateful to the hon. Gentleman for his point of order. My immediate reaction is twofold. First, where a crime has been committed—he referenced at the outset of his point of order the fact of a crime and, indeed, of a conviction—that is a matter for the police and the prosecuting authorities. Secondly, and more widely, in so far as the hon. Gentleman has referenced an outrageous instance, or series of instances, of anti-Semitic abuse, I think that the whole House would be united in concluding that that behaviour was both despicable and beneath contempt. Although I would not ordinarily seek to personalise such matters, as the hon. Gentleman referred to the hon. Member for Liverpool, Wavertree (Luciana Berger) being on the receiving end of this abuse, I think that decent people throughout the House and across the country would empathise entirely with the hon. Lady and share my own assessment of the people responsible for that gratuitous abuse. [Hon. Members: “Hear, hear.”]
The issue of criminality is well understood and is a matter for the police, not the House, but this is about the medium of communication. If it were a newspaper, then the newspaper would not be committing criminality by allowing itself to be used as the vehicle, and the House would want to have a view on how that newspaper should be held to account. There is precedent from 1956, with John Junor, on how that was done. How can the House hold Twitter to account for its failure to act to stop its platform being used for this abuse?
The short answer to the hon. Gentleman is that the House can debate whatever the House wants to debate, and hon. Members can seek opportunities to air matters in the usual way. I have a hunch—it is reinforced by the wry grin emerging on the hon. Gentleman’s face—that the idea will by now have occurred to him, if it had not already done so, that he could seek to raise these matters in an Adjournment debate. I just have the sense, although I am of course not psychic, that his application will be winging its way to the appropriate quarter before the close of the day.
On a point of order, Mr Speaker. We now finally have the overarching report into the suspension of the Leeds children’s heart unit, which has exposed very serious failures in the safe and sustainable review process and clear abuse of whistleblowing by both NHS medical professionals and officials. We have not heard anything about any statement, which we clearly need from a Minister at the Dispatch Box, finally to put this matter to rest and allow Members to contribute to that closure so that all such units can move on. May I seek your advice on how we might be able to do that?
If memory serves me correctly, Health questions took place relatively recently so it may be some little while before the next scheduled session takes place. However, the hon. Gentleman will be aware that as he raised his point of order, no less illustrious a figure than the Deputy Chief Whip, the right hon. Member for Chelsea and Fulham (Greg Hands), was sitting, as he still is, on the Treasury Bench, and his point will have been heard. Furthermore, the hon. Gentleman will know that we have business questions tomorrow, and I just have a sense that he will be in his place to raise this matter and to demand a statement from the Government.
People are going on about train tickets. I am sure that the hon. Member for Leeds North West (Greg Mulholland) was not proposing to toddle off to Leeds tomorrow morning, but if he was, he might decide to reconsider and to be present for business questions. Only time will tell; we shall see.
Railways (Public Sector Operators)
Motion for leave to bring in a Bill (Standing Order No. 23)
I beg to move,
That leave be given to bring in a Bill to amend the Railways Act 1993 to permit public sector railway operators; and for connected purposes.
Twenty years after privatisation, it is clear that passengers are getting a raw deal. The Tories’ botched privatisation in the 1990s has led to a fragmented railway, which is less efficient to run and more expensive to use than other networks across Europe. The franchise process simply does not work in its current form. The collapse of the west coast main line franchise, at a cost of more than £55 million to the taxpayer, shows just how broken the system is.
On the east coast, where a public operator has performed really well in recent years, it is banned by law from seeking to carry on as the operator. How can it be right that East Coast Main Line Ltd is the only operator in the world that cannot bid to run this service in the future, despite a track record of success? East Coast has shown that a public option can work for our railways. Every penny of profit that it makes has been reinvested back into the service. For example, East Coast contributed £1.3 million to the £3.3 million upgrade of Peterborough station, which I and my constituents use.
Instead of continuing this success story, the Government want to re-privatise the east coast main line at an estimated cost of £6 million. That money would be better spent on improving the service, rather than satisfying the Tory obsession with privatisation. Labour is the only party with a plan to reform the railways and put passengers first. With this Bill, I am very pleased to support the brilliant work of my hon. Friend the Member for Nottingham South (Lilian Greenwood), the shadow rail Minister, and my hon. Friend the Member for Wakefield (Mary Creagh), the shadow Transport Secretary, who have set out the reforms that we need.
The next Labour Government will review this Government’s failed franchising process as a priority. After the chaos of recent years, we will act to safeguard taxpayer and passenger interests by putting in place a system that is fit for purpose. We will learn the lessons of the east coast main line, where we have seen the benefits of a not-for-dividend operator, by legislating to allow a public sector operator to take on lines and challenge the train operators on a genuinely level playing field and in the public interest. That will help to secure value for money for passengers and taxpayers.
As a Co-operative MP, I am pleased that we have pledged that the next Labour Government will explore co-operative and mutual solutions and the benefits of co-operative principles, and increase the involvement of passengers and employees in transport by giving them a much greater say in the industry. The Co-operative party’s reports, “Rail Cymru” and “A People’s Railway for Scotland”, explore the options for Scotland and Wales. As a localist, I am pleased that Labour is committed to devolving decisions across all areas of the UK on the running of regional and local services, so that areas can bring trains, buses, ferries and trams together into a single network.
We must tackle the monopoly market for rail rolling stock by giving Network Rail greater responsibility for developing a long-term plan for the procurement and leasing of new rail rolling stock. We will create a guiding mind for the railways by bringing Network Rail together with a representative passenger rail body to contract routes; co-ordinate services and skills in the industry; oversee stations, fares and tickets; and ensure that there is customer satisfaction across the network. We will ease the pressure on fare payers through the efficiencies that our reforms release, by capping annual fare rises on every route, by simplifying fare structures and by creating a new legal right to the cheapest ticket. I know that those proposals will be welcomed by many of my constituents.
Corby and east Northamptonshire are served by private and public sector rail operators. The contrasting experiences of my constituents demonstrate the need for my Bill. Corby, which is served by East Midlands Trains, recently celebrated five years since Labour opened the new railway station. Corby is the fastest growing town in the country. It was once known as the largest town in Europe without access to a railway system. Use of the station has doubled since it was opened in 2009. It takes 70 minutes on the train from St Pancras. The station is a symbol of Labour’s investment in the regeneration of Corby and it has given a big boost to the local economy. It was campaigned for by the former Labour MP, Phil Hope, and by Labour councillors, and it was delivered by a Labour Government. We are now working to increase the frequency of trains and calling for new northbound services.
However, we cannot celebrate the fares that passengers face. They are way too high and they price out many people. A constituent told me the other day that he had a medical appointment in London, but he did not know how he would find the more than £100 needed to get there. A Corby to London season ticket costs £7,400 and an open return costs £105. Many constituents in the east Northamptonshire side of my constituency, such as those who live in the town of Oundle or in villages such as Warmington, travel from Peterborough station on the east coast line.
Although the fares on the east coast main line are still high, the rate at which they have increased has been hugely different. Since 2010, a standard anytime open return ticket from Peterborough to London has increased by £12, or 14%. The equivalent fare from Corby on East Midlands Trains has risen by £20 since 2010, which is almost twice the rate of increase at 24%. This year, East Coast has raised its fares by an average of 1.21%, which represents a genuine real-terms cut in the cost of living for passengers. No private franchisee has taken that step. It would be fair to say that many of my constituents who use Peterborough station still feel that fares are too high, but by comparison, East Coast is keeping fare rises down.
More than that, East Coast is performing better for passengers. It has achieved record passenger satisfaction and punctuality rates since 2009. It has introduced almost 7,000 more trains a year, and 500,000 more passengers are travelling on the franchise. East Coast has partly funded and helped to deliver a major programme of station upgrades, including at Peterborough station. It is also performing for the taxpayer, having returned more than £800 million to the Treasury.
East Coast’s passengers and the employees who have worked to make East Coast a success in public hands will not understand why the operator is prevented from taking on the running of other lines, let alone why it is banned from continuing to operate the east coast line. Because of the Tory rules, we will have a situation where European public rail companies can run lines in this country, but our British-owned operator cannot.
I completely agree with my hon. Friends the Members for Wakefield and for Nottingham South that, instead of Tory dogma and an obsession with privatisation, we need a different approach that puts the public interest first, that reverses the presumption against the public sector and that serves the passenger properly. It is time for reform of an industry that sucks up a vast amount of subsidy, and seems loth to invest it back into the service of which it is custodian, and that provides little redress for passengers stung by ever-increasing fare hikes—[Interruption.]
The Tories and the Lib Dems are wedded to the status quo: only Labour has a plan for reforming the railways—a new model, with a strong voice from and control by the people who pay for the railways, the taxpayer and the fare payer, and a strong voice for employees who stay working on the railway no matter the colour of the uniform or the paint on the trains. The next Labour Government will review the failed franchising process; legislate to allow a public sector operator to take on the lines; devolve decisions over the running of regional and local services; tackle the monopoly market for rail rolling stock; address the cost of living by capping annual fare rises on every route; simplify fare structures; create a new legal right to the cheapest ticket; and, as Conservative Members have shown today, we will do it all in the face of their opposition. They are standing up for the wrong people. The Bill is just the first step to a railway in which passengers are put first.
I oppose the motion and urge the House to reject the arguments put forward. The privatised industry is actually a success—freight tonnage is up and passenger numbers continue to rise. What we have heard from the hon. Member for Corby (Andy Sawford) will be detrimental to the industry, to employees and especially to passengers. It is based on a redundant political dogma. Labour Members who yearn for bygone days when people were prepared to look to the state to run their buses and trains should come to terms with the modern world.
Wisely, the previous Labour Government made no attempt to reverse the policy during their 13 years of misrule—[Interruption.] Thirteen wasted years, indeed. The change in direction since the days of Tony Blair is striking. The Opposition clearly have no ambition to win elections any more. The very phrase “directly operated railways” conjures memories of a past in which giant state conglomerates ran great swathes of our industry at enormous expense to the taxpayer—[Interruption.] The eyes of Labour Members light up at talk of subsidy. They yearn for the opportunity to subsidise failed industries again—[Interruption.]
Subsidies and propping up ailing businesses at taxpayers’ expense are things that Labour Members understand, but taxpayers want value for money. They want reduced fares, lower taxes and a good railway, which is what we are achieving under the privatised system. Is Labour actually advocating renationalisation? That is what it sounds like. The plan would take us back a generation. It would create a rigged market and passengers would suffer. Under Labour’s plan, the state would write the rules of the franchise, then the state would bid and then the state would decide who had won the race. It would be complex, costly and about an ideological obsession.
The east coast is a service on life support. It was rescued by the Department for Transport and it does not pay the same access charges. Labour’s plan would be costly—up to £500 million. First, the state would have to pay the cost of compiling the bids at up to £10 million a bid. With 15 franchises in England alone, the bill could be more than £100 million. The hon. Member for Corby did not say where that money would be found. Presumably, in line with normal Labour practice, it would be an additional burden on the taxpayer. Secondly, under Labour’s plan, the state would also have to take on the working capital cost of any franchise it operated, amounting to £400 million for the network. In addition, if the bidding process were to be truly level, performance bonds, season ticket bonds, risk capital and default would all have to be taken into account.
My constituency takes its name from the east coast’s premier seaside resort, but it also contains the largest port complex in the UK, an international airport and 10 railway stations. Only last week, a parliamentary Committee gave the go-ahead for the development of the south Humber marine energy park by Able UK, with 4,000 potential jobs. That further strengthens the need for better connectivity and the Under-Secretary of State for Transport, my hon. Friend the Member for Devizes (Claire Perry)—whom I was delighted to welcome to Cleethorpes only two weeks ago—will know that that would improve the potential of south Humber and north Lincolnshire even more.
It is private sector railway companies that will provide better services. I remember the days when I could jump on a train in Cleethorpes to go to Doncaster and I would share the carriage with one man and his dog. Thanks to the private operator First TransPennine Express, we have an excellent hourly service and I have every confidence that the Minister will maintain it. We need services expanding and electrification of the line into Immingham, where 25% of the nation’s rail freight starts or ends. I urge the House to reject the motion. The Bill would be a step backwards that my party and I will not support.
Question put (Standing Order No. 23).
That Andy Sawford, Mrs Emma Lewell-Buck, Andy McDonald, Roberta Blackman-Woods, Fiona O’Donnell, Ian Murray, Sheila Gilmore, Alex Cunningham, Ian Mearns, Mrs Sharon Hodgson and Julie Elliott present the Bill.
Andy Sawford accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 16 January 2015, and to be printed (Bill 111).
National Audit Office
I beg to move,
That an humble Address be presented to Her Majesty, praying that Her Majesty will appoint Lord Bichard KCB to the Office of Chair of the National Audit Office.
This is only the second time that a Prime Minister has moved a motion to appoint the chair of the National Audit Office and the first time the process has been applied to someone new to the role. It is a direct result of our Budget Responsibility and National Audit Act 2011 to strengthen the governance of the National Audit Office. At a time when we are working hard to deal with our debts, it reflects the critical role of the NAO in scrutinising public expenditure and safeguarding the interests of hard-working taxpayers.
First, I would like to thank Professor Sir Andrew Likierman who is standing down when his term of office ends in January. As the NAO’s inaugural independent chair, he has played a vital role in establishing the NAO board as an effective governance body.
The proposed new chair, Lord Bichard, has been chosen following an open competition by a selection panel that included the Chair of the Public Accounts Committee, the Auditor General for Scotland and the permanent secretary of the Treasury. Lord Bichard has had a distinguished career in local and central Government. His many roles have included chief executive of Brent and Gloucestershire local authorities, chief executive of the Benefits Agency and permanent secretary of the Department for Employment, which then became the Department for Education and Employment. He led the vital inquiry into child protection measures following the horrific Soham murders, and also served as chair of the Legal Services Commission, chair of the Design Council and founding director at the Institute for Government.
I believe Lord Bichard’s extensive experience across the public sector makes him an outstanding choice as the independent chair of the National Audit Office, and I have no hesitation in commending this motion to the House.
This is the second occasion when we have had time set aside in the House to debate the public appointment of the chair of the National Audit Office. I warmly welcome and support the process whereby both the Executive and the legislature are involved in the appointment to this important post, and the fact that the Prime Minister is present to propose to the House the appointment of Lord Bichard. I join him in thanking Sir Andrew Likierman for his excellent stewardship of the organisation over the past few years since its inception.
I have known Michael Bichard for many years. Indeed, I first met him before he joined the civil service when he was working as a chief executive in local government. He is a man of outstanding ability and clear judgment, and he brings to the role vast experience across the public sector from his roles in local government, leading a government agency and leading a Government Department. He has also run a very successful higher education institution and was involved in establishing the Institute for Government as its first director. I have every confidence in his ability to fulfil this new role.
I agree with the Prime Minister that in the current times, with continuing pressures to reduce public expenditure and borrowing, we need a strong, fearless and high quality National Audit Office to provide well-evidenced information on how the taxpayers’ pound is being spent. Sir Michael’s long experience and undoubted knowledge and expertise make him an excellent choice as chair of this important institution. I am delighted to be able to support the motion before the House.
I support the motion. Two years ago, when the Budget Responsibility and National Audit Act 2011 set up the chair of the National Audit Office, there were two chief concerns: to strengthen the governance of the National Audit Office in a way which, it was widely agreed, it could benefit from; and to ensure at the same time the continued statutory independence of the Comptroller and Auditor General in exercising his statutory functions. The CAG is an officer of the House of Commons, and it is vital that his independence and ability to undertake inquiries, wherever he—or she, were there a female doing the job—feels necessary, is unfettered. The 2011 Act needed to pull off the trick of providing both for the chair to have the ability to advise the CAG, and for the CAG to have regard to that advice while at the same time continuing to have
“complete discretion in the carrying out of…functions”.
This House owes a debt of gratitude to Professor Sir Andrew Likierman for the way he has carried out that task. I have every confidence that Lord Bichard, who has a very distinguished career in public service, will be able to perform the same function with equal skill. I have no hesitation in commending the motion to the House.
Question put and agreed to.
Taxation of Pensions Bill
I beg to move, That the Bill be now read a Second time.
Security in retirement has been a central part of the Government’s agenda. It is important that we adapt to the needs of a population who live longer and who are increasingly active in old age. In the course of this Parliament we have significantly improved the state support on offer to pensioners. From April 2016, the new state pension will give people certainty about what they can expect from the state during their retirement and reduce the likelihood that they will require means-tested benefits. The triple lock introduced at the beginning of this Parliament ensures that increases for the basic state pension will not be outstripped by earnings, growth or inflation. This means that pensioners are now £440 a year better off than they would have been had the state pension only been increased by average earnings since 2011.
We have also taken steps to help people saving for their retirement. Automatic enrolment, introduced in 2012, gives all employers a duty to enrol all eligible employees into a qualifying pension scheme. In the past two years, approximately 4 million people have been newly enrolled into a pension. By the time the programme is fully rolled out in 2016 up to 9 million will be newly saving for their retirement. This radical reform will transform our culture of saving and increase the amount being saved in workplace pensions by about £11 billion a year.
Automatic enrolment will ensure that individuals have the opportunity to save into a pension, but we also need to ensure that when they come to access those savings they get a fair deal. This Government have always believed in personal responsibility. If people work hard and save all their lives, when they reach retirement they should be given the freedom to choose how they spend those savings. Through the Bill, we are introducing fundamental reforms to how people can access their defined contribution pension savings. This is the most radical change in the way people take their pensions for almost a century. The Bill contains provisions to: remove the limits on withdrawals from drawdown; make annuities more flexible; create a new way to take money directly from one’s pension savings; prevent the reforms from being exploited for unintended tax purposes; and restrict and reduce tax charges payable on certain lump sum death benefits.
We have consulted extensively on how best to implement these changes. Given that it is a highly technical and complex area, we have also taken the step of publishing a briefing, available on gov.uk, which explains clearly what each section of the Bill does. Alongside that, Her Majesty’s Revenue and Customs guidance, which is also on the gov.uk website, explains in more detail how the changes are intended to work. The Department for Work and Pensions’ Pension Schemes Bill, which is in Committee, covers the regulatory side to those freedoms, notably the guidance guarantee. These issues are being debated thoroughly as part of the Bill.
Will the Minister explain why there has been a change in terminology from “advice”—which the Chancellor mentioned in his introduction of the proposed measures—to “guidance”, which, unlike advice, legal protections are not associated with?
We made it clear, in the documentation that was published at the time of the March Budget, that the legal status of the support we have provided is “guidance”. That means that there is not a recommendation of a specific product; none the less, that support will be hugely helpful for those who will face choices. It is right that the role that we play—or facilitate—is about providing support in the form of guidance, rather than making recommendations of particular products.
I would like to provide Members with an overview of the different parts of the Bill. At Budget 2014, the Chancellor announced that everyone with a defined contribution pension could take it as they wished from age 55, and would no longer be subject to drawdown limits or income tests before being able to take their money flexibly. The current system denies people flexibility at the point of taking their pension. For those with the smallest and largest pension savings, there is the option to take their pension as cash, but for everyone else there are considerable restrictions. They have two main options: purchase an annuity or enter capped drawdown. Capped drawdown limits how much someone can take out each year to an amount calculated by reference to the amount they might have received from an annuity purchased with their fund.
Flexible drawdown already lets those with very high levels of savings to take their money however they want, taxed at their marginal rate, if they can prove that they have a guaranteed pension income for the rest of their life of at least £12,000. The Government have already reduced that from £20,000 to give many more people flexibility, but the first main change provided for in the Bill goes much further, making unlimited drawdown available to anyone with a defined-contribution pension and removing the limits on what can be withdrawn from those funds.
The Bill also ensures that existing drawdown funds can, if the individual wants, be converted to flexi-access drawdown, so that those currently in capped drawdown will be able to benefit too. The aim of the changes is to give all the 320,000 people who retire every year with defined contribution savings greater choice about how to access those savings, regardless of how big their pension pot is. The changes will take effect from 6 April 2015.
Some people think that this change—allowing everyone access to their own hard-earned money—will cause people to spend recklessly what they made sacrifices to save. The Government do not agree. Those who have saved the money over a lifetime should be trusted to make their own decisions about how best to use it to provide themselves with an income in retirement. Through the guidance guarantee, we are making sure that customers have access to impartial guidance on how to make the most of their money.
We agree that it is important that people can access their money and use it how they best see fit, but might not the introduction of these flexibilities lead to there being so many products on offer that some unscrupulous people might offer individuals unsuitable products? What will the Government do to ensure that people are not mis-sold products that are not suitable for them or, indeed, that err on the side of illegality?
The hon. Lady raises an important point. First, the guidance guarantee will ensure that guidance is available to people on what their options might be, to point them in the right direction. Secondly, we recognise that the regulators have an important role to play. The Financial Conduct Authority is very engaged in this matter, setting standards and ensuring proper enforcement. She is right that we must deal seriously with any unscrupulous businesses out there that seek to exploit people, but we have a regulatory regime in place to address that very point.
Will the Minister elaborate on the tax implications for the Treasury of these legislative and policy changes?
At the time of the Budget, we set out our estimates of the implications for the public finances, certified by the Office for Budget Responsibility. We have also made a number of announcements since the Budget that will have a revenue impact. The Office for Budget Responsibility will return to this issue at the autumn statement, when it will set out its numbers in the usual way. The estimates have yet to be certified by the Office for Budget Responsibility—as one would expect, given that we are still some way from the autumn statement—but an update on the numbers that were published in March will also be set out in December.
The changes we have announced have resulted in moving some revenue from one year to another, rather than fundamentally changing the face of the public finances, so in broad terms their overall tax impact is not considerable, certainly when compared with the substantial changes that the Government have made, such as increasing the state retirement age or reforming public sector pensions.
To follow up the question from my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), there has been a suggestion that the change could lead to a windfall for the Treasury at a time when that would be very helpful for future Budgets. What does the Minister say to that suggestion, which has been made by some in the real world out there?
The numbers that we and the OBR believe are likely to be changed as a consequence of the policy were set out in the March document. We very much doubt that there will be a huge windfall for the Exchequer as a consequence of these changes, whatever the appeal of that might be. As I have said, some revenues have been moved from future years into earlier years, but some of the claims about the impact are somewhat exaggerated and highly unlikely.
To pick up on the important point made by the Chair of the Work and Pensions Committee, will the Minister seriously consider putting on the face of the Bill a criminal offence of trying to deceive people out of their pension savings? That will act as a deterrent to unscrupulous organisations or individuals from the moment the legislation goes on to the statute book.
The Financial Conduct Authority has already made it clear that if, for example, anyone attempts to present themselves as providing guidance under the guidance guarantee when they are not in a position to do so, that will be looked at very seriously. There is a strong determination to ensure that the dishonest, the unscrupulous and those seeking to mislead people are treated very seriously indeed. We are talking, after all, about a regulated sector, and those who try to conduct regulated activities who are not properly regulated already face offences. I recognise the hon. Lady’s concern about whether we are determined to address those who try to defraud our constituents. Yes, we are absolutely determined to address that, and the FCA is very engaged in that process.
I, too, would like to press the Minister on the issue of consumer protection. At the moment, if someone gets bad advice from a financial adviser, they have a degree of protection through the FCA. If people receive advice from those who are not professionals in financial matters—the Minister has conceded that these are complex matters—what comeback will they have?
As I say, the FCA is very engaged in this area and has already set out its determination to ensure that those seeking to mislead face punishment. The FCA has responsibility for ensuring that regulated firms treat their customers fairly and communicate in a way that is clear and not misleading. We believe that it has considerable powers here. Of course, the Pension Schemes Bill is also important in ensuring that the FCA puts in place standards for the guidance guarantee—standards that anyone delivering that service must comply with.
I am extremely grateful to the Minister for taking a second intervention so quickly. He has been careful in his words regarding the FCA. We are talking about those who are manipulative and try to deceive people out of their entire life’s pension; it is a really serious issue. I would like him to confirm that when he refers to “serious” punishment and this being taken “very seriously”, it means a criminal conviction for these people. Will he confirm that that is how seriously the FCA will treat this offence?
The FCA will certainly treat this extremely seriously. I entirely share the hon. Lady’s view that this is an important matter and that it is right to take the strongest action to ensure that those who attempt to defraud our constituents of their life savings face severe sanctions. This Bill is about the tax changes; the Pension Schemes Bill deals with the wider issues, and it gives the FCA powers to set standards for the guidance guarantee. Regulated firms have responsibilities to treat their customers fairly, and the FCA has made it clear that it expects firms to comply with that, in this context as in others.
We of course engage closely with the ABI and other bodies involved in this area. Indeed, the work in this Bill and in the Pension Schemes Bill is a result of close engagement with the ABI. The Government are determined to ensure that we have a regulatory system that protects our constituents from the unscrupulous. This is principally an issue for the FCA, but we are determined to ensure that it has the powers that it needs. Much in the Pension Schemes Bill relates to that.
May I remind the Minister that one reason for bringing forward these freedoms was to try to tackle the mis-selling that already goes on, whereby people are effectively forced by the law to buy annuities, which in many cases are totally unsuitable for them? That has led to real cases of detriment. The mis-selling issues under these freedoms are not new; they have been around for a long time.
I would like to make a little progress. That brings me to the second main change in the Bill, which is to make annuities more flexible. Current tax legislation caters for two broad categories of retirement income: lifetime annuities and drawdown. As I have set out, we are making drawdown much more flexible. Let me explain how we are doing the same for annuities.
We think annuities will still be the right product for many people, as they provide the valuable security of a guaranteed income for life. The current requirements for a lifetime annuity, however, lead to an inflexible and restrictive product, and there is a clear demand for more flexible ways of getting income from one’s pension pot. We want these reforms to stimulate competition and innovation in the retirement income market. We want providers to innovate and create new products that will more closely reflect the changing needs of their customers. We have consulted extensively with industry on the changes that it would like us to make to enable this kind of innovation. The Bill will deliver those changes by allowing annuities to decrease, and by removing the 10-year guarantee period for guaranteed annuities. That gives significantly more flexibility to providers to offer products that meet individuals’ needs more closely. Those changes will apply to annuities sold after 6 April 2015.
The third major change in the Bill is a new method by which people can access their pension. Currently, people who want to take their pension as cash have to take their whole tax-free lump sum—25% of their fund—and place the other 75% in a drawdown fund. Any money they then draw down is taxed at their marginal rate. The Bill will introduce a new option by giving individuals the flexibility to take one or more lump sums from their pension fund—with 25% of each payment tax-free and 75% taxed at their marginal rate—without having to enter into drawdown. This lump sum is known as an uncrystallised funds pension lump sum, or an UFPLS. [Interruption.] It is perhaps not the most elegant of names, but try doing better with “uncrystallised funds pension lump sum”. These payments can be taken from funds that are uncrystallised—that is, have not yet been accessed. It will be open to schemes to provide this option from 6 April 2015 onwards. This does not change the amount of tax people pay on their pension, but it does provide them with extra flexibility and further choice about when and how to access their savings in a way that suits them.
I want highlight changes that we are making through the Bill to ensure that these reforms, which are intended to give individuals more choices about their income in retirement, are not exploited for tax purposes. If the Government were to take no action, an individual over the age of 55 could divert their salary each year into their pension, take it out immediately and receive 25% of it tax-free, thus avoiding income tax and national insurance contributions on their employment income. That is not the intention of the reforms.
The Government spend a considerable amount a year on pensions tax relief and have a responsibility to ensure that the money is used for genuine pension saving. Under the current system, individuals in flexible drawdown have no annual allowance. They are not entitled to tax relief on anything that they contribute to their pension after they have accessed it flexibly. Extending this rule under the new system would be disproportionate and would disadvantage average savers. We are in an era of much more flexible retirement. An individual might access their pension flexibly and then decide to return to work, or access it while working. They might still want to save into a pension. They might be automatically enrolled into a pension and be subject to a tax charge on the amount contributed. If we kept the current system, there would be a strong incentive to opt out of auto-enrolment.
Instead of having no annual allowance, individuals who access their pensions flexibly will, under the new system, have a lower annual allowance of £10,000, which will apply to their defined contribution savings. This approach allows people the flexibility to contribute to their pension even when they have flexibly accessed their pension rights. At the same time, it ensures that individuals do not use the new flexibilities to avoid paying tax on their current earnings. It will prevent those with the means to divert large sums into pensions from doing so, while allowing the vast majority of individuals to continue to save. The Government have worked very closely with industry to develop this measure, and will continue to do so to ensure that it remains fair and proportionate.
The Minister will be aware that the Pension Schemes Bill is in Committee. I am a member of that Committee, and in our fourth sitting, on Thursday 23 October 2014, a gentleman called Mr John Greenwood, a Financial Times journalist who has written quite a lot on this subject, said that the Treasury’s new policy to limit the amount of money that could be taken out at once
“will impact on only 2% of the population”.
That is true. However, as I have said, we have tried to ensure that we do not give people an opportunity to use the new arrangements as a way of avoiding substantial amounts of tax, while also ensuring that, in an era of more flexible working, we do not prevent people from gaining access to their pensions and then making further contributions in the circumstances that I have described. We concluded that introducing a reduced £10,000 personal allowance was the best way of striking a balance between those two objectives. We will, of course, continue to look at the matter closely to ensure that the system is not exploited at a significant cost to the Exchequer.
The Minister is being very generous with his time. He is also, potentially, being very generous with the Treasury’s coffers. Mr Greenwood said that the allowance
“will impact on only 2% of the population, so it is a penalty with no teeth for 98% of the population.” ––[Official Report, Pension Schemes Public Bill Committee, 23 October 2014; c. 126, Q284.]
What is the Treasury’s forecast of the potential loss of national insurance contributions?
The Office for Budget Responsibility will return to the issue of the forecast at the time of the autumn statement. Mr Greenwood’s evidence featured some eye-watering numbers, but they were based on extraordinary assumptions about behaviour. All the changes resulting from the reforms that we have announced since the Budget will be announced in the autumn statement in the usual way. We certainly do not recognise some of the numbers that have been floated in relation to cost, but the numbers have not yet been certified by the OBR, so I cannot give the hon. Gentleman the answer that he seeks at this stage. Of course we have been mindful of the impact on the Exchequer, but we believe that our proposals will not put it at risk of losing substantial sums. As I have said, we are not preventing people over 55 from drawing down part of their pensions while continuing to make contributions, or retaining the flexibility to do so. We might have closed off that option, but we decided not to.
The Minister is indeed being generous with his time. May I ask when the Treasury is likely to publish its assessment of the risks associated with the delivery of this project? It has obviously identified a number of such risks, and it would be helpful for everyone to see the assessment.
A number of elements are involved. We have already estimated the costs resulting from the Budget announcement, and, as is customary, we will update the House about the cost of further changes that we have made in the autumn statement. We need to take account of a number of policy announcements that have been made since the Budget. The information will be available once the numbers have been certified by the Office for Budget Responsibility—that is, at the time of the autumn statement.
The last change that I want to explain is the change that the Government are making to the tax charges on pensions when someone dies. We will table amendments in due course to enact those changes in detail, but the Bill currently provides for certain lump sums to be paid from pension schemes when someone dies under the age of 75. It ensures that when someone dies with money in a drawdown account before reaching the age of 75 and a lump sum is paid from it, that sum can be paid tax-free. It also ensures that if someone dies with a pension after reaching the age of 75, the tax charge on a lump sum paid from it is reduced from 55% to 45%, and it reduces the tax charge when someone over 75 receives a serious ill-health lump sum to 45%.
The Bill makes a number of other changes, which I will summarise briefly. They include the introduction of a permissive statutory override, which will allow schemes to make the types of payments set out in this Bill without the need to change their scheme rules; provisions to ensure that the new system is reflected in the rules governing overseas schemes involving UK tax-relieved funds; allowing payments from guaranteed annuities to be paid to beneficiaries as a lump sum if they are under £30,000; and measures to ensure that people cannot gain an unintended tax advantage by becoming temporarily non-resident.
Our pension reforms have been extensive and fundamental. We have taken steps to provide a solid foundation for private saving by reforming the state support that is on offer and introducing automatic enrolment. However, it is also vital to give people an informed choice, and the Bill introduces welcome changes to ensure that that happens. It makes the tax system fairer by ensuring that people have more choice in regard to how they access their savings, while also preventing people from exploiting the new flexibility in order to gain unintended tax advantages. At the heart of it are three key principles: responsibility, fairness, and individual choice. I commend it to the House.
I look forward to an interesting debate on the detail of the Bill, both today and in Committee.
Opening the debate on Second Reading of the Pension Schemes Bill, the Minister for Pensions said:
“we will be very busy over the remaining months…taking the pensions system to a…better place.”—[Official Report, 2 September 2014; Vol. 585, c. 195.]
I agree with the first part of that statement: we will indeed be very busy. As for the second part, the extent to which we can improve the Bill remains to be seen. The efficacy of any Bill should be judged only according to its outcomes, and at this stage there are a number of concerns about the outcomes of this Bill, which are far from certain. There are a number of unanswered questions. My hon. Friends have asked a number of them today, and I am sure that more will arise during the Bill’s passage.
As the Institute for Fiscal Studies said at the time of the Budget, the reforms in the Bill will change the pensions landscape dramatically, in the ways in which people take income in retirement and the pensions industry is structured. As the Minister has explained, from 6 April 2015 those aged 55 and older—I should perhaps declare an interest, as I am a member of that age group—will be granted far more freedom. They will be able to gain access to as much of their pension savings as they wish, as often as they wish.
The Minister for Pensions has described the Opposition’s view of the new freedom as “ambivalent”, but that is something of a misrepresentation. We are not ambivalent about what the Bill purports to achieve. Since the reforms were announced in the Budget statement, our position has been consistent, but, for the avoidance of doubt, I shall restate it. We support increased flexibility and choice for savers, which is why we have long advocated reform of the annuities market to help people shop around to get a better deal. However, it would be remiss of us not to identify and highlight the potential problems and pitfalls that the Bill presents. One of my main concerns, which has already been raised today, relates not just to what it seeks to achieve, but to the speed at which it seeks to achieve it.
Does the shadow Minister agree that, given the increasing array of choices now available, one of the most important decisions anyone can make will be how comfortably can they live in retirement? The guidance and help the Government provide on making these difficult choices is very poor.
There is confusion as to what the proposals will mean in practice because there has not been the discussion across the political spectrum and among social partners that took place for the accumulation stage—making sure that more people save for their retirement. There has been little if any discussion about the decumulation stage, beyond criticising annuities. That is part of the problem with this process: the Government pulled a rabbit out of a hat at the Budget, without building a broad consensus to ensure that everybody is on board.
My hon. Friend makes a valuable point which I will address in due course. Before I do so, I want to put on the record one of the concerns expressed by the TUC, which, in keeping with the point made by my hon. Friend, said that it believes that
“the measures contained in the Bill are being rushed in, thus overturning the emphasis on consensus and consultation that has been a positive feature of pensions policy making over the last decade.”
There are two pension Bills running side by side in the House and I do not want to stray into discussing the detail of the other one which is being considered in Committee—I am sure you would not allow me to do so, Mr Deputy Speaker. However, my hon. Friend makes a valuable point.
The hon. Lady is being very generous in taking a number of interventions. She has the opportunity to confirm that the Labour party would support an amendment to the Bill to make it a specific criminal offence for unscrupulous, so-called pensions advisers to swindle innocent people out of their pensions and lifetime savings. Is that not a valuable amendment that could easily be made and confirmed by the Financial Secretary this afternoon?
The hon. Lady makes an important point, and I listened carefully to her intervention on the Financial Secretary. As a constituency MP, I am aware of people who have been swindled out of their life savings through unregulated, unscrupulous people giving them bad advice; indeed, the Financial Secretary has heard me talk about this issue when considering other Bills. I am very interested in what the hon. Lady said about such an amendment, which we would want to consider to give as much protection as possible to consumers.
A point that the Financial Secretary skirted round when he announced the changes to annuities was that they can now go down, as well as up, as a result of this legislation. Does that not bear out the concern raised by the hon. Member for North Down (Lady Hermon)? If such flexibility is provided for the providers, there is a real danger that people could be sold a pup and find that their income unexpectedly diminishes over time?
That is an important point, and these are exactly the reasons why it might have been useful if more time had been provided for discussion within the industry and with the partners in the process, so that we can get to that better place that I talked about at the outset. It is not just about giving people more choice; it is about giving them the ability to make choices that are wise not only at the moment when they choose to draw down or take part of the lump sum, but that are based on providing for the future.
One of our concerns is that although the reforms may well give greater choice, we have to consider whether that greater choice translates into better value and a better deal for those involved in the process. People making use of the flexibility will of course have new opportunities, but as we have heard, new opportunities potentially bring new risks. Those who purchase the wrong products, invest unwisely or fall victim to unscrupulous practices in the unregulated market will see their money swiftly evaporate. Those who use the new flexibility to take out cash from their pension savings may find that they are paying a higher rate of tax. We can also expect a deluge of new products to flood the market, and while some of them may well be good, by the very nature of things, some may well be less so. That is why it is important that people get good-quality guidance to help them make the right choice.
Is my hon. Friend concerned about the question of the capacity to deliver the advice that the guidance guarantee is meant to supply? According to evidence that the Pension Schemes Bill Committee took last week, the figure is less than 25%. It is not just that poor advice might be given; there may be none at all.
My hon. Friend makes an important point, and I read with interest the transcript of the Committee’s evidence session. People need good-quality guidance to help them make the right choices. We must guard against mis-selling, for example—we cannot afford a repeat of the payment protection insurance scandal. We must prevent people from falling victim to exploitation and illegality. We know that pension liberation fraud has already endangered millions of pounds in savings, affecting many people. That is the reason why I am concerned about the way the Government have handled these reforms, which to some seem a bit rushed and haphazard.
Is there not also the concern that people will end up spending a lot more of the pensions they have drawn down into savings accounts on social care? This Government have forcibly removed £4 billion from adult social care budgets, so we know that people are paying more for social care. If the money is held just in savings accounts, many more people will end up being liable for those costs.
The point my hon. Friend makes is absolutely crucial for many people, which it is why it is so important that they get guidance, so they can make sensible decisions to provide for the long term. I will say a bit more about social care and other services later, if I have the opportunity to do so.
After the Chancellor announced the overall pensions reforms to the House in the Budget statement, we set out three tests against which we believe they should be measured. The first was the advice test: would there be robust advice for people on providing for their retirement and measures to prevent mis-selling? The second was the fairness test: that the new system would be fair, with those on middle and low incomes still being able to access the products that give them the certainty in retirement that they want. The third was the cost test: that the Government must ensure that these reforms do not result in extra costs to the state, either through social care or pensioners falling back at a later stage on means-tested benefits such as housing benefit. We stand by those tests and would argue that so far, the Government have been unable to give assurances on any of those points.
Is my hon. Friend aware of a study carried out by Ipsos MORI which showed that 12% of those who were eligible to do so would withdraw their pension pot entirely next year? When asked what they would do with it, one in five suggested that they would use at least part of it for a holiday.
Yes, I am indeed aware of that report. I shall go on to raise similar concerns and seek answers from the Minister to them in due course.
In addition to setting the three tests, we have also commissioned a retirement income taskforce, chaired by Professor David Blake of the pensions institute at the Cass business school. We wanted to look at how we could enhance retirement income and ensure that savers had access to good-value products alongside the support that they needed.
I would argue that our position on pensions has been consistent ever since our time in government. When the Labour Government took office in 1997, there was a crisis of pensioner poverty resulting from a decline in the value of the state pension under the Conservatives. There was also a crisis of trust in private pension provision following the mis-selling scandals that previous reforms had opened the way to. Responding to those challenges, the Labour Government built a robust regulatory framework to police and protect people’s pensions. That framework included the Pension Protection Fund. We also laid the groundwork for the universal state pension with a triple lock guarantee, and established the National Employment Savings Trust to help people to save for their retirement.
The reason that I mention those reforms is that none of them was rushed through. They were all based on sound evidence and consultation, and they had the common aim of helping people to make the right choices while affording them the certainty and security in retirement that they deserved. We now have to consider whether the present Government’s approach to pension reform has been consistent, or whether it seems at times to be erratic and contradictory.
To be fair, things began well for this Government. The single-tier pension and the auto-enrolment legislation represented positive steps to build on the progress made by the previous Government. Those reforms were based on evidence, consultation and consensus. That was acknowledged by, among others, Otto Thoresen, the director-general of the Association of British Insurers, who said that
“good consultation and a good period to execute”
improved the chances of legislation being successful.
However, the Government’s approach to the latest pension reforms, announced in the Budget statement, appears disjointed. Prior to announcing the reforms, they did not consult, either consumers or the industry. This has resulted in some of the issues that have been raised today not being flagged up at that time, and in the Government’s argument losing some of its intellectual rigour.
I would like to draw the House’s attention to the comments of the shadow Minister for Pensions, my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East on Second Reading of the Pension Schemes Bill, in which he highlighted the discord between the Government’s stance on pensions in the accumulation and retirement phases. That has been commented on today as well. In the accumulation phase, the Government’s approach—one that the Labour Government had fostered—is founded on the recognition that the pensions landscape is complex and difficult to navigate. That approach harnesses inertia to encourage pension savings, with individuals employed without pension schemes being placed on them by default. That is a sensible approach and it has proved effective.
However, the Government’s approach to the retirement stage, as outlined in the latest reforms, departs from that model, shifting the emphasis from the importance of accumulation to the ease of access. This Bill places the onus of choice back on the individual, working on the assumption that they will be able successfully to navigate what my hon. Friend the shadow Pensions Minister has called the “jungle of financial products”. He referred to there being a “tension” between the two approaches. He has been a friend of mine for many years, and I think that that is typical of his diplomatic way of expressing himself. The Association of British Insurers has also noted that tension, observing that:
“Automatic enrolment has seen millions more people saving for their retirement and further pension reforms should build on this. We are very concerned that the focus of recent discussion around the Freedom and Choice reforms is on early access to cash at age 55 rather than on building assets for income in retirement.”
The Minister referred to the fact that the Bill introduces the option of taking uncrystallised funds pension lump sums. I have to say that I have not been able to think of a better acronym than the one he came up with, try as I might. As he said, that provision will allow people to withdraw money directly from their pensions without first designating it for drawdown. Individuals will be able to take 75% of each withdrawal tax free, with the rest taxed at the marginal rate. This has been described by some as allowing people to use their pension almost like a bank account. More than any other measure in this Bill, it will expedite people’s access to their pension.
I should like to probe the Government’s thinking on this point a bit further. In searching for greater clarity, I repeat the question that my hon. Friend the shadow Minister put to the Pensions Minister in the earlier debate. He asked:
“If auto-enrolment policy was correct to assume that individuals need to be guided, helped and encouraged into better pension decisions, why do we no longer think that is the case at retirement?”—[Official Report, 2 September 2014; Vol. 585, c. 206.]
Perhaps the Minister will be able to respond to that question when he sums up the debate today.
In the meantime, I think we all agree that the Bill will increase innovation and result in a raft of new pension products entering the market. In many ways, that would be a good thing but, as I have said before, the flipside to freedom and choice is risk and complexity.
As ever, the hon. Lady is making a thoughtful and probing speech. It would be fair to say, however, that her tone is not one of great enthusiasm for greater flexibility and choice in the pensions system. Will she tell the House whether her party is considering reversing the changes that we are introducing today?
I am surprised by the Minister’s comment. I see it as my duty and responsibility as the shadow Minister to make thoughtful and probing speeches. I also said at the outset that we welcomed the opportunities that increased flexibility would bring, but people need to understand that the flipside to that freedom and choice will be risk and complexity. This is the place in which we should debate that, as we discuss the principles behind the Bill. We will also probe the matter further in Committee. The Financial Conduct Authority has observed that firms might devise
“complex, opaque and overpriced products”
that do not represent good value for customers. It is incumbent on us to understand that risk, and to ask questions about how such products would be regulated. Furthermore, the marketing of those new products might not always clearly articulate the risks involved.
I agree with my hon. Friend. That fiasco is a recent memory for many of us, and it is our responsibility to ensure that all the risks, as well as all the upsides, are explored.
I should like to quote the ABI, which has stated:
“Giving customers more choice is welcome but it is also imperative to recognise that good guidance and advice is vital to prevent people making decisions which could lead to retirement poverty and/or to them giving up valuable benefits.”
That is a very important point. People in the industry also recognise that we need to have some caution and ensure that we do the right thing.
That brings me neatly to the fraught issue of the guidance guarantee. The Minister talked a bit about that in responding to interventions, and although I recognise that it is not within the specific ambit of the Bill, it has a great bearing on it. That guarantee is integral to the measures in the Bill, because if the Bill is to be a success, the guidance must be fit for purpose. It is not unfair to say that the continuing concerns and confusion over the guidance guarantee do not give confidence to people who are worried about how they are going to access the guidance. It seems as though the guidance was a secondary consideration. As I have said, the pension reforms were announced without the prior consultation with the industry that we might have expected. Some of the confusion was added to when the Chancellor stated that his reforms would be accompanied by advice, given that we know that what he really meant to say, and what was promised in the Budget, was unregulated guidance.
We then had the unedifying and unhelpful intervention by the Pensions Minister, who appeared to make light of the need for guidance by saying:
“If people…get a Lamborghini, and end up on the state pension, the state is much less concerned about that, and that is their choice.”
That is not helpful at all and has not been during the process. On Second Reading of the Pension Schemes Bill, the hon. Member for Reigate (Crispin Blunt), who is in his place, asked for clarification on how the guidance guarantee would be funded. The Pensions Minister answered by saying that
“the £20 million is not an estimate of the annual recurring cost of providing guidance; it is a one-off seedcorn, getting-the-thing-going fund…if we need to set up websites, produce literature and create infrastructure, the £20 million will enable us to do so.”—[Official Report, 2 September 2014; Vol. 585, c. 198-99.]
That is a bit vague and non-specific. Less than a year from when this Bill comes into force, surely he should know exactly what the guidance will look like.
We now know that the Government propose to deliver the guidance across three platforms, only one of which will be face to-face guidance—that was what was initially promised. We also know that the Money Advice Service will not be involved in the delivery. The three agencies involved will be: the Pensions Advisory Service, which will provide over-the-phone guidance; Citizens Advice, providing face-to-face guidance; and gov.uk, to which this Minister referred. That raises the question of how the Government will ensure that guidance delivered across three different mediums will be of a consistent standard.
The crux of the matter, and what the consumer needs to understand, is: what will the guidance consist of? Will it be an interactive exchange, or will it be a list of questions that must be asked and areas that must be covered? The Financial Conduct Authority appears to think it will be the former, saying it should cover:
“the key facts and consequences of each”—
including financial consequences, e.g. tax implications.”
The Pensions Minister, however, seems to think it will be the latter. He has said that there is a “world of difference” between
“a guidance conversation to get people to base camp”
“sophisticated, individualised, tailored piece of…financial advice recommending products.”
The Pensions Minister has, however, been keen to assure us that the guidance is not being offered on the cheap—his preferred epithet is “budget”. The levy on the pensions industry will not be set at the level required to pay for
“full-blown, regulated, independent, tailored financial advice.”—[Official Report, 2 September 2014; Vol. 585, c. 199.]
Rather, it will be designed to generate only so much as is required to pay for what he terms the “cost-efficient” guidance version. To summarise, the guidance guarantee seems to amount to the following: it will not be regulated, personalised, or product-specific; it will be “cost efficient”, “substantially cheaper” than advice and funded by a “modest” levy on the industry—enough to get people to “base camp.”
That was what was said almost two months ago, but, sadly, judging by the evidence given to the Pension Schemes Bill Committee, things have not progressed much since. So bereft has been the Government’s approach to information gathering and analysis that we still do not know how many people are likely to take advantage of the new flexibilities. In evidence to the Work and Pensions Committee in April, the Pensions Minister was unable to give any firm indication. He said:
“I am not sure there is much point in me guessing. As I say, HMRC assumed that about 30% would take the cash...some of the annuity providers are saying it might be 70%- odd. We do not know.”
We are also reduced to guessing because, despite a freedom of information request from the shadow Pensions Minister, the Government have refused to publish any analysis they have conducted of the behavioural impact of these reforms. We do not know how many people are likely to make use of the new guidance, but a guidance pilot conducted by Legal & General found that only 2.5% of those offered guidance accepted it. The Pensions Advisory Service has estimated that take-up in the first year will be about 25%, so what happens in respect of the 75% who do not take the guidance? What backstop measures, or second line of defence, will be in place for those who do not take up the offer of guidance? In the first year at least, the answer appears that there will be none at all.
Again, the FCA has raised concerns about that, saying,
“we will have the usual supervisory work going on keeping a very close eye on products as they develop. If people choose not to take the guidance, they choose not to take the guidance.”
That means that, potentially, up to 75% of people using the flexibility in the first year will access their pensions and use the money without taking any guidance at all. I do not know whether the Minister finds that concerning, but I do, and I am not the only one. Just Retirement has described the lack of a backstop as
“a massive threat to the pensions freedom reforms.”
The need to install a second line of defence was endorsed by others within the pensions industry, including the ABI, which also expressed doubt about the rigour of the FCA’s consultation on guidance.
The ABI’s head of policy said:
“We have discussed it with our members. We are a little concerned the FCA consultation…was narrowly drawn, which is understandable because it didn’t have much time.”
Why did it not have much time? Is it because the Government are in such a terrific hurry to force these reforms through? We are being left in a situation where the first tranche of people taking advantage of these reforms could be seen to be the guinea pigs in this process, and that is not acceptable.
Let me deal with a point that my colleague raised about the Ipsos MORI research. The extent of the concern has been laid bare by that, because it found that up to 200,000 pension investors could take advantage of the new flexibility in the first year alone. It is estimated that that would generate an additional £1.6 billion of pension income for Treasury coffers, which is why I was asking the Minister what estimate he had made as to what the Treasury would receive. It might be seen as good news for the Treasury, but perhaps not as such great news for savers, because only 38% of these pension investors were able to state accurately how much tax would be deducted from a medium-sized pot and only 6% could accurately predict what rate of tax would be applied to large pension pots.
I know that the shadow spokesperson is not as cynical as I would be about some of this, but does she accept that HMRC’s own figures indicate that over the next budget period there will be a £4 billion windfall to the Treasury as a result of these changes? Of course, in the much longer term tax revenues will fall because there will be less income from the tax on annuities.
I would never suggest that the hon. Gentleman is cynical. He raises an important point, which again shows why I was trying to press the Minister on some of that.
I realise that I have taken up a considerable amount of time, and I want to give opportunities for other hon. Members to speak. However, I wish to raise just one other issue as I draw to a conclusion. I have mentioned the areas of uncertainty about the guidance versus advice debate, but I ask the Minister also to comment on the announcement about the abolition of the 55% tax on pensions at death—the so-called “death tax announcement”—made at the conference recently. I think that, at the time, the Minister said that annuities would not benefit from the tax cut. But it was certainly my understanding—the Minister can correct me if I have misunderstood—that the so-called value protected annuities will certainly so benefit, and that is still on the Treasury website. I have written to the Chancellor to ask for information, but I have not yet had a response. Clearly, uncertainty remains over the added potential for tax avoidance, which has been produced by the Bill.
In order to deter avoidance, the Government have introduced money purchase annual allowance rules, which, as the Minister said, places a £10,000 limit on the annual amount that can be saved tax free through money purchase agreements. The intention is to ensure that individuals do not use the new flexibilities to avoid tax on their current earnings. However, the rules still allow for £2,500 a year of salary to be “washed” tax free through salary sacrifice arrangements. I am interested to hear what the Government have done to address that risk and what further action they plan to take to guard against the new flexibilities being used in such a way.
When it was suggested to the Pension Schemes Bill Committee that there would be ways in which people, especially those over the age of 55, could use the new flexibilities to avoid taxation, the Minister did not seem to be at all concerned. Is the shadow Minister concerned, and will it be an issue for the Bill?
Yes, the shadow Minister is concerned as, I am sure, are the Ministers on the Front Bench, who will have to say something in response as they wind up the debate this afternoon. It is a matter that we will have to explore further in the Bill.
In conclusion, we are serious about getting pension reform right. We want people to have the freedom to choose the retirement product that works for them, and we want them to have good products from which to choose. It would have been better if the Government had consulted further on the reforms and conducted a full and thorough analysis of all the tax implications before they announced the Bill. None the less, we still have the opportunity to look at the Bill in greater detail and on that basis we will not be opposing it today.